Green v. Beckman

The Court: The suit is brought against stockholders to recover money had and received by a corporation more than two and less than three years before the commencement of the action. Defendants demurred generally, and also specially that it appeared from the complaint that the cause of action did not accrue within two years, etc. The Court below sustained the demurrer.

The construction of Section 359 of the Code of Civil Procedure is not free from difficulty. The section reads: “ 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 the penalty or forfeiture attached, or the liability was created.”

It was held in New York, that a suit against a stockholder of a corporation to charge him individually with a debt contracted by it, pursuant to a provision of the act of incorporation, was not an action spoken of in the Statute of Limitations as “ an action upon a statute, for a forfeiture or cause, the benefit and suit whereof is limited to the party aggrieved.” (Corning v. McCullough, 1 Comst. 47.) In the [547]same case it was held, that where the charter of an incorporated company provided that the stockholders should be liable for its debts, and that a creditor could, after judgment obtained against the corporation, and execution returned unsatisfied, sue any stockholder and recover his demand, such stockholders were liable in an original and primary sense, like partners or members of an unincorporated association, and their liability was not created by the statute of incorporation.

That, under such an act, the liability of the stockholders was primary, may be admitted. A fortiori when, as under our Code, the stockholder may be proceeded against originally for his proportion of a corporation debt. And so it has been repeatedly held in this State. In the New York case it would have been enough to have said that the stockholder was liable as upon his implied contract, arising out of the circumstance that he became a stockholder under the statute which imposed the obligation, and that an action based upon his implied promise, was not an action upon a statute for a forfeiture, or cause in the nature of a forfeiture. Section 359 of the Code of Civil Procedure is broader in its terms than the statute referred to in Corning v. McCullough, 1 Comst. 55. It provides that an action to enforce a liability created by law against the stockholder may be brought within three years after the discovery of the facts, etc. It is true, that the stockholder becomes a party to the contract by his own volition. It might be admitted, that, in the strict sense of the term, there may be, as insisted by respondents, no common law corporations, but, except for tlie express• language of our Constitution and statute, no such personal liability would attend the creation of a corporation proper.