Evans v. Nellis, 187 U.S. 271 (1902)

Evans v. Nellis

No. 66

Argued November 4, 1902
Decided December 1, 1902
187 U.S. 271

CERTIFICATE FROM THE CIRCUIT COURT

OF APPEALS FOR THE SECOND CIRCUIT

Syllabus

The statutory liability of stockholders of corporations (other than railway, religious or charitable) equal to the amount of their stock under sections 32 and 34 of the General Statutes of Kansas of 1868, as decided by the highest court of that state, could not be collected by the receiver of an insolvent corporation, but was an asset which a creditor of the corporation alone could recover for his individual benefit to the extent required to pay his judgment obtained against the corporation.

The highest court of the state having decided that sections 14 and 16 of the laws of Kansas enacted in 1899 (Laws of 1898, c. 10), repealed sections 32 and 34 of the statutes of 1868, and that the statutory liability of stockholders can be collected only by the receiver for the benefit of all creditors, and that the receiver must, under the system for collecting the assets and paying the debts of an insolvent corporation as provided in the statute, bring an action against the corporation and all the resident stockholders, it follows that the receiver of an insolvent corporation of Kansas (other than railway, religious or charitable) appointed in 1898, who has not brought an action against the corporation and all the stockholders resident in Kansas, cannot maintain an action either under the statute of 1868 or the law of 1899 in a circuit court of the United States, against an individual stockholder for the amount of the statutory liability.

The questions to be answered and the case on which they arise are shown in the statement of facts and resulting questions of law constituting the certificate of the court below, which is as follows:

Statement of facts

That the Interstate Loan and Trust Company is a corporation created and organized under and by virtue of the general laws of the State of Kansas, July 22, 1885, and as such was authorized to transact business as a land-mortgage company; that in or about the month of November, 1897, E. B. Crissey commenced an action against the said the Interstate Loan and Trust Company in the United States Circuit Court for the District of Kansas, First Division, to which court jurisdiction in that behalf duly appertained; that said action was duly commenced by the issue of a summons to said company; that said summons was duly served upon the said company, and that said company duly appeared in said suit by attorney and defended the same, and that such proceedings were afterwards had in said action that, on the 31st day of December, 1897, a judgment was duly given and made in and by said court in said action in favor of the said plaintiff and against the said company, in and by which judgment it was decided, adjudged, and decreed that there was due and owing to the plaintiff therein from and by the said company the sum of $6,792.20 and $56.45 costs, and that the plaintiff therein have and recover said sum from the said company, with interest thereon from said date at the rate of six percent per annum, and that the said plaintiff have execution therefor against the said company; that thereafter an execution against the property of the said the Interstate Loan and Trust Company was duly issued out of the said court upon said judgment for the said sum of $6,792.20 and the costs as aforesaid, directed to the United States marshal for the District of Kansas, and that thereafter the said marshal duly returned said execution wholly unsatisfied for the reason that no property, real or personal, belonging to said company could be found whereon to levy the same; that thereafter and on or about the 9th day of June, 1898, upon the application of the said E. B. Crissey, the plaintiff herein was duly appointed receiver of the said the Interstate Loan and Trust Company by the Circuit Court of the United States for the District of Kansas, First Division, to which said court jurisdiction therein duly appertained, and has duly qualified and acted as such; that thereafter and on or about the 9th day of February, 1899, an order was duly given and made in and by said Circuit Court of the United States for the District of Kansas, First Division, by which order it was considered, adjudged, ordered, and decreed that the said John H. Evans, as receiver, proceed against all or any of the stockholders of the Interstate Loan and Trust Company from whom, in his judgment, a recovery can be had to collect all of their liability as stockholders in said company, a copy of which order is hereto annexed and marked exhibit A, and which copy the plaintiff herein prays may be considered as part of his complaint as if herein set forth in full; that the defendant is a citizen of the State of New York, and prior to the month of November, 1897, became a stockholder of said corporation and the owner of 602 shares of the capital stock thereof of the par value of $100 a share, and has ever remained a stockholder and the owner of said shares. At the time when the defendant became a stockholder of said corporation, and from that time ever since, it was provided by the Constitution of the State of Kansas (sec. 2, article XII) as follows:

Dues from corporations [organized and existing under the laws of the State of Kansas] 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, but such individual liabilities shall not apply to railroad corporations nor corporations for religious or charitable purposes.

At the time the defendant became a stockholder of said corporation, it was provided by the General Statutes of Kansas of 1868 (sections 32, and 44) as follows:

SEC. 32. If any execution shall have been issued against the property or effects of a corporation, except a railway or a religious or charitable corporation, and there cannot be found any property whereon to levy such execution, then execution may be issued against any of the stockholders, to an extent equal in amount to the amount of stock by him or her owned, together with any amount unpaid thereon; but no execution shall issue against any stockholder except upon an order of the court in which the action, suit, or other proceeding shall have been brought or instituted, made upon motion in open court, after reasonable notice in writing to the person or persons sought to be charged, and, upon such motion, such court may order execution to issue accordingly, or the plaintiff in the execution may proceed by action to charge the stockholders with the amount of his judgment.

SEC. 44. 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, suits may be brought against any person or persons who were stockholders at the time of such dissolution, without joining the corporation in such suit, and if judgment be rendered, and execution satisfied, the defendant or defendants may sue all who were stockholders at the time of dissolution for the recovery of the portion of such debt for which they were liable, and the execution upon the judgment shall direct the collection to be made from property of each stockholder, respectively, and if any number of stockholders (defendants in the case) shall not have property enough to satisfy his or their portion of the execution, then the amount of deficiency shall be divided equally among all the remaining stockholders, and collections made accordingly, deducting from the amount a sum in proportion to the amount of stock owned by the plaintiff at the time the company dissolved.

By a law of Kansas enacted January 11, 1898, sections 32 and 44 aforesaid were repealed, and by sections 14 and 15 it was provided as follows:

SEC. 14. That section 32, chapter 23, of the General Statutes of 1868 be and the same is hereby amended to read as follows: "Sec. 32. If any execution shall have been issued against the property or effects of a corporation, except a railway or a religious or charitable corporation, and there cannot be found any property upon which to levy such execution, such corporation shall be deemed to be insolvent, and upon application to the court from which such execution was issued, or to the judge thereof, a receiver shall be appointed to close up the affairs of said corporation. Such receiver shall immediately institute proceedings against all stockholders to collect unpaid subscriptions to the stock of such corporation, together with the additional liability of such stockholders equal to the par value of the stock held by each. All collections made by the receiver shall be held for the benefit of all creditors, and shall be disbursed in such manner and at such times as the court may direct. Should the collections made by the receiver exceed the amount necessary to pay all claims against such corporation, together with all costs and expenses of the receivership, the remainder shall be distributed among the stockholders from whom collections have been made, as the court may direct, and in the event any stockholder has not paid the amount due from him the stockholders making payment shall be entitled to an assignment of any judgment or judgments obtained by the receiver against such stockholder, and may enforce the same to the extent of his proportion of claims paid by them."

. 15. That section 46, chapter 23, of the General Statutes of 1868 be and the same is hereby amended to read as follows: "Sec. 46 The stockholders of every corporation, except railroad corporations or corporations for religious or charitable purposes, shall be liable to the creditors thereof for any unpaid subscriptions, and in addition thereto for an amount equal to the par value of the stock owned by them, such liability to be considered an asset of the corporation in the event of insolvency, and to be collected by a receiver for the benefit of all creditors."

The present action was brought in the Circuit Court of the United States for the Northern District of New York by the receiver of the said the Interstate Loan and Trust Company, appointed as aforesaid, against the defendant to recover the sum of $60,200, alleging his liability as a stockholder and the owner of the said 602 shares of the said corporation.

Upon the foregoing facts, this Court desires instructions upon the following questions:

Questions of Law

1st. Are sections 14 and 15 of the laws of Kansas of 1898 valid legislation in view of the provision of the Constitution of the State of Kansas respecting the individual liability of the stockholders of corporations, or are they invalid as subjecting such stockholders to liabilities other than "dues from corporations?"

2d. Do sections 14 and 15 aforesaid contravene the Constitution of the United States by impairing the contractual liability of the defendant previously existing as a stockholder of a corporation of the State of Kansas?

3d. Is the plaintiff, as a receiver appointed as aforesaid, entitled to maintain an action in the Circuit Court of the United States for the Northern District of New York?

In accordance with the provisions of section 6 of the Act of March 3, 1891, establishing courts of appeals, etc., the foregoing questions of law are by the Circuit Court of Appeals for the Second Circuit hereby certified to the Supreme Court.