Debts of Corporations.—While the Constitution requires the debts of corporations to bo secured by the personal liability of the corporators, and makes each stockholder liable for his proportion of such debts, it leaves to the Legislature the power to regulate such liability, and to prescribe the rule by which each stockholder’s proportion of such debts shall be ascertained.
Idem.—An Act of the Legislature making each stockholder of a corporation liable for his share of all its debts contracted while he is a stockholder is sufficient to answer the requirements of the Constitution.
Idem.—There is nothing in the Constitution that renders a man who becomes a stockholder personally liable by so doing for his proportion of all the uncanceled debts of the corporation created before he became a stockholder.
Proof to fix Liability of Stockholder.—In an action against the stockholders of a corporation to recover the proportional share of each one of the corporate debts, the proof must show that the defendant was a stockholder when such debt was contracted. Proof of a judgment against the corporation does not show when the debt was contracted.
Judgment Against Corporation.—A judgment rendered against a corporation, while a party is a stockholder, upon a contract entered into before the relation of stockholder existed, is not a contract within the meaning of the Act which makes such stockholder liable for the corporate debts contracted while he was such stockholder.
Action to recover Corporate Debts.—A joint or several action may he brought against stockholders of a corporation for corporate debts.
How Liability of Stockholders may be Discharged.—Each stockholder of a corporation formed under the Act of 1853, entitled “An Act to provide for the formation of corporations for certain purposes,” is liable for his proportion of the corporate debts ¿ and any one creditor, whose debt is sufficient, may collect of him the entire amount of his liability on all the corporate debts, leaving him to seek contribution out of his co-stockholders. When such stockholder has paid to any one or more creditors the amount of his entire liability, his liability ceases.
Idem.—To determine how much any one stockholder of such corporation is liable to pay to a corporate creditor, it is necessary to find the whole amount of the indebtedness of the corporation created while he was a stockholder j and any one creditor, whose demand is large enough, may have judgment for the stockholder’s proportion of all such corporate debts.
Certificates of Incorporation.—Defects in certificates of incorporation arc cured by the Act of April 1st, 1864.
Judgments as Evidence.—The point, whether judgments against a corporation are admissible in evidence without putting in the entire judgment roll, not decided.
Opinion — Sawyer
By the Court, Sawyer, C. J.: Action against stockholders of the Pond Gold and Silver Mining Company, to recover against them personally a debt due from the corporation. Section sixteen of the Act authorizing the formation of mining corporations provides, that “'each stockholder shall be individually and personally liable for his proportion of all the debt's and liabilities of the company contracted or incurred during the time that he was a stockholder, for the recovery of which joint or several actions maybe instituted and prosecuted.” We have no doubt of the power of the Legislature, under sections thirty-two and thirty-six of Article IV of the Constitution, to adopt this limitation. The former is in these words: “Dues from corporations shall be secured by such individual liability of the corporators, and other means as may be prescribed by law.” And the latter reads as follows: “Each stockholder of a corporation or joint stock association shall be individually and personally liable for his proportion of all its debts and liabilities.” It was manifestly contemplated that the Legislature should regulate the liability, and prescribe the rule by which each stockholder’s proportion should be ascertained. (French v. Teschemaker, 24 Cal. 539.) The principle adopted by the Legislature makes every stockholder liable for his share of all debts contracted while he is a stockholder. The entire body of stockholders, for the time being, is personally liable for the entire debt contracted—an entire set of stockholders is liable for every debt. This is sufficient to answer all the requirements of the Constitution. There is nothing in the provision that requires each man, when he becomes a stockholder, to do so on the penalty of becoming responsible for all prior liabilities of the corporation that remain uncanceled. This would he to make several different sets of stockholders personally responsible for some debts, and only one set for others. There is nothing in the Constitution requiring such a result.
There is nothing whatever in the testimony tending to [167]show when the indebtedness sued on was contracted, and, consequently, nothing to show whether it was contracted while the several defendants were stockholders or not. It is true, a page of the minute book of the company, which was incorporated February 9th, 1863, was read, to show that it “commenced business in July, 1863,” and “that the company did no business after July, 1864—had no property, and was doing nothing.” From this it must have been inferred by the Court that the debts were contracted some time between the 1st of July, 1863, and the last of July, 1864. If such inference was admissible from this evidence, it would not help the matter. The evidence also shows, that the several parties held different amounts of stock at different times, and consequently that their proportions varied at different times. For instance, the Court finds that Baldwin held thirty shares when the indebtedness was contracted. But the evidence shows that he had ten shares on the 4th of March, 1863; April 17th, 1863, seventeen shares; September 5th, five shares more. According to the testimony, he could at no time have had thirty shares before the 5th of September. Met the indebtedness may in part or wholly have been contracted before the latter date. Frank Johnson was found to have held twenty shares. The testimony shows that on April 17th, he had fifteen shares, and on July 24th, five shares more, making twenty. Admitting that the debt must have been contracted while the company was doing business, at what time was it incurred?—before or after the 24th of July? There is not a shadow of testimony tending to show, yet the extent of Johnson’s liability is materially affected by this important fact. Winans is found to have twenty shares, yet the testimony does not tend to show that he had any prior to the 7th of August. Lubeck, Meeker, Donohoe, Ralston & Co., and McHugh do not appear by the evidence to have had any stock till the 10th of August, 5th of September, 22d of August, and 31st of August, respectively, yet they are found to have had, respectively, eight, fifteen, thirty and forty-one shares, when such indebtedness
Act of 1850, concerning Corporations.—The Act of 1850 concerning corporations, has no application to corporations formed under the Act of 1853, for “Manufacturing, mining, mechanical, or chemical purposes, or for the purpose of engaging in any species of trade or commerce.” The Act of 1853 repealed the Act of 1850 so far as these classes of corporations arc concerned.
[168]
was contracted. If we are required to infer that the entire indebtedness must have been contracted while the company was doing business, it may still all have been contracted in the month of July, 1863; and it does not appear that these latter named parties are personally liable at all, for, so far as the evidence shows, they were not stockholders in the month of July. The fact is, there is nothing in the record which tends, in any degree, to show when the indebtedness was contracted; and the appellant is right in maintaining that the findings on this point are unsupported by the evidence, and that the judgment against the corporation goes for nothing, without other evidence to show when the debts upon which the recovery was had were contracted. In this respect there was a fatal error.
The claim of the respondent that the judgment is itself a contract creating a new debt, within the meaning of the statute, for which all who were stockholders at the date of the rendition of the judgment are personally liable, is too absurd to require argument to refute it. That a judgment is a contract of record, in a certain legal sense, may be conceded, but it creates no such new liability as the statute in question contemplates. The judgment only merges and puts in a new form, against the will of both corporation and stockholders, an indebtedness which has already been contracted. If this is to be construed as the creation of a new liability, there would be no way for a stockholder to escape personal responsibility for all debts which had before been incurred; and the limitation provided for by section sixteen of the Act concerning corporations for mining companies would be utterly nugatory.
We do not understand that the judgment in favor of plaintiff is for more than was due. In order to find out how much any one stockholder is liable to pay to the plaintiff of the amount due from the corporation, it is necessary to find the whole amount of the indebtedness of the corporation created while he is a stockholder. If his share of personal liability, upon the whole indebtedness, is sufficient [169]to pay the judgment of the plaintiff, we know of nothing to prevent the plaintiff from collecting the whole out of him, leaving the stockholder, who has paid more than his share of the particular debt, to seek contribution out of his co-stockholders. This is the reasonable construction of section sixteen. Of course when the judgment is once satisfied, the plaintiff can collect no more from the other stockholders, although his judgment may, before satisfaction, have authorized him to collect it out of several stockholders. This, if we understand it, disposes of appellant’s third point.
The statute authorizes a joint action or several actions.
It is not clear that any fatal defect exists in the certificate of incorporation. If so, it is cured by the Act of April 1st, 1864. (Laws 1864, p. 303.)
On the point as to whether the judgments against the corporation were admissible in evidence, without putting in the entire judgment roll, each party appears to be equally confident, yet neither takes the trouble to cite any authority upon the precise point, and, as the case is decided upon another ground, we shall not perform the duties of counsel in investigating the question for them. If the question is raised again, we hope counsel will be prepared with the authorities to maintain their views.
Judgment and order denying new trial reversed, and new trial granted.
[The above opinion was delivered while Mr. Justice Shafter and Mr. Justice Currey were members of the Court. Ueither Mr. Justice Rhodes nor Mr. Justice Sanderson expressed any opinion. A rehearing having been granted, the following opinion was delivered after Mr. Justice Sprague and Mr. Justice Crockett had become Justices. Mr. Justice Sanderson and Mr. Justice Sprague concur in the opinion of the Chief Justice.]
[170]By the Court, Sawyer, C. J.:
We granted a rehearing upon the point as to whether, under section sixteen of the Act of 1853, for the formation of mining and certain other corporations, as amended in 1863, a creditor, in his recovery against an individual stockholder on his personal liability, is limited to the stockholder’s share of that particular debt, or whether he can recover the whole amount of his debt against such stockholder, provided the entire amount for which the stockholder is personally responsible upon the aggregate of the corporate debts, is sufficient to pay the debt in suit.
Upon a careful re-examination of the question by the light of the arguments in the several petitions for rehearing, and further briefs, we are unable to find any ground of escape from the conclusion before attained. We can put no other construction upon the provisions of section sixteen, which, to our minds, appears reasonable. The whole section is as follows: “ Bach stockholder shall be individually and personally liable for his proportion of all the debts and liabilities of the company contracted or incurred during the time that he was a stockholder, for the recovery of which joint and several actions may be instituted and prosecuted. In any such action, whether joint or several, it shall be competent for the defendant or defendants, or any or either of them, on the trial of the same, to offer evidence of the payment by him, or them, or any or either of them, of any debts or liabilities of such corporations, and upon proof of such payment, the same shall be taken into account and credited to the party or parties making such payment, and j udgment shall not be rendered against the party or parties, defendant, proving such payment for a sum exceeding the amount of his or their proportion of the debts and liabilities of such incorporations, after deducting therefrom the sums proven to have been paid by him, them, or any or either of them, on account thereof.” (Laws 1863, p. 736.)
It would be no strained construction to so hold upon the [171]first clause of the section down to the first period, if there had been nothing more. But, in that case the construction might be open to some doubt, whether it was contemplated that each creditor should be compelled to pursue each stockholder for his individual share of his debt, or whether he might make his money out of the first one he could find, whose liability is sufficient to cover the indebtedness, and where he could make it easiest. If there is any one, who, in a legal point of view could be injured by the latter construction, it would be other creditors, and not the stockholder. In contemplation of law, each stockholder ought to pay, and will pay, the whole amount of Ms liability to some party, and it is not of the slightest moment to Mm, to whom he pays it, for, when fully paid, he is discharged. The only benefit a stockholder could derive from the other view would be, the probability, or possibility, that owing to the expense and impracticability of pursuing each stockholder for Ms fraction of liability upon each debt, large and small, he might escape altogether a large portion of the liability for which he engages himself as a member of the corporation— a species of benefit at the expense of honest creditors, which the law in no way recognizes, or countenances. That the Legislature did not contemplate that each stockholder should be the debtor of each creditor for a share of his whole liability, corresponding to the creditor’s share of the whole debts of the corporation, and no more, or that one creditor, by his diligence, should get no advantage over another, in case of the insolvency of the corporation and a portion of the stockholders, seems plain to our minds from the remainder of the section. It provides, that “in such action, whether joint or several,” against a stockholder or stockholders to enforce the personal liability, “it shall be competent to show on the trial payment by Mm, or them, or any or either of them, of any debts or liabilities of such corporation, and upon proof of such payment the same shall be taken into account and credited to the party or parties making such payment, and judgment shall not be rendered against the [172]party or parties defendant proving such payment for a sum exceeding the amount of his or their proportion of the debts and liabilities of such incorporations, after deducting therefrom the sums proven to have been paid by him, or them, or any or either of them on account thereof.” This shows no intention to protect one creditor against the superior diligence of another, or to divide up the liability of the stockholder, giving a part to each creditor, but indicates a contrary purpose. It authorizes the payment of the wdiole liability to the first who comes with a demand sufficient to absorb it, and, by implication, at least, authorizes the creditor to make his money out of any party liable to pay the amount. It is not designed to give an option to the stockholder to prefer whom he will, for the law recognizes no personal favors as due to stockholders as such, but it is designed to protect them, when they have paid the full amount of their liability to a party duly entitled, whether he has collected it with or without suit. Besides, the latter clause provides, that, “ the judgment shall not be rendered against the party or parties defendant proving such payment for a sum exceeding the amount of his or their proportions of the debts and liabilities,” etc., and the provision that judgment “ in any such action, whether joint or several,” shall not be entered “ exceeding the amount,” etc., upon well settled rules of construction, implies that it may be entered “ in any such action,” up to “ the amount of his or their proportion of the debts and liabilities of such corporations.” The evident policy of the law with respect to creditors, in this, as in our Attachment Law, is, to give the preference to the vigilant rather than to the sleeping, in strict accordance with the time-hallowed maxim: vigilantibus, et non dormientibus, serval lex. And the party liable can, in contemplation of law, have no interest in the question as to which particular creditor shall receive the amount of his liability. He can have no legal concern beyond protection after his liability is discharged, and can, in no legal sense, be injured by payment to one, rather than to another.
[173]It is said, however, that section thirtjrtwo of the general Act of 1850, concerning corporations, as also amended in 1863, must be read in connection with said section sixteen, under consideration; that the two sections must be so construed as to harmonize; and as the provisions of said section thirty-two are specific, and clearly limit the recovery of each creditor to a portion of the whole liability of each stockholder, corresponding to his share of the whole debts due from the corporation, section sixteen must bear the. same construction, or the two sections will not be in harmony, or if this view is not correct, that, then, we should look to those provisions upon a similar, or cognate subject matter, to ascertain what the Legislature probably intended by the less specific provisions of section sixteen, adopted on the same day. This argument, if we correctly apprehend the matter, proceeds upon a mistaken view, as to the applicability of said section thirty-two, of the Act of 1850, to the subject matter of this suit, and as to the relation to each other of the two Acts of 1850 and 1853. As we read these Acts, section thirty-two of the one, and sixteen of the other, apply to wholly different subjects matter; while the argument drawn from a comparison of the two sections appears to us to support the construction maintained in this opinion, rather than the other.
The two Acts of 1850 and 1853, are two distinct and wholly independent Acts, each embracing a separate and distinct, not the same, subject matter. They both relate to corporations, but not to the same corporations. The Act of 1850, it is true, originally covered the whole field of corporations. It was divided into several chapters, each chapter providing for certain classes of corporations. The first chapter contained certain general provisions, applicable to all created under that Act, and said section thirty-two is found in said chapter. Chapter V of that Act provided for corporations for manufacturing, mining, mechanical or chemical purposes. (Stat. 1850, pp. 347, 365.) But in 1853 a new Act, “ to provide for the formation of corporations for certain purposes,” which included manufacturing, mining, [174]mechanical or chemical purposes, or for the purpose of engaging m any species ot trade or commerce, foreign or domestic, was passed; and Chapter V of the Act concerning corporations of 1850, was repealed, so that, thenceforth, the Act of 1850 had no application to corporations to be formed for these purposes. The old Act was not amended, but absolutely repealed, so far as these classes of corporations, thereafter to be formed, are concerned, and a new and independent Act, covering the whole subject matter of such corporations adopted. (Stat. 1853, p. 87, Secs. 1, 25, 27.) As to the corporations formed under this new Act, it is provided in express terms, “such corporations, and the members thereof, being subject to all the conditions and liabilities herein imposed, and none others.” (Ib. Sec. 1.) Again, “corporations formed under this Act, and the members thereof, shall not be subject to the conditions and liabilities contained in an Act entitled ‘ An Act concerning corporations,’ passed April 22d, 1850.” (Ib. p. 92, Sec. 27.) Thus by express enactment neither section thirty-two nor any other of the provisions, general or special, of the Act of 1850, either as it before stood, or as amended in 1863, has any connection with or application to corporations, like the one now in question, formed under the Act of 1853, which Act is complete within itself. Its construction, therefore, cannot affect the question at issue.
Section sixteen of the latter Act is the only one touching the question, and the decision of the point now under consideration must depend alone upon the construction given to said section. As the two sections, then, are in different Acts, and have no application to the same subject matter, there is no occasion to give a construction that shall harmonize the two, for each can have a full and complete operation upon its own subject matter, however different the provisions, and their construction may be.
Section sixteen of the Act of 1853, and section thirty-two of the Act of 1850, were both amended by two several Acts, passed on the same day, April 27th, 1863, but neither amend[175]ment ivas made applicable to any class of corporations, except those provided for in the particular Act to which it was an amendment. Section sixteen of the Act of 1853, as thus amended, has already been given. Section thirty-two of the Act of 1850, as amended on that day, reads as follows:
“Each stockholder of any corporation shall be severally, individually, and personally liable for such proportion of all its debts and liabilities as the amount of stock owned by him in such corporation bears to the whole of the capital stock of the corporation, for the recovery of which joint and several actions may be instituted and prosecuted; and in any such action against any of the stockholders of a corporation, the Court shall ascertain and determine the proportion of the debt which is the subject of the suit for which each of the stockholders who are defendants in the action are severally liable, and judgment shall be given severally in conformity therewith. If any stockholder in a corporation shall pay his proportion of any debt due by such corporation he shall be released and discharged from any further individual or personal liability for such debt.”
It will be seen by comparison that those two sections are wholly different; that they could not be made to apply to the same subject matter, and could not possibly be intended to accomplish the same object. Both provide for prosecuting joint or several suits to enforce the liability, but section thirty-two provides that in any such action against any of the stockholders “the Court shall ascertain and determine the proportion of the debt which is the subject of the suit, for which each of the stockholders who are defendants in the action are severally liable, and judgment shall be given severally in conformity therewith.” This provision expressly contemplates that each creditor shall recover a portion of the whole personal liability of the stockholder, corresponding to the portion of the whole indebtedness held by him, and no more, and directs the Court to ascertain the proportion of [176]the “ debt which is the subject of the suit,” each is severally liable for, and enter a several judgment in conformity therewith. There is no allowance for payment to other creditors. Section sixteen contains no provision of the kind, but, on the contrary, contains a provision authorizing the defendant or defendants “in any such action, whether joint or several,” to show that they have paid their full share of personal liability, or some part of it, to other creditors, and directs the amount so paid to be allowed to the party paying. Said section thirty-two provides that if any stockholder “ shall pay his proportion of any debt, he shall he released and discharged from any further individual or personal liability for such debt.” He is not to be discharged from paying his proportion of other debts, although he may pay the whole of some particular debt. Under section sixteen it is quite different, for in a suit upon one debt, he may show that he has paid the whole, or a part, of his liability to some other creditor or creditors, and “judgment shall not be rendered against him for a sum exceeding the amount of his or their proportion of the debts and liabilities, * * * after deducting therefrom the sums proven to have been paid,” etc. Thus the two sections, as to the rights of the creditors as against the individual stockholders, go upon different theories. One is based upon the theory that each creditor shall be entitled to hold each stockholder personally liable to himself for a portion of each stockholder’s entire liability, corresponding with the amount of the share of the whole debt due from the corporation held by such creditor; and the other upon the .theory that the vigilant creditor may reap the reward of his vigilance, by obtaining his money from any party whose liability is sufficient to cover his demand. It cannot he supposed that this difference is accidental, or that the Legislature, by adopting provisions so entirely diverse, intended to express the same idea, or confer the same rights. These two Acts were before the Legislature at the same time, and were passed on the same day. That body had no difficulty in finding language to express its intention clearly [177]in section thirty-two; and, if it had in contemplation a similar result in passing the amendment to section sixteen, it is reasonable to suppose it would have adopted similar language. When in two laws under consideration and passed at the same time, theories so diverse have been adopted, it must be presumed that it was with a design, and that the specific design in each section is in harmony with its own general theory. Why the Legislature applied a different rule to these different classes of corporations, they have not seen fit to inform us. Whether the policy is a wise one, or not, is no concern of ours. It is enough for us to know, if such be the fact, and so we think it to be, that thus the law is written.
Under the view here taken, each section is consistent with itself in the general theory upon which it proceeds, and in the provisions general and specific for giving it effect; while under the other view, section sixteen would be inconsistent Avith itself in these respects. We are unable to give any other construction, which appears to us reasonable, to the statute in question, than that before adopted.
Whichever view prevails, the result on this appeal is not changed, for the judgment must be reversed on other grounds. But the question is directly presented in the record, and it will necessarily arise on the next trial. For this reason, and as it has been fully argued, we deem it proper to determine it now.
. The judgment and order denying a new trial are reversed, and a new trial granted, and the remittitur directed to issue forthwith.
Concurrence — Rhodes
Rhodes, J., concurring: ■ The solution of the questions upon which the rehearing was granted, depends, in my judgment, upon the construction of section sixteen, and not of section thirty-two.
The first clause of section sixteen declares the liability of stockholders. “ Each stockholder shall be individually and [178]personally liable for his proportion of all the debts and liabilities of the company contracted or incurred during the time that he was a stockholder.” The remainder of the section relates to the mode of procedure in ascertaining and determining the amount of the debts for which each stockholder ’ is liable. Joint and several actions may be instituted. The stockholder may prove, and there shall be allowed to him, in reduction of the amount for which he would otherwise be liable, in a suit brought by a creditor, the amount which he may have paid upon '“any debt or liability of such corporation,” and, thereupon, judgment shall be given for a sum not exceeding his “ proportion of the debts and liabilities of such corporation,” less the amount previously paid by him. That is to say, each stockholder is liable for his proportion of all the debts and liabilities of the corporation, and for nothing beyond; and upon his payment of such proportion, his liability ceases. Suppose the debts of the corporation amount to one hundred thousand dollars, and that there are one hundred stockholders, each holding the same amount of stock. When one stockholder has paid a creditor one thousand dollars he is no longer liable to the other creditors. Under that section he is clearly authorized to exhaust his whole liability in the satisfaction of the debt of one creditor, and the other creditors must look to the corporation and the other stockholders for the payment of their demands. This construction, it is true, may enable the diligent creditor to secure the payment of his demand from the only solvent stockholder in the company, and leave the other creditors without remedy, except against the corporation, which may, perhaps, be insolvent. This result certainly would ensue should the only solvent stockholder exhaust his liability for his proportion of all the debts of the corporation in the payment, without suit, of the claims of one or more of the creditors. This results, not from construction, but from the positive terms of the Act.
Should the opposite construction be given, consequences more injurious to the creditors and more absurd in their [179]results would ensue. The solvent stockholder in the supposed corporation pays ten dollars on any debt or liability of the corporation; and in each of the suits brought by creditors whose claims do not severally exceed one thousand dollars, he relieves himself from responsibility by proving his one payment of ten dollars. Had the stockholder paid one hundred dollars he would not be liable to any creditor whose claim did not exceed ten thousand dollars.
Dissent — Crockett
Crockett, J., dissenting: I dissent from the opinion of my associates on the important question involved in this case. The order granting • a rehearing confined the argument of counsel to the questions relating to the liability of the defendants as stockholders in a mining corporation, under section sixteen of the Act concerning mining corporations, as amended in 1863. (Stats. 1863, p. 736.)
The question to be considered is one of great practical importance in this State, and is accurately stated in brief of defendant’s counsel, as follows:
“Can a creditor of a mining corporation recover from any individual shareholder the proportion due from the latter of the aggregate debts and liabilities of the corporation, or so much thereof, as will satisfy the creditor’s debt? or is the recovery to be limited to the proportionate share of the. debt sued for due from the stockholder ?”
The solution of this question will depend upon the proper construction of section thirty-two of the general Incorporation Act as amended in 1863, (Stats. 1863, p. 766,) and the sixteenth section of the Act concerning mining corporations, as amended in 1863. (Stats. 1863, p. 736.) Both these amendments were passed and took effect on the same day, and must be construed together, so as to harmonize their [180]provisions if practicable. Section thirty-two is in the following words:
“Bach stockholder of any corporation shall be severally, individually, and personally liable for such proportion of all its debts and liabilities as the amount of stock owned by him in such corporation bears to the whole of the capital stock of the corporation, for the recovery of which, joint or several actions may be instituted and prosecuted; and in any such action against any of the stockholders of a corporation, the Court shall ascertain and determine the proportion of the debt which is the subject of the suit for which each of the stockholders who are defendants in the action are severally liable, and judgment shall be given severally in conformity therewith. If any stockholder in a corporation shall pay his proportion of any debt due by such corporation, he shall be released and discharged from any further individual or personal liability for such debt.”
Section sixteen is as follows: “ Bach stockholder shall be individually and personally liable for his proportion of all the debts and liabilities of the company contracted or incurred during the time that he was a stockholder, for the recovery of which joint or several actions may be instituted and prosecuted. In any such actions, whether joint or several, it shall be competent for the defendant or defendants, or any or either of them, on the trial of the same, to offer evidence of the payment by him, or them, or any or either of them, of any debts or liabilities of such corporations, and upon proof of such payment, the same shall be taken into account and credited to the party or parties making such payment, and judgment shall not be rendered against the party or parties defendant proving such payment for a sum exceeding the amount of his or their proportion of the debts and liabilities of such incorporation after deducting therefrom the sums proven to have been paid by him, them, or any or either of them, on account thereof.”
[181]If the question rested for its solution on section thirty-two alone, it would present but little difficulty. That section requires the Court to “ ascertain and determine the proportion of the debt, which is the subject of the suit for which each of the stockholders, who are defendants in the action, are severally liable, and judgment should be given severally in conformity therewith.” It follows, as a necessary implication from this language, that each stockholder shall be liable only for his proportion “ of the debt, which is the subject of the suit,” and not for the whole debt. The remainder of the section renders it still more clear: “ If any stockholder in a corporation shall pay his proportion of any debt due by such corporation, he shall be released and discharged from any further individual or personal liability for such debt.” It is plain from these provisions that each stockholder is liable only for his proportion of each debt, and not for the whole debt.
It will be borne in mind that this section is a part of the general Act, applicable to all corporations, except mining and other corporations organized under the Act of 1853; whereas, section sixteen, already quoted, is a portion of the Act relating especially to mining and certain other specified corporations. It is insisted by counsel that the Legislature, in enacting the sixteenth section, intended to establish a system of liability in respect to stockholders in these particular corporations different from that which applies to stockholders in corporations generally; and that the liability of a stockholder in a mining corporation is to be governed exclusively by that section. Whilst there is much force in this suggestion, it is a well established rule in construing statutes that the Court will look into cotemporaneous legislation on the same or kindred subjects, in order the better to comprehend the meaning of doubtful clauses in the particular statute under discussion. But if the question we are considering be tested by the sixteenth section alone, it is by no means free from doubt. This section manifestly authorizes a stockholder in a mining corporation to elect to which [182]of the creditors of the corporation he will pay the whole or any part of the amount of his proportion of the aggregate corporate debts. It expressly provides that on the trial, “ upon the proof of such payment, the same shall be taken into account and credited to the party or parties making such payment, and judgment shall not be rendered against the party or parties defendant proving such payment for a sum exceeding his or their proportion of the debts and liabilities of such incorporation, after deducting therefrom the sums proven to have been paid by him, them, or any or either of them, on account thereof.”
The majority of the Court holds that the right which this section confers upon the stockholder, to elect to which of the creditors he will pay the whole or any part of his proportion of the aggregate debt of the corporation, necessarily implies that each creditor has a correlative right to collect his entire debt from any one of the stockholders whose proportion of liability for the entire debts of the corporation is equal to the sum due to that particular creditor. If the creditor has this right, it is only by implication, for it is not expressly given; and inasmuch as it is a right which does not appertain to creditors of corporations generally, it is for those who maintain the proposition to establish that in this particular class of corporations the creditor has a different and more plenary remedy 'against the stockholder than is provided for creditors of corporations generally. I do not perceive that there is any necessary or even reasonable connection between the two propositions, or that one is the correlate of the other. Bor reasons satisfactory to the Legislature, it has seen fit to authorize a stockholder of mining, ■or certain other specified corporations to elect to which one of the creditors he will pay his proportion of the corporate indebtedness. It is not for us to attempt to explain or justify the motives or policy which led to this enactment. It is enough for our purpose that “ita est scripta lex.”
It does not follow, however, as a logical or reasonable sequence, in the absence of any provision to that effect, that [183]a creditor may, by compulsory process, appropriate the whole, or as much as is necessary, of the entire liability of a stockholder for the aggregate corporate debts to the payment of his own debt, to the exclusion of other creditors. The sixteenth section does not admit of such an interpretation. To so construe it would lead to perplexing and embarrassing results. The creditor who obtained the first judgment might appropriate to his own debt the entire liability of the only solvent stockholders, to the exclusion of all other creditors; and creditors whose demands were not due would be wholly powerless, whilst other creditors were appropriating the entire proceeds of the liabilities of the only solvent stockholders. This appears to me to be a perversion of the whole theory of our legislation on this subject, and is a proposition which ought not to be established by the Courts by mere implication, nor without an explicit declaration of the legislative will to that effect.
The genera] policy of our legislation on this subject, has been to secure to each creditor of the corporation his proportionate part of whatever was due from each stockholder on account of his liability for the entire corporate indebtedness. The sixteenth section, it is true, departs from this policy, in so far as it permits a stockholder to pay to any one or more creditors the whole or any part of the sum due from such stockholders; but this is a personal privilege accorded to the stockholder, for reasons satisfactory to the Legislature, and with which we have no concern. I am unwilling, however, by mere implication to establish the proposition that any creditor, by compulsory process, may compel the application to his own debt of the entire sum due from one or more stockholders, on account of the corporate indebtedness, whilst there are other debts of the corporation unpaid. I am unable to perceive any valid reason for such a discrimination in favor of mining, and a few other specific corporations; and in the absence of legislation to that effect, it should not be established by mere implication.
In my opinion, the judgment should be reversed.
AI Brief
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Holding. The court held that a stockholder in a mining corporation is personally liable for their proportion of all corporate debts incurred while they were a stockholder, and a creditor may recover the full amount of their debt from any such stockholder up to the limit of that stockholder's total proportionate liability. The court further held that the evidence failed to establish when the debts were contracted, necessitating a reversal of the judgment.
Issues
Whether a creditor may recover their debt from a stockholder up to the limit of the stockholder's total proportionate liability for all corporate debts.
Whether the evidence sufficiently established that the debts were contracted while the defendants were stockholders.
Whether a judgment against a corporation constitutes a new debt for which stockholders are personally liable.
Disposition. reversed
Quotations verified verbatim against the opinion
“The principle adopted by the Legislature makes every stockholder liable for his share of all debts contracted while he is a stockholder.”
“The fact is, there is nothing in the record which tends, in any degree, to show when the indebtedness was contracted”