Case ID: ohio-st_65/html/0321-01.html
Source: Caselaw Access Project
Author: {"author": "Speak, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Kulp v. Fleming.
    
      Individual liability of corporation stockholder — Provision of statutes does not alone create liability — Legal status of stockholder under the statute — Rule as to statute becoming part of contract — Validity of contract where made, recognized where performed, tohen — Construction of statute of sister state by highest court followed — Stockholders liability in Kansas enforced in Ohio, when — Interstate law — Contract law.
    
    1. A provision of statute that the stockholders of a corporation shall be individually liable to creditors for the debts of the company does not alone create the liability. It is rather a legislative requirement that whoever becomes a stockholder shall thereby assume an individual liability, and thus gives legal effect to the acts of the parties. The actual liability becomes operative by the act of a shareholder in becoming such, being founded on his proposal to become liable which arises from the membership and individual agreement to abide by the organic law of the corporation, and the acceptance thereof by the creditor by extending credit. Such obligation is contractual.
    2. The law of the state where a contract is executed and is to be performed, enters into and becomes a part of the contract in the sense that its construction, validity and obligatory effect are to be controlled by that law; and when valid there the contract will be sustained elsewhere, and accorded the interpretation required by the law of the place where made, unless the contract is against good morals, or contravenes a settled policy of the state in whose tribunals its enforcement is sought.
    3. The construction of the statute of a sister state by its highest court will be followed by this court.
    
      4. The individual liability of stockholders for debts of a corporation, provision for which is made by the constitution and statutes of Kansas, is not penal but is contractual. That liability may be enforced in Ohio. And a petition of a creditor in a suit against a stockholder which shows the constitutional and statutory provisions respecting such liability, and sets forth the construction given by the court of last resort of Kansas holding the liability to exist and to be several and contractual, and alleges other facts showing the ownership of the claim by plaintiff, the ownership of the stock by de fendant, the insolvency of the corporation, its dissolution under the provisions of the statute and that it had suspended business more than a year before the commencement of the action, states a cause of action.
    (Decided December 3, 1901.)
    Error to the Circuit Court of Medina county.
    The action below was brought by the defendant in error against the plaintiff in error in the common pleas of Medina, to recover on a claimed liability as' a stockholder in the State Bank of Kansas, a corporation of that state, the plaintiff below being a creditor of that corporation. A general demurrer to the amended petition having been sustained, and judgment against the plaintiff entered, error was prosecuted to the circuit court where the judgment of the common pleas was reversed and the cause remanded for further proceedings. To this judgment of reversal the defendant below brings error.
    The amended petition among other things avers that the defendant, Kulp, “is and has been for more than five years last past, a resident of the state of Ohio, and on the 15 th day of October, 1886, was and ever since has been, a stockholder in the State Bank of Oberiin, Kansas, a corporation organized in said state under the provisions of the constitution and laws thereof;” * * * that by article 12, section 2 of the constitution of the state of Kansas, in force at said date and to the present time, it was provided that “dues from corporations shall be secured by individual liability of the stockholders to an amount equal to the stock owned by each stockholder, and such other means as shall be provided by law;” * * * that section 46 of an act entitled “An act concerning private corporations,” passed by the legislature of said state of Kansas in 1868, and con-tinning in force to the time óf the filing of the amended petition, being section 1206 general statutes of said state, provides “that no stockholder shall be liable to pay debts of a corporation beyond the amount due on his stock and an additional amount equal to the stock owned by him;” * * * that section 40 of the above entitled act, as amended and passed in 1883, and continuing in force to the time of the filing of the amended petition, being section 1200 of general statutes of Kansas, among other things provides “that any corporation shall be deemed to be dissolved for the purpose of enabling any creditor of such corporation to prosecute suit against the stockholders thereof to enforce their individual liability, if it be shown that such corporation has suspended business for more than one year;” * * * that section 44 of said act, continuing in force to the time of the filing of the amended petition,-being section 1204 of general statutes of Kansas, provides among other things: “If any corporation created under this or any general statute of this state, except railway or charitable or religious corporations, be dissolved, leaving debts unpaid, suit may be brought against any person or persons who are stockholders at the time of such dissolution without joining the corporation in said suit.” The amended petition further averred a construction of the foregoing sections by the Supreme Court of the state of Kansas to the effect that under said statutes the liability of the stockholders to the creditors of a corporation is several and not joint; that each stockholder must be sued separately; that the liability arises upon contract, and the action to enforce it is transitory and may be brought in any state where service can be obtained on any stockholder; that the creditor who first proceeds by suit against a stockholder obtains a prior lien upon such stockholder’s liability.
    The amended petition made all other averments necessary, showing the ownership of the claim of the plaintiff; the ownership of stock by the defendant; the insolvency of the corporation; its dissolution under the provisions of the foregoing sections of the statute; that its property had been fully administered upon, appropriated and exhausted for the benefit of its creditors, and that at a date more than one year before the commencement of the action the corporation had suspended business.
    
      Lee Elliott, for plaintiff in error.
    In the first place we contend that a stockholder in a Kansas corporation is not liable for the debts of the corporation after his stock has been fully paid up. It is not claimed that any amount remained unpaid on Kulp’s stock in the State Bank of Oberlin, so that the liability upon which this action is founded, must be upon the double liability of stockholders. If not subject to this double liability as a holder of this stock, this action cannot be maintained against Kulp. In considering the question of liability of stockholders for the indebtedness of a corporation it should be borne in mind that the liability to creditors on unpaid stock is an entirely different thing from “double liability,” or the superadded liability to an amount equal to the amount of stock owned.
    The liability of a stockholder to creditors for the amount remaining unpaid on his stock existed at common law and might be subjected by any creditor to the payment of his claim, but after the stock had been fully paid up there was no liability on the part of the stockholder for the debts of the corporation in the absence of a statute creating such a liability. Morley v. Thayer, 3 Fed. Rep. 737; Terry v. Little, 101 U. S., 216; Carr v. Iglehart, 3 Ohio St., 457; Beach on Corp., 115; Pollard v. Bailey, 87 U. S., 520.
    The liability of the-defendant, Kulp, if it exists, must, therefore, rest on statutory provisions, and since it appears by the petition that the corporation for whose debts it is sought to charge the defendant with liability was organized in the state of Kansas under its constitution and laws, the test of liability must be the constitution of Kansas and the laws passed under it. And since, as to the courts of Ohio, Kansas is a foreign jurisdiction, only those provisions of the constitution and laws pleaded in the petition can be considered in determining the question of liability.
    The language of this provision does not purport to create any liability in and of itself, but is rather a direction to the legislative body that in its legislation authorizing the organization of corporations, if any such legislation is enacted under the constitution, dues from corporations must be secured in the mí nner pointed out, leaving it for the legislature to provide in detail the manner in which such security shall be effected and enforced. The entire language of the provision clearly contemplates legislative action in some manner to carry it into effect. It does not ex proprio vigore, create a liability itself, but leaves such liability to be brought into being by some future action of the legislature from which it will spring if any such liability ever falls upon the stockholders. Thompson on Corp., section 3004.
    This provision of the Kansas constitution has been considered by the court of appeals of New York and was held not self-executing and to create no liability. Marshall v. Sherman, 148 N. Y., 9 (51 Am. St. Rep. 564). The same holding was made in Tuttle v. Bank, 161 Ill., 497; Bell v. Farwell, 176 Ill., 489.
    Constitutional provisions couched in substantially the same language as the one under consideration were held not self-executing in Morley v. Thayer, 3 Fed. Rep., 737; Fusz v. Spanhorst, 67 Mo., 256; Groves v. Slaughter, 40 U. S. (15 Pet.), 449; French v. Teschemaker, 24 Cal., 518.
    A comparison of section 3258 with that pleaded as the law of Kansas which it is claimed was intended to accomplish the same end, will show how far short that falls of accomplishing what was intended, if it was intended by the Kansas legislature to create the liability claimed in the petition.
    The utmost that can be said for the construction claimed for the Kansas statute is, that because it is. enacted that stockholders shall not be liable beyond a certain point, therefore it is equivalent to saying that up to that point they shall be liable. In other words that the liability claimed is created by inference and not by direct language. It is submitted that legislation authorizing the taking of property of one person to pay the debt of another is the exercise of too high a prerogative to be left solely to inference as to what the intention of the legislature was. Steamboat Ohio v. Stunt, 10 Ohio St., 582.
    However desirable or in accord with the court’s ideas of proper public policy it may be to hold the stockholders liable for the debts of a corporation, the intention of the statute is to be derived from the words used and not from speculation aliunde. Brower v. Hunt, 18 Ohio St., 311. If the intention is doubtful, the literal and obvious meaning must be adhered to. Burgett v. Burgett, 1 Ohio 469. But if the language of the statute is unambiguous there is no room for construction. McCormick v. Alexander, 2 Ohio, 65. Even though what the eourt may conceive to he the objects of the act, are defeated. Bruner v. Briggs, 39 Ohio St., 478. Applying these rules of construction to the language of the statute relied on there can be no doubt that it entirely fails to sustain the liability claimed under it.
    The decision pleaded is a construction of sections of the Kansas statute which relate to the remedy and do not of themselves create or purport to create a liability but merely provide the means for enforcing a liability which is assumed to exist but which this legislation did not undertake to create. Tuttle v. Bank, 161 Ill., 497.
    Even if effect be given to what the petition alleges to have been decided by the Supreme Court of Kansas, there is nothing pleaded that can affect the question of liability in the case at bar. The liability of a stockholder in a corporation in Ohio is also several and not joint. Umsted v. Buskirk, 17 Ohio St., 113. That the ruling that each stockholder must be sued separately is a construction of a statute providing a local remedy is shown by the fact that while the rule is the same in both states as to the stockholders’ liability being several, the Supreme Court of Ohio before the statute providing a special remedy, section 3260, Revised Statutes, held that the action to enforce the liability must be for the benefit of all the creditors and that all stockholders must be parties and that no creditor could maintain an action for his sole benefit or acquire any rights thereby. Wright v. McCormick, 17 Ohio St., 86; Terry v. Little, 101 U. S., 216.
    
      The question as to whether the liability arises on contract or is transitory is determined by the law of the forum and not that of the location of the corporation. Hence these are questions relating to the remedy and are to be determined by the lex fori.
    
    It seems to us therefore that it clearly follows from the foregoing reasoning and authorities that:
    (a) The provision of the Kansas constitution relied on is not self-enforcing and creates no liability.
    (b) Neither does the legislation pleaded as section 46 of the act concerning corporations or 1206 general statutes of Kansas.
    (c) Nor do the remaining sections pleaded since they relate to the remedy merely.
    {d) The Supreme Court of Kansas has not in fact passed upon the question as to whether or not the liability exists and this court is consequently at liberty to determine that matter by its own rules of interpretation.
    (e) Which must lead to the result that no liability exists.
    A penalty is in the nature of a punishment for the non-performance of an act or the performance of an unlawful act. 18 Enc. Law, 269; Woolverton v. Taylor, 22 Am. St. Rep., 521. This case comes strictly within the definition. Through the alleged non-performance by the corporation, of its duty to continue its business, the penalty is visited, not upon the corporation in default, but upon its stockholders, by making them liable to be forced to pay its debts in case of suspension for the time named.
    This act is certainly not .less penal in its nature than suit on a bond for treble damages for misfeasance in office which is held penal, and not enforceable by this court. Indiana v. John, 5 Ohio, 217; 
      Sturgess v. Burton, 8 Ohio St., 215; Lawler v. Burt, 7 Ohio St., 340; Attrill v. Huntington, 70 Md., 191; 14 Am. St. Rep., 344; Heaton v. Eldridge, 56 Ohio St., 87; Mack v. DeGraff Quarries, 57 Ohio St., 463; Beach on Corp., section 148.
    There was no liability of the stockholders at common law, consequently the liability claimed, if- it exists at all, must be statutory. If a new right be created by statute, one that did not exist at common law, and a statutory method be provided for its enforcement, that remedy is exclusive of all others, and must be strictly pursued. State v. Marlow, 15 Ohio St., 114; Dunn v. Kanmacher, 26 Ohio St., 497.
    ' The remedy sought in the petition would not have been proper in this state, either under section 3260 of the Revised Statutes, or under the procedure prescribed by the Supreme Court before its enactment. Its only warrant, therefore, is the statute of Kansas, providing a remedy for right conferred by its statutes — that is, as said by Beach, quoted above, it is “The remedy prescribed by the statute of the state from which the corporation derives its charter.” But the petition wholly fails to meet the further requirement that “it should be made to appear therein that it can be employed in the state of the forum.”
    That this is essential, and a failure in this respect is fatal, is supported by the leading text writers, as well as by the reported cases. Cook on Stockholders, sections 220, 223; Thompson on Corporations, section 3423.
    There certainly could not well be imagined a case where the special remedy prescribed in the state where the corporation exists, could be more “contrary to the course of the foreign court of the foreign state in which it is sought to charge the stockholder,” than that in this case. The policy of Ohio in this respect, both that announced by the Supreme Court in Umsted v. Buskirk, supra, before the enactment of section 3260, and the practical adoption of the holding in that case by its enactment, was to avoid a multiplicity of suits by requiring the affairs of a corporation to be settled in one suit, in which the claims of all the creditors, and the liability of all the stockholders, both as to the creditors and between themselves, should be definitely settled in one suit, all the parties interested being before the court. •
    The Kansas procedure, as pleaded in the petition, being precisely the reverse, permitting at least as many'different suits as equals the square of the num-' ber of stockholders multiplied by the whole number of creditors, in many different jurisdictions^ and rendering the final settlement of the affairs of the corporation and the rights and liabilities of its creditors and stockholders, certainly very difficult and expensive, if not quite impossible. Bank v. Rindge, 154 Mass., 203.
    Our own statute, section 3260, has been held a special and exclusive remedy, not enforceable in the courts of another state. If that be true, much more is that provided in Kansas as pleaded in the petition. Nimick v. Mingo Iron Works Co., 25 W. Va., 184.
    A bill in equity to ascertain and determine the extent of this individual liability against the stockholders of such corporation cannot be sustained in the courts of this state. Marshall v. Sherman, 148 N. Y., 9; Lowry v. Inman, 46 N. Y., 120; Christensen v. Eno, 106 N. Y., 97; Bank v. Bliss, 89 N. Y., 338; Fowler v. Lamson, 146 Ill., 472; Young v. Farwell, 139 Ill., 326; Tuttle v. Bank, 161 Ill., 497; May v. Black, 77 Wis., 101; Thompson v. Bank, 19 Nev., 103; 
      Derrickson v. Smith, 27 N. J. L., 166; Morley v. Thayer, 3 Fed. Rep., 737; Bell v. Farwell, 176 Ill., 489.
    That the course pursued by the defendant in error, if sustained, could not fail to work great hardship, if not in fact result in a practical miscarriage of justice in many cases at least, seems to me very apparent. In any event the burden imposed on the stockholder must be very materially increased by the very process of adjustment, and the attempt to introduce such a practice into Ohio must, if successful, result in discriminating against the resident of Ohio and in favor of the citizen of another state.
    The difficulty, if not the actual impossibility, of arriving at any result that would serve the ends of justice between the parties was very forcibly put ini Post v. Railroad Co., 144 Mass., 341.
    
      Frank Spellman and Virgil P. Kline, for defendant in error.
    First. We desire to discuss, first: What has been the construction of the constitution and statutes of the state of Kansas quoted in this amended petition?
    Second. What effect will the courts of this state give to such construction?
    First. Construction by the Supreme Court of Kansas.
    1. The liability arises upon contract, and the action to enforce it is transitory, and may be enforced in any state where service can be obtained. Howell v. Manglesdorf, 33 Kan., 194.
    2. Each stockholder must be sued separately.
    “Under section 44 (1204) of the law concerning private corporations, the liability of the stockholder to the creditors of a corporation is several and not joint, and each must be sued separately.” Abbey v. Dry Goods Company, 44 Kan., 415.
    3. It has been' held that the creditor who first moves in conformity to section 32 to charge stockholders, obtains a prior lien upon the liability of the stockholder proceeded against. Wells v. Robb, 43 Kan., 201; Ball v. Reese, 58 Kan. 614.
    From this it necessarily follows that the creditor who first proceeds by suit against a stockholder obtains a prior lien upon such stockholder’s liability.
    4. This stockholder’s liability under the Kansas statute is in lieu of the partnership liability that the stockholders escape by means of their incorporation. Abbey v. Lang, 44 Kan., 688.
    From the foregoing decisions it appears that under the Kansas law the stockholder’s liability is a liability arising upon contract, wherein each creditor proceeds against each stockholder separately by an ordinary action at law; that a suit to enforce one stockholder’s liability brought by one creditor is in no sense dependent upon any other suit brought by any other creditor, or the same creditors against any other stockholder; that such a suit is in no sense an equitable proceeding, and hence the rules of equity practice have no application to suits to enforce this liablitiy; this is manifest:
    1. Because each stockholder must be sued separately.
    2. Because the creditor who first takes steps to enforce the liability acquires a prior right to the fund.
    3. Because this stockholder’s liability under the Kansas law is in lieu of the partnership liability that the stockholders escape by reason of the incorporation; in other words stockholders in Kansas corporations are partners with a several limited liability, which can only be enforced after judgment has been obtained against the corporation and an execution issued and returned unsatisfied (Section 32), or if the creditor does not wish to proceed against the cor poration first, after the corporation has ceased to do business more than one year. (Sections 40 and 44. i
    From the above it is obvious that it has never occurred to the Supreme Court of Kansas that the liability of a stockholder to a creditor had not been definitely fixed under the constitution by the fore going sections quoted. On the contrary, that court, as will be seen above, enforced the liability against stockholders in behalf of creditors, and has construed the legislation as authorizing suits to be brought in a foreign jurisdiction as upon contract.
    Second. What construction will be given to this interpretation of the constitution and laws of Kansas by the highest tribunal of that state when suit is brought to enforce the contractual liability thus said to exist in the courts of another state? Bank v. Ellis, 166 Mass., 414.
    Again the Kansas statutes come under consideration by the Supreme Coiirt' of Illinois in the cases; Bell v. Farwell, 176 Ill., 489 (52 N. E. Rep., 346); Aultman’s Appeal, 98 Pa. St., 506; Van Riper, Ex parte, 20 Wend., 614; Savings Association v. O’Brien, 3 N. Y. Sup., 764; 20 N. Y., 826; Payne v. Stewart, 33 Conn., 516; Hodgson v. Cheever, 8 Mo. Appeal, 318; Bank v. Mining Co., 42 Minn., 327; Flash v. Conn, 16 Fla., 428; affirmed by the U. S. Cir. Ct. (Florida), 109 U. S., 371; Lowry v. Inman, 46 N. Y., 120; Guykendall v. Miles, 10 Fed. Rep., 342; Bagley v. Tyler, 43 Mo. Appeal, 195; Bank v. Rindge, 57 Fed. Rep., 279; Nimick v. Iron Works, 25 W. Va., 184.
    
      The doctrine that the statutes of a state as interpreted by the highest tribunal of that state will be enforced by the courts of a sister state is too well established to need further authorities. Morawetz on Corporations, section 875.
   Speak, J.

Did the amended petition state a case is the question before us, the ultimate question being can a creditor of an insolvent Kansas corporation maintain an action in Ohio, against a citizen of this state, to enforce statutory liability against him as a stockholder in a Kansas corporation?

Against such liability, and against the judgment of the circuit court, it is insisted that the provision of the Kansas constitution is not self-enforcing; that the legislation pleaded creates no liability, and that the Supreme Court of Kansas has not in fact passed upon the question as to whether or not the liability exists. Hence this court is at liberty to determine the matter by its own rules of interpretation, and this must lead to the result that no liability does exist.

The constitutional provision is given in the statement, but for perspicuity it is here repeated: “Dues from corporations shall be secured by individual liability of the stockholders to an additional amount equal to the stock owned by each stockholder, and such other means as shall be provided by law.” It may be conceded that this constitutional provision, standing alone, is not sufficient; it is not self-executing. This conclusion is in consonance with the rules of construction generally adopted and is distinctly held by the Supreme Court of Kansas in Woodworth v. Bowles, 61 Kansas, 569. It does not follow, however, that the provision is to be ignored. It is not improper to consider it in connection with the statutes of that state upon the subject. It may be conceded, further, that the language of the Kansas statutes respecting the liability of stockholders is not as direct as it might have been made, and much is claimed against the provision for liability by reason of the peculiar phraseology. But the question, in arriving at the proper construction is, what did the legislature mean by the language that is used? One provision, adopted in 1868, is that “no stockholder shall be liable to pay debts of a corporation beyond the amount due on his stock and an additional amount equal to the stock owned by him.” The act further provides that “if any corporation, created under this or any other general statute of this state, except railway or charitable or religious corporations, be dissolved, leaving debts unpaid, suit may be brought against any person or persons who are stockholders at the time of such dissolution, without joining the corporation in such suit.” Another provision, enacted in 1883, is to the effect that “any corporation shall be deemed to be dissolved for the purpose of enabling creditors of such corporation to prosecute suits against the stockholders thereof and enforce their individual liability, if it be shown that such corporation has suspended business fot more than one year.”

Giving effect to the duty imposed upon the legislature by the imperative mandate of the constitution,, “dues shall be secured,” etc., how can it be supposed that the statutes enacted by the legislature upon the subject, and to which reference has been made, had any other purpose than to comply with this requirement, and can it be seriously doubted that that body intended by its legislation to make the provision which the constitution thus enjoins? We think not; and however inartificial the language of the section of the statute first referred to, it seems to us clear that, being guided by the usual canons of construction, the reasonable conclusion is that, taking the entire legislation together, there is sufficient provision of law to establish the liability of the stockholder. But if there remain doubt about this, such doubt would be effectually removed by the holding of the Supreme Court of that state, pleaded in the petition, and found in the following decided cases, viz: Howell v. Manglesdorf, 33 Kan. 199; Wells v. Robb, 43 Kan., 201; Abbey v. Dry Goods Company, 44 Kan., 415; Ball v. Reese, 58 Kan., 614; Woodwort v Bowles, 61 Kan., 569. True, the holding of the court is not in direct, affirmative terms, but the judgments rendered are based upon the premise that the liability does exist, and would not have been rendered but for such condition.

Having thus ascertained that the liability of the defendant stockholder is fixed by the law of Kansas, we come to the question whether such liability may be enforced in the courts of Ohio. It is insisted by counsel for plaintiff in error that the obligation is purely statutory, if it exists at all; that it is in reality a penalty and a penalty only, and if so, would, as matter of course, not be enforceable outside the limits of the state of Kansas. This latter proposition may be conceded. But is the obligation purely statutory, and is the liability in the nature of a penalty? A penalty of a character which will not be enforced outside the jurisdiction, implies some wrong done and that the money claimed is compensation, or by way of punishment. An instance of this character is found in Diversey v. Smith, 103 Ill., 378. The statute declares that a corporation shall not transact business until certain specified things have been done, and if it does so in violation of the statute, the trustees and corporators shall be liable in a specified amount, and this was held a penalty; but the distinction is clear between such an obligation and one where the liability is primary, or is based on contract. No fact appears in the present case to show that the stockholder has violated any statute or committed any wrong, and the wrong of the corporation is not the violation of any positive, duty enjoined by law, but the failure to make a success of its business. Upon principle it seems clear that the demand is not for a penalty. And this conclusion is supported by abundant authority. Aultman’s Appeal, 98 Pa. St., 505; Bank v. Mining Co., 42 Minn., 327; Flash v. Conn, 16 Fla., 428; Lowry v. Inman, 46 N. Y., 119; Cuykendall v. Miles, 10 Fed. Rep., 342; Bagley v. Tyler, 43 Mo. App., 195; Bank v. Rindge, 57 Fed. Rep., 279; Crippen v. Laighton, 69 N. H., 540; Kirtley v. Holmes, 107 Fed. Rep., 1. What, then, is the nature of the stockholder’s liability? Is it wholly statutory, resting entirely on the peculiar-provisions of the Kansas statute, or is there another element which enters into the obligation? It may be conceded that it is not supported by any rule of the common law, but this does not end the inquiry. The charter of this banking corporation — that is the statute — provided that the stockholders should be liable individually to creditors upon the arising of . certain contingencies. Knowing this the stockholders became such with full knowledge, not only that they were thus stipulating for this liability, but with the knowledge that persons giving credit to the corporation would do so, and would rightfully give it, upon the faith of the personal liability of the stockholders. It was an offer to become liable on tbe part of tbe stockholders, accepted by the creditor when the credit was given and thus became a contract, made, it is true, not directly with the creditor, rather with the corporation perhaps, but one which was for the benefit of creditors, and to which, upon well settled principles in this state, (Emmitt v. Brophy, 42 Ohio St., 82,) the creditors would have the right to resort in case the corporation itself should fail to respond. Brown v. Hitchcock, 36 Ohio St., 678; Corning v. McCullough, 1 Comst., 47. The provision of the statute does not create the liability; it is merely a legislative requirement that whoever becomes a stockholder shall at the same time assume an individual liability to the creditor; it is to declare the legal effect of the acts of the parties, which enable them to contract in a manner not authorized at common law. It was thus, as it seems to us, on principle, in the nature of a guaranty. But whether so or not the question has been settled by the decisions of the Supreme Court of Kansas. It is held by that court that the liability of a stockholder is a contractual liability, and arises from the contract of subscription to the capital stock, and that in so subscribing and becoming a stockholder, he thereby guarantees payment to the creditors of an amount equal to the par value of the stock owned by him. It is further held by that court that this liability is several; that it should be payable to the judgment creditor who first brings action, and that such action is transitory and may be brought wherever personal service can be made upon the stockholder. These facts are alleged in the petition, and the allegations are supported by the decisions heretofore cited. See, also, Morawetz on Priv. Corps., section 870, and Cook on Stock, etc., section 223. And the construction thus given to the constitution and statutes of Kansas would be binding upon this court even though we did not agree with the interpretation there given on principle. It being thus determined that the liability is contractual, that it is several, and that the creditor first bringing action obtains a prior lien with which other creditors may not interfere, we see no reason why it cannot be enforced against the stockholder individually in Ohio, by action against him alone. True, our method of enforcing the liability of stockholders is by a proceeding in the nature of a suit in equity which contemplates the bringing in of the corporation, of all the creditors, and of all the stockholders, and a decree which will adjust and finally settle the rights and liabilities of the parties. This is made practicable because the corporation is a creature of our law, the stockholders principally residents of the state, and a multiplicity of suits may thus be avoided. But our courts have no jurisdiction to adjudicate the affairs of a foreign corporation, and any attempt to wind up its business by a comprehensive decree in our courts would be futile. Whether, where it is shown that there are other stockholders residing in Ohio, the plaintiff might, properly make them parties, and maintain a suit against all that might be served, we need not inquire, for no such fact appears in the present case. However that may be, we think it cannot be said that the Kansas statutes are at variance with our legislation upon any matter of principle, or with the public policy of the state. The right to maintain the action here does not depend upon the exercise of comity; it rests wholly .on the duty of the Ohio courts to enforce a contract voluntarily entered into in another state and made legal by the laws of that state. And, as observed by Williams, J., in Heaton v. Eldridge, 56 Ohio St., 97: “The law of a state or country where a contract is executed and is to be performed, enters into and becomes a part of the contract in the sense that its validity and obligatory effect are to be determined and controlled by that law; and when valid there, the contract will be sustained everywhere, and accorded the interpretation required by the law of the place where made, when the law is properly brought to the attention of the court, unless the contract is against good morals or contravenes a settled policy of the state or country in whose tribunals its enforcement is sought”

We are aware that this ground of action is not favored by the courts of several of the states, notably those of New Hampshire, New York and West Virginia, the holding being that the liability is wholly statutory and opposed to the policy of these states. Grippen v. Leighton, supra; Marshall v. Sherman, 148 N. Y., 9; Nimick v. Iron Works, 25 W. Va., 184. On the other hand the right to such remedy is maintained by the Supreme Court of Massachusetts and Illinois, in late decisions, although earlier decisions of the same courts denied them. Bank v. Ellis, 166 Mass., 414; Bell v. Farwell, 176 Ill., 489. Also by the courts of Alabama (Morris v. Glenn, 87 Ala., 628), of California (Ferguson v. Sherman, 116 Cal., 169), of Michigan (Bank v. Lawrence, 117 Mich., 669), and of Missouri, (Guerney v. Moore, 131 Mo., 650). Federal decisions are to like effect. McVickar v. Jones, 70 Fed., 754; Flash v. Conn, 109 U. S., 371. See, also, Morawetz, section 875.

We think the amended petition states a ease, and •the judgment of the circuit court overruling the dedemurrer will he

Affirmed.

Minshall, C. J., Williams, Burket, Davis and Shauck, JJ., concur.