Court Opinion

ID: 7962161
Source: CourtListenerOpinion
Date Created: 2022-09-09 00:47:18.172262+00
Date Added: 2024-06-11T16:34:31.406815
License: Public Domain

By the Court —
McMillan, J.
— This action is brought under Subdivision 4, Sec. 156, of the Pub. Stat., page 553, to recover the unpaid amount of subscription of the defendant to the stock of the Minneapolis and Cedar Valley Railroad Company, the judgment debtor. The plaintiff sues as Sheriff by virtue of a levy upon the said indebtedness of the defendant, Sibley, to the Railroad Company, under an execution upon a judgment.in favor of McDonald, Graham & Co., against the said Minneapolis and Cedar Valley Railroad Company. His right of action must depend, therefore, entirely upon the statute authorizing him to collect debts thus levied upon. Pub. Stat., Chap. 61, Sec. 109, page 572. *328Thé Minneapolis and Cedar Valley Railroad Company was incorporated during our Territorial existence, by special act of the Legislature approved March 1,1856, and does not, therefore, come within the provisions of the State Constitution relating to corporations, nor is there in the act of incorporation any provision making the stockholders individually liable to any extent for the debts of the company. It is not claimed that the general provisions of statute relating to corporations (Pub. Stat., pages 330-1-2-3, Sees. 321-2,) affect this case, nor do we deem these provisions applicable in this instance. Gebhart vs. Eastman & Gibson, 7 Minn., 60. The liability of the defendant, therefore, as a stockholder in the corporation is unaffected by statutory provision.
Assuming, for the purposes of this case, that the statute authorizing the attachment and levy of debts due to a judgment debtor —Pub. Stat., subdivision 3, Sec. 148, page 551 — embraces demands both of a legal and equitable character, it is evident that the rights and liabilities of the parties to the debt levied on, must characterize it as a legal or equitable claim, and that the Sheriff can avail himself only of equities existing between such parties, and not of such as may exist in favor of the judgment creditor against any or all of such ¿parties. Therefore, the plaintiff in this case can have no greater rights against the stockholder than the company has. Excluding then any equities peculiar to a creditor of a corporation, which under other circumstances might be reeog-nized, let us consider the liability of the stockholders to the company.
The allegation in the complaint is that the defendant, Sibley, after the organization of the company duly subscribed for and agreed thereby to pay to said Railroad Company, 250 shares of $100 each of the capital stock of said company, but has not paid to exceed five per cent, thereof.
The charter provides that “the directors may require and receive payment of the subscriptions to the capital stock at such time and in ■ such proportion, not exceeding ten per cent., at any one installment under such conditions as they shall see fit, and may *329declare said stock forfeited, and all payments thereon, or otherwise, on a failure to make payment as required, provided they shall first give thirty days’ notice of such requisition.”
The subscription thus pleaded must be taken as a naked subscription for stock, showing no express promise to pay, and as between the stockholder and the company, the terms of the charter regulating the subscriptions for stock, must be considered as entering into the contract between the stockholder and the company.
Whether on a simple subscription for stock, the coinpa'ny can maintain an action at law, has been variously decided, and the authorities differ widely; as the question was not discussed in this case, and but two of the members of the Court take part in this decision, we refrain from deciding the point, but assuming that an action will lie in favor of the company against the stockholder upon an implied promise, still the terms of the subscription must be the measure of the defendant’s liability, and, unless by these terms the debt is recoverable, no action can be maintained by the .company.
The terms of this contract on the part of the stockholders are, to pay the amount when called by the company, in installments not exceeding ten per cent, each, upon thirty days’ notice. Here are three conditions or qualifications of the promise; first, a call by the company, and this not a call upon ’ an individual stockholder, blit upon the whole stock of the corporation; second, for-an amount not exceeding ten per cent, of the stock; third, thirty days’ notice.
The complaint does not allege a call for any installment or for any amount, either upon the whole stock or the defendant individually, but avers that no call has been made; nor does it allege any default except that “the defendant has not paid to exceed five per cent, of the amount of'stock subscribed for by him.”
We are unable to see, in this state of facts, any breach of the contract' on the part of the defendant, upon which the company can maintain an action against him.
The complaint seeks to avoid this difficulty by alleging the insolvency of the company, its refusal to call for installments of *330stock subscriptions, or make provision for tbe payment of its debts ; the total abandonment of the work for which it was created, and of its own organization since some time in 1859.
We do not think these circumstances affect the rights of the parties in this action. In a direct proceeding in equity, by a creditor against a corporation and its stockholders, invoking a court of chancery to subject the unpaid stock of a corporation to the liquidation of its liabilities, the creditor might perhaps avail himself of these facts as a ground of equitable relief. But the plaintiff — the Sheriff — in this action, as we have before endeavored to show, has no other rights in this matter than such as pertain to the company as against a stockholder, and in such case, we think, it cannot be claimed that the facts pleaded strengthen the claim of the company to recover for a breach of the contract of subscription to its stock; on the other hand they go directly to defeat such claim.
Whatever view may be taken of the doctrine laid down by the Supreme Court of Ohio in the cases cited by the counsel for the appellant, an examination of the cases we think will show that they do not sustain the position taken by the appellant in this case. These were all proceedings in chancery under a special statutory provision, (Swan's Stat., 704, sec. 16, Ed. 1841), brought by judgment creditors, after return of nulla bona, directly against the corporation and certain delinquent stockholders. In these cases the creditors, although they came into a court of chancery under statutory provisions, brought with them all their equities not only against the corporation, but the stockholders, and these could all be recognized and enforced. In this case the creditor himself does not come into court, but the sheriff comes, bringing, not the equities which would attach to the creditor in' a direct proceeding against all the stockholders, but if anything more than a legal title, strictly statutory, to a debt, certainly only such equities as exist between the original parties to the claim levied on.
A single instance will illustrate the vital difference between the cases cited by the appellant’s counsel and the case at bar. The Supreme Court of Ohio says: “ When a company as in this case *331becoming insolvent, abandon all action under their charter, the original mode of making calls upon the stockholders cannot be pursued. The debt, therefore, from that time must be treated as due without further demand.” Henry et al. vs. Vermillion and Ashland R. R. Co. et al., 17 Ohio R., 187.
This may be true in equity in an action by the creditor against the company and stockholders, in which it was enunciated, but the same rule will not apply in an action by the .company against a stockholder on his stock subscription, since such a state of facts throws the whole default upon the company.
"We are of opinion, therefore, that the complaint does not state facts sufficient to constitute a cause of action. The order sustaining the demurrer should be affirmed.