Pierce v. The Topeka Commercial Security Company and Clifford C. Baker

• Decision Date: 07 January 1899
• Docket Number: 11012
• Citation: 60 Kan. 164,55 P. 853
• Parties: MARY H. PIERCE v. THE TOPEKA COMMERCIAL SECURITY COMPANY AND CLIFFORD C. BAKER
• Court: Kansas Supreme Court

55 P. 853

60 Kan. 164

MARY H. PIERCE v. THE TOPEKA COMMERCIAL SECURITY COMPANY AND CLIFFORD C. BAKER

No. 11012

Supreme Court of Kansas

January 7, 1899

Decided January, 1899.

Error from Shawnee district court; Z. T. HAZEN, judge.

Affirmed.

Stebbins & Evans, and Frank H. Foster, for plaintiff in error.

J. D McFarland, for defendant in error C. C. Baker.

OPINION

JOHNSTON J.

Clifford C. Baker was a stockholder in the Topeka Commercial Security Company, a Kansas corporation, against which Mary H. Pierce obtained a judgment for $ 2428.29. After the return of an execution unsatisfied she instituted a proceeding against Baker to enforce his statutory liability on the stock held by him in the corporation, and therein it was made to appear that Baker had paid the full face value of the stock held by him, and also that he had bona fide judgments and claims against the corporation which greatly exceeded the amount of the stock owned by him; and further that these claims and demands accrued when the corporation was a going concern, and prior to the bringing of the action in which Mary H. Pierce obtained her judgment. The trial court held that Baker was entitled to set off against the statutory liability the debts owing to him from the corporation, and the motion for execution against him was denied.

The single question presented on this review is: May a stockholder in a Kansas corporation, who has paid the full face value of his stock, when proceeded against by motion for an order that execution issue against him, show, by way of set-off or defense, or in diminution or extinguishment of his liability as such stockholder, that the corporation is indebted to him upon bona fide claims and demands which accrued before he became liable as such stockholder? It is strongly contended that the claims of the stockholder against the corporation do not constitute a legal set-off, because of a want of mutuality between the parties to the action. The claim of the stockholder is not a set-off in its technical legal sense, but it is an equitable defense which he is entitled to make. When he becomes a bona fide creditor of the corporation he is clothed with the same equity as contract creditors. Under our code the distinction between actions at law and suits in equity no longer exists, and it specifically provides that "the defendant may set forth in his answer as many grounds of defense, counter-claims, set-off, and for relief, as he may have, whether they be such as have been heretofore denominated legal or equitable, or both." (Gen. Stat. 1889, P 4177; Gen. Stat. 1897, ch. 95, § 94.)

In Abbey v. Long, 44 Kan. 688, 24 P. 1111 the right of a stockholder to make the defense of an equitable set-off was recognized. It was held that, where a creditor was proceeding by motion under the statute for an execution against a stockholder, the latter was entitled to set off against his liability any amount voluntarily paid by him in good faith of the just debts of the corporation. If a stockholder may set off voluntary payments made by him of the debts of the corporation in diminution or bar of a recovery against him, there is no good reason or authority why he may not also set-off in like manner the indebtedness due from the corporation to him. In Musgrave v. Glen Elder Association, 5 Kan.App. 393, 49 P. 338, the court of...