170 P. 103 | Idaho | 1918
This action was brought by appellant as receiver of the Traders’ State Bank against the respondents as stockholders. It appears that one Churchill obtained judgment against the bank on the 13th day of March, 1912, for $4,187.67. On the 18th of December, 1912, Churchill caused execution to be issued against the bank, which was returned January 7, 1913, with no property found. The judgment was assigned to one McCarthy. On March 1, 1913, application having been made therefor, appellant was appointed receiver with full power and authority to act in all matters necessary for the recovery from the officers, directors and stockholders of the bank of all of the assets and moneys received by them from the corporation as withdrawals and assets thereof, etc., sufficient to pay the judgment. On May 5, 1913, this action was instituted.
The complaint sets forth two causes of action. The first cause seeks to recover from the stockholders upon their alleged liability under Eev. Codes, sec. 2979, as re-enacted 1911 Sess. Laws, c. 124, sec. 35. The second cause of action is based upon the alleged withdrawal of the assets of the corporation and their distribution among the individual stockholders while the debt here in question was subsisting, outstanding and unpaid. At the close of the appellant’s testimony the trial court entered a judgment of nonsuit upon the
It should be borne in mind that while appellant seeks in his first cause of action to recover upon an alleged statutory liability, the allegations in this cause of action are such as to defeat his right, if any, to recover upon this theory. It is alleged therein that the stockholders withdrew all of the assets from the corporation and distributed them pro rata among themselves. It appears, according to these allegations, that there were 140 shares, the several owners of which, the respondents herein, partook of the assets to the extent of $125 per share. Taking the facts thus alleged as true, there are two legal propositions which, considered together, operate to defeat this cause of action. In the first place it may be stated as a general rule that where a creditor seeks to enforce against a stockholder an individual statutory liability, he must first exhaust his remedy against the corporation. (10 Cyc. 724, 728; Swan Land & Cattle Co. v. Frank, 39 Fed. 456.) In the second place, Rev. Codes, sec: 2732, as amended Qess. Laws 1909, p. 159, makes such withdrawal and distribution of the assets unlawful. Such action of the stockholders and.directors of the bank was void as to existing creditors. (Martin v. Zellerbach, 38 Cal. 300, 99 Am. Dec. 365.) The assets of the corporation constitute a trust fund for the payment of its debts, which cannot lawfully be divided up until after the creditors are paid. (10 Cyc. 654; Chicago, M. & St. P. Ry. Co. v. Third Nat. Bank of Chicago, 134 U. S. 276, 10 Sup. Ct. 550, 33 L. ed. 900; Reid v. Eatonton Mfg. Co., 40 Ga. 98, 2 Am. Rep. 563; Curran v. State of Arkansas, 15 How. (U. S.) 304, 14 L. ed. 705; Schley v. Dixon, 24 Ga. 273, 71 Am. Dec. 121; Chicago, R. I. & P. R. R. Co. v. Howard, 7 Wall. (U. S.) 410, 19 L. ed. 117; Baltimore & Ohio Tel. Co. v. Interstate Tel. Co., 54 Fed. 50, 4 C. C. A. 184; John v. Champagne Lbr. Co., 157 Fed. 407.) The corporation has never been dissolved, and so far as existing
It is apparent from what has been said that the assets of the corporation under the allegations of the first cause of action are more than ample to pay the debt here involved. It is therefore unnecessary for us to determine what, if any, statutory liability might exist, since in any event no such liability can exist in this case under the allegations of the first cause of action, for the reason that it affirmatively appears therein that the assets of the corporation have not been exhausted. Therefore, as to the first cause of action the motion was properly sustained because no cause of action was stated.
We come now to a consideration of the second cause of action. What has already been said touching the action of the stockholders in dividing up the assets of the corporation unlawfully, and with reference to the trust fund doctrine, is. equally applicable here, but in this cause of action the receiver is proceeding properly to compel the stockholders to refund to him, as the legal and judicial representative of the corporation, sufficient of the funds so unlawfully withdrawn and distributed to satisfy the judgment in question. While the court sustained the motion for a nonsuit as to the second cause of action upon the ground that it is barred by the statute of limitations, it did not designate what section of the statute applied, but the motion was based and respondents are relying upon Rev. Codes, sec. 4053, subdivision 1 of sec. 4054, and sec. 4077, which are as follows:
“Sec. 4053: Within four years:
“An action upon a contract, obligation, or liability, not founded upon an instrument of writing.
‘ ‘ Sec. 4054. Within three years:
“1. An action upon a liability created by statute, other than a penalty or forfeiture; ....
“Sec. 4077. This title does not affect actions against directors or stockholders of a corporation to recover a penalty or forfeiture imposed, or to enforce a liability created by law ; but such actions must be brought within three years after the discovery by the aggrieved party of the facts upon which*264 the penalty or forfeiture attached, or the liability was created.” .
But in our opinion none of the foregoing sections applies. Rev. Codes, sec. 2732, as amended Sess. Laws 1909, p. 159, is as follows:
“See. 2732. The directors of corporations must not make dividends, except from the surplus profits arising from the business thereof; nor must they divide, withdraw, or pay to the stockholders, or any of them any part of the capital stock; nor must they reduce or increase the capital stock, except in this title specially provided. For a violation of the provisions of this Section, the directors, under whose administration the same may have occurred, except those who may have caused their dissent therefrom to be entered in the minutes of the meeting of the Board of Directors at the time, or those who were not present when the vote was taken, are, in their individual and private capacity, joihtly -and severally liable to the corporation and to the creditors thereof, in the event of dissolution, to the full amount of the capital stock so divided, withdrawn, paid out or reduced. There may, however, be a division and distribution of the capital stock of any corporation which remains after the payment of all its debts, upon its dissolution or the expiration of its term of existence.”
The supreme court of California, in construing sec. 309 of the California Civil Code, which is the same, so far as it fixes the liability of the directors, as Rev. Codes, sec. 2732, supra, has held that the inhibition therein created extends also to the stockholders, and prohibits them from receiving the assets of the corporation distributed in violation of sec. 309, supra. (Kohl v. Lilienthal, 81 Cal. 378, 20 Pac. 401, 22 Pac. 689, 6 L. R. A. 520.) It appears that the liability created by Rev. Codes, sec. 2732, supra, is in the first instance to the corporation, and that the directors are liable “to the creditors thereof, in the event of dissolution.” Clearly, then, as between the creditors and stockholders the liability of' the latter is a secondary liability. (Thompson on Corporations, 2d ed., par. 5361; Andrew v. Vanderbilt, 37 Hun (N. Y.), 468.)
Considering the ease upon any of the theories advanced, it is clear that the defense of the statute of limitations is unavailable. Other errors assigned are without merit.
The action of the trial court in sustaining the motion for a nonsuit as to the second cause of action was therefore erroneous. The judgment is reversed and a new trial granted. Costs are awarded to appellant.