§ 909. Meaning of "debts and liability" as used in the statute. It has been repeatedly decided that individual stockholders were not liable to creditors for damages arising from the commission of torts by the company's agents under statutes which imposed such liability for "debts" only. only. But when the term " liabilities" is used in connection with it, the combination seems sufficiently comprehensive to include all acts and species of obligation and wrong, for which a civil action would lie, except such as are purely penal in character.

But the torts of the company's agents for which an action would lie against the individual shareholder, are only such as would authorize an action against the corporation itself. But it seems that though a statute does not impose liabilities for torts, yet if a judgment for damages arising for a tort be first recovered against the corporation, the judgment itself becomes an indebtedness which may be recovered against a stockholder.1

the State of Illinois, cannot enforce against a stockholder in the corporation, the liability imposed by the Illinois statute on each stockholder for double the amount of his stock, such liability being one in favor of creditors of the bank and not in favor of the corporation.

1 A corporation being the lessee of property permitted waste thereon for which the lessor in an action for damages recovered a judgment for $5,300 and the corporation being insolvent brought suit against a stockholder thereof on whose stock more than that amount was then unpaid to enforce the payment of the judgment. It was held that whether the original claim of the plaintiff for damages was or was not an "indebtedness" of the corporation within the scope of Section 3, Article 11, of the Constitution of Oregon, which declares that a stockholder of a corporation "shall be liable for the indebtedness" of the same to the amount unpaid on the stock, the judgment thereon is such an "indebtedness." Being a question of construction, the decision is applicable to cases of special statutory liability. Powell v. Oregonian Ry. Co., 36 Fed. Rep. 726. An employee is not estopped to proceed against stockholders of an insolvent corporation for his wages where the charter provides for their individual liability by taking a note from the corporation and obtaining judgment thereon for such wages, and receiving a pro rata on his claim out of the corporate assets. Jackson v. Meek, 87 Tenn. 69. The court considered that the individual liability of stockholders was designed merely to supply any deficiency of the corporate assets. But when the liability of a stockholder attaches irrespective of any judgment against the company, the recovery of a judgment sub

Although a judgment against the corporation is conclusive upon the stockholders, as to the fact and extent of the company's liability, it is not conclusive upon the questions whether the cause of action adjudicated was of a nature to involve an individual liability and whether the conditions as to ownership of stock and the fact of such ownership at the time specified existed.1

3

It has been held that the words "debts contracted" mean all liabilities incurred against the corporation during membership, whether ex contractu or ex delicto.2 But this is not according to the present general view; Among the demands which have been held to be debts" within the statutes are: liability upon a breach of warranty, and a claim for unliquidated damages for breach of contract by a corporation.

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But

a stockholder is not liable as for a debt for a claim for damages against a corporation, arising from the negligence or misfeasance of its servants; At any rate,

sequent thereto will not prolong the statutory period of limitation. Still hen v. Ware, 45 Cal. 110.

1 Baker v. Brown, 33 Mich. 247; Powell v. Williamette, etc., R. Co., 15 Or. 393; Howell v. Manglesdorf, 6 Am. & Eng. Cor. Cas. 413. In an action to subject the stockholders of a corporation to liability for corporate debts, on the ground that no proper certificate of certain increased stock issued by the company was ever filed, it appeared that the original stock, and an increase thereof, up to $70,000, had been fully paid, and the certificate duly filed. Held, that the burden was on plaintiff to show that defendants' stock was increased stock of an issue subsequent to the first $70,000. Griffith v. Green, 13 N. Y. S. 470.

In an action under Pub. St. R. I. c. 155, making stockholders liable for debts of the corporation “then existing," upon their failure to file the required annual certificate, evidence, other than the judgment against the corporation, is admissible to show when it contracted the debt sought to be enforced against the stockholder. Congdon v. Winsor (R. I.), 21 A. 540; holding also that the stockholders are liable, if a false certificate of the assets and liabilities of the company is filed.

2 Carver v. Braintree, 2 Story (U. S.), 432–7.

3 Child v. Boston & F. Iron Wks., 137 Mass. 516; Dolittle v. Marsh, 71 Neb. 243; Heacock v. Sherman, 14 Wend. 58.

• Dryden v. Kellogg, 2 Mo. App. 87.

5 Mill Dam Foundry v. Hovey, 21 Pick. 417.

Cable v. McCune, 26 Mo. 371.

he is not liable before judgment is obtained against the

corporation.1

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The phrase liable to the amount of his stock" as used in the constitutions and codes, means not simply the amount remaining unpaid on the stock, but an additional sum equal to the amount of the stock.2

§ 910. Judgment against corporation as evidence.—A judgment obtained against the corporation is conclusive against the shareholders of the indebtedness of the corporation3 except that it is subject to impeachment for fraud or on other grounds by them in any case where the corporation itself might successfully attack it.

A judgment duly obtained against the corporation, and an execution thereon returned nulla bona is, in a majority of the cases and in the absence of different statutory provisions, held to be a prerequisite to the right to proceed against the shareholder on his statutory liability.*

And it has been held that though the corporation be insolvent, the liability of stockholders for unpaid capital must be first resorted to.5 But this view is untenable

1 See Powell v. Oregonian Ry. Co., 36 F. 726. Nor are defendant shareholders chargeable with a previous unsuccessful attempt to have a receiver appointed when it was not necessary. Richmond v. Irons, 121 U. S. 27; 7 S. Ct. 188. They should not be charged with claiming of persons who failed to appear and prove their claims. Id. See Christensen v. Eno, 106 N. Y. 97; 2 N. E. 648; Peters v. Ft. M. C. Co., 72 Ia. 405; 34 N. W. 190.

2 McDonnell v. Ala. G. L. Ins. Co., 85 Ala. 401. The liability under the Alabama statute in favor of creditors does not accrue until after dissolution. Id. 3 Came v. Brigham, 39 Me. 35; Bullock v. Kilgour, 39 O. St. 543; Thayer v. New England Lithographic Co., 108 Mass. 523; Wilson v. The Stockholders, etc., 43 Pa. St. 424; Borland v. Haven, 37 Fed. Rep. 394; Hampton v. Weare, 4 Ia. 13; Donworth v. Coolbaugh, 5 Ia. 300; Farnum v. Ballard, etc., Machine Shop, 12 Cush. 507. The fact that plaintiff obtained his judgment in a federal court in the state, instead of in a state court, does not deprive him of this statutory remedy. Ballin v. J. & E. B. Friend Lace Importing Co. (Wis.), 47 N. W. 516.

Supra, § 824.

Stewart v. Lay, 45 Ia. 604; Wright v. McCormack, 17 O. St. 86.

under the statute of most of the states. The proceeding to set aside the judgment against the corporation would have to be brought in equity, or made available by cross action where the action on the judgment was brought in a court having both legal and equitable jurisdiction.

§ 911. Where the shareholder is also a creditor.-Under the statutes no more than with respect to his common law liability for unpaid capital will the shareholder be allowed to set off his indebtedness against the creditors. He must present his claims and share ratably with others in the distribution, unless there is a special provision in the statute, charter or articles to the contrary.1

If he could set off his claim as a creditor against his liability as a stockholder, he might be paid in full while the other creditors would receive only a part of the amount due them.2

§ 912. Priority of payment.-It is often an important question whether a creditor first suing a shareholder to enforce his individual liability; and who is guilty of no laches in prosecuting his suit, is entitled to a priority over a creditor suing subsequently but who first obtained judgment.

The supreme court of Illinois answered this question in the affirmative, giving as a reason that "otherwise it would be within the power of the stockholder on being sued to enforce his own terms with the creditor, or to entirely defeat his recovery by hunting up

1 Thebus v. Smiley, 110 Ill. 316; Re Empire City B'k, 18 N. Y. 200, 227; Grissell's Case, L. R. 1 Ch. 528; Black's Case, L. R. 8 Ch. 254. See Weber v. Fickey, 47 Md. 196; Emmert v. Smith, 40 Md. 123.

2 Re Empire City B'k, 18 N. Y. 200; Black & Co.'s Case, L. R. 18 Ch. 254,

201.

some other creditor with whom he could make satisfactory terms and confess judgment in his favor."1

The true principle is thus stated :-" Where separate actions are tolerated, the creditors of the corporation first suing a stockholder in respect of his individual liability acquires by the bringing of suit, a preference over other creditors which neither they nor the stockholder can defeat, unless possibly by bringing a general winding-up bill.

Such a suit may be said to be an equitable attachment of the stockholder's liability to the extent of the plaintiff creditors' claim. It follows that the stockholder after notice of such a suit, may not defeat the suing creditor, by paying the claim of other creditors so far as to exhaust his liability. If such a power existed, the stockholder could use it as a weapon to defeat creditors altogether.'

But where the action is in the first instance or becomes by interpleader a general winding-up proceeding to compel contribution by the stockholders and distribution among creditors, a court of equity marshals all the assets to which the creditors have a right to resort, equalizes the burdens upon the stockholders and make an equitable distribution among the creditors. In such case the merely legal as contra-distinguished from the equitable rights of the parties are of controlling consideration.3

§ 913. Parties at law. Where stockholders are made jointly and severally liable, the plaintiff creditor may

1 Thebus v. Smiley, 110 Ill. 316, 319. See also, Jones v. Willberger, 42 Ga. 575; Wells v. Robb, 43 Kan. 201.

2 Thompson on Liability of Stockholders, § 424. Under the Colorado statute (Laws 1883, c. 19, § 43), in an action against all the stockholders for the entire debt of the corporation a judgment by default against one for the whole amount will be reversed. Buenz v. Cook (Colo.), 24 P. 679.

3 Chicago v. Hall, 103 Ill. 342.