Whitman v. National Bank

83 F. 288, 28 C.C.A. 404, 1897 U.S. App. LEXIS 2091
CourtCourt of Appeals for the Second Circuit
DecidedJuly 21, 1897
DocketNo. 135
StatusPublished
Cited by16 cases

This text of 83 F. 288 (Whitman v. National Bank) is published on Counsel Stack Legal Research, covering Court of Appeals for the Second Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Whitman v. National Bank, 83 F. 288, 28 C.C.A. 404, 1897 U.S. App. LEXIS 2091 (2d Cir. 1897).

Opinion

SHIPMAN, Circuit Judge

(after stating the facts as above). It will be observed that the complaint contains the averments which are required either by section 32 or section áá, and seeks to enforce an alleged liability of the defendant, whether he is to be charged with the amount of the Kansas judgment or with the amount of the debt due to the plaintiff from the corporation; and it is to be further noticed that not only the fact of the judgment was proved, but that also all the facts upon which the judgment was based, such as the guaranty, the discount, and the nonpayment, were proved, so that the question which is often raised as to the force and effect of the original judgment, and. how much it establishes against the stockholder, is immaterial. The [291]*291plaintiff has proved all the facts that are to be proved, — whether the judgment conclusively established against the stockholders the indebtedness of the bank, or was only prima facie evidence of it, or was no evidence of the indebtedness, but was merely a condition precedent to a suit against the stockholder. The main question in the case— whether a suit to enforce the liability declared by the constitution of Kansas, and provided by its statutes, was transitory in its character, and could be brought by an action at law in a court of another state against a single stockholder, who was a resident of such state — has already been stated. It is to be premised, as was clearly shown by Justice Clifford in Morley v. Thayer, 3 Fed. 739, with respect to this particular constitutional provision, that it is not self-executing in its character, and that statutory legislation was, therefore, required to carry it into effect. Groves v. Slaughter, 15 Pet. 449; Wells v. Robb, 43 Kan. 201, 23 Pac. 148. It is also to be premised, as stated in Pollard v. Bailey, 20 Wall. 520, and reaffirmed in Bank v. Francklyn, 120 U. S. 747, 7 Sup. Ct. 757, that the statutory remedy is exclusive. “A general liability created by statute, without a remedy, may be enforced by an appropriate common-law action. But when the provision for a liability, is coupled with a provision for a special remedy, that remedy, and that alone, must be employed.” Two other decisions have been recently given by the supreme court, which do not undertake to construe this class of statutes, but which are important because they declare the conclusion which must naturally follow if the plaintiff’s construction has been established by the highest court of Kansas, and because they show the particulars in this class of statutes which the supreme court regards as especially significant upon the question of construction. The case of Flash v. Conn, 109 U. S. 371, 3 Sup. Ct. 263, was based upon a provision in a general act of the stale of New York for the formation of corporations that all the stockholders of every company incorporated under it shall he severally individually liable to creditors of the company until the whole amount of the capital stock shall be paid in and certified. The court, after saying that great, if not conclusive, weight must be given to the construction which the highest court of New York had placed upon the statute, and that, following such construction, the liability was :in contract, said that “it can be enforced by an action sounding in contract against a stockholder found in another state,” and that a resort 1 o equity was not necessary, but an action at law was adequate. Upon the last point the court said:

“Lastly, it is objected that the declaration sets out a case which should have been prosecuted In equity, and not at law. There is no ground for this objection to rest on. In the cases of Pollard v. Bailey, 20 Wall. 520, and Terry v. Tubman, 92 U. S. 156, to which we are referred in its support, the liability of the stockholders was in proportion to the stock held by them. Bach stockholder was, therefore, only liable for his proportion of his debts. This proportion could only be ascertained upon an account of the debts and stock, and a pro rata distribution of the indebtedness among the several stockholders. This, the court held, could only be done by a suit in equity. But in this case the statute makes every stockholder individually liable for the debts of the company for an amount equal to the amount of his stock. This liability is fixed, and does not depend on the liability of other stockholders. There is no necessity for bringing in other stockholders or creditors. Any creditor who has recovered judgment against the com[292]*292pany, and -sued out an execution thereon, which has been returned unsatisfied, may sue any stockholder; and no other creditor can.”

This decision was not novel in its character, although its doctrine had not been universally controlling in the state courts, but in Huntington v. Attrill, 146 U. S. 657, 13 Sup. Ct. 224, the supreme court stated its position in regard to the duty of a court of one state to enforce a statute of another state, which was penal in the popular sense, and a position which was not in accordance with the obiter remarks of the justice who delivered the opinion of the court in Steam-Engine Co. v. Hubbard, 101 U. S. 188, 192. The Huntington Case grew out of a statute of the state of New York, which made the officers of a corporation who signed and recorded a false certificate of the amount of its capital stock liable for all its debts; and the question was whether such a statute was so penal in its character that it could not be enforced in the courts of another state. The court said:

“As tbe statute imposes a burdensome liability on tbe officers for tbeir wrongful act, it may well be considered penal, in tbe sense that it should be strictly construed. But, as it gives a civil remedy at tbe private suit of the creditor only, and measured by the amount of bis debt, it is, as to him, clearly remedial. rl'o maintain such a suit is not to administer a punishment imposed upon an' offender against tbe state, but simply to enforce a private right secured under its laws to an individual. We can see no just ground, on principle, for bolding such a statute to be a penal law, in tbe sense that it cannot be enforced in a foreign state or country.”

It becomes, therefore, of prime importance to ascertain what the highest court of Kansas has said in regard to the transitory character of an action to enforce the statutory remedy, or what it has said upon the nature of the stockholder's obligation,.and whether it was several or joint, definite, or adjustable according to a proportion. The germ of the present statutes of Kansas is found in the territorial laws of 1855. The entire body of statutes which were enacted at that session was afterwards repealed, and statutory provisions in regard to the individual liability of stockholders seems to have been passed with respect to particular classes of corporations, and not to have been reproduced in a condensed form, until the revision and codification of 1868.

The first judicial decision of Kansas in regard to the individual liability of stockholders was upon the proper construction of section 14, c.

Free access — add to your briefcase to read the full text and ask questions with AI

Related

Collins v. Streitz
95 F.2d 430 (Ninth Circuit, 1938)
Lewis v. Clark
129 F. 570 (Ninth Circuit, 1904)
Atlantic Trust Co. v. Osgood
116 F. 1019 (U.S. Circuit Court for the District of Southern New York, 1902)
Whitman v. Citizens' Bank of Reading
110 F. 503 (Second Circuit, 1901)
Davis v. Mills
99 F. 39 (U.S. Circuit Court for the District of Connecticut, 1900)
Hutchings v. Lamson
96 F. 720 (Seventh Circuit, 1899)
Western Nat. Bank of New York v. Reckless
96 F. 70 (U.S. Circuit Court for the District of New Jersey, 1899)
Hale v. Hardon
95 F. 747 (First Circuit, 1899)
Dexter v. Edmands
89 F. 467 (U.S. Circuit Court for the District of Massachusetts, 1898)
Schiffer v. Trustees of Columbia College
87 F. 166 (U.S. Circuit Court for the District of Southern New York, 1898)
Mechanics' Sav. Bank v. Fidelity Insurance, Trust & Safe Deposit Co.
87 F. 113 (U.S. Circuit Court for the District of Eastern Pennsylvania, 1898)
James H. Rice Co. v. Libbey
85 F. 821 (U.S. Circuit Court for the District of Eastern Wisconsin, 1898)
American Freehold Land-Mortgage Co. of London v. Woodworth
82 F. 269 (U.S. Circuit Court for the District of Northern New York, 1897)

Cite This Page — Counsel Stack

Bluebook (online)
83 F. 288, 28 C.C.A. 404, 1897 U.S. App. LEXIS 2091, Counsel Stack Legal Research, https://law.counselstack.com/opinion/whitman-v-national-bank-ca2-1897.