Nimick v. Mingo Iron Works Co.

• Decision Date: 29 November 1881
• Court: West Virginia Supreme Court
• Parties: Nimick & Co. v. Mingo Iron Works Co.

25 W.Va. 184

Nimick & Co.

v.Mingo Iron Works Co.

Supreme Court of Appeals of West Virginia.

Submitted January 29, 1883.

Decided November 29, 1881.

A manufacturing company incorporated and organized under the laws of the State of Ohio, which imposed on the stockholders of such company an individual liability in addition to their stock equal to the amount of the stock held by each of them, as a security to its creditors for the payment of the debts of the corporation, having become insolvent, one of its judgment-creditors on his own behalf, and for the benefit of all other creditors, instituted his suit in the municipal court of Wheeling against said corporation and certain of its stockholders residing within the jurisdiction of that court, to ascertain and determine the extent of the personal liability resting upon each of them for the pay- ment of the debts of the corporation, and to enforce payment of the same. To this bill the defendant stockholders demurred, and the court sustained the demurrer, and dismissed the bill with costs. Upon an appeal to this Court, it was Held:

I. That the stockholders of such a corporation are individually liable to the creditors thereof, if the same be necessary for the payment of its debts, in addition to their stocks in an amount equal to the stock by them subscribed or otherwise acquired. (p. 198.)

II. That this liability is not in the nature of a penalty or forfeiture, but it arises out of the implied promise of the stockholder to assume and discharge the individual liability imposed by the statute, under which the corporation was created. (p. 198.)

III. That this liability is not a primary resource or fund for the payment of the debts of the corporation; that it is collateral and conditional to the principal obligation which rests upon the corporation, and is to be resorted to by the creditors only in case of the insolvency of the corporation, or when payment cannot be enforced against it by the ordinary process. (p. 198.)

IV. That this liability is a security provided by law for the exelusive benefit of the creditors, over which the corporate authorities can have no control; and that this liability is several in its nature, but the right arising out of it is intended for the common and equal benetit of all creditors of the corporation. (p. 198.)

V. That in any suit instituted for the purpose of enforcing this liability against the stockholders the corporation is a necessary party. (p. 198.)

VI. That the statute-law of Ohio, under which such corporation was created, imposing on such stockholders such individual liability, not only conferred upon its creditors a new right but also prescribed the remedy whereby the same may be enforced. (p. 202.)

VII. That the remedy so prescribed for the ascertainment and enforcement of this liability must be pursued in the courts of the State of Ohio, where the corporation was located, and by the local statutes of which alone the liability exists. (p 208.)

VIII. That a bill in equity to ascertain and determine the extent of this individual liability against the stockholders of such corporation cannot be sustained in the courts of this State. (p. 207)

IX. That in the interpretation of the statutes of another State this Court will adopt the construction given to such statutes by the highest judicial tribunal of such State, unless the same be in contravention of the constitution of the United States, (p. 192.)

Statement of the case by Woods, Judge:

This was a chancery suit brought in the municipal court of Wheeling, in January, 1881, against the Mingo Iron Works Company and forty-eight other defendants, alleged to be stockholders therein, by Alexander Nlmick, George P. McBride and John S. Slagle, partners trading under the firm of Mmick & Co., suing for themselves and on behalf ot all other crrditors of said Mingo Iron Works Company, who would come in and contribute to the expenses of this suit.

The plaintiffs' original bill was demurred to, and the demurrer was sustained, and the plaintiffs took leave to tile an amended bill, which was filed at April rules, 1882. The plaintiffs alleged in their original and amended bills that the defendant, The Mingo Iron Works Company is a corporation lawfully incorporated and organized on or about the 18th ot February, 1871, under and by virtue of the constitution and laws of Ohio, for the purpose of mining coal and other minerals and manufacturing pig iron, nails and iron, and carrying on such business as is usually connected therewith, as authorized by an act to provide for the creation and regulation of incorporated companies in the State of Ohio passed May 1, 1852, and the acts amendatory and supplementary thereto; that said corporation bad a capital stock of $250,000.00 divided into shares of $100.00 each, which were owned by certain stockholders named in the bill, of which said forty-eight defendants owned in the aggregate 1, 755 shares, all of which stock was owned by said several stockholders, at the times when the debts hereinafter mentioned were contracted, and at the time this suit was brought; that of these forty-eight stockholders, thirty-four particularly mentioned in the bill owning in the aggregate 1, 415 1/2 shares of said capital stock, are residents of the city of Wheeling, county of Ohio, and State of West Virginia, and are within the jurisdiction of the said municipal court of Wheeling, but out of the jurisdiction of the courts of the State of Ohio; and that the others of said stockholders are residents of other States, and out of and beyond the jurisdiction of said municipal court. The plaintiffs further allege, that the said corporation in the conduct of its business became largely indebted to various creditors, and among them to the plaintiffs to the amount of $24,504.86, for which they recovered against it, in the court of common pleas of Jefferson county, Ohio, in which were the principal office and place of business of said corporation, a judgment at the November term, 1878, of said court, all of which remains unsatisfied except $1,292.59 paid thereon on the 16th of April, 1880, by the assignee of said corporation; that all of the real and personal property of said corporation, has been sold under proper judicial proceedings in the State of Ohio, and the proceeds applied to the payment of its debts, and that the debts due from said corporation still unpaid, amount to $280,000.00, including the debt due to the plaintiffs.

They further allege that by the third section of the thirteenth article of the constitution of the State of Ohio, it is provided that," dues from corporations shall be secured by such individual liability of the stockholders and other means as may he prescribed by law; but in all cases each stockholder shall be liable over and above the stock by him or her owned, and any amount unpaid thereon, to a further sum at least equal in amount to such stock, and that by the said act ot the Legislature of Ohio, passed May 1, 1852, and the acts amendatory and supplementary thereto, it is further provided that " the stockholders of a corporation which may be hereafter formed, and such stockholders as are now liable under former statutes, shall be deemed and held liable in addition to their stock in amount equal to the stock by them subscribed, or otherwise acquired, to the creditors of the corporation to secure the payment of the debts and liabilities of the corporation;" and that said constitutional provision, and the said statutes, at the time of the organization of said corporation, and at the time of the institution of the plaintiffs' suit were in full force, and they allege that the unpaid debts due from said corporation are greater in amount than the whole amount of its capital stock, and that by virtue of the said constitution and laws of the State of Ohio, the stockholders of said corporation are severally liable to its said unpaid creditors, in amounts equal to the amount of the several shares of its stock held by them respectively, for the joint and equal benefit of all of said creditors, in proportion to the amount of their several debts, and that this liability arises out of the contract incident to the ownership of stock in said corporation under the laws of Ohio; and that each of said stockholders therein, at the time he became such stockholder in said corporation bound himself to its creditors for the payment of all its debts, in an amount equal to the stock owned by him in addition to said stock, and that all of said debts were contracted on the faith of said liability; that on January 29, 1878, all of the real estate of said corporation was sold under proper judicial proceedings in the court of common pleas of Jefferson county, Ohio, and the proceeds properly applied in part satisfaction of its preferred indebtedness; that on July 10, 1878, said corporation made to the defendant George A. Dean, one of the stockholders, owning one share ot said capital stock, an assignment in writing under the insolvent laws of Ohio, of all its property for the benefit of its creditors, and that Dean accepted said trust, and is now acting as such assignee of said corporation, and they aver that its entire assets in his hands when collected, will not, after payment of costs and expenses, exceed $1,000.00 for distribution among its creditors, but that said trust has not yet been settled or executed. The plaintiffs file with and as part of their bill, a list of seventysix of the creditors of the corporation, embracing more than onehundred and twenty-five different claims, ranging in amounts from $2.50 to $60,000.00.

The plaintiffs further allege that on the 7th of May, 1870, they brought suit on behalf ot themselves, and all other creditors of the The Mingo Iron Works Company, in the court of common pleas of Jefferson county, Ohio, against all the parties in this suit, except certain of the stockholders particularly named in their bill, and that in that suit in Ohio," they...