138 Minn. 446 | Minn. | 1917
This is an action to enforce the stock liability of the stockholders of the defendant corporation. The defendant Sanders answered. The plaintiff demurred to a portion of the answer. From the order sustaining the demurrer the defendant Sanders appeals.
In a proceeding such as this the stockholders are concluded on the question of corporate indebtedness by the judgment against the corporation in the absence of fraud vitiating it. Oswald v. Minneapolis Times Co. 65 Minn. 249, 68 N. W. 15; Holland v. Duluth Iron Min. & Dev. Co. 65 Minn. 324, 68 N. W. 50, 60 Am. St. 480; Hanson v. Davison, 73 Minn. 454, 76 N. W. 254; Town of Hinckley v. Kettle River R. Co. 80 Minn. 32, 82 N. W. 1088; Finch, Van Slyck & McConville v. Le Sueur County Co-op. Co. 134 Minn. 376, 159 N. W. 826. In the view of the l'aw the stockholders are represented by the corporation and the judgment is in effect against them in their corporate capacity. If the judgment was procured by fraud they are not concluded. This is indeed conceded. The question is, may the' judgment be assailed by answer in the sequestration proceeding for the fraud which vitiates it?
In Oswald v. Minneapolis Times Co. 65 Minn. 249, 68 N. W. 15, the court said that the judgment which supported the action was “conclusive against the stockholders until reversed for error or impeached for fraud by a direct proceeding. The judgment cannot be impeached collaterally by stockholders, any more than by the corporation itself.” This language lends itself to the suggestion that in the sequestration proceeding the stockholder cannot show fraud inhering in the judgment; but in that case, as the court says, ho facts constituting fraud were alleged or proved. In Town of Hinckley y. Kettle River R. Co. 80 Minn. 32, 82 N. W. 1088, fraud and collusion in the judgment were allege,d by the stockholders. The trial court found against the charge and its finding was sustained by this court. The plaintiff there as here urged that the stockholders could not in the sequestration proceeding assail the judgment for fraud. The particular point was not mentioned in the opinion. It is clear that neither of the cases is decisive of the question.
An examination of the cases outside of this state shows that in like or resembling proceedings the cases almost universally hold either directly,
Each rule has its advantages and disadvantages'. We adopt the one in accord with authority and hold that the stockholders may by answer in the sequestration proceeding assail for fraud or collusion the plaintiff’s judgment upon which the proceeding rests.
The fifth paragraph of the answer alleges that the affairs of the corporation were negligently and fraudulently conducted by the plaintiff and its officers and its assets depleted. It is a concession of the defendant’s brief that these allegations do not constitute a separate defense and are of importance only in connection with the charges of fraud and collusion affecting the judgment.. We accordingly construe the answer as presenting only one affirmative defense and what is alleged in paragraph five requires no further consideration.
Order affirmed.