Court Opinion

ID: 8507346
Source: CourtListenerOpinion
Date Created: 2022-11-23 08:07:32.8472+00
Date Added: 2024-06-11T16:50:56.863694
License: Public Domain

Hagans, J.,
dissented. The main question upon which' we differ, arises upon the motion for judgment for the “ additional” liability found to be due from the respective stockholders for the par value of their stock.
Article 13, section 3, of the constitution, is as follows: “ Dues from corporations shall be secured by such individual liability of the stockholders and other means as may be prescribed by law, but in all cases each stockholder shall be liable over and above the stock by him or her owned, and any amount unpaid thereon, to a farther sum at least equal in amount to such stock.”
This clause of the constitution was the result of a compromise in the constitutional convention. The discussion upon it was lengthy and able. The whigs were for imposing no liability whatever on stockholders. The democrats were for making stockholders liable as partners, without reference to amounts of stock held: so that if one held but a small amount of stock, his whole private property should be answerable to the creditors of the corporation, if necessary. The whigs desired no change in the law as it had been; the democrats, representing those who smarted under losses by trusting corporations, desired every corporation to be held as a partnership.
Section 78 of the act of 1852 (1 S. & C. 310), already referred to, under which this action is brought, is as follows: “All stockholders * * * of any joint stock company organized under the provisions of this act, shall be deemed and held liable to an amount equal to their stock subscribed in addition to said stock, for the purpose of securing the creditors of such company.” The balance of this section relates to the directors of religious and other societies, and makes them liable individually. Our Supreme Court, Wright, etc. v. McCormick, etc., 17 Ohio St. 95, has set at rest the construction of the enactment. “The. liability thus imposed on stockholders is not a primary resource or fund for the payment of debts of any corporation. It is collateral and conditional to the principal obligation which rests on the corporation, and is to be resorted to by *240bthe creditors only in case of the insolvency of the corporation, or when payment can not be enforced against it by the ordinary process. It is a security provided by law for the exclusive benefit of the creditors, over which the corporate authorities have no control. The liability on the part of the stockholders is several in its nature, but the right arising out of this liability would seem to be intended for the common and equal benefit of all the creditors.” It is apparent from the reading of the section quoted, as well as from the opinion of the Supreme Court, that the stockholders are not jointly, nor jointly and severally liable. The liability is created by .statute, not by contract, and is incidental to the relation of stockholder. In respect to the stock held by each owner, it is separate property, and the stockholder is the sole owner and is separately liable thereon. There is nothing in the constitution or in the act, which gives stockholders of corporations the character or imposes on them the liabilities of partners, as in several of the States, and perhaps in Ohio under special statutes. See Owen v. Purdy, 12 Ohio St. 73; Commercial Bank v. Factory, 6 R. I. 154; Morey v. Clark, 17 Mass. 330; Garrison v. Howe, 17 N. Y. 458; Neon v. Okley, 2 Hill, 265; Chesley v. Pericode, 32 N. H. 388.
"When persons are jointly, or jointly and severally liable, it is because, as between them and the creditors, each is liable, by contract in solido, for the whole amount, and there is, therefore* no injustice in requiring any one of them to pay the whole amount, leaving him to obtain redress among his co-debtors as he can. If necessary, one may be compelled to pay the whole debt without reference to the solvency of the rest of his co-debtors. He is a guarantor, so to speak, to the creditors of the solvency of the co-debtors. It will be observed, however, that the statute does not make the stockholders liable to the corporation, nor for each other, but for the purpose of securing the creditors of the corporation.
Many of the stockholders are not within the jurisdiction of the court, and can not be reached by either process or *240cpublication, and can not therefore be bound by its judgment. And some of those who are within the jurisdiction of the court and served with process, and upon whom a judgment will be binding, are nevertheless insolvent, and some, as appears by the receiver’s report, have been discharged by proceedings in bankruptcy. It follows, from what has been stated, that those who are solvent do-not stand in the relation of joint or joint and several debtors to the creditors, nor as sureties or guarantors for the insolvent stockholders. The stockholders are not liable to a common burden, but only each is severally liable for the amount charged upon him by the statute in respect of his separate stock. The creditors having but a limited claim upon those who are liable, can not throw upon them the loss arising either from the insolvency of some stockholders or from the absence of others from the jurisdiction of the court, all of whom are made equally liable by the statute. To hold otherwise would he to say that the debts of an insolvent corporation are practically a burden on the solvent stockholders only; and they who pay the debt relieve the insolvent stockholders, pro tanto, under our statute, which makes all the stockholders equally liable to the creditors, and in no sense makes them jointly or jointly and severally liable to the creditors, or for the solvency of each other. In Umstead v. Buskirk, 17 Ohio St. 113, it is broadly stated that the “ additional liability” can not be enforced against part of the stockholders at the election of the creditors, without the right on their part to call on their co-stockholders for a general account and contribution in proportion to their shares of stock. “ The right of contribution,” says the court, “ grows out of the organic relation existing among the stockholders. As between them and the creditors, each stockholder is severally liable to all the creditors, and as between themselves, each stockholder is bound to pay in proportion to his stock.” They have the right to insist upon contribution on that principle, and, growing out of this right, is the duty of the stockholders to contribute. No one or more of the stockholders, therefore, can shift this duty upon the shoulders of any *240dother one or more of them, and the creditors can not exact the performance of this duty from one or more only, to the exclusion of any one or more, for any reason whatever. These views of that clause of section 78 of the statute (1 S. & C. 310), already quoted, are strengthened by the clause of the same section which immediately succeeds, relating to the liability of the directors of religious and other societies, in which it is declared they “ shall be deemed and held individually liable for all debts contracted by them for their respective societies or associations.” Here the legislature has substantially declared that directors of the societies shall be liable as partners, j ust as if they were not incorporated. Hut we are not to legislate into the first clause relating to stockholders the individual liability imposed upon directors in the succeeding clause, but rather to construe the first clause as the legislature plainly intended it to be. We are not for any reason to enlarge the statutory liability. No case, it is believed, can be found in any of the States where similar legislation has been had, enforcing the individual liability of stockholders, on the ground that they are jointly liable or jointly and severally liable, in which that legislation does not, by some expression in the statute, plainly authorize such a construction. In our statute there is no such expression.
It is said by my brethren that the liability is necessarily several, because it is for different amounts, depending upon the respective amounts of stock. No joint judgment can be rendered, but each is liable for all to the extent of his stock. The judgment must be for different amounts. The proposition, when carefully considered, states, in fact, that the liability is joint and the iudgment must be several, because the liability is several, which is hopeless confusion, as it seems to me.
Holding these views as I do, this cause presents only the ordinary contingency as to many of these stockholders which all creditors assume, viz: that their debtors may be either unable to pay when called upon, or be beyond the reach of process, though the demand be perfectly valid and-capable of suit. Crease, etc. v. Babcock, etc., 10 Met. 525.