Without determining whether or not the creditor of a corporation can in any case maintain an action against a stockholder without first obtaining judgment against the corporation, we think that there is nothing in the law making a stockholder liable to a creditor in such cases which in any manner enlarges the operation of the statute of limitations, or affects any right which the stockholder has thereunder. If the theory of the plaintiff be correct, it would be within the power of a creditor of a corporation to extend the statutory bar for a period which surely never was contemplated by the law-making power. In the case at bar, the action upon the bonds might have been brought at any time within ten years
In the case at bar, the plaintiff recovered judgment against the corporation on the fourth day of June, 1878. It took no further action until July 22, 1880, when execution was issued and demand made upon the officers of the corporation for property upon which a levy could be made. And this action was not commenced until April 11, 1881. No cause for delay is shown; and there can be no such excuse,
Affirmed.
OPINION UPON REHEARING.
Upon a rehearing allowed upon plaintiff’s petition, this cause has again been argued and submitted. Upon a patient and careful reconsideration of the question involved in the ease, we remain well satisfied with the conclusion announced in the former opinion. We will briefly state certain considerations, not presented in that opinion, which, to our minds, conclusively establish the correctness of our decision.
The Code contains the following provisions:
“’Section 1082. Neither anything in this chapter contained, nor any provisions of the articles of incorporation, shall exempt the stockholders from individual liability to the amount of the unpaid installments on the stock owned by them, or transferred by them for the purpose of defrauding creditors; and execution against the company may to that extent be levied upon the private property of any such individual.
“Section 1084. Before any stockholder can be charged with the payment of a judgment rendered for a corporate debt, an action shall be brought against him, in any stage of which he may point out corporate property subject to levy; and, upon his satisfying the court of the existence of such property, by affidavit or otherwise, the cause may be continued, or execution against him stayed, until the property can be levied upon and sold, and the court may subsequently render judgment for any balance which there may be after disposing of the corporate property; but, if a demand of property has been made, as contemplated in the preceding section, the costs of said action shall in any event be paid by the company or the defendant therein, but he shall not be permitted to controvert the validity of the judgment rendered against the corporation, unless it was rendered through fraud and collusion.”
What, under these provisions, fixes the liability of a stockholder? (1) The non-payment of stock subscribed by the stockholder; (2) The inability of the creditor to collect his claim from property owned by the corporation, or, more properly, the fact that the corporation has no property from which the claim may be collected. There is no dispute as to the first of these conditions, and, as to the second, there can be no dispute as to the fact; for the answer, which is admitted by the demurrer, alleges that the railroad company has had no property since 1875. Now, it cannot be doubted that, upon the meeting of these two conditions, the creditor has a right to proceed against the stockholder. Wiry has he such rights?
The judgment against the corporation does not pertain to plaintiff’s right of action, but to the evidence required in order to establish it. The right of action arose upon the meeting of the conditions first specified. The measure of recovery is to be determined in an action against the corporation, which is simply a proceeding to provide evidence in the action to be brought by plaintiff. The action and judgment against the corporation are simply matters of preparation for the trial of the action against the stockholder. Delay in such preparation does not affect the right of action, and such preparation, when completed, does not create it. It is like the taking of evidence preparatory to trial. It could not be said that a plaintiff had no cause of action until he had secured and prepared his evidence.
The statute, Code, section 2529, limits actions within the prescribed time after “their causes accrue,” not after a time when the plaintiff has prepared his proof, and is thereby able to recover judgment. We adhere to the conclusion announced in the foregoing opinion.
dissenting. — The error of the majority, as I think, consists in the assumption that plaintiff’s right of action against defendant, as a stockholder of the. corporation, accrued when the incorporation became insolvent, and had no property out of which his claim against it could be made.
But the object of the legislature in enacting the statute was, undoubtedly, to afford him a remedy which, as between him and the stockholders, should be exclusive, and there is now no other proceeding against the shareholder by which he can be compelled to contribute to the satisfaction of his debt, except the one provided by the statute.
While, therefore, the individual liability of the shareholders for the debts of the corporation grows out of the contract relations between them and its creditors, the right of action against them thereon accrues in favor of the creditor only on the happening of the events which the statute has made conditions precedent to his right of recovery against them.
Under the practice before the statute, when the remedy of the creditor was by a creditor’s bill in equity, it was essential to his right of action against the shareholder that he should have exhausted his legal remedies against the corporation, anda casual examination of sections 1083, 1084 shows,
The manifest object of the proceedings contemplated by the statute is to charge the shareholder with the judgment against the corporation, and no lawyer would think of attempting to proceed against him until the legal liability of the corporation was established by the judgment of some court of competent jurisdiction. As plaintiff’s right of action against defendant did not accrue thereon until it obtained its judgment against the corporation, the statute of limitations did not begin to run until that time. Code, § 2529. The holding of the majority is, in effect, that it began to run whenever the corporation became bankrupt, and had no property out of which the creditor’s claim could be made. I cannot bring myself to believe that this is the true rule. If it is, it might follow, in some cases, that the remedy of the creditor against the shareholder might be barred before his right accrues under the statute, to institute proceedings for its enforcement; this would be the case in every instance where the debt of the corporation does not mature until five years after it becomes insolvent.
The rule I am contending for could work the hardships and inconveniences pointed out in the original opinion only in case the shareholder neglected his own interests. The stockholder of an insolvent corporation has it in his power at any time to institute legal proceedings for the winding up of its affairs, and the collection and proper application of its assets,— a proceeding not always open to the creditor; and in this right he has ample protection against the liability to be charged with stale or unjust-claims against the corporation.
But if the rule is the correct one, as I think it is, it ought to be applied regardless of the consequences which might