exceed the assets, and such personal liability combined, so that the fund will be insufficient to discharge all the claims upon it, a court of equity may, at the suit of a part of the creditors on their own behalf and that of all the other creditors, take jurisdiction, and bring before it all the stockholders and depositors, and determine the several rights and liabilities and adjust equities and marshal the fund and distribute it pro rata, and in such case enjoin the prosecution of suits at law by individual creditors against stockholders, seeking to appropriate the entire and unequal benefit of such security. In such a case, the securing of a ratable distribution of such fund, among all the creditors entitled to share, is a proper ground for equitable jurisdiction, and so is the avoidance of a multiplicity of suits.'

§ 393. Same-Bill of Discovery.-And in Massachusetts, although the courts there refuse altogether to enforce the liability of a stockholder in a foreign company, it has been held that a bill will lie by a judgment creditor against the officers of a foreign corporation, resident in that jurisdiction, alleging that there are no officers or corporate books within the jurisdiction of the corporate domicile, and praying a discovery of the names and residences of the persons who were stockholders at the date of his judgment, and the amount of stock held by each.'

§ 394. Same-Jurisdiction of Parties.-When, however, the attempt is made to enforce the liability of a stockholder in a foreign company, for an unpaid balance of stock, by bill in equity, a manifest difficulty presents itself in the want of jurisdicEames v. Doris, 102 Ill. 350; Queenan v. Palmer, 117 Ill. 619.

2 Post, § 405, and note.

3 Post v. Toledo, etc. R. Co., 144 Mass. 341.

are

tion of the proper necessary parties. And notwithstanding it was held by MR. JUSTICE STORY, in Wood v. Dummer,' that the general rule in such cases requiring all persons materially interested to be made parties is properly relaxed, where the parties beyond the jurisdiction, or are so numerous that it is impossible to join them, and that a court of equity will make such decree as it can without them, yet it must be remembered that in that case the wanting parties were stockholders. Jurisdiction of the company itself would seem to be essential, for the proceeding is in effect a winding-up proceeding. The practical result of these doctrines is that the salutary principle that the capital stock is a trust fund for the payment of the creditors, has no application to stockholders who reside beyond the jurisdiction of the corporate domicile, except in the isolated instances, where it can be enforced under the local statutes for summary issue of execution. Such a ruling is a matter of no inconsiderable importance, in view of the growing practice of organ

13 Mason, 308.

2

2 Bank of Virginia v. Adams, 1 Pars. Sel. Eq. Cas. 534; Patterson v. Lynde, 112 Ill. 196; Griffith v. Mangan, 73 N. Y. 611. The action in this last case was based upon a statute of New Jersey, where the company was organized, providing that "each stockholder shall be bound to pay on each share held by him, the sum necessary to complete the amount of such share as fixed by the charter of the company, or such proportion of that sum as shall be required to satisfy the debts of the company," an amount which could only be adequately ascertained by proceeding in equity. See dicta in Vose v. Grant, 15 Mass. 505; Spear v. Grant, 16 Mass. 9. The case of Bartlett v. Drew, 57 N. Y. 588, rests on a different basis. There the liability sought to be enforced was a common law liability, the action being to compel a stockholder to give up to a creditor of the corporation corporate assets which he had wrongfully converted to his own use, and the court held that the action could be sustained, notwithstanding the principal debtor was a foreign corporation, and that plaintiff would not be required to undertake proceedings to wind it up and settle its affairs.

izing companies in a different jurisdiction from that in which the corporators reside and in which it is intended to do business..

§ 395. Same-Such Liability Regarded as a Debt -Summary Remedy.-In some of the States, the equitable liability for unpaid balance of stock may be enforced by motion under statutes permitting the summary issue of execution against the stockholders, on a judgment against the company, after the return of an execution unsatisfied.' And in the recent case of Persch v. Simmons,' the special term of the New York Supreme Court treats such a liability as an ordinary debt, which may be enforced under a statute authorizing a creditor, when a nulla bona execution has been returned, to maintain an action against his debtor and any other person for the discovery of any assets, chose in action or other property held in trust for him.'

§ 396. Same-A Same-A Later View.-In some of the more recent cases, however, a more practical view obtains, and it is held that where the remedy at law against the company in the State of its domicile has been exhausted, a bill in equity may be maintained against a stockholder resident in a foreign jurisdiction to enforce the payment of the balance due on his stock.*

1 Merchants' Nat. Bank v. Bailey Mfg. Co., 34 Minn. 323, 25 N. W. Rep. 639; First Nat. Bk. v. Gustin, etc. M. Co., 42 Minn. 327, 44 N. W. Rep. 198, 7 Ry. & Corp. L. J. 175. The case of Bartlett v. Drew, 57 N. Y. 588, is to be distinguished. There the assets, which it was sought to reach in the hands of the stockholder, were unconnected with his stock or stock subscription. See also Tinkham v. Borst, 31 Barb. 407.

23 N. Y. Supp. 783.

3N. Y. Code Civ. Proc. § 1871.

4 Shickle v. Watt, 94 Mo. 410; Persch v. Simmons, 3 N. Y. Supp. 783. See also Aultman's Appeal, 98 Pa. St. 505, and Sacket's Harbor Bank v. Blake, 3 Rich. Eq. 225, in each of which there was a peculiar state of

§ 397. Statutory Liability-Penal Laws.-Coming now to those liabilities which are specifically imposed upon the stockholders of a corporation by statute, we may properly divide them into two great classes: (1) those which are in the nature of a penalty, and (2) those which are contractual, being a part of the undertaking of the subscription. As applied to stockholders of foreign corporations this distinction is particularly material, for it is a well established rule of international law that the principle of comity does not extend to penal laws. Such have been held to be strictly local.' When, therefore, the liability for corporate debts is imposed upon the stockholder as a penalty, it cannot be enforced beyond the jurisdiction of the sovereign creating the corporation."

§ 398. Distinction between Contractual and Penal Liability.—With regard to the liabilities imposed by statute, it is not always easy to distinguish those which are penal from those which are contractual. The difficulty is increased by the habit, of some of the courts, of loosely designating all such liabilities imposed by statute as "statutory," without distinguishing those which are penal from those arising from the contract of subscription, while they apply the term "contractual" only to the liability for an unpaid balance of stock, which we have thought it better to designate as equitable. The

facts under which the difficulty as to parties did not arise. But in New Haven Horse Nail Co. v. Linden Spring Co., 142 Mass. 349, the Massachusetts court, under a similar state of affairs, refused to afford the remedy.

1 Halsey v. McLean, 12 Allen, 438; Story Confl. L. §§ 620, 621; Ogden v. Folliott, 3 Durn. & East, 733; State v. John, 5 Ohio, 217; Scoville v. Canfield, 14 Johns. 338; United States v. Lathrop, 17 Johns. 4.

2 Sayles v. Brown, 40 Fed. Rep. 8.

mere fact that the liability is created by statute, or that it is contingent upon a failure to perform some statutory duty, will not make it a penalty. The ordinary rule is that stockholders are not liable for corporate debts. Their undertaking is usually satisfied by the payment in full of the stock subscribed. But it is the prerogative of the sovereign, in granting a franchise of incorporation, to impose as conditions such individual liability upon the stockholders as it may deem most in accordance with the principles of an enlightened public policy, and best calculated to prevent fraud and to protect the public and corporate creditors. It may withhold all or a portion of that individual exemption from liability for corporate debts usually incidental to corporate capacity. The liability so resulting is not to be regarded as a statutory obligation, since it is a part of the charter of the company to which the stockholder gives his assent by becoming a member; it is a part of his contract with his associates, and the liability created by it must be regarded as contractual in its nature.'

1 Hawthorne v. Calef, 2 Wall. 10; Conant v. Van Schaick, 24 Barb. 87; Prov. S. Ins. v. Jackson Place, etc. Rink, 52 Mo. 552; St. Louis Ry. Sup., etc. Co. v. Harbine, 2 Mo. App. 134; Manville v. Edgar, 8 Mo. App. 324; Blakeman v. Benton, 9 Mo. App. 107; Hodgson v. Cheever, 8 Mo. App. 323; Bagley v. Tyler, 43 Mo. App. 195; Corning v. McCullough, 1 N. Y. 47; Story v. Furman, 25 N. Y. 214; Lowry v. Inman, 46 N. Y. 119; Ochiltree v. Railroad Co., 21 Wall. 249; Terry v. Calnan, 13 S. C. 220; Kimball v. Davis, St. Louis Ct. App. Dec. 27, 1892, MS. Compare Freeland v. McCullough, 1 Denio, 414, 43 Am. Dec. 685. The Massachusetts and New Hampshire courts have declined to treat such liabilities as contractual, calling it a mere creature of statute. Rice v. Hosiery Co., 56 N. H. 114; Erickson v. Nesmith, 4 Allen, 233, 15 Gray, 221; Halsey v. McLean, 12 Allen, 438; New Haven Horse Nail Co. v. Linden Spring Co., 142 Mass. 349. And the Federal court in Massachusetts has taken the same view. Andrews v. Bacon, 38 Fed. Rep. 777.