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in the Ohio courts alone is contemplated by | stockholders of certain corporations, which Ohio Rev. Stat. 1880, $ 3260, as amended in appear in the Revised Statutes of 1880, § 1894, which was enacted in pursuance of this constitutional provision, and itself provides 3258, in the following form: for the procedure and states the remedy.
"The stockholders of a corporation which
may be hereafter formed, and such stock[No. 167.]
holders as are now liable under former
statutes, shall be deemed and held liable, Argued and submitted March 7, 1905. De- in addition to their stock, in an amount cided April 3, 1905.
equal to the stock by them subscribed, or
otherwise acquired, to the creditors of the N A CERTIFICATE from the United corporation, to secure the payment of the
States Circuit Court of Appeals for the debts and liabilities of the corporation.” Second Circuit presenting the question Section 3260 of the Revised Statutes of whether the provision of the Constitution 1880, as amended in 1894, provided as folof Ohio for the individual liability of stock- lows: holders in a domestic corporation is so far “A stockholder or creditor may enforce self-executing that it may be enforced out-such liability by action jointly against all side the jurisdiction of that state without the holders or owners of stock, which action compliance with the requirements of the shall be for the benefit of all the creditors Ohio statutes with reference to the enforce of the corporation, and against all persons ment of such liability. Answered in the liable as stockholders; and in such action negative.
there shall be found and determined the
amount payable by each person liable as Statement by Mr. Justice Peckham: stockholder on all the indebtedness of the
This case comes here by virtue of a certifi- corporation, in which adjudication no costs cate from the United States circuit court of shall be taxed to nor collected of any stockappeals for the second circuit, which sets holder to an amount which, together with forth the following facts:
the amount to be paid on said indebtedness, The case came before the circuit court of will exceed the amount of the stock on appeals by appeal from the decree of the which he is liable, Provided, that in any United States circuit court for the southern such action, the plaintiff may file in the district of New York, sustaining demurrers court a sworn statement that a stockholder to the bill of complaint and dismissing the or stockholders or the legal representatives bill. The complainant in the bill was a of a deceased stockholder have not been creditor of the railway company (the de- summoned, giving their residence if known, fendant), which is a corporation created and that it is impracticable to secure servunder the laws of the state of Ohio; and ice of summons upon such stockholders or complainant recovered a judgment against such legal representatives of a stockholder, the defendant railway company in the su- and remitting from the claims of the plainpreme court of the state of New York, upon tiff, or of other creditors consenting, so which execution was issued and returned un- much as may be found payable by such satisfied. The complainant then brought stockholders not served with summons exits bill in equity in the United States cir- cept those who may be insolvent or nonresicuit court for the southern district of New dent of the state; and judgment shall be York, for the benefit of itself and other rendered against the stockholders who have creditors, against numerous stockholders of been served with summons for the pro rata the railway company, defendant, residing in amount for which they would be liable if the district, to enforce the liability of those all solvent stockholders resident of the state stockholders for the debts of the railway were served with summons; and when a company, under the laws of Ohio, and that creditor has prosecuted against a corporacompany was made a party defendant, tion an action of [at] law begun before any
The Constitution of Ohio (1851), art. 13, action to enforce the stockholders' liability, § 3, is as follows:
and has recovered final judgment only after “Dues from corporations shall be secured such an action to enforce the stockholders' by such individual liability of the stock liability has been prosecuted to a final deholders, and other means, as may be pre- cree in the court in which the action was scribed by law; but in all cases, each stock commenced, such judgment creditor may holder shall be liable, over and above the bring a like action against the stockholders stock by him or her owned, and any amount of the corporation to enforce such judgment unpaid thereon, to a further sum, at least at any time within four years after the reequal in amount to such stock."
covery of his said judgment, but the stockIn pursuance of this provision of the Con- holders shall not be liable for any amount in stitution the legislature of Ohio adopted excess of that provided in § 3258.” statutory provisions with respect to the As so amended this section stood at the
time when this suit was begun. Afterwards, less than six months from the first publicain 1900, but before the filing of the section of such order, and, in default thereof, ond amended bill of complaint, the section, to be precluded from all benefit of the judg. as further amended and supplemented, pro- ment which shall be rendered in such acvided as follows:
tion, and from any distribution which shall “Sec. 3260. Whenever any creditor of a be made under such judgment. corporation seeks to charge the directors, “Sec. 3260 (f). Upon a final judgment trustees, or other superintending officers of in any such action against an insolvent cora corporation, or the stockholders thereof, poration, the court shall cause a just and on account of any liability created by law, fair distribution of the property and assets he may file his complaint for that purpose of such corporation or the proceeds thereof in any common pleas court which possesses to be made among its creditors. jurisdiction to enforce such liability.
“Sec. II. That said § 3260 be, and hereby “Sec. 3260 (a). The court shall proceed is, repealed. thereon, as in other cases, and, when neces- “Sec. III. This act shall apply to pending sary, shall cause an account to be taken actions, and shall take effect and be in of the property and obligations due to and force from and after its passage." from such corporation, and may appoint The court below sustained the demurrer one or more receivers.
on the following ground: “Sec. 3260 (6). If, on the coming in of “It is thought that the question raised by the answer or upon the taking of such ac- this demurrer should be decided upon the count, it appears that such corporation is assumption that the action is the one proinsolvent, and has not sufficient property vided for by $ 3260, Ohio Rev. Stat. as it or effects to satisfy such creditor, the court stood after the amendment of 1894. Inasmay proceed to ascertain the respective lia- much as that section expressly provides for bilities of the directors, officers, and stock an action jointly against all the stockholdholders, and enforce the same by its judg-ers, including such as are out of the jument, as in other cases.
risdiction or for other causes cannot be “Sec. 3260 (c). In all cases in which the served, and the complaint avers that there directors or other officers of a corporation, are stockholders who have not been made or the stockholders thereof, are made parties parties, there is a lack of parties defendto an action in which a judgment is ren- ant, and the demurrer is sustained. If, dered, if the property of such corporation moreover, the amendments of the statute is insufficient to discharge its debts, the passed in 1900 are to be considered, the court shall give notice to nonresident stock position of the demurrants is even stronger. holders, as provided in $$ 5048, 5049, 5050, Manifestly, this action is not the one there5051, or 5052 of the Revised Statutes, and by provided for.” shall first proceed to compel each stockholder to pay in the amount due and re- Messrs. Frederick C. McLaughlin and maining unpaid on the shares of stock held Harvey Scribner for the bank. by him, or so much thereof as is necessary Mr. Lucius H. Beers for Eno et al. to satisfy the debts of the company.
Mr. Joseph Fettretch for Hudson. “Sec. 3260 (d). If the debts of the com- Messrs. Charles N. Judson and Wil. pany remain unsatisfied, the court shall liam B. Hale for Ivison. proceed to ascertain the respective liabilities Mr. Arthur F. Cosby for Clews et al. of the directors or other officers and of the Mr. John G. Milburn for Astor. stockholders, and to adjudge the amount payable by each, and enforce the judgment Mr. Justice Peckham, after making the as in other cases. The court may authorize foregoing statement, delivered the opinion and direct the receiver to prosecute such of the court:
The questions propounded by the circuit be necessary, in other jurisdictions, to col- court of appeals are the following: lect the amount found due from any officer First. Whether art. 13, § 3, of the Conor stockholder.
stitution of Ohio is so far self-executing “Sec. 3260 (e). Whenever any action is that it may be enforced outside of the jubrought against any corporation, its direct- risdiction of said state without compliance ors or other superintending officers, or with said requirements of § 3260 of the stockholders, according to the provisions of Revised Statutes of said state as amended this chapter, the court, whenever it appears in 1894. necessary or proper, may order notice to be Second. Whether art. 13, § 3, of the Conpublished in such manner as it shall direct, stitution of Ohio is so far self-executing requiring all creditors of such corporation that it may be enforced outside of the juto exhibit their claims and become parties risdiction of said state without compliance to the action, within a reasonable time, not 'with said requirements of § 3260 of the
action in his own name as receiver, as mayo
Revised Statutes of said state as amended | bility. The cases of Wright v. McCormack, in 1900.
17 Ohio St. 86, and Umsted v. Buskirk, 17 The counsel for the complainant contends Ohio St. 113, were both brought under a that the article of the Ohio Constitution, statute enacted to provide a method for above set forth, is self-executing to the ex- enforcing the constitutional liability, and tent of declaring the general contractual in the former case the courts speaks of the obligation and the general rule as to prop- liability of the stockholders as a “statutory erty rights; and it is insisted that the lia- liability,” and of the statute itself as a bility of the stockholders in the railway statute under which the liability arises." corporation may be enforced by the courts That was an early statute, passed not long of another jurisdiction without compliance after the adoption of the constitutional prowith the requirements of any of the statutes vision, and for the purpose of executing it. which have been passed by the legislature of | 50 Ohio Laws, 296, passed May 1, 1852. Ohio in regard to the enforcement of the Wright v. McCormack was approved in liability provided for in the Constitution. Umsted v. Buskirk, 17 Ohio St. 113. SubThese statutes, it is said, refer only to the sequent statutes were passed for the same form and mode of-procedure in local courts, purpose of enforcing the liability of stockand neither of them contains any limita- holders, and those set out in the record not tion or condition imposed upon the sub- only definitely state the liability, but give stantive right declared by the Constitution, the procedure and provide the remedy in as construed and enforced by the Ohio order to enforce it. It will be seen that the courts for many years prior to the statu- constitutional provision refers in terms to tory enactments.
the securing of dues from corporations by We have not been referred to any de- the individual liability of stockholders, and cision of the Ohio supreme court directly by such other means as may be prescribed involving the question whether the provi- by law. The Constitution evidently looks sion of the Constitution referred to is self- to the legislature for providing means. A executing or not. If there were any such statute which is passed in pursuance of such decision we should follow it. That court a provision, and which itself provides for has, however, regarded the liability of stock- the procedure and states the remedy, even holders as statutory in its nature, as is though imposing no limit or conditions in seen from its decisions in the cases herein- regard to such liability other than such as after cited.
are found in the constitutional provision itThe question has arisen in some of the self, is, nevertheless, a statute providing other states regarding this same provision, a remedy which is to be followed within and it has been held to be not self-executing the principle sustained by the authorities. Barnes v. Wheaton, 80 Hun, 8, 29 N. Y. cited below. The statute, under such cirSupp. 830. In that case it was held by the cumstances, may be said to so far provide appellate division that it was obvious that for the liability and to create the remedy the provision was not self-executing, but its as to make it necessary to follow its propurpose was to confer upon the legislature visons and to conform to the procedure prothe power and impose upon it the duty of vided for therein. See Pollard v. Bailey, 20 securing dues from corporations by impos- Wall. 520, 526, 22 L. ed. 376, 378; Fourth ing upon the stockholders of such corpora- Nat. Bank v. Francklyn, 120 U. S. 747, 756, tions as are organized under the laws of 758, 30 L. ed. 825, 829, 7 Sup. Ct. Rep. 757 ; that state an individual liability, and by Evans v. Nellis, 187 U. S. 271, 47 L. ed. such other means as, in its discretion, it 173, 23 Sup. Ct. Rep. 74; Morley v. Thayer, should deem proper, but limiting such pow 3 Fed. 737, circuit court, district of Massaer and discretion by the provision that each chusetts; Cleveland, L. & W. R. Co. v. Kent, stockholder should be made liable to an 87 Hun, 329, 34 N. Y. Supp. 427; Nimick v. amount at least equal to the amount of Mingo Iron Works Co. 25 W. Va. 184. In stock held by him. This provision was not Fourth Nat. Bank v. Francklyn, 120 U. S. regarded as imposing a liability independ-747, 756, 758, 30 L. ed. 825, 829, 7 Sup. Ct. ent of the statute, nor as conferring upon Rep. 757. Mr. Justice Gray, speaking for the plaintiff any right to maintain the ac- this court, said: "In all the diversity of tion then before the court. It has been opinion in the courts of the different states, held substantially to the same effect in upon the question how far a liability im. Nimick v. Mingo Iron Works Co. 25 W. posed upon stockholders in a corporation Va. 184.
by the law of the state which creates it can But whether the constitutional provision be pursued in a court held beyond the limits might be regarded as, to a certain extent, of that state, no case has been found in self-executing in the absence of any statute which such a liability has been enforced on the subject, we find that the legislature of by any court without a compliance with Ohio has passed statutes to enforce such lia-'the conditions applicable to it under the legislative acts and judicial decisions of the Circuit Court in that state enforcing the state which creates the corporation and im- lien of an assessment for a street improveposes the liability. To hold that it could ment. Affirmed. be enforced without such compliance would See same case below, 25 Ky. L. Rep. 1024, be to subject stockholders residing out of 76 S. W. 1097. the state to a greater burden than domes- The facts are stated in the opinion. tic stockholders." In order to comply with Messrs. Helm Bruce, James P. Helm, the conditions of the statute of Ohio it and T. K. Helm for plaintiff in error. seems plain from the provisions of the stat- Messrs. William Furlong, A. E. ute that the action must be brought in that Richards, Benjamin F. Washer and Henry state.
25 S. C.-30.
L. Stone for defendants in error. In the case now before us the complainant has paid no attention to the statutes Mr. Justice Holmes delivered the opinof Ohio, so far as bringing suit in that ion of the court: state is concerned, and therefore has not This is a proceeding under the Kentucky followed the provisions contained in them. Statutes, § 2834, to enforce a lien upon a It has commenced no action in the state of lot adjoining a part of Frankfort avenue, Ohio, but, on the contrary, assumes to ask in Louisville, for grading, curbing, and pavthe Federal circuit court in New York state ing with asphalt the carriage way of that to administer the relief asked for in its part of the avenue. The defendant, the bill, against stockholders who are residents plaintiff in error, pleaded that its only inof New York, the same as if the suit had terest in the lot was a right of way for been commenced in Ohio. This, we think, its main roadbed, and that neither the right the complainant could not do. By the terms of way nor the lot would or could get any of the Ohio statute, properly construed, the benefit from the improvement, but, on the remedy must be pursued in the courts of contrary, rather would be hurt by the inthat state. The case of a plaintiff failing crease of travel close to the defendant's to obtain satisfaction of his judgment by tracks. On this ground it set up that any following, in Ohio, the remedies given by special assessment would deny to it the the Ohio statute, is not before us, and we equal protection of the laws, contrary to need not determine the character of any the 14th Amendment of the Constitution other remedy, or where it may be enforced. of the United States. It did not object to
We therefore answer the first question in the absence of the parties having any reverthe negative. It is unnecessary to answer sionary interest, but defended against any the second question. The answer will be special assessment on the lot. The answer certified to the Circuit Court of Appeals for was demurred to, judgment was rendered the Second Circuit.
for the plaintiff, and this judgment was So ordered.
affirmed by the Kentucky court of appeals.
25 Ky. L. Rep. 1024, 76 S. W. 1097. A writ (197 U. S. 430)
of error was taken out, and the case was LOUISVILLE & NASHVILLE RAILROAD
brought to this court. It will be noticed COMPANY, Piff. in Err.,
that the case concerns only grading, curb
ing, and paving, and what we shall have to BARBER ASPHALT PAVING COMPANY say is confined to a case of that sort. and The City of Louisville.
The state of Kentucky created this lien
by a statute entitled "An Act for the Gov. Public improvements-assessment under
ernment of Cities of the First Class.” Louisarea rule—lack of benefits as depending ville is the only city of the first class at on use of property.
present in Kentucky, and the general prinThe fact that the only use made of a lot ciples of the act are taken verbatim from
abutting on a street improvement is for a the part of the charter of Louisville which railway right of way does not make invalid, was considered and upheld by this court in under U. S. Const. 14th Amend., for lack Walston v. Nevin, 128 U. S. 578, 32 L. ed. of benefits, an assessment thereon for the 544, 9 Sup. Ct. Rep. 192. But we take the grading, curbing, and paving, made under the area rule prescribed by Ky. Stat. 88 statute as a general prospective law, and 2833, 2834.
not as a legislative adjudication concerning
a particular place and a particular plan, [No. 170.]
such as may have existed in Spencer v. Mer. Argued March 7, 8, 1905. Decided April 3, chant, 125 U. S. 345, 31 L. ed. 763, 8 Sup. 1905.
Ct. Rep. 921, and as was thought to exist
in Smith v. Worcester, 182 Mass. 232, 59 N ERROR to the Court of Appeals of the L. R. A. 728, 65 N. E. 40, referred to at the
State of Kentucky to review a judgment argument. which affirmed a judgment of the Jefferson The law provides in the case of original
construction, such as this improvement was, contrary to the Constitution of the United that it shall be made at the exclusive cost States. Walston v. Nevin, 128 U. S. 578, of the adjoining owners, to be equally ap- 32 L. ed. 544, 9 Sup. Ct. Rep. 192; French portioned according to the number of feet v. Barber Asphalt Paving Co. 181 U. S. 324, owned by them. In the case of a square 45 L. ed. 879, 21 Sup. Ct. Rep. 625; Webor subdivision of land bounded by principal ster v. Fargo, 181 U. S. 394, 45 L. ed. 912, streets, which the land including the de-21 Sup. Ct. Rep. 623; Cass Farm Co. v. fendant's lot was held to be (see Cooper v. Detroit, 181 U. S. 396, 45 L. ed. 914, 21 Sup. Nevin, 90 Ky. 85, 13 S. W. 841; Nevin v. Ct. Rep. 644; Detroit v. Parker, 181 U. S. Roach, 86 Ky. 492, 499, 5 S. W. 546), the 399, 45 L. ed. 917, 21 Sup. Ct. Rep. 624; land is assessed half way back from the Chadwick v. Kelley, 187 U. S. 540, 543, improvement to the next street. Act of 544, 47 L. ed. 293–295, 23 Sup. Ct. Rep. 1898, chap. 48; Ky. Stat. § 2833. A lien 175; Schaefer v. Werling, 188 U. S. 516, 47 is imposed upon the land, and “the general L. ed. 570, 23 Sup. Ct. Rep. 449; Seattle v. council, or the courts in which suits may Kelleher, 195 U. S. 351, 358, 25 Sup. Ct. be pending, shall make all corrections, rules, Rep. 44, 49 L. ed. 232. and orders to do justice to all parties con
A statute like the present manifestly cerned.” § 2834. The principle of this might lead to the assessment of a particumode of taxation seems to have been fa- iar lot for a sum larger than the value of miliar in Kentucky for the better part of the benefits to that lot. The whole cost of
. a hundred years. Lexington v. McQuillan, the improvement is distributed in propor9 Dana, 513, 35 Am. Dec. 159.
tion to area, and a particular area might The argument for the plaintiff in error receive no benefits at all, at least if its presoscillates somewhat between the objections ent and probable use be taken into account. to the statute and the more specific grounds If that possibility does not invalidate the for contending that it cannot be applied act, it would be surprising if the correconstitutionally to the present case. So far sponding fact should invalidate an assessas the former are concerned they are dis- ment. Upholding the act as embodying a posed of by the decisions of this court. principle generally fair and doing as nearly There is a look of logic when it is said that equal justice as can be expected seems to special assessments are founded on special import that if a particular case of hardbenefits, and that a law which makes it ship arises under it in its natural and ordipossible to assess beyond the amount of the nary application, that hardship must be special benefit attempts to rise above its borne as one of the imperfections of human source. But that mode of argument as- | things. And this has been the implication sumes an exactness in the premises which of the cases. Davidson v. New Orleans, 96 does not exist. The foundation of this fa- U. S. 97, 106, 24 L. ed. 616, 620; Mattingly miliar form of taxation is a question of v. District of Columbia, 97 U. S. 687, 692, theory. The amount of benefit which an 24 L. ed. 1098, 1100; Parsons v. District of improvement will confer upon particular Columbia, 170 U. S. 45, 52, 55, 42 L. ed. land-indeed, whether it is a benefit at all 943, 946, 947, 18 Sup. Ct. Rep. 521; De-is a matter of forecast and estimate. In troit v. Parker, 181 U. S. 399, 400, 45 L, ed.
, L. its general aspects, at least, it is peculiarly 917, 921, 21 Sup. Ct. Rep. 624; Chadwick v. a thing to be decided by those who make the Kelley, 187 U. S. 540, 544, 47 L. ed. 293, law. The result of the supposed constitu- 294, 23 Sup. Ct. Rep. 175. tional principle is simply to shift the bur- But in this case it is not necessary to den to a somewhat large taxing district,-- stop with these general considerations. The the municipality, and to disguise, rather plea plainly means that the improvement than to answer, the theoretic doubt. It is will not benefit the lot, because the lot is dangerous to tie down legislatures too close occupied for railroad purposes and will conly by judicial constructions not necessarily tinue so to be occupied. Compare Chicago, arising from the words of the Constitution. B. d Q. R. Co. v. Chicago, 166 U. S. 226, Particularly, as was intimated in Spencer v. 257, 258, 41 L. ed. 979, 992, 17 Sup. Ct. Merchant, 125 U. S. 345, 31 L. ed. 763, 8 Rep. 581. That, apart from the specific use Sup. Ct. Rep. 921, it is important for this to which this land is devoted, land in a goodcourt to avoid extracting from the very gen-sized city generally will get a benefit from eral language of the 14th Amendment a sys- having the streets about it paved, and that tem of delusive exactness in order to de- this benefit generally will be more than the stroy methods of taxation which were well cost, are propositions which, as we already known when that amendment was adopted, have implied, a legislature is warranted in and which it is safe to say that no one then adopting. But, if so, we are of opinion supposed would be disturbed. It now is es- that the legislature is warranted in going tablished beyond permissible controversy one step further and saying that on the that laws like the one before us are not' question of benefit or no benefit the land