Page:The Green Bag (1889–1914), Volume 18.pdf/592

 STOCKHOLDER'S LIABILITY FOR CORPORATE DEBTS scriptions and the creditor is suing after hav ing, exhausted his remedies against the cor poration, the stockholder may set up (i) that the statute has run against the cor poration's claim against the stockholder, and so the creditor is barred; or, (2) that the creditor's claim against the corporation would have been barred but for a new prom ise or part payment by the corporation and so the stockholder is freed from liability. Where the stockholder has a defense of the statute of limitations to the corporation's claim for unpaid subscriptions and the court holds that the stockholder's liability is not direct to the creditor, the statute is a good defense to the creditor's suit.1 On the other hand, if in such case the stockholder's liabil ity to the creditor is direct, the creditor doubtless could sue him at any time prior to the closing of the period which is to bar the creditor's suit, even if the stockholder has the defense of the statute against the corporation.2 So where the liability of the stockholder to the creditor is direct, the creditor could doubtless sue at any time within the period fixed for his action, regard less of the defense the corporation might have under the statute of limitation to the creditor's claim, unless perhaps the jurisdiction is one where the statute of limitations not only bars the remedy but ends the cause of action. But the really troublesome case is where the stockholder's liability is not direct to the creditor, and the corporation waives its de fense of the statute of limitations or post pones the running of the statute against itself by giving renewal notes, making pay-

1 Hawkins v. Donnerberg, 40 Ore. 97; Van Hook v. Whitlock, 3 Paige (N. Y.), 409; South Carolina, etc. Co. v. Bank. 6 Rich Eq. (S. C.) 227; see i Cook on Corporations. 5th ed. §195, pp. 386-7. 1 The last case seems never to arise because uniformly the period within which a creditor must sue on the direct liability of the stockholder is either as short as. or shorter than, that in which the corporation must sue the stockholder.

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ments, etc. Where the liability of the stock holder to the creditor is direct, it has been held in such case that the corporation can not start a new liability on the part of the stockholder by giving renewal notes;1 but where his liability is secondary there is more doubt.2 The argument against leaving the stockholder's defense at the mercy of the corporation is that he is a kind of surety who, while he is not released by an extension of time given without his consent to his prin cipal,3 still cannot be made against his will to have the running of the statute of limita tions postponed.4 The argument the other way is practically that of the business needs of the situation. On the authorities the stockholder has the advantage. And now in conclusion, it only remains to take up the problem premised under class i of statutes of limitations. Suppose the liability of the stockholder to the creditor is direct and the bar of the statute applica-

1 Hyman v. Coleman, 82 Cal. 650; Santa Rosa Nat'l Bank v. Barnett, 125 Cal., 407; Goodall v. Jack, 127 Cal. 258; Hardman v. Sage, 124 N. Y., 25; Close v. Potter, 155 N. Y. 145; Union Bank v. Wando, etc. Co.. 17 S. C. 339. Nor can the stock holder be discharged by an agreement between the creditor and the corporation not having that end in view, unless the creditor's claim is satisfied. Knickerbocker Trust Co. v. Myers. 133 Fed. 764. 2 See 10 Cyc. 685. It has been held that in the absence of fraud or collusion a stockholder cannot intervene in the creditor's suit against the corporation for the purpose of treating the stat ute of limitations against the corporation's debt. Meyer v. Bristol Hotel Co.. 163 Mo. 59. 4974 "The liability of the stockholder is to pay the debt of the corporation, not his own debt. His obligation is distinct and dehors that of the company. Being a mere collateral security it must have a fixed limitation. We cannot accede to the proposition that the limitation is shifting and divers, corresponding identically to the unexpired periods of limitation on the corporation debts." Hawkins v. Furance Co., 40 Ohio St. 507, SI3-
 * Salina Nat'l Bank v. Prcscott, 60 Kan. 490,