50 A. 1044 | Md. | 1902
This is a suit at law brought on the 15th of June, 1901, in the Baltimore City Court by the appellee against the appellant. The appellee was a depositor and creditor of the South Baltimore Bank which was on the 24th of February, 1898, by a decree of the Circuit Court of Baltimore City, adjudged to be insolvent and was dissolved. The appellant, at the time of the failure of the bank was the owner of thirty-eight shares of its capital stock and as such owner was a stockholder of the bank to the amount of $950.00 and one of its directors.
The charter of the bank, Acts of 1888, ch. 294, contains the following provision: "The continuance of this corporation shall be on the condition that the stockholders and directors of this corporation shall be liable to the amount of *354 their respective share or shares of stock in this corporation for all its debts and liabilities upon note, bill or otherwise."
The declaration contains several counts, but the object of this suit is to recover from the appellant, as stockholder, an indebtedness of the bank to the appellee on account of the statutory liability of the appellant as stockholder and director under the statute incorporating the bank.
The appellant filed four pleas to the declaration. The fourth plea is an equitable plea and sets forth the following defense on equitable grounds. "And for a fourth plea, the defendant for defense on equitable grounds says, that this defendant paid to William Colton and Simon P. Schott, receivers, of said South Baltimore Bank, prior to the institution of this suit, the sum of $2.995, which sum was by an order of the Circuit Court No. 2, of Baltimore City, distributed amongst the creditors of the South Baltimore Bank, the plaintiff being one of said creditors and having received his dividend out of said sum and that by such payment the defendant became and is a creditor of said bank in the sum of eleven hundred dollars, an amount greater than the amount of the shares of stock in said bank alleged to have been owned by him at the time of its failure and that by reason thereof there is no liability on his part to the plaintiff."
A demurrer was interposed to the plea and from a judgment sustaining the demurrer, this appeal has been taken.
It will be thus seen that the question raised by the demurrer to the plea is whether a stockholder of an insolvent corporation can set off in equity the indebtedness of the corporation to him, against his statutory liability. This question has not been heretofore directly passed upon by this Court, but the weight of authority seems to sustain the defense set up to the action in this case and that is, that the indebtedness of the company to the appellee constitutes an equitable defense or set off against his statutory liability.
It is admitted by the demurrer to the equitable plea that the appellant is a creditor of the bank to the extent of eleven hundred dollars, an amount greater than the value of the *355 shares of stock owned and held by him at the time of the failure of the bank. In other words, he is a creditor of the bank to the extent of eleven hundred dollars, while the par value of the stock held by him is nine hundred and fifty dollars, and he claims the right to set off the amount which the bank owes him as against the amount for which he may be liable as the owner of the stock.
In the recent case of Colton v. Mayer,
The liability of the stockholder then under the statute having been settled, as a debt due from the stockholder to the creditor, there can be no valid reason, it seems to us, why a stockholder who is also a creditor should not be entitled as a matter of equity to set up as an equitable defense, the debt of the bank to him against his own liability. Mr. Cooke in his book onCorporations, vol. 1, sec. 225 (c), says that it has been held that where the statute creates a fund out of which the creditors are to be paid ratably, then the stockholder cannot set off an indebtedness of the corporation to him. He must pay in what the statute requires and then prove his claim against the corporation like any other creditor. But where the shareholders liability by statute is immediate and personal and several and any creditor may sue any shareholder, then, the shareholder may set off a debt, owing to him from the corporation, when he is sued by a corporate creditor. In 1 Beach on PrivateCorporations, sec. 727, it is said: "But if the statute imposes upon shareholders a personal liability to creditors, immediate and several, so that any creditor may institute an independent action against any shareholder for the enforcement of corporate debts then a defendant shareholder may set off debts due from the company to himself." In Taylor on Private Corporations, sec. 732, it is thus stated: "When a *356 single creditor can and does sue a shareholder at law, to enforce the statutory liability of the latter, it is then competent for the shareholder to set off a debt owing him from the corporation."
The decisions of the Courts in the States, where the question has been raised and passed upon, are not at all in accord. The Courts of New York, Pennsylvania, Georgia, Missouri, Florida and Kansas, hold the doctrine, that the stockholder is entitled to the equitable set off, while on the other hand the Courts of Virginia, West Virginia, Illinois and some other States assert the very opposite doctrine.
In Ball v. Anderson, 196 Pa. St. 88, the Supreme Court of Pennsylvania, in a recent decision, where the question was involved, says, the clear weight of authority appears to be in favor of the right of the stockholder to set off the indebtedness of the corporation to him. The following cases sustain the view announced by the Pennsylvania Court. Hood v. French,
In Musgrave v. Glen Elder,
We are of the opinion, therefore, upon the principle stated in these cases that the defence set up in the equitable plea should prevail in this case, and without extending this opinion by passing upon the other questions raised by the record, the judgment sustaining the demurrer to the fourth plea will be reversed and the cause remanded.
Judgment reversed and cause remanded with costs.
(Decided January 16th, 1902.) *358