Barnes v. Wheaton

29 N.Y.S. 830, 87 N.Y. Sup. Ct. 8, 61 N.Y. St. Rep. 492
CourtNew York Supreme Court
DecidedJuly 15, 1894
StatusPublished
Cited by4 cases

This text of 29 N.Y.S. 830 (Barnes v. Wheaton) is published on Counsel Stack Legal Research, covering New York Supreme Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Barnes v. Wheaton, 29 N.Y.S. 830, 87 N.Y. Sup. Ct. 8, 61 N.Y. St. Rep. 492 (N.Y. Super. Ct. 1894).

Opinion

MARTIN, J.

The provisions of the constitution of the state of Ohio, set out in the complaint, declare that :

“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 further sum, at least equal in amount to such stock.”

In State v. Sherman, 22 Ohio St. 411, it was held that the legislature of that state had no power, under the present constitution, to create corporations without securing the individual liability of their stockholders, at least to the minimum amount required by the constitution; and if the act of incorporation did not secure this, either by express provision, or by requiring from the corporators or stockholders such acts, of organization or otherwise, as would subject them to the constitutional provision, the act would be unconstitutional and void. In French v. Teschemaker, 24 Cal. 518, 539, where a similar provision in the constitution of that state was under consideration, it was held that the provision was not self-executing, but required legislation to carry it into operation. The cases of Morley v. Thayer, 3 Fed. 737; Fusz v. Spaunhorst, 67 Mo. 256; and Groves v. Slaughter, 15 Pet. 449,—are to the same effect. It is obvious that this provision of the constitution is not self-executing, but that its purpose was to confer upon the legislature the power, and impose upon it the duty, of securing dues from corporations by imposing upon the stockholders of such corporations as were organized under the laws of that state an individual liability, and by such other means as, in its discretion, it should deem proper, but limiting such power and discretion by the provision that each stockholder should be made liable to an amount at least equal to the amount of the stock held by him; and we think that this provision does not, independent of a statute imposing such liability, confer upon the plaintiff any right to maintain this action. Moreover, an examination of the complaint discloses that this action was not based upon a right to recover under the provisions of the constitution, but upon the provisions of the statutes of that state passed in pursuance of such constitutional provision; and thus the plaintiff is bound by his complaint, which bases the action upon the statutory liability of the defendant. May v. Black, 77 Wis. 104, 45 N. W. 949. Therefore, in determining the liability of the stockholders of a corporation organized under the laws of that state, it is necessary to examine the statutes defining or declaring the same. The only statute which imposes or defines such liability—at least, so far as appears from the complaint—is section 3258 of the statutes of Ohio, as revised in 1890. As we have already seen, that section provides:

“The stockholders of a corporation which may be hereafter formed, and such stockholders as are now liable under former statutes, shall be deemed and held liable, in addition to their stock, in an amount equal to the stock by them subscribed, or otherwise acquired, to the creditors of the corporation, to secure the payment of the debts and liabilities of the corporation.”

If there was any other statute of that state that would justify this action, upon the facts alleged in the complaint, the existence [834]*834of that statute should have been set out to a sufficient extent to show that the plaintiff had a right of action under and by virtue of it. In an action brought upon a cause of action given by the statute of another state, the existence of the statute is a fact which must be pleaded; and it must appear that under the statute, if proved, a good cause of action exists in favor of the plaintiff against the defendant. Fagan v. Strong (Sup.) 7 N. Y. Supp. 919; Throop v. Hatch, 3 Abb. Pr. 23; Debevoise v. Railroad Co., 98 N. Y. 378. A right of action against a stockholder for the debts of a corporation does not exist at common law; and a statute which imposes upon the stockholder personal liability for the corporate debts must be strictly construed, as it is in derogation of the common law, and cannot be extended beyond its literal terms. Chase v. Lord, 77 N. Y. 1. A party seeking to maintain an action under a statute must state every fact requisite to a cause of action arising under it. Austin v. Goodrich, 49 N. Y. 266. To state a cause of action under the provisions of section 3258, it was necessary to allege that the corporation mentioned in the complaint was either formed subsequent to the adoption of the statute, or that the stockholders of it were at the time. of its passage liable under some former statute, as that section is made applicable only to such cases. The complaint in this case contains no such allegation, and thus, we think, fails to state a cause of action against the defendant under section 3258. The statutes of the state of Ohio have not only limited the liability of stockholders to those of a corporation formed after the passage of that act, and such stockholders as were then liable under former statutes, but they have also provided a special remedy for the enforcement of such liability. Section 3260 of the Revised Statutes of Ohio, in effect, provides that a stockholder or creditor may enforce the liability mentioned in section 3258 by a joint action against all the holders or owners of the stock of the corporation, which action shall be for the benefit of all- the creditors of the corporation, and against all persons liable as stockholders. In such an action there shall be found and determined -the amount payable by each person liable as such -stockholder on all the indebtedness of the corporation, and that upon such an adjudication no costs shall be taxed to nor collected -of any stockholder to an amount which, together with the amount to be paid on such indebtedness, would exceed the amount of the -stock on which he was liable. Thus the question is presented whether this statute has provided such a remedy for the enforcement of the liability imposed by section 3258 as to exclude any -other remedy. In Nimick v. Iron Works Co., 25 W. Va. 184, the -question of the effect and operation of this statute was considered, and it was there held that ii not only conferred upon the creditors of a corporation a new right, but also prescribed the remedy whereby the same might be enforced; that the remedy so prescribed for the ascertainment and enforcement of this liability must be pursued in the courts of the state of Ohio, where the corporation was located, and by the local statutes of which alone the liability existed; and that a bill in equity to ascertain and de[835]*835termine the extent of such individual liability against the stockholders of such corporation could not be sustained in the courts of West Virginia. May v. Black, 77 Wis. 101, 45 N. W. 949, was an action commenced in that state, on a demand for work and labor, against a corporation organized under the laws of the state of Michigan. The constitution of the latter state provides that the stockholders of all corporations organized under the statutes of that state shall be individually liable for all labor performed for them, and that such liability may be enforced by an action in assumpsit, and a suit for such labor may be commenced against all the stockholders and the corporations jointly. In that case it was held that the remedy by action in assumpsit was exclusive, that the corporation must be a party, and that the remedy thus given against the stockholders could be enforced only in the courts of Michigan. In Bollard v. Bailey, 20 Wall.

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Bluebook (online)
29 N.Y.S. 830, 87 N.Y. Sup. Ct. 8, 61 N.Y. St. Rep. 492, Counsel Stack Legal Research, https://law.counselstack.com/opinion/barnes-v-wheaton-nysupct-1894.