Case ID: ohio-st_49/html/0438-01.html
Source: Caselaw Access Project
Author: {"author": "By THR Court.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Bronson v. Schneider.
    
      Corporations — Stockholder's liability — Statue of limitations — When begins to run against creditors of corporation.
    
    To set the statute of limitations running against a creditor of a corporation, and in favor of the stockholders on their statutory liability, it is necessary that the creditor’s claim he reduced to judgment, and execution returned unsatisfied, or, that the property of the corporation, by some legal proceeding, be put in process of application to the payment of its debts, so as to render judgment and process against it impossible or nugatory -r as, where the corporation has been dissolved, or thrown into' bankruptcy, or placed in the hands of a receiver, or has made an assignment of its^roperty for the benefit of its creditors.
    (Decided June 24, 1892.)
    Error to the Circuit Court of Rucas county.
    The action below was commenced on the 7th day of July,. 1885, by Calvin Bronson, a creditor of the Toledo Stove' Company, which is a corporation organized under the laws of this state, against George Schneider and others, the stockholders of the corporation, for the enforcement of their statutory liability for the payment of the debt ■ due the plaintiff, from the corporation, it being insolvent. The question in the case is, whether the plaintiff’s action, when it was commenced, was barred by the statute of limitations. The facts of the case, so far as they are material to the decision of the question, are as follows:
    On the 28th day of February, 1878, the Toledo Stove Company, made and delivered to the plaintiff, its promissory note of that date, and thereby promised to pay to the order of the plaintiff, the sum of $9,500 in six months, with interest at the rate of eight per cent, per annum after maturity.
    On the same day, the company, to secure the payment of the note, executed and delivered to the plaintiff, its mortgage deed, and thereby conveyed to the plaintiff, his heirs- and assigns, all the real property of the company; and at the same time, in order to,further secure the payment of the note, executed and delivered to the plaintiff, its chattel mortgage, and thereby. conveyed to the plaintiff all the other property of the company. On the 20th day of February, 1879, the plaintiff commenced his action in the court of common pleas, of Rucas county, against the company, asking judgment on the note, and for a foreclosure of his mortgages. On the 22nd day of March, 1879, the company filed its answer, in which it admitted that there was due to the plaintiff on the note, $7,102.80, with interest thereon at 8 per cent, per annum, from August 28, 1878, and alleged that the residue of the amount claimed by the plaintiff was illegal interest. On the 2nd day of March, 1880, a judgment was rendered in favor of the plaintiff and against the company, for the sum of $10,514, and the court ordered all of the property to be sold for the payment of the same. In pursuance of the judgment and ■ order, the property was sold by the sheriff at public sale, to the plaintiff, on the 4th day of September, 1880, the real property for the sum of $2,800, and the other property for the sum of $263.75, and such sales were confirmed by the court on the 9th day of November, 1880. At the time the action to recover judgment on the note and mortgages was begun, on the 20th day of February, 1879, and ever since, the value of all the property of the company did not exceed the sum of $5,000. The real property was, on the 4th day of March, 1880, appraised at $8,000, and after having been twice offered for sale, and nbt sold for want of bidders, was on the 3rd day of August", 1880, re-appraised at $4,200. Since the 20th day of February, 1879, the plaintiff has had possession of all of the prdperty of the company, and no business has been done by it.
    
      John F. Kumler and É. W. Toller ton, for plaintiff in error.
    
      Joshua R. Seney, for defendants in error.
   By THR Court.

The plaintiff’s action was not barred. The time within which such action may be commenced, is six years after the cause of action accrues. Hawkins v. Furnace Co., 40 Ohio St., 507. When the creditor’s right of action is otherwise complete, his cause of action against the stockholders accrues upon the insolvency of the corporation'. By insolvency, however, is not meant, simply that the property of the corporation is insufficient to pay its debts. We have heretofore held, that a creditor of a corporation may commence an action against its stockholders to enforce their statutory liability, when his claim has been reduced to judgment, and execution issued thereon has been returned no property whereon to levy, or, when the property of the corporation has been transferred to an assignee for the benefit of its creditors. Morgan v. Lewis, 46 Ohio St., 1; Barrick v. Gifford, 47 Ohio St., 180. Under the constitution and laws of the state, the corporate property is the primary fund for the payment of the debts of the corporation, and the statutory liability of the stockholders is a security to be resorted to only when the payment of its debts cannot be enforced against its property; and hence, to set the statute of limitations running against the creditor and in favor of the stockholders, it is necessary that the creditor’s claim be reduced to judgment and execution returned' unsatisfied, or, that the property of the corporation, by some legal proceeding, be put in process of application to the payment of its debts, so as to render judgment and process against it impossible or nugatory; as, where the corporation has been dissolved, or thrown into bankruptcy, or placed in the hands of a receiver, or has made an assignment of its property for the benefit of its creditors.

Judgment reversed.