Olson v. Cook
| Decision Date | 22 June 1894 |
| Docket Number | 8638,8639 |
| Parties | Hans H. Olson v. Levi M. Cook et al |
| Court | Minnesota Supreme Court |
Argued May 31, 1894
Appeal by defendants, Levi L. Cook, Willis H. Manley and Eliza Roos from an order of the District Court of Hennepin County, Henry G. Hicks, J., made November 27, 1893, overruling their demurrers to the complaint.
The plaintiff, Hans H. Olson, on July 7, 1892, deposited in the State Bank of Minneapolis $ 123.60 and took a certificate due in one year. On August 30, 1893, he recovered judgment thereon against the bank for $ 139.13. A writ of execution was issued and returned unsatisfied. The bank suspended payment June 22, 1893, and five days thereafter being insolvent made an assignment of all its property to George H Fletcher under Laws 1881, ch. 148, in trust for the equal benefit of all its creditors. On August 12, 1893, Fletcher resigned his trust and Wm. J. Hahn was appointed in his stead and the assets transferred to him by the order of the District Court. The assets were not more than $ 100,000 and the debts not less than $ 500,000. The capital of the bank was $ 100,000 divided into shares of $ 100 each. It was at first $ 60,000 but on August 5, 1886, it was increased to $ 75,000 and on July 7, 1892, to $ 100,000. Of these shares Levi L. Cook held twenty-five, Eliza Roos forty and Willis H Manley ten. The remaining shares were held by Kristian Kortgaard and others. Cook acquired his shares prior and Roos and Manley after July 7, 1892. The plaintiff commenced this action September 23, 1893, under 1878 G. S. ch. 76, against all the stockholders to enforce their double liability. The complaint stated the foregoing facts and others and asked that all creditors be required to come in and prove their claims or be precluded from all benefit of the judgment and from any distribution made under it. The defendants severally demurred to the complaint on the grounds that there is another action pending between the same parties for the same cause; to-wit, the insolvency proceedings under Laws 1881 ch. 148; and that it does not state facts sufficient to constitute a cause of action. The demurrers were overruled. The three defendants above named appealed and stipulations were made with the others that all the demurrers should abide the result of these three.
Orders affirmed.
James O. Pierce and George D. Emery, for appellants.
The demurrers should have been sustained on the ground of another action pending. Allen v. Walsh, 25 Minn. 543; Johnson v. Fischer, 30 Minn. 173; Merchants' Nat. Bank v. Bailey Mfg. Co., 34 Minn. 323; Arthur v. Willius, 44 Minn. 409; McKusick v. Seymour, Sabin & Co., 48 Minn. 158; State v. Bank of New England, 55 Minn. 139; Merchants' Nat. Bank of Chicago v. Northwestern Mfg. & Car Co., 48 Minn. 349; Minnesota Thresher Mfg. Co. v. Langdon, 44 Minn. 37; Mohr v. Minnesota Elevator Co., 40 Minn. 343.
The complaint does not set forth all the requisite facts or ask the proper relief necessary to make it sufficient under 1878 G. S. ch. 76.
This proceeding is brought prematurely. While stockholders may, in a proper proceeding, be held to their statutory liability, this is only to be done after the corporate assets have been fully administered and found to be insufficient. The liability of the stockholder is that of a surety. Tripp v. Northwestern Nat. Bank, 41 Minn. 400.
A stockholder is not liable to action for statutory liability, where it does not appear that the corporate assets proper have been fully administered and that a deficiency is ascertained. Stewart v. Lay, 45 Iowa 604; Appeal of Means, 85 Pa. St. 75; Cambridge Water Works v. Somerville Dyeing & B. Co., 4 Allen 239; McClaren v. Franciscus, 43 Mo. 452; Toucey v. Bowen, 1 Bissell, 81; Drinkwater v. Portland Marine Ry., 18 Me. 35; Merchants' Nat. Bank v. Bailey Mfg. Co., 34 Minn. 323; Nolan v. Hazen, 44 Minn. 478.
Only debts proper of the corporation are enforceable against the stockholders; not damages recovered in actions of tort. Cook, Stockholders (2nd Ed.) § 217. Damages recovered by reason of a bridge being out of repair are not included. Heacock v. Sherman, 14 Wend. 58. Nor damages for infringement of a patent. Child v. Boston & Fairhaven Iron Works, 137 Mass. 516. Nor damages for loss of a steamboat. Bohn v. Brown, 33 Mich. 257. Nor damages against a common carrier for negligence. Stanton v. Wilkeson, 8 Ben. 357.
So far as the allegations of the complaint may be taken as sufficient, not a single present indebtedness of the bank has accrued since either appellant Roos or Manley became a stockholder. A registered stockholder is liable, not for debts contracted before he became such, but for those contracted while he was such, although he subsequently transfers his stock. Cook, Stockholders, § 259; Moss v. Oakley, 2 Hill, 265; Adderly v. Storm, 6 Hill, 624; Judson v. Rossie Galena Co., 9 Paige 598; McCullough v. Moss, 5 Denio, 567; Williams v. Hanna, 40 Ind. 535; Larrabee v. Baldwin, 35 Cal. 155; Coleman v. White, 14 Wis. 700.
Stock not issued when the plaintiff's debt was contracted, cannot be called upon to contribute to his debt, because he could not have dealt with the company upon the faith of any capital represented by any such stock. First Nat. Bank v. Gustin, M. C. Mining Co., 42 Minn. 327; Hospes v. Northwestern Mfg. & Car Co., 48 Minn. 174.
Jno. W. Arctander, for respondents.
There was no other action pending. A stockholder's liability is not a corporate asset. Dutcher v. Marine Nat. Bank, 12 Blatchf. 435; Jacobson v. Allen, 20 Blatchf. 525; Fransworth v. Wood, 91 N.Y. 308; Wright v. McCormack, 17 Ohio St. 86; Arenz v. Weir, 89 Ill. 25; In re People's Live Stock Ins. Co., 56 Minn. 180. All the powers conferred upon the Assignee under Laws 1881, ch. 148, are, to take into his possession all the property of the debtor, and to convert the same into money and distribute the net proceeds thereof in the way designated by law, and to bring actions to avoid unlawful preferences. It is in doing the latter only that the assignee, by statute is clothed with the power to represent the creditors. 1878 G. S. ch. 41, § 27; Bristol v. Sanford, 12 Blatchf. 341; State v. Bank of New England, 55 Minn. 139.
The remedy under chapter 76 is exclusive. Allen v. Walsh, 25 Minn. 543; Johnson v. Fischer, 30 Minn. 173; Mohr v. Minnesota Elevator Co., 40 Minn. 343; Patterson v. Stewart, 41 Minn. 84; St. Louis Car Co. v. Stillwater Street Ry. Co., 53 Minn. 129.
This suit was not prematurely brought. State Savings Ass'n v. Kellogg, 52 Mo. 583; Shellington v. Howland, 53 N.Y. 371; Flash v. Conn, 109 U.S. 371; Morgan v. Lewis, 46 Ohio St. 1; Munger v. Jacobson, 99 Ill. 349; Patterson v. Wyomissing Mfg. Co., 40 Pa. St. 117; Hospes v. Northwestern Mfg. & Car Co., 48 Minn. 174.
Stockholders who become such after the debt is contracted are liable under the statute for debts made before they become stockholders. The leading case against this position is Moss v. Oakley, 2 Hill, 265, in which case the court states that it does not regard the question as clear or free from doubt. It bases its conclusion as to the proper interpretation of the statute upon the nature of the particular case, and the general scope of the New York statute. New Hampshire, although deciding the question the same way, expressly disclaims following Moss v. Oakley, and bases its decision upon the peculiar language of the statute. Chesley v. Pierce, 32 N.H. 388. The statute of California is as follows: "Each stockholder shall be individually and personally liable for his proportion of all the debts and liabilities of the company contracted or incurred during the time that he was a stockholder." See Larrabee v. Baldwin, 35 Cal. 155.
An examination of the authorities will show that opposed to the doctrine of Moss v. Oakley, as followed by Indiana and Maryland, stand Maine, Massachusetts, Connecticut, Rhode Island, Ohio, Illinois, Missouri and Wisconsin. Longley v. Little, 26 Me. 162; Curtis v. Harlow, 12 Metc. 3; Holyoke Bank v. Burnham, 11 Cush. 183; Middletown Bank v. Magill, 5 Conn. 28; Sayles v. Bates, 15 R. I. 342; Brown v. Hitchcock, 36 Ohio St. 667; Railroad Co. v. Smith, 48 Ohio St. 219; Root v. Sinnock, 120 Ill. 350; McClaren v. Franciscus, 43 Mo. 452; Skrainka v. Allen, 76 Mo. 384; Griswold v. Seligman, 72 Mo. 129; Cleveland v. Burnham, 55 Wis. 598; Day v. Vinson, 78 Wis. 198.
But the question is really res judicata in Minnesota. Although we have no direct decision on the particular statute in question, the Supreme Court of this state is committed by a prior ruling upon a statute identical in terms. I refer to the case of Gebhard v. Eastman, 7 Minn. 56.
Collins, J. Buck, J., absent, took no part. Canty, J., having tried the case below, when district judge, did not sit.
The bank defendant was incorporated under the laws of this state to do a banking business, at first with a stock capital of $ 60,000, afterwards increased to $ 75,000, and later still to $ 100,000. June 27, 1893, it made, under the insolvent law, an assignment for the benefit of its creditors, and defendant Hahn is the assignee thereunder. July 7, 1892, plaintiff made a deposit with the bank, repayable to him in 12 months after that date. It not being paid when due, on August 19, 1893, he recovered judgment against the bank for the deposit, issued execution thereon, and September 5, 1893, it was returned wholly unsatisfied, for want of property whereon to levy.
The plaintiff brings this action in behalf of himself, and all other creditors of the bank who shall exhibit their claims and become parties to the action, against all the stockholders, to enforce their statutory liability; and he asks for the appointment of a receiver to receive and...
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