State Nat. Bank v. Sayward, 252.

• Court: United States Courts of Appeals. United States Court of Appeals (1st Circuit)
• Citation: 91 F. 443
• Docket Number: 252.
• Parties: STATE NAT. BANK OF CLEVELAND, OHIO, v. SAYWARD et al.
• Decision Date: 19 January 1899

91 F. 443

STATE NAT. BANK OF CLEVELAND, OHIO,
v.
SAYWARD et al.

No. 252.

United States Court of Appeals, First Circuit.

January 19, 1899

George Putnam (Jabez Fox and James L. Putnam, on the brief), for appellant.

William B. French, for appellees Sayward and Linder.

Charles A. Drew, for appellee Annable.

Charles D. Adams, for appellee George F. Reed.

Before PUTNAM, Circuit Judge, and ALDRICH and BROWN, District Judges.

ALDRICH, District Judge.

The defendants are residents of Massachusetts, and hold stock in an Ohio corporation. The corporation in which the stock is held is a private corporation, called the 'Findlay Rolling-Mill Company,' and is not a party here. This is a suit to enforce the stockholders' statutory liability created by the constitution and statute laws of the state of Ohio, and is directed against the Massachusetts stockholders in the Findlay Rolling-Mill Company of Ohio, for the purpose of collecting a judgment for $12,465.68, including costs, which this plaintiff, an Ohio creditor, recovered against the rolling-mill company in an Ohio suit. These defendants were not parties to the Ohio suit; they own only a small part of the stock of the corporation; and there are other creditors of the corporation than this plaintiff.

Section 3, art. 13, of the constitution of Ohio, declares that:

'Dues from corporations shall be secured, by such individual liability of the stockholders, and other means, as may be 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.' [91 F. 444] And the statute creating the liability is as follows:

'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 an 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. ' Rev. St. Ohio 1880, Sec. 3258.

The remedy for the enforcement of the creditors' statutory right provides that a stockholder or creditor may enforce such liability jointly against all the holders or owners of stock, which action shall be for the benefit of all the creditors of the corporation, and against all persons liable as stockholders, and in such action there shall be found and determined the amount payable by each person liable as stockholder on all the indebtedness of the corporation. The statute providing the remedy also, among other things, provides for a judgment for a pro rata amount among the resident stockholders.

There is nothing in the case presented which requires a critical discussion of the question whether the bill or complaint is strictly a creditors' bill. It is enough to say that, as a substantial feature of the Ohio statute which provides the remedy, it is required that the action shall be for the benefit of all the creditors of the corporation and against all persons liable as stockholders, and that the remedy fairly contemplates an accounting, which, in substance and effect, means a proceeding in the nature of an equitable proceeding. It is not worth while, in respect to states where distinctions between forms of action are abolished, to discuss the strict technical meaning of names employed in statutes to designate the remedy, like that of 'action,' 'petition,' 'action at law,' or 'suit in equity.' It is sufficient to look to the substance of the statute, and if it is found that the statute provides for or contemplates a remedy in the nature of an equitable proceeding, and the character and conditions of the liability are such as present ground for equitable cognizance, the remedy should be in equity.

The supreme court of Ohio in Umsted v. Buskirk, 17 Ohio St. 114, 188, in passing upon the statute in question, observes that:

'The right arising out of this liability is intended for the common and equal benefit of all the creditors. The suit of a creditor, under this statute, should, in our opinion, be for the benefit of all the creditors; and the stockholders whose liability is sought to be enforced have the right to insist on their co-stockholders being made parties for the purposes of a general account, and to enforce from them contribution in proportion to their shares of stock.'

The same court, in an earlier case in the same volume (Wright v. McCormack, 17 Ohio St. 87, 95), remarked that the liability imposed on the stockholders is not a primary resource or fund for the payment of the debts of the corporation; and the liability is treated as collateral and conditional to the principal obligation which rests on the corporation, to be resorted to by all the creditors in case of the insolvency of the corporation, or where payment cannot be enforced by the ordinary process, and as a security provided by the statute for the benefit of all the creditors, in which no creditor can gain priority or institute a separate suit for the enforcement of the liability in his own behalf. [91 F. 445]

The question of the character and scope of the creditors' remedy upon the stockholders' liability under the Ohio statute was again before the supreme court of that state in 1881, in Wheeler v....