Young v. Farwell
28 N.E. 845
Ill.
1891
Check Treatment
Mr. Justice Scholeield

delivered the opinion of the Court:

Although a creditor of a corporation may, after judgment against it and return of execution by the sheriff unsatisfied, seek satisfaction of his judgment by creditor’s bill against a single delinquent stockholder of the corporation, (Hatch v. Dana, 101 U. S. 205,) yet in such case the delinquent stockholder may file a cross-bill in the case, obtain a discovery of the other stockholders, bring them before the court, and enforce contributions from all who are alike delinquent as himself. (Natch v. Da/na, supra; Beach on Private Corporations, sec. TOO, and authorities cited in note 4; Cook on the Law of Stock and Stockholders, sec. 206.) But it is manifest this is impossible except in the State where the corporation has its existence and most of the stockholders reside. No discovery can be obtained in this State against the Chicago Mining Company, no account can be taken of its indebtedness, and no decree can be rendered winding up its affairs and apportioning its indebtedness to the solvent delinquent stockholders by our courts, for the simple reason that it is beyond the jurisdiction of our courts, and no orders made here can be obligatory upon it or its property in Michigan, or in any other State than this.

The rights sought to be passed upon and determined in this proceeding are those which arise from the relations between a corporation and its members, and depend upon the law of the place where the corporation was organized. As was said in New Haven H. N. Co. v. Linden Springs Co. 142 Mass. 353: “The liability which the stockholders are alleged to be under to the corporation and its creditors has little analogy to a debt due, according to the generally recognized principles of law. It is of a peculiar character, involving the organic law by which the corporation is created, and requiring local administration.” And in the present case, if we shall undertake to adjudicate upon the relations between the stockholders and the corporation and its creditors, we shall have to determine whether purchasers or pledgees of unpaid shares of stock in corporations organized under the laws of Michigan, relating to mining corporations, may be held liable to the creditors of' such corporations, and if so, under what restrictions and to what extent, and whether creditors of such corporations are entitled to collect their debts from the holders of its unpaid stock as if such holders were general debtors of the corporation, or whether the only remedy in such case is limited to a forfeiture and sale of the shares of unpaid stock.

These questions have not been authoritatively decided by the courts of Michigan, and from the intimation in Young v. Erie Iron Co. 65 Mich. 111, the latter question is one about which there are differences of opinion in the minds of the members of its Supreme Court. It is manifest that if we, were to undertake to decide these questions, it is possible that) this court and the Supreme Court of Michigan might reach opposite conclusions upon them, and the consequences of that result would inevitably be unjust to either creditors or some of the stockholders, or both. Suppose that we were to here hold that appellee is liable, as prayed in the bill, and direct that a. decree be entered accordingly; that he then goes to Michigan and files a bill for contribution against his co-stockholders, and the courts of that State hold that, under, the statutes affecting this corporation, there is no personal liability fox-unpaid shares of stock, and that the only remedy for unpaid shares of stock is forfeiture and sale of shares. Necessarily, he would be without remedy, and thus our decision would hold our citizen to a more onerous responsibility because of his ownership of shares of stock, than would be that of the citizen of the State under whose laws the corporation was organized and transacted all of its business, for his like ownership of precisely the same class of shares of stock.

It is, moreover, obvious, that to allow these creditors to leave Michigan, the home of the corporation, and of many of its stockholder's, and of themselves, without attempting to collect their judgment of the stockholders there, and to have their rights as respects the stockholders authoritatively determined under the statutes of that State governing alike the corporation, its stockholders. and creditors, and to come here and enforce payment of their judgment against a stockholder of this State, would be to favor the citizen of Michigan over the citizen of our own State. D. W. Wadsworth, the senior member of the firm of D. W. Wadsworth & Go., is indebted, or was indebted when the indebtedness for which this suit is brought was incurred, (and he has not since paid it,) to the corporation, for unpaid shares of stock, more than the amount of the indebtedness here sought to be collected. It is not possible that there can be any reason why he should not pay this indebtedness, and yet that appellee should pay his indebtedness of precisely the same character, or that appellee should first make the payment in full, and then seek contribution from Wadsworth. We are aware that his insolvency, and that of some of the other stockholders in Michigan, is urged in argument as a reason why he and they were not made to pay; but that rests upon assertion, only, and is not an element in support of this proceeding. If this bill had been filed in Michigan, that question could have been considered on cross-bill, the fact of solvency could .have been ascertained with regard to all the stockholders, and the just proportion of the corporate indebtedness that should be borne by the solvent stockholders determined by decree of the court; but such decree could be entered in no other jurisdiction, because, as before shown, in no other jurisdiction can a decree for an account and winding up of the affairs of the corporation be rendered that would be conclusive upon the corporation, its stockholders and creditors.

Since any decree which we might approve in this case could not do complete justice to those liable to be affected by it, and might do injustice to some, we decline to pass upon and determine the questions stated supra and discussed in argument. The appellant must first seek a remedy in the courts of the State of Michigan, and there have authoritatively determined the respective relations of creditors and stockholders of this corporation towards it and towards each other, and then, if it shall be necessary, their rights as respects stockholders domiciled in this State may be enforced in the courts of this State. Lynde et al. v. Patterson et al. 112 Ill. 196; New Haven H. N. Co. v. Linden Springs Co. supra; Halsey v. McLean, 4 Allen, 434; K. and E. R. R. Con. Co. v. T., S. & W. R. R. 135 Mass. 134; Erickson v. Nesmith, 15 Gray, 221; Aultman’s Appeal, 98 Pa. St. 505; Gregory v. N. Y., L. E. & W. R. R. 40 N. J. Eq. 38; Rice v. M. H. Co. 56 N. H. 114; May v. Black et al. 77 Wis. 101.

This reaches the same result, though through different reasoning, as that reached by the Appellate Court. Its judgment must therefore be affirmed.

Judgment affirmed.