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Independent of that liability, a further personal liability has frequently been imposed by statute or by articles of association for the purpose of still further securing persons giving credit to corporations. Such liability is not dependent upon the question whether anything remains unpaid upon the subscription.1

Sometimes the individual liability is absolute; in other instances, joint and several; but, generally, it is placed at such proportion of the debts and liabilities as the amount of stock owned by him bears to the whole of the subscribed capital stock or shares of the corporation, and for a like proportion only of each debt or claim against the corporation, and is further limited to those debts contracted while the relation of shareholder existed. But whatever the character of the liability imposed, the authorities are uniform in giving such statutes a strict construction, and seldom, if ever, extend them by implication beyond the plain purport of the language employed.2

The National Bank Act imposes a personal liability upon stockholders, and provides that the estate of a shareholder in the hands of the executor shall be liable

1 Root v. Sinnock, 120 Ill. 350; 11 N. E. 339; McDonnell v. Ala. G. L. Ins. Co., 85 Ala. 401. But a liability imposed in a state constitution is not self. enforcing. Statutory provisions giving a remedy are necessary. Morley v. Thayer, 3 F. 737. If the liability is imposed upon stockholders of certain classes of corporations, and not upon those of other persons, ostensibly organizing as a corporation of the latter class, but really to become and to carry on the business of the former, do not, by so organizing, escape the statutory liability. State v. Minn. T. M. Co., 40 Minn. 213; Mohr v. Minnesota El. Co., Id. 343. See also Young v. Iron Co., 65 Mich. 111.

2 Chase v. Lord, 77 N. Y. 1; Chamberlain v. Huguenot Mfg. Co., 118 Mass. 532; Gray v. Coffin, 9 Cush. 192; Coffin v. Rich, 45 Me. 511; O'Reilly v. Bard, 105 Pa. St. 569; Salt Lake City Nat. B'k v. Hendrickson, 40 N. J. Law, 52; Windham Prov. Inst., etc., v. Sprague, 43 Vt. 502; Bassett v. St. Albans Hotel Co., 47 Vt. 313; Mayer v. Penn. Slate Co., 71 Pa. St. 293; Diven v. Lee, 36 N. Y. 302; Priest v. Essex Hat Mfg. Co., 115 Mass. 380; Davidson v. Rankin, 34 Cal. 503; Dewey v. St. Albans Trust Co., 57 Vt. 332.

in like manner and to the same extent that the testator would be if living.1

§ 901. Whether contractual or penal. There is a conflict in the decisions and authorities as to the exact nature of the liability under such statutes.. It is said, and the weight of authority seems to favor this view, that it arises from a contractual relation upon the theory that the statute is a mere general declaration of municipal law, and that when one becomes a shareholder in a corporation he voluntarily assumes ex contractu the obligations imposed by law.2

Such statutes must be distinguished not only from the common law liability for unpaid subscriptions, but also from the statutes making stockholders liable for the debts of the corporation or for fixed sums for acts of dereliction on the part of the officers and agents of the corporation. The latter are generally held to be and are construed as penal.3

1 Richmond v. Irons, 121 U. S. 27; 7 S. Ct. 788; Witters v. Sowles, 32 F. 130, holding that assets which have been transferred to devises or legatees cannot be subjected to liabilities of the bank accruing after the transfer. The statutory individual liability under the national banking law applies to a married woman who is such a shareholder, without regard to the manner in which the stock was acquired. Witters v. Sowles, 32 F. 767; Same v. Same, 35 F. 640, holding also that the remedy to enforce the assessment against the married woman and to charge her separate property is at law, and not in equity.

But the liability may be enforced by a bill in the nature of a creditors' bill brought by any creditor on behalf of himself and all other creditors. Gatch v. Fitch, 34 F. 566.

* Sullivan v. Sullivan Mfg. Co., 14 S. Car. 494, 500; Manville v. Edgar, 8 Mo. App. 324; Terry v. Calman, 13 S. Car. 220, 227; Nimick v. Mingo Iron Wks. Co., 25 W. Va. 184; Moore v. Boyd, 74 Cal. 167; 15 P. 670. See Wiles v. Suydam, 64 N. Y. 173; Corning v. McCullough, 1 Const. 47, 55; Moss v. McCullough, 5 Hill, 133, per CowAN, J.; McMahon v. Macy, 51 N. Y. 155. Under the Illinois statute. if defendant is shown to have been a stockholder when the suit is brought, it is not necessary to show in addition that he was such when the cause of action accrued. Root v. Sinnock, 120 Ill. 350.

3 Sayles v. Brown. 40 F. 8, where a statute of Rhode Island, imposing a liability upon the stockholders for the debts of the corporation for failure of the

§ 902. Whether primary or secondary.-In California, it is well settled by several decisions of the Supreme Court, that the right of action under the statutory provisions, accrues against the stockholder at the same time as against the corporation. Upon the construction generally given similar statutes an individual corporator, in respect to his personal liability for the debts of the corporation, does not occupy the position of a surety, but that of a principal debtor. His responsibility commences with that of the corporation, and continues during the existence of the indebtedness. It has been held not contingent, but absolute and unconditional.2

§ 903. When nature of liability becomes important.— The question whether the liability arises ex contractu or is penal in character becomes important when its enforce

officers to file a statement of capital paid in, and amount of indebtedness was held to impose a penalty and hence was not enforceable in the state of Maryland. 1 Civ. Code, sec. 322; Davidson v. Rankin, 34 Cal. 503; Larabee v. Baldwin, 35 Cal. 168; Stilphen v. Ware, 45 Cal. 110.

2 Mokelumne Hill, etc., Co. v. Woodbury, 14 Cal. 265; Davidson v. Rankin, 34 Id. 503; Young v. Rosenbaum, 39 Id. 646; Sonoma Va. B'k v. Hill, 59 Id. 107; Faymondville v. McCullough, Id. 285; Mitchell v. Beckman, 64 Id. 117; Morrow v. Superior Court, Id. 383; Fuller v. Ledden, 87 Ill. 310; Todhunter v. Randolph, 29 Ind. 275; Perkins v. Saunders, 56 Miss. 733; Flash v. Conn, 16 Fla. 428; Stewart v. Lay, 45 Iowa, 604. Under a bank charter that provides that, on default by the bank in the payment of any debt or liability, the stockholders shall be held individually responsible for an amount equal to the amount of stock held by them respectively, the stockholders are, in effect, partners, and not as sureties to the creditors of the bank. Schalucky v. Field, 124 Ill. 617; 16 N. E. 904.

In an action to enforce the personal liability of stockholders, under Rev. St. Wis., § 1773, for a corporate obligation, the liability is primary and absolute, arising upon the creation of the obligation, and limited only by the debt contracted, and does not fall within the provision of Rev. St. Wis., § 3224, that the court, "when necessary," shall cause an account to be taken of debts due to and from the corporation, shall appoint a receiver, etc., but may be enforced by action at law. Flour City Nat. Bank v. Wechselberg, 45 F. 547.

A complaint in an action to enforce the personal liability of stockholders, which charges that defendants "were all of the stockholders" of the corporation, though possibly objectionable, on a motion to make more definite and certain, will not be held demurrable, as failing to charge that defendants were stockholders. Flour City Nat. Bank v. Wechselberg, 45 F. 547.

ment is sought in a tribunal of a state other than that whose statutes impose it. It is well settled that the validity, effect and enforceability of contracts are governed by the lex loci contractu while statutes imposing penalties have no extra territorial force. If the liability sought to be enforced is in the nature of a contract and is not opposed to the legislation or public policy of the state in which its enforcement is sought, the courts of that state will give effect to it; but it will be otherwise if it be penal in its nature.1

The liability of stockholders is determined by examination of the charter or statutes under which the corporation is organized.2 But the law of the former determines the method of enforcing the liability. But there is no doubt of the contractual nature of the liability between the stockholders for contribution under such statutes.*

1 First Nat. B'k v. Gustin-Minerva Consol. Min. Co., 42 Minn. 327; 6 L. R. An. 676; Sav. Ass'n v. O'Brien, 51 Hun, 45; Derrickson v. Smith, 27 N. J. L. 166; Plymouth First Nat. B'k v. Price, 33 Md. 487; Halsey v. McLean, 12 Allen, 438; Gale v. Eastman, 7 Metc. 14; Scoville v. Canfield, 14 Johns. 338; Ogden v. Folliott, 3 L. R. 733; State v. John, 5 Ohio, 217. Statutes imposing a liability upon stockholders for failure to give certain notices are penal in character and not enforceable beyond the state enacting them. Sayles v. Brown, 40 F. 8; Sturges v. Burton, 8 Ohio St. 215; Kritzer v. Woodson, 19 Mo. 327; Hill v. Frazer, 23 Pa. St. 320; Harrisburg B'k v. Com., 26 Pa. St. 451; Andrews v. Murray, 33 Barb. 354; Shaler Hall Quarry Co. v. Bliss, 34 Barb. 309; Boughton v. Opis, 21 N. Y. 261; Squires v. Brown, 22 How. Pr. 35, 45; Bird v. Hayden, 1 Robt. 383; Cable v. McCune, 26 Mo. 371; Lawler v. Burt, 7 Ohio St. 341.

2 Bingham v. Rushing, 5 Ala. 406; Lane v. Morris, 8 Ga. 474; Bank v. Gustin, etc., Min. Co., 42 Minn. 327; Shaw v. Baylan, 16 Ind. 384; Summer v. Marcy, 3 Woodb. & M. 105; Bank of St. Marys v. St. John, 25 Ala. 620; Smith v. Huckabee, 53 Ala. 193; Trustees v. Flint, 13 Met. 539; Coffin v. Rich, 45 Me. 510.

2 New Haven Horse Shoe Nail Co. v. Linden Spring Co., 142 Mass. 349; First Nat. B'k v. Gustin-Minerva, etc., Min. Co., supra; May v. Black (Wis.), 45 N. W. 549; Sayles v. Brown, 40 F. 8.

4 Sav. Ass'n v. O'Brien, 51 Hun, 45. See also, Perry v. Turner, 55 Mo. 418; State Sav. Ass'n v. Kellogg, 63 Id. 540; Donnelly v. Mullwal, 12 Mo. App. 139. "The laws of the state where a corporation is organized, as construed by the courts thereof, are rules of property as to the rights and liabilities between the

§ 904. The remedy.-More or less difficulty is encountered in attempting to reconcile cases of this class in which the question of remedy arises unless special attention is given to the precise language of the statute under consideration. The remedy must always be such as is appropriate to the liability to be enforced.

The statute which creates the liability may declare the purposes of its creation and provide directly or indirectly a remedy for its enforcement.1 If the statute creating the liability prescribes a remedy that only is available whether the proceeding is instituted in the state creating the corporation or elsewhere, and whether in the state or federal courts.2

But in the absence of statutes containing specific provisions on the subject, and prescribing the remedy according to the weight of authority, creditors of the corporation must exhaust their remedies against the corporation and its assets before proceeding against the shareholders upon their statutory liability.3

There are a number of authorities which seemingly conflict with this view; but they will be found to be

corporation and stockholders; and stockholders resident in that state who have been made liable as such under those laws for corporate debts may in equity maintain an action in a federal court for contribution against a non-resident stockholder, notwithstanding the fact that the principal liability could not have been enforced anywhere except in that state." Allen v. Fairbanks, 45 F. 445. 1 Terry v. Little, 101 U. S. 217. See Davison v. Rankin, 34 Cal. 503; Young v. Rosenbaum, 39 Id. 646; Sonoma Val. B'k v. Hill, 59 Id. 107; Mitchell v. Beckman, 64 Id. 177; Fuller v. Ledden, 87 Ill. 310; Todhunter v. Randolph, 29 Ind. 275; Perkins v. Sanders, 57 Miss. 733; Flash v. Conn. 16 Fla. 428; Stewart v. Lay, 45 Ia. 604. Under the California statute no previous recovery against the corporation is necessary, nor is a previons demand essential to a right of action against a stockholder where it would have been useless. Davidson v. Rankin, 34 Cal. 503; Young v. Rosenbaum, 39 Cal. 646; Mitchell v. Beckman, 64 Id. 117.

2 Fourth Nat. B’k v. Francklyn, 7 S. Ct. 757.

3 Mean's App., 85 Pa. St. 75; Fourth Nat. B'k v. Franklyn, 120 U. S. 747; Boylins v. Swift, 40 Ia. 648; McClaren v. Franciscus, 43 Mo. 452; Wright v. McCormick, 17 O. St. 86; Lane v. Harris, 16 Ga. 217; Drinkwater v. Portland, etc., Ry. Co., 18 Me. 35; Douchy v. Brown, 24 Vt. 197.

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