Page:Henry Osborn Taylor, A Treatise on the Law of Private Corporations (5th ed, 1905).djvu/788

 § 775.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. XIV. bility of shareholders, 1 the action should be brought in a court having equitable powers, and on behalf of all creditors who are willing to share in the expense. Thus, a statute provided that " if the indebtedness of the company shall at any time exceed the amount of its capital stock, the trustees assenting thereto shall be personally and individually liable for such excess to the creditors of the company." The Federal Supreme Court held that an action at law could not be maintained by one creditor among many to enforce for his own benefit the liability thus created ; but that the remedy was in equity, since the excess, for which the directors were liable, constituted a fund for the benefit of all the creditors. 2 Justice Miller said, giving the opinion of the court : " The remedy for this violation of duty as trustees is in its nature appropriate to a court of chancery. The powers and instrumentalities of that court enable it to ascertain the excess of indebtedness over the capital stock, the amount of this which each trustee assented to, and the extent to which the funds of the corporation may be resorted to for the pay- ment of the debts ; also, the number and names of the creditors, the amount of their several debts ; to determine the sum to be recovered of the trustees and apportioned among the creditors, in the manner which trial by jury and the rigid rules of com- mon law proceeding render impossible." 3 McKeon, 23 Cal. 472; National Bank v. Paige's Executor, 53 Vt. 452. 1 See § 726. 2 Horner v. Heming, 93 U. S. 228. 3 Horner v. Heming, 93 U. S. 228, 232. Accord, Merchants' Bank v. Stevenson, 10 Gray, 332; Low r. Buchanan, 94 111. 76; Buchanan b. Bartow Iron Co., 3 111. App. 191; Anderson v. Speers, 21 Hun, 5(58. See Peele v. Phillips, 8 Allen, 86; Bond v. Morse, 9 Allen, 471. But see Cornwall v. Eastham, 2 Bush (Ky.), 561; Buell v. Warner, 33 Vt. 570; Bassett v. St. Alhan's Hotel Co., 47 Vt. 313. As to the form of an action at law, see Union Iron Co. 0. Pierce, 4 Bliss. 327. 768 It has been held that it is not nec- essary for the creditor to recover a judgment against the corporation before proceeding against the direct- ors to enforce a liability of this na- ture. Merchants' Bank v. Stevenson, 5 Allen, 398. But see Kinsley v. Rice, 10 Cray, 325; Johnson v. Church- well, 1 Head (Tenn.), 146. When on account of paying a divi- dend out of capital, directors are rendered liable for the debts of the corporation, it has been held that the corporation need not be joined as defendant. The guilty directors have no right of subrogation, and no recourse against the corporation. Hill v. Frazier, 22 Pa. St. 320.