Page:The Green Bag (1889–1914), Volume 18.pdf/588

 STOCKHOLDERS' LIABILITY FOR CORPORATE DEBTS ous and equivalent liability to the creditors, without taking any steps whatever against the corporation.1 There are other varia tions in the statutes,2 but these will suffice. In (a) and (6) the stockholder's liability is secondary; in (c) it is, in form at least, direct and primary. The second class of statutes given above establish a liability which, though it is in excess of the stockholder's express contract, is imposed merely to do away pro tanto with the common-law exemption of stockholders from individual liability in order to protect creditors, and is therefore not regarded as penal.3 Here, again, the statutes may be divided into those (a) where the creditor can sue only after the corporation has been ad judged insolvent, or, as under the national bank act,4 an assessment has been levied by a designated public officer; (6) where the creditor must first get a judgment against the corporation; and (c) where the creditor may sue the stockholder direct without any previous action against the corporation. So much for the statutes fixing stock holders' liabilities. Before taking up the statutes of limitation affecting that lia bility, however, a word is necessary as to the nature of the liability, and as to the proper proceeding to enforce it. Some of our state statutes of limitation — and this is true 1 See Smith v. Londoner, 5 Colo. 365. 1 i Cook on Corporations, $th ed. page 460. See Huntington v. Attrill, 146 U. S. 657; Whitman v. Oxford Nat'l Bank, 176 U. S. 559. A statute forbidding a corporation to do busi ness until certain things are done, and until those things are done making the stockholders liable individually for corporate debts, has been held in Illinois to be intended to impose punishment and so to be penal. Diversey v. Smith, 103 Ill. 378. Wherever a liability is penal the statute of limita tions covering actions for penalties applies, i Cook on Corporations, $th ed. p. 463. ' Deweese v. Smith, 97 Fed. 309; Aldrich v. Yates, 95 Fed. 78. See McClaine v. Rankin, 197 U. S. 154. But see Wyman v. Wallace, 26 Sup. Ct. Rep. 495, where the bank went into voluntary liquidation.
 * See note in i L. R. A. (n. s.), 901.

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of some code states * — still base the period of limitation on the old common law forms of action; but most of them are so worded that a different period is fixed if the stockholders' liability is contractual from what is fixed if it is not, and it is important therefore to determine whether the liability can be said to be one on contract. The liability of the stockholders to the corporation for unpaid subscriptions is, of course, contractual and the corporation's action is assumpsit.2 This is as true of a stockholder who becomes such by purchase from previous stockholders as it is of sub scribers; for such transferees, where they know the stock purchased is not fully paid up, are liable on the subscription contract by an implied assumption as assignees,* that is, by what amounts practically to a novation implied in fact.4 That it is not implied as a 1 See, for instance. Mills Ann. Stat. Colo. §2900; Toothaker v. City of Denver, 13 Colo. 219. Under such statutes the common-law remedies to enforce stockholder's liability has been held to be case on an implied assumpsit rather than debt. Carroll v. Green, 92 U. S. 509; Corning v. McCullough, i N.Y 47, 58, 61. See Metropolitan R. R. Co. v. District of Columbia, 132 U. S. i, 12. But see Bullard v. Bell, i Mason (U. S.) 243. See Supply Ditch Co. v. Elliott, 10 Colo. 327. For other cases see 10 Cyc. 382. 8 Webster v. Upton, 91 U. S. 65; Higgins v. Ill. Trust & Sav. Bank, 193 Ill. 394; Hartford, etc. R. R. Co. v. Boorman, 12 Conn. 529; Kelly v. Clark, 21 Mont. 291; Merrimac M. Co. v. Bagley, 14 Mich. 501; Aliens. Grant, 122 Ga. 552; See v. Heppenheimer (N. J. Ch.) 61 Atl. 843; Wishard v. Hansen, 99 Iowa, 307. See Huddersford Canal Co. v. Buckley, 7 T. R. 36, and i Cook on Corpora tions, 5th ed. § 49. 4 This novation which, as between the corpora tions and the buyer and seller of its stock, is bind ing, may be disregarded by the creditor (but see Allen v. Montgomery, etc. Co., ir Ala. 437), except that it is proper to hold that the creditor cannot look to the transferrer until he has ex hausted his remedy against the transferee. Harper v. Carrol, 66 Minn. 487; Higgins v. Ill. Trust & Savings Bk., 193 Ill. 394; Wyman v. Bowman, 127 Fed. 257.
 * Beene v. Cahawba, etc. R. R. Co., 3 Ala. 360.