186 Ky. 17 | Ky. Ct. App. | 1919
Opinion of the Court by
Reversing.
The question upon this appeal is whether, in any event, a suit may he maintained in equity against a stockholder for a debt of the corporation before a judgment has been obtained at law against the corporation and a return of “no property,” and without the corporation being made a party defendant. That ordinarily and as a general rule the secondary and equitable liability of a stockholder for the corporation debt cannot be enforced until the primary and legal liability of the corporation has been determined and legal remedies exhausted by obtaining a judgment and a return of “no property” thereon, is freely admitted by appellant, which insists, however, that the facts pleaded in its petition bring this case within an exception to the general
The appellee, to sustain the action of the chancellor in sustaining special demurrers to the petition and dismissing the action without prejudice, relies upon the case of Swan Land & Cattle Company v. Frank, 148 U. S. 603, and the general rule, as stated in 10 Cyc. 728, and as recognized by this court in C. & O. R. Co. v. Griest, 85 Ky. 619; L. & N. R. Co. v. Biddell, 112 Ky. 494; Harbison, Walker Co. v. McFarland, 156 Ky. 44; Camden Interstate Railroad Co. v. Lee, 84 S. W. 332; but it is conceded that the facts relied upon here as constituting an exception to the general rule were not present in any of the cited Kentucky cases, and that the precise question involved here is one of first impression in this jurisdiction. We need not, therefore, review these Kentucky cases, as expressions found therein, if any, that might be construed as favorable to one side or the other of this controversy were beside the question then before the court and cannot be accepted as authority. The general rule, as stated in 10 Cyc. 728, is in substance that as a rule of equity procedure a creditor of a corporation cannot have equitable relief against its shareholders until he has. prosecuted his demand to a judgment at law against the corporation unless circumstances existed excusing him from doing so. On the next page (729) of the same volume it is stated upon authorities cited that there are two theories as .to what will excuse the necessity of exhausting legal remedies against the corporation before a suit can be maintained upon the equitable liability of the stockholder, the first of which is that a cle facto dissolution of a corporation is sufficient, while the other is that nothing less than a
Wherefore the judgment is reversed for proceedings consistent herewith.