Spense v. Iowa Valley Construction Co.

Corporation: liability op stockholders. In a proceeding by a judgment creditor of a corporation to subject tbe property of an individual stockholder to its payment, it is a sufficient defense that, by the articles of incorporation, the stockholders are not individually liable beyond the amount of unpaid stock subscribed by them, and that defendant’s subscription has been fully paid.

Appeal from Marshall Circuit Court. The petition alleges that on the 4th day of May, 1871, the plaintiff's recovered judgment against the Iowa Yalley Construction Company, an association of individuals doing business in Marshall county. That the judgment is unsatisfied. That on the 19th of June, 1871, execution was issued, and was afterward returned, no property found on which to levy. That there is no property of said company to satisfy the judgment. That the other individual defendants named are members of said company, and that they have received the benefit of the consideration for the rendition of the judgment. The petition asks that the defendants show cause why judgment should not be rendered and execution issued against them as individuals. For answer defendants deny that they received the benefit of the consideration as averred. They admit that they are members of said construction company, and aver that their subscription has long ago been fully paid. That said company was. duly incorporated under the laws of Iowa, and by the articles of incorporation defendants were not to be liable beyond the amount of their subscription. To this answer the plaintiffs demurred as follows : 1. The answer admits defendants are stockholders in said company. 2. Tbe mere fact of the payment of the amount of their subscriptions does not exempt the individual property of defendants. 3. The answer does not show that the capital stock or any assets of said corporation are in existence and within reach of process. 4. The answer does not offer to discover any property of the corporation. 5. It does not show how the capital stock is held, whether by the company or the individual members thereof. The court sustained the demurrer and rendered judgment against defendants for the amount of plaintiff's claim. Defendants appeal. Subdivision 5, of section 1151, Revision, says: “ Among the powers of such bodies corporate are the following: To exempt the private property of its members from liability for corporate debts, except as herein otherwise declared. By the demurrer the plaintiffs admit the articles of incorporation did not provide for such exemption. The answer avers the said corporation was duly incorporated under the laws of this State. The word “ duly ” means in the manner and at the time provided by law now in force. A general allegation that a corporation was founded under that law is equivalent to an allegation of the particular purpose for which it was founded. Lvndsey v. Svmonds, 2 Abb. N. S. 69. An averment that a meeting was duly convened implies it was regularly convened. People v. Hcvwes, 23 Barb. 403. An averment that trustees had been duly appointed is an averment that they were regularly and legally appointed. Conger v. Hallidap, 11 Paige, 314. The allegation that a policy of insurance was duly assigned indicates the assignment was under seal, and for a good consideration. 23 Barb. 431. Duly protested at maturity, is a good averment to admit evidence of demand, refusal to pay, and notice of non-payment. Woodbury v. Sackrider, 2 Abb. 402. Where the articles of the incorporation make the responsibility the same as if no corporation, then scire facias does not lie against the members. After judgment against the corporation, the remedy is by action on the original demand. Southmayd v. Hubbard, 3 Conn. 52; Middletown Bank v. Magill, 4 id. 28; Knowlton v. Ackley, 8 Cush. 93; Harris v. Dorchester, 23 Pick. 112. Where the plaintiff seeks to make a stockholder liable for his unpaid stock, such plaintiff must show the stock is due. Allen v. Montgomery R. R. Co., 11 Ala. N. S. 437. At common law the members of a corporation are not individually liable. Hampson et al. v. Wears, 4 Iowa, 15; Middletown Bank v. Russ, 3 Conn. 135. The personal liability of members of a corporation for the corporate debts depends solely on provisions of positive law to be strictly construed and not extended by implication. Cray v. Coffin, 9 Cush. 192; Sfiaw v. Boylan, 16 Ind. 384. Even where dividends have been made to members, such members are not liable in an action at law although part of the corporate property had been assigned to the members in exclusion of bona fide creditors. Angelí and Ames on Corp. (6th ed.), § 596; Vose v. Grant, 15 Mass. 505. So where a stockholder withdraws his stock from the corporation when the corporation was indebted on bills which had previously been issued. Spear v. Grant, 16 Mass. 9; McKellar et al. v. Stoul, 14 Iowa, 359.