US SUPREME COURT DECISIONS

A state statute which confers upon a judgment creditor of a corporation, when execution on a judgment against the corporation is returned unsatisfied, the power to summon in a stockholder who has not fully paid the subscription to his stock and obtain judgment and execution against him for the amount so unpaid in no way increases the liability of the stockholder to pay that amount, and inasmuch as he was before then liable to an action at law by the corporation to recover from him such unpaid amount at law, as well as to a suit in equity, in common with other similar stockholders, to compel contribution for the benefit of creditors, no substantial right of the stockholder is violated. chanrobles.com-red

Page 134 U. S. 516

The Court, in its opinion, stated the case as follows:

This writ of error brings up for reexamination a judgment of the Supreme Court of Missouri, and presents the question whether a certain statute, to which that judgment gave effect, impaired the obligation of a contract arising out of a subscription by Britton A. Hill to the stock of an insurance company created by the laws of Missouri.

By the second section of an Act of the Missouri Legislature approved March 3, 1857, creating the Washington Insurance Company, it was provided, in reference to subscriptions to its stock, that

"at the time of subscribing, there shall be paid on each share one dollar, and nine dollars more within twenty days after the first election of directors. If any stockholder fails to make such payment, such stockholder shall forfeit the amount paid on such stock at the time of subscribing. The balance due on each share shall be subject to the call of the directors, and the said company shall not be authorized to make any policy or contract of insurance until the whole amount of shares subscribed shall be actually paid in, or secured to be paid on demand by approved notes or mortgages on real estate."

The same act contained the following provisions:

"This act shall be, and the same is hereby declared, a public act, and the same shall be deemed and construed as such, and the corporation established by this act shall be, and the same is hereby exempted from the operation of sections seven, thirteen, fourteen, fifteen, sixteen, and eighteen of article first of the act entitled 'An act concerning corporations,' approved November 23, 1855, and said sections shall be deemed as repealed so far as the same concerns the corporation hereby established."

Sections seven, thirteen, fourteen, fifteen, sixteen, and eighteen of the above act of 1855, from the operation of which the Washington Insurance Company was thus exempted, are as follows:

"§ 7. The charter of every corporation that shall hereafter be granted by the legislature shall be subject to alteration, suspension, and repeal, in the discretion of the legislature. "

Page 134 U. S. 517

"§ 13. In all corporations hereafter created by the legislature, unless otherwise specified in their charter, in case of deficiency of corporate property or estate liable to execution, the individual property, rights, and credits of every member of the co-partnership or body politic having a share or shares therein shall be liable to be taken on execution to an additional amount equal to that of the amount of his stock, and no more, for all debts of the corporation contracted during his ownership of such stock, and such liability shall continue, notwithstanding any subsequent transfer of such stock, for the term of one year after the record of the transfer thereof on the books of the corporation, and for the term of six months after judgment recovered against such corporation in any suit commenced within the year aforesaid, provided that in every such case, the officer holding the execution shall first ascertain and certify upon such execution that he cannot find corporate property or estate."

"§ 14. In such case, the officer may cause the property of such stockholder to be levied upon by execution in the same manner as if the same were against him individually, after giving him forty-eight hours' previous notice of his intention, and the amount of the debt or deficiency, if he resides within the county, or, if not within the county, to his agent, if he have any within the county, otherwise to the clerk or cashier or some other officer of the corporation, unless such stockholder, his agent, or the clerk or other officer, on demand and notice as aforesaid, shall disclose and show to the execution creditor, or the said officer, corporate property, or estate subject to execution sufficient to satisfy said execution and all fees."

"§ 15. Such creditor, after demand and notice as mentioned in the preceding section at his election, may have an action against any such stockholder or stockholders, on whom such demand and notice may have been served, jointly or severally, or so many of them as he may elect, to recover of him or them individually the amount of his execution and costs, or of the deficiency as aforesaid, not exceeding the amount of the stock held by such stockholder or stockholders."

"§ 16. The clerk or other officer having charge of the

Page 134 U. S. 518

books of any corporation, on demand of any officer holding any execution against the same, shall furnish the officer with the names, places of residence (so far as to him known), and the amount or liability of every person liable as aforesaid."

"§ 18. Every corporation hereafter created shall give notice annually in some newspaper printed in the county where the corporation is established, and in case no paper is printed therein, then in the nearest paper, of the amount of all the existing debts of the corporation, which notice shall be signed by the president and a majority of the directors, and if any of the said corporators shall fail so to do, all the stockholders of the corporation shall be jointly and severally liable for all the debts of the company then existing, and for all that shall be contracted before such notice shall be given."

Rev.Stat.Missouri 1865, pp. 372-373.

By an Act of the Legislature of Missouri approved February 9, 1859, the Excelsior Insurance Company was created. That act is as follows:

"§ 1. That an insurance company be, and is hereby, established in the City of St. Louis, to be known by the name and style of the 'Excelsior Insurance Company,' the stockholders of which are hereby declared a body corporate and politic, with the same amount of capital stock and period of existence, and the same rights, privileges, and restrictions, as were conferred upon the 'Washington Insurance Company' of St. Louis, by an Act of the General Assembly of the State of Missouri approved March the third, eighteen hundred and fifty-seven, with the exception of so much of section eight of said act as declares the same a public act and exempts said corporation from the operation of section eighteen of article first of the act entitled 'An act concerning corporations,' approved November the twenty-third, eighteen hundred and fifty-five."

"§ 2. James H. Lucas, Henry L. Patterson, Thomas Sterin, Morris Collins, James G. Brown, and John C. Porter, or any three of them, or such person or persons as they may appoint, are hereby constituted commissioners to open books for subscription to the capital stock, in the same manner as is prescribed in the charter of said Washington Insurance Company.

Page 134 U. S. 519

This act to take effect from and after its passage."

Sess.Acts Missouri, 1859, p. 74.

Section 6, article 8, of the Constitution of Missouri, which went into effect in 1865, provides as follows:

"Dues from private corporations shall be secured by such means as may be prescribed by law, but in all cases each stockholder shall be individually liable, over and above the stock by him or her owned, and any amount unpaid thereon, in a further sum at least equal in amount to such stock."

In order to give effect to this constitutional provision, the legislature, by an act which went into effect March 19, 1866, amended section 13 of the above act of 1855, so as to read as follows:

"§ 11. If any execution shall have been issued against the property or effects of a corporation, and if there cannot be found whereon to levy such execution, then such 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, provided always that 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 sufficient notice in writing to the person sought to be charged, and upon such motion, such court may order execution to issue accordingly."

Rev.Stat.Missouri, 1866, p. 328.

In July, 1866, Hill subscribed for 64 shares, of the par value of $100 for each share, of the stock of the Excelsior Insurance Company, paying part cash, and giving to the company four notes, for $750 each, dated, respectively, July 20, 1866, and one note dated July 11, 1866, for $1,800. Each one of these notes was payable on demand to the order of the insurance company. At the commencement of these proceedings, his stock had become reduced to 37 shares.

The Constitution of Missouri of 1875 provided that

"Dues from private corporations shall be secured by such means as may be prescribed by law, but in no case shall any stockholder be individually liable in any amount over or above the amount of stock owned by him or her."

Art. 12, § 9. chanrobles.com-red

Page 134 U. S. 520

In 1879, the statutes of Missouri were revised, and the above section of the act of 1866 was amended so as to read as follows:

"§ 736. If any execution shall have been issued against any corporation, and there cannot be found any property or effects whereon to levy the same, then such execution may be issued against any of the stockholders to the extent of the amount of the unpaid balance of such stock by him or her owned, provided always that no execution shall issue against any stockholder except upon an order of the court in which the action, suit, or other proceedings shall have been brought or instituted, made upon motion in open court, after sufficient notice in writing to the persons sought to be charged, and upon such motion such court may order execution to issue accordingly, and provided further that no stockholder shall be individually liable in any amount over and above the amount of stock owned."

The present action was brought under the statute last quoted. It was commenced by notice to Hill on behalf of the Merchants' Mutual Insurance Company that it would move the Circuit Court of the City of St. Louis for execution against him, as a stockholder of the Excelsior Insurance Company for the balance unpaid upon his 37 shares of the capital stock of the Excelsior Insurance Company. The proceeding was docketed as a suit against that company by the Merchants' Insurance Company. Hill appeared, and upon the trial of the action the court found that the unpaid balance on said shares was $2,127.50. For that amount, with costs, an execution was directed to be issued against Hill. Upon appeal to the St. Louis Court of Appeals, that judgment was affirmed, and the judgment of the Court of Appeals was affirmed by the supreme court of the state. 12 Mo.App. 148, 86 Mo. 466. chanrobles.com-red

Page 134 U. S. 524