Norris v. Johnson

• Decision Date: 20 June 1871
• Citation: 34 Md. 485
• Parties: RICHARD NORRIS, JR., v. WILLIAM H. JOHNSON.
• Court: Maryland Court of Appeals

34 Md. 485

RICHARD NORRIS, JR., v. WILLIAM H. JOHNSON.

Court of Appeals of Maryland

June 20, 1871

APPEAL from the Superior Court of Baltimore City.

The case is fully stated in the opinion of the Court.

The cause was argued before BARTOL, C.J., MAULSBY, MILLER and ALVEY, J.

Robert J. Brent, for the appellant.

One creditor of a corporation cannot sue at law a stockholder thereof, where it is shown that other creditors exist. The proceeding must be a creditors' bill in equity against the individual stockholder, as all have an equal interest, and one cannot appropriate the individual liability of, perhaps, the only solvent stockholder, to his exclusive use. Briggs vs. Penniman, 8 Cowen, 592 593; Stedman vs. Eveleth, 6 Metealf, 119; Crease, et al. vs. Babcock, et al., 10 Metcalf, 532; Erickson, et al. vs. Nesmith, 15 Gray, 222; Harris vs. First Parish in Dorchester, 23 Pick., 114; Mann vs Pentz., 3 N. Y., 422.

Charles Marshall and Wm. A. Fisher, for the appellee.

The only questions presented are:

First: The effect of the fact that the appellant had paid up his subscription.

Second: The right of the appellee to sue the appellant alone, at law.

On the first point this Court has decided, in construing the 9th section of the Act of 1852, ch. 358, (which is nearly identical in language, and entirely similar in its legal import, to the provisions of Article 26, section 52 of the Code of 1860,) that the liability exists without reference to the amount the subscriber may have paid on his subscription. Matthews, &c. vs. Albert, &c., 24 Md., 535, 536; Angell & Ames on Corporations, sec. 621.

The second point involves the right of one creditor of such corporation to sue one stockholder at law, it being admitted that there were other unknown creditors of the company.

The only case in this State which touches the question, is that of Matthews, &c. vs. Albert, &c., 24 Md., 538. That was a proceeding in equity against all the stockholders, and the Court there say that "it is just and proper that such other stockholders as are liable under the statute, should contribute ratably their proportion of the complainant's claim." This language is used with reference to that case, and must be understood and construed as applicable to a case in which a creditor does not seek to enforce the several liability of one stockholder, but contents himself with calling upon all the stockholders for contribution. The equitable rule is laid down by the Court, but it does not necessarily exclude the creditor from insisting upon his right to adopt a different form of action, and proceed upon the several liability of any stockholder.

The Code gives the right asserted by the appellee. The personal liability created by the statute amounts to a contract between each stockholder severally, and each creditor who becomes such while the stockholder is a member of the corporation.

The Legislature could not take away the liability of the stockholders, after it had once attached. Hawthorne vs. Calef, 2 Wallace, 10, 23.

The moment the corporation contracts a debt, two contracts arise under the law. The one is the contract of the corporation, which it is bound to fulfil to the extent of its corporate property. The other is coëxisting, and is a contract between the creditor and each subsisting stockholder severally, that if the capital stock be not fully paid up, as required by law, the stockholder will pay the debt out of his own property, to the extent of the par value of his stock. There is nothing in such a contract to make it necessary for the creditor to resort to a Court of Equity to enforce it. It may subject the stockholder to several suits, but that is the consequence of his making a contract with several creditors. He cannot vary the right of one creditor, by making a contract with another. To hold that the creditor must seek contribution from all the stockholders, is in effect to hold that the liability of the stockholder is limited to his contributory share of the debts of the company, and not to the par value of his subscription as provided by law. Bank of Poughkeepsie vs. Ibbotson, 24 Wend., 473; Garrison vs. Howe, 17 N. Y., 462; Abbott vs. Aspinwall, 26 Barb., 207; Paine vs. Stewart, 33 Conn., 516, 529; Bullard vs. Bell, 1 Mason, 297; Angell & Ames on Corp., secs. 611, 624, 626; Hawthorne vs. Calef, 2 Wallace, 10, 23.

The stockholder, when sued by one creditor, cannot set up any defence to his statutory liability, except some right in himself. He is bound to pay a certain sum of money, and, no matter how many creditors there may be, he can only be required to pay that sum. He cannot urge in his defence that other unknown creditors may claim a share of what he owes.

[The counsel for the appellee further relied on the argument made by Mr. Rowland, in behalf of the appellee, in the succeeding case of Norris vs. Wrenschall, argued at the same time--REP.]

MILLER J., delivered the opinion of the Court.

This is an action at law by the appellee as a creditor, against the appellant as a stockholder of the "Baltimore City Concrete Company," a corporation formed under the provisions of the Code, (Article 26,) relating to corporations for manufacturing purposes. The suit is to enforce the individual liability of the defendant under section 52 of that Article, and the declaration is framed upon that section. All errors in pleading were waived, and it was agreed the parties may recover or defend upon any facts offered in evidence, without reference to the state of pleadings. By agreement, it was admitted that the company was duly incorporated under these provisions of the Code, in March, 1866, with a capital stock of $100,000, in one thousand shares each, of the par value of $100; that in January, 1869, the company became indebted to the plaintiff in the sum of $471.10 for goods sold and delivered, and work done and materials furnished; that at the time this debt was contracted, the defendant was a stockholder, holding one hundred and ten and a half shares, which he fully paid up and continued to hold them at the time of trial; that the whole amount of its capital stock has never been paid in, and a greater amount thereof is unpaid than the amount of the plaintiff's claim; that the corporation has other creditors, whose number and the amount of their claims are unknown; and that the defendant, before suit brought, tendered to the plaintiff the sum of $72.96, as the...