source: Caselaw Access Project

author: Spear, J.

license: Public Domain

text:
    Mason v. Alexander. Ingersoll v. Alexander.

      Corporations — Action to enforce statutory liability of stockholders — Appeal — Jurisdiction— Waivei — Parties— Continuance — Interest— Counsel fees — Liability of assignor of stock.

    1. In a suit to enforce liability of stockholders, brought prior to the enactment of section 3260, Revised Statutes, by the creditor of an insolvent corporation, organized under the act entitled, “An act to enable associations of persons for building hotels and for other purposes, to become bodies corporate, passed April 5, 1866, as amended April 16, 1861,” in a county where some of the stockholders reside and are summoned, but not in the county where the corporation is situate and has its principal office or place of business, where the stockholders served out of the county in which the action is pending interpose a plea to the jurisdiction as to their persons, which, upon demurrer is held against them, and they then consent to a reference of the case to a referee for trial; appear at trial; after report filed, except to same; give notice of appeal to the district court from a judgment rendered against them; perfect the appeal to that court, and there, after consenting to a reference of Ihe ease to a referee for trial, and after report made to tlie district court by the referee, file exceptions to such report, it is too late to question the jurisdiction of the appellate court.
    2. In such case (it having been shown that the indebtedness of the corporation is greatly in excess of the capital stock), where it is made to appear that a defendant, prior to the beginning of the action, had transferred his stock to a solvent holder within the jurisdiction, who owned it during the time a portion of the debts accrued, but who is not a party to the suit, it is not error to the prejudice of either stockholders or creditors for the court to adjudicate as between other stockholders who are parties and creditors, and continue the case for further proceedings as to liability of the vendor and vendee of the stock as between themselves, and as between them and creditors. Nor is the court’s jurisdiction to determine the liability of such vendor at a subsequent term ousted, although the order of continuance does not in terms provide that the case is continued as to him.
    3. In such case it is not error to include, in the judgment rendered, interest from the date of the beginning of the suit, although the amount of recovery may thereby exceed the stockholder’s original liability.
    4. In such case the court has power to order reasonable counsel fees to plaintiff’s attorneys to be paid out of the proceeds of the judgments.
    5. If, in such case, by reason of insolvency or residence without the jurisdiction, the amount due from any stockholder is not collectible, the assignor of the stock up to the time the liability attached, may be charged with the deficiency. Brown v. Hitchcock, 36 Ohio St. 667, followed.
    Error to the District Court of Lake county.
    On the 20th January, 1877, George W. Steele filed a petition in the court of common pleas of Lake county against The Little Mountain Association' (corporation) and some forty pérsons as stockholders, some of whom resided in Lake county, alleging, among other things, the recovery of a judgment against the association, that it was insolvent, that the defendants (stockholders) were such stockholders at the time the indebtedness arose, and were indebted to plaintiff and to other creditors of the association for an amount equal to the amount of stock held by each respectively; praying the court to find who are the other creditors, the amount due the plaintiff, and to each creditor, which stockholders are solvent, and within the jurisdiction, and which, if any, are insolvent or beyond the jurisdiction; also, that the court adjudge that each defendant pay the amount due from him, and that plaintiff, and the other creditors, have such full and ample relief as the nature of the case requires.
    Service was made upon the association in Cuyahoga county, and upon divers stockholders in Lake, Cuyahoga, and other counties of the state. A joint answer on the .part of the association and certain stockholders, who are plaintiffs in error, was interposed, alleging want of jurisdiction on the ground that the corporation was situate and ■had its principal office and place of business in Cuyahoga county. To this a demurrer was filed, which, being sustained, the defendants excepted and took leave to answer.
    Issue being joined on part of some of the defendants (several creditors having also become parties and filed answers), the cause, by consent, was sent to a referee for trial. The parties appeared, and a trial was had before the referee. His report being filed, and exceptions thereto heard, and in part sustained, and in part overruled, a trial was had, and judgment rendered against the defendants (stockholders). Prom thesé judgments they severally gave notice of appeal to the district court, and in due time perfected their several appeals. The association did not appeal.
    Among the facts found by the referee was that the sum of the debts was far in excess of the capital stock. This was at no time disputed.
    In the district court, at the March term, 1881, by consent of all the parties, the cause was referred to George E. Paine, Esq., as referee and special master, to determine and report the liability of each of the stockholders, the amount of stock held by each, the time during which they held the same, and who, if any, are insolvent or beyond the jurisdiction. Also to determine and report who are creditors of the association, to whom the money recoverable is due and payable, and the amount to each, when the indebtedness to each accrued, and the amount which each of said stockholders, defendants, is liable to pay.
    Subsequently, the death of the plaintiff being suggested, his executor, John ~W. Alexander, was made plaintiff, and the action was ordered to stand revived.
    Due notice having been given, hearing before the referee was commenced on the 13th January, 1888, and adjourned from time to time until March 5th. At the adjourned hearing, February 3, 1883, counsel for the defendant objected to the further taking of testimony or proceeding further with the hearing on the ground that the estate of George B. Senter, deceased, was not before the court. Also on the ground that one S. A. Fuller, a stockholder, had not been made party. These objections were overruled, exceptions taken, and the hearing proceeded.
    Report of the referee was made to the court at its March term, 1883. The referee found, among other things, that EL. O. Blossom, one of the defendants, as alleged in his answer, filed February 15,1877, held and owned $500 of the stock from March 3, 1869, to the fall of 1872, when, on or before December 31, 1872, he assigned and transferred the same to one S. A. Fuller, who still holds and owns the same, and that he is within the jurisdiction of the court, has not been served with process, and is supposed to be solvent. Also that defendant, Ii. O. Nellis, acquired $500 of stock February 28,1872, and held the same until March 19, 1873, ■when he transferred it to one Calvin, who afterward transferred it to one Loomis, who is the present owner; that Loomis is insolvent and Calvin beyond the jurisdiction. By bill of exceptions, taken before the referee, it is shown that George B. Senter, a stockholder, who owned $500 of stock, was deceased; that his executor, Grannis, who had been made a party and served, deceased prior to the hearing, and that the estate of Senter was hot^ before the court or referee, though said estate was solvent and within the jurisdiction.
    To the referee’s report the plaintiffs in error filed divers exceptions (some of the parties appearing in the capacity of stockholders and some as creditors), among others, that the referee erred in overruling the objection to proceeding until Fuller was brought in ; that the referee erred in proceeding when the estate of Senter was not before the court. The case coming on for hearing upon the plaintiff’s motion to confirm the report of the referee, and exceptions of stockholders and creditors, and evidence, the court sustained the exceptions as to the holding in regard to Fuller to the extent of directing that he be made defendant by supplemental petition and summons; also as to the Senter estate by like direction, and thereupon the general exceptions were overruled, to which defendants excepted. Thereupon the defendants filed a motion stating objections to proceeding further until Fuller was made defendant, moved for an order compelling the plaintiff to make Fuller a party, and, if that should be overruled, then that they have order to make Fuller a party before taking further action, which motion was overruled and the court refused to order except as before ordered, to which defendants severally excepted. The court thereupon approved and confirmed the report except as modified, to which, the defendants severally excepted. The defendants then, on leave, withdrew their answers to the merits, and the cause was heard and submitted to the court upon the demurrer to the answer to the jurisdiction filed in the common pleas. This demurrer was sustained, to which the defendants severally excepted. They then, on leave, refiled their general answer, and the cause was heard and submitted on the pleadings and testimony. The court thereupon found that the whole indebt, edness was a sum much in excess of the capital stock; that the defendants, stockholders (except Blossom), were liable as stockholders in several amounts as to each, which included interest from the commencement of the suit, and rendered judgment accordingly; also ordered that from the sum to be realized from collection of the judgments the clerk pay the costs, including a counsel fee of $1,000, to plaintiff’s attorneys, and that the residue be paid to the creditors pro rata, according to the amouut of their several claims as found by the referee. Thereupon, as to Fuller and the Senter estate, the cause was ordered continued for further proceedings. No judgment for or against, or order of any kind, was made as to Blossom.
    Separate petitions alleging error in the proceedings of the district court were filed in this court by stockholders and creditors, some of the latter class being also stockholders. They were heard and submitted together.

      J. F. IngersoU and Alvord $ Alvord, for plaintiffs in error.
    1. In an action to enforce the statutory liability of the stockholders of a corporation, all the stockholders must be made parties defendant. Rev. Stat., sec. 3260; Umsted v. Buskirk, 17 Ohio St. 114; Wheeler v. Faurot, 37 Ohio St. 26; Bullock v. Kilgour, 39 Ohio St. 543; Taylor Priv. Corp., secs. 725, 726; Pollard v. Bailey, 20 Wall. 520; Terry v. Little, 101 U. S. 216; Eames v. Doris, 102 Ill. 350; Crease v. Babcock, 10 Met. (Mass.) 525; Grew v. Breed, 10 Met. (Mass.) 569; Hawkins v. Furnace Co., 40 Ohio St. 507.
    2. A stockholder can hot be held for an amount in excess of his stock, whether such excess be by way of interest, costs, or otherwise. Aside from the constitutional and statutory provisions making a stockholder liable beyond the amount of his stock for corporate debts, he is not personally liable to crediters for corporate debts. Taylor Priv. Corp., sec. 700; Thomp. Lia. Stock., sec. 4; Seymour v. Sturgess, 26 N. Y. 134; Carr v. Iglehart, 3 Ohio St. 457; Walker v. Lewis, 49 Tex. 123. Such is the rule at common law. Hence the extent of the increased liability must be measured wholly by the constitutional and statutory provisions.
    The policy of the legislation that the liability shall not be exteuded by implication is seen in section 3260 of the Revised Statutes, where it is provided that in an action to enforce such liability “ no costs shall be taxed to nor collected of any stockholder to an amount which, together with the amount to be paid on said indebtedness, will exceed the amount of the stock on which he is liable.” See upon this point, Grund v. Tucker, 5 Kan. 70, 79.
    The adjudged cases are not numerous on this proposition, but the following, we think, fully sustain our position: Thomp. Lia. Stock., sec. 374; Cole v. Butler, 43 Me. 401, 405; Crease v. Babcock, 10 Met. 525, 568; Grew v. Breed, 10 Met. 569, 577; Sackett’s Harbour Bank v. Blake, 3 Rich. Eq. (S. C.) 225, 233; Burr v. Wilcox, 22 N. Y. 551; Munger v. Jacobson, 99 Ill. 349.
    3. An action to enforce a stockholder's liability must be brought in the county where the corporation has its principal office.
    The corporation is a necessary party. Umsted v. Buskirk, 17 Ohio St. 118.
    The legislature intended to make such an action local. Code Civ. Proc., sec. 48; Rev. Stat., sec. 5026.
    The petition does not aver that all stockholders who are solvent and within the jurisdiction of the court have been made parties. All such stockholders are necessary parties. Wheeler v. Faurot, supra; Bonewitz v. Van Wert County Bank, 41 Ohio St. 78.
    4. The legislature of Ohio has always been very reluctant to pass any law looking toward the payment of the attorney of the prevailing party by any sort of taxable fee to him. Such provision has been made, under certain restrictions, in partition cases, cases for the appropriation of private property, and in actions by a creditor to set aside a fraudulant conveyance. In no case is the idea favored that the court has power to set off a large portion of the fund realized, in a suit such as this, to be used in paying the attorney of the plaintiff. See State v. Taylor, 10 Ohio, 381.

      Perry Bosworth and J. B. Burroughs, for defendants in error.
    The fact that Fuller and the administrator of Seuter were not pai’ties first appeared on the hearing before the referee. The action had then been pending more than six years. No plea in abatement was interposed, nor was any motion made by any party to have them brought in until the hearing in the district court. Each stockholder and creditor had a right to intervene and by cross-petition or otherwise become an actor in the case and bring in all proper parties. The plaintiff had no higher rights and owed no higher duties in that respect than any other party. By failing to ask that such parties be made, the plaintiffs in error have no ground of complaint.
    No prejudice to any party appears. The total stock was’ but $18,500 and the total debts $39,573, so that a full duplication of the stock would pay less than fifty cents op the dollar of the debts. There was no contribution to bo' made from one to another to equalize burdens, and there was no equity to be adjusted between the present and the absent ones.
    As to the question of interest: The liability of the stockholder does not spring entirely from, nor is it created wholly by, statutory enactment under the constitution. The constitution and statute create the liability, but the stockholder places himself under the liability by contract when he subscribes for or acquires the stock.
    The statute imposes no liability upon him until by contract, express or implied, he voluntarily assumes the liability by taking the stock. The common law creates the liability for ordinary debts, but the debtor puts himself under that liability voluntarily by contracting the debt. In one case the liability is statutory, in the other common law, but the element of contract, the voluntarily coming under it by contract, express or implied, is the same in both eases. Without an assumpsit, express or applied, there is no liability in either case.
    The obligation then rests upon contract as fully as any other debt and falls within the general statutes of the state, providing for interest on money due on contract. Eev. Stat., sec. 3181.
    This view of the nature of the obligation is supported by Hawkins v. Furnace Co., 40 Ohio St. 507; Carroll v. Green, 92 U. S. 509; Corning v. McCullough, 1 Comst. 58; Baker v. Atlas Bank, 9 Met. (Mass.) 182; Commonwealth v. Cochituate Bank, 3 Allen, 42; Terry v. Anderson, 95 U. S. 628.
    The only real question is when did the obligation become due ? It being an obligation contingent upon the insolvency of the corporation, it accrued when the contingency occurred and was ascertained.
    To hold that the stockholder is not liable for interest would, in effect, offer him a premium of six per cent per annum to prolong the litigation.
    Authorities are not abundant on this question, but the following are in point: Wehrman v. Reakirt, 1 Cin. Sup. Ct. Rep. 230-240; Burr v. Wilcox, 22 N. Y. 555; Hooker v. Kilgour, 2 Cin. Sup. Ct. Rep. 350.
    As to the question of jurisdiction: The corporation is not complaining of having been sued in the wrong county.
    The place for the action is determined by section 5031 of the Revised Statutes.
    The stockholders are the real parties. Judgment and relief is sought against them only. The corporation is only one of many proper parties.
    The right to sue a corporation is not conferred by statute ; it is a common-law right. Hence the mode or place of proceeding is not a jurisdictional fact.
    The allowance of attorney’s fees was proper and lawful. Trustees v. Greenough, 105 U. S. 527; Central Railroad v. Pettus, 113 U. S. 117.
   Spear, J.

Attention is called to several alleged errors in the record: 1. That the district court had no jurisdiction of the person of the plaintiffs in error. 2. That the proper parties were not before the court when the judgment was rendered; and that a stockholder, served and in court, was relieved of liability, and no one charged in his place. 3. That interest was erroneously charged against the defendants below. 4. That fees wei’e erroneously ordered paid to plaintiff’s attorneys. 5. That under the facts as to Homer C. Nellis no liability existed against him. They may bo considered in order :

First. Eor the purpose of making the question the demurrer of the plaintiff admits that the homo of the Little Mountain Association was in Cuyahoga, and not in Lake county. The association was a necessary party to the suit, although it was, in this case, but a nominal party, as no relief was asked against it. Therefore, the question whether the court of common pleas had, at the inception,, jurisdiction of those parties who raised, by answer, the question of jurisdiction, depends on whether the corporation could be held to answer, in a case of this character, in a county other than the one in which it was situate and in which was located its principal office or place of business. We are favored with an ingenious brief to support the negative of this proposition. But we are inquiring rather as to the jurisdiction of the district court at the close of the litigation than of that of the common pleas at its beginning. To determine this question it is but necessary to keep in mind certain subsequent facts disclosed by the record. Tt will be noticed that every one of the plaintiffs in error, who sought to raise the question of jurisdiction in the common pleas, consented to a reference of the case for trial to a referee, and after rendition of judgment there, gave notice of appeal to the district court,*and perfected his appeal either by the giving of bond in the amount directed by the court, or otherwise, in conformity to the statute. There, too, they consented to a reference of the case to a referee for trial, appeared at the trial, when his report was filed promptly interposed their general exceptions to it, and appeared and wmre heard upon them in the district court. True, they occasionally raised the voice of protest, but it was done incidentally, and not in a way to invoke action of the court until after the case had came on for ti;ial. Can they now be heard to say that that court had not jurisdiction of their persons? We are not aware that the precise question, upon equivalent facts, has been judicially determined in this state, nor have we been able to find, outside of Ohio, a case presenting exactly this question. Adjudications in other states, however, are not likely to aid in its proper solution, because the practice in Ohio is essentially different from the practice in other states in removing cases from general trial courts to appellate courts. While in many of the states, and perhaps in all except in our own, an appeal from a court of general jurisdiction is in the nature of a writ of error, whereby the appellate court passes upon the record, as to facts as well as law, does not hear additional or other evidence, but confines its adjudications to errors appearing upon the record, in Ohio the appeal itself vacates, without revisal, the whole proceeding as to findings of fact as well as law, and the case is heard upon the same or other pleadings, and. upon such competent testimony as maybe offered in that court. It takes up the subject of the action de novo, in respect to pleadings, necessary parties, trial and judgment, in like manner as if the cause had never been tried below. (Eor further discussion of these distinctions, see opinion of Swan, J., in Grant v. Ludlow, 8 Ohio St. 28.) The issues and questions, therefore, tendered in the appellate court are those presented as though for the first time, and it can make no manner of difference that the coux’t below erred as to some preliminaiy questions, or indeed as to any question. As the issues are presented when the case gdts to the appellate coux’t, unless amendment be thex’e permitted, the court takes them up and disposes of them. The question, therefore, of whether the comnxon pleas had jurisdiction of the persons of the plaintiffs in ex’ror was not of consequexxce, provided the appellate court had such jui’isdietion. Recurring to the record we find that the first move made in the district court by defendants was by those who were creditors to dismiss the appeal. This was for alleged want of jurisdictioxx.of the action, not for want of jurisdiction of their persons. Then followed consent to a inference for trial, and the fux’ther steps already stated. Not until the case had proceeded to tx’ial ixi the district court did they present to that court the question of jurisdiction over their pox’sons. Independent of the question of the effect of taking the case to that court by appeal, it would seem that these parties had given the court abundant jurisdiction of their persons.

But we ara xxot without authox-ity, which, ixx our opinion, bears upon the question. The case of Fee v. Big Sand Iron Co., 13 Ohio St. 563, approved in Shafer v. Hockheimer, 36 Ohio St. 219, is authority to the point that where, after judgment by default against a defendant not within the jurisdiction, the defendant appears in court to give notice of appeal, and has it entered, he can not be allowed afterward to deny the jurisdiction; that is, jurisdiction of the court.below; and the.reason he is held to have submitted to that jurisdiction is, that, by giving notice of appeal without questioning the jurisdiction of his person, he has entered an appearance. How different does a party stand in the appellate court, to which he has taken the case by appeal, where he, by consent to a reference, by motion and otherwise, makes an appearance there before he seeks to challenge the jurisdiction of that court as to his person. Allen v. Miller, 11 Ohio St. 374, is to the effect that where a defendant, in connection with a plea to the merits, interposes a plea to the jurisdiction as to his person, and that being first heard and decided adversely, then proceeds with the trial, is not thereby prevented from averring want of jurisdiction. At first blush this case might seem to be inconsistent with the holding in the later case, though the opinions are rendered by the same judge. Rut a reference to the language of the opinion, page 379, would appear to relieve it of seeming inconsistency. It is that “ the defendant, Miller, embraced the first occasion which offered, to wit, in his answer, to assert his objection to the jurisdiction of the court, nor did he waive that objection by any subsequent act on his part.” In the case of Fee v. Big Sand Iron Co. the defendant entered his appearance first and objected afterward, and that case is more nearly analogous to the case at bar. Allen v. Miller seems to rest upon the effect of making objection to the jurisdiction at the first opportunity. The present ease is one where the defendants did not make objection to the jurisdiction at the first opportunity; but they appeared first and objected afterward. "We do not perceive that Allen v. Miller is an authority against the position we are seeking to maintain.

It will be borne in mind that we are not dealing with a case where the lower court had not jurisdiction of the subject-matter of the action, though, even in such case, if it be one where the appellate court would have original jurisdiction, and the party defeated below appeals to it and there appears, without objection pleads to the mei'its, and enters upon a trial, he can not afterward be heard to question the court’s jurisdiction of the subject-matter of the action. Harrington v. Heath, 15 Ohio, 483; Bisher v. Richards, 9 Ohio St. 495; Wood v. O'Ferrall, 19 Ohio St. 427, and Thomas v. Pennrich, 28 Ohio St. 55. See also an important holding in Adams Ex. Co. v. St. John, 17 Ohio St. 641. A fortiori, if the question is one simply as to the' person. And how, in principle, does such a case differ from one where the appellate court has rightful jurisdiction of the subject-matter by an appeal?

But why did not the appeal itself by these plaintiffs in error give the appellate court jurisdiction of their persons ? They were not required to appeal. Had they desired to challenge the ruling of the common pleas upon their answer to the jurisdiction, and present the question so made to this court, they should have forborne an appeal, and proceeded by petition iii error. The process is a simple one, and the remedy, if they had been wronged, would have been ample. By appealing they voluntarily took the case to the district court, and asked that court to try the case and adjudicate their rights, not upon questions of law alone, but upon all the facts and upon all the issues in the case. "Why was this not, as to their persons, a voluntary appearance in that court, and how can they now say that that court could not do precisely what they asked it to do for want of jurisdiction of their persons? How can they be permitted to speculate on the chance of a favorable judgment, and then turn around and deny the jurisdiction as to their persons of the tribunal to which they have appealed and thus submitted their persons ? Why should they be allowed to resort to that court, have their appeal docketed, compel all the other parties to follow the case there, and then say to the court, we did not mean any thing; we were notin earnest about this; we are not in court, and you have no jurisdiction over us? See language of Read, J., in Harrington v. Heath, supra, p. 488; of Sutliff, J., in Bartges v. O’Neil, 18 Ohio St. 75; of Gholson, J., in Bisher v. Richards, supra, p. 498, and of Brinkerhoof, J., in Wood v. O’Ferrall, supra, p. 430.

It is unneecessary to consider whether, at the outset, the common pleas had or had not jurisdiction. The jurisdiction of the district court can not be successfully questioned.

Second. The complaint under this head is that S. A. Fuller, a stockholder, was not a party at the time the case was heard before the referee of the district court, nor ■when the decree under review was entered. Also, that the administrator of George B. Senter, a deceased stockholder, was not in court at the same time, and that Blossom, the assignor of Fuller’s stock, was exonerated, and thereby the other stockholders were prejudiced.

As to the alleged error by reason of delay in making new parties. Should the plaintiffs in error now be heard to make this complaint? The case was ordered, by consent, to a referee in the common pleas, was by him heard and reported upon, and atrial and judgment and appeal followed, aud yet no such objection was interposed. Again, at March term, 1881, of the district court, by consent of all parties, the case was referred to the gentleman who heard it as referee. The court’s attention was not called to any defect of parties, although the record shows that the plaintiff in error, Blossom, and his attorneys, who also represented all defendants who objected before the referee and in the district court, and are now making complaint under this head, “knew the facts disclosed by Blossom’s answer as to Fuller’s connection with Blossom in regard to the stock, aud the record showed that Fuller had not been brought in. Blossom was a creditor of the corporation, as well as a stockholder, and with all other creditors had just as full right as had the plaintiff to bring Fuller in, and, if not content with the vigilance being exercised by plaintiff, it was Ms duty then to inform the court of the condition of the record. The action was being prosecuted no more for the interest of the plaintiff than for that of every other ei-editor, except that the amount due plaintiff may have been larger than the amounts claimed by some of the others. Still another term of the district court intervened (March term, 1882) before the hearing to the referee commenced, and yet no sign was made to the court that other persons were necessary parties in the case. Not until the lapse of twenty-two months after the reference, and just as the parties had gathered for trial under an order of reference, consented to by these plaintiffs in error, did they make objection to further proceedings until other parties should be made defendants. This tardiness, apparently deliberate, is suggestive, at least, and the parties who were so slow to object when the absent ones could have been brought in without delaying the case, can not now well ask special consideration at the hands of the court. Unless it be made quite clearly to appear that .they have been prejudiced in some substantial manner, a reviewing court will hardly give willing ear to their complaints, and interfere with the action of the trial court in the premises. We are nothin a case like this, inclined to search for unsubstantial and unimportant errors.

But, should this view be waived, does the record, upon the whole ground, here being considered, show even technical error? It is urged that Blossom had the right to demand that Fuller, his assignee, should be present as a party, so that on that trial all his rights as respects Fuller and all of Fuller’s rights might be then and there finally adjudicated for the very purpose of avoiding further litigation, for Fuller stands in the relation of indemnitor to Blossom; that no judgment was rendered against Blossom and he is out of the case; so that, if Fuller shall not be held, those shares of stock assigned escape assessment altogether, and that the action of the court in this regard was prejudicial to the rights of Blossom and of all creditors, and was error. But is Blossom out? The assumption is that as no judgment was rendered against Blossom it was equivalent to a judgment in his favor, and that, as the journal entry is so drawn as to order a continuance as to Fuller and the Senter estate, and does not, in terms, order the case continued as to Blossom, he is necessarily out of court. With deference to the learned counsel, we can not concur in this assumption. If the case was continued at all it was, without question, continued as to Blossom in his relation of creditor. He therefore remained in for one purpose; why not for all other purposes of the case not before accomplished ? No finding having been had or judgment rendered for or against him on the claim of plaintiff, the issue, as to him, was undetermined. Unless the defendants (stockholders) were jointly liable, so that a judgment against some would work a release as to the others, the judgment was not a final judgment as to Blossom in either relation ; and if that be so the court’s jurisdiction over him is not lost, for where jurisdiction is once acquired, unless the action be ended by the parties, the jurisdiction continues until final judgment in the case. Bolles v. Stockman, 42 Ohio St. 445. We know of no principle upon which it can be claimed that where the stock is held in severalty the statutory liability of stockholders to the creditors of the corporation is joint, nor of any practice that would warrant the rendition of a joint judgment. On the contrary, the case cited by counsel (Umsted v. Buskirk, 17 Ohio St. 113) is authority, were authority needed, to the effect that the judgments to be rendered are several, although the suit is prosecuted for the common and equal benefit of all the creditors, We conclude, therefore, that the district court’s jurisdiction over Blossom was as unquestionable after the time at which judgments were rendered against his co-defendants as before. If error is to be discovered it must be found with reference to some other feature of the case.

It was proper, under section 5006, Revised Statutes, to bring in Fuller and Senter’s administrator de bonis non, in order to a full determination of all the questions involved. But, under section 5013, Revised Statutes, in a case where no equities between stockholders were to be adjusted, why might not the court determine the controversy before it without prejudice either to the rights of those already in court, or of those yet to be brought in 1 The judgments rendered and to be rendered being several, if each stockholder liable at all was liable to the full amount of his stock, no reason is perceived why, by vh’tue of section 5311, Revised Statutes, the court had not full power to render judgment against one or more defendants, leaving the action to proceed against the others. Not only is this right given by statute, but it is well recognized practice in chancery cases. See Dougherty v. Walters, 1 Ohio St. 201.

This view is not in conflict with the cases of Umsted v. Buskirk, supra; Wheeler v. Faurot, 37 Ohio St. 26, and Bullock v. Kilgour, 39 Ohio St. 543, cited by counsel, when those cases are properly considered. It will be noticed that in Bullock v. Kilgour a judgment had been rendered against one of the defendants in 1870, for an amount certain, as being the extent of his statutory liability. In March, 1882, the plaintiff, by supplemental petition, sought to recover an additional amount upon a liability which existed when the first judgment was rendered, and the trial court gave judgment as prayed. This court held the first judgment to be a final judgment, and that the issue was res judicata between the parties. In the case at bar no judgment of any kind as to Blossom had been rendered. In Wheeler v. Faurot two defendants (stockholders) set up by answer that they had sold their stock to solvent purchasers amenable to process, and prayed that they might be made parties and brought in by summons. This the trial court refused to do. This court, recognizing the doctrine of Umsted v. Buskirk, to the effect that for the purposes of general account among the stockholders, and to enforce from them contribution in proportion to their shares of stock, and to a complete determination of all the equities involved, the other stockholders should be brought in, and that any defendant had the right to insist upon their being made parties, held that the action of the trial court was erroneous, and reversed it. Here the district court did not refuse to have remaining stockholders brought in ; on the contrary, it made an order to that effect. But there was no necessity that the case should be delayed on that account, for, as to all affected by the judgment, there was not, nor could there be, accounting or contribution between the • stockholders, and the cases'above cited are very far from being authority in support of the claim that, where such a condition of the case appears,the court’s hands are tied, and it can do nothing until every solvent stockholder living and within the jurisdiction, and the representative of every one deceased, is brought in. The position would be different if it were necessary to order contribution, an adjustment of equities, and an equalization of burdens among stockholders. But that necessity, we have found, does not exist here. The liability of no stockholder against whom a judgment was rendered could possibly be increased or diminished by the disposition of the issues to be determined later. • The debts of the corporation, as found by both referees, and not disputed, far exceeded the capital stock; so that, in any possible event, every stockholder that could be holden at all was liable for an amount equal to his stock. Nor can the creditors complain. They could as well shane in the proceeds of judgments rendered against Blossom or Fuller, and the Senter estate, at a subsequent term, as though the amounts had been earlier ascertained; at most, delay could not aid them. We see nothing in the way of the district court, when issues should be made between Blossom and Fuller, adjudicating between them, and if it be found that Fuller is not liable, proceed to adjudicate as between Blossom and the creditors. Should Fuller not be held liable on final trial no prejudice would accrue to Blossom which could have been cured by a delay of the whole case; and as to effects of delay generally, as already found, he was as much responsible as any other party.

What might be regarded as proper practice under section 3260, Revised Statutes, we are not called upon to determine. That section having been enacted since the commencement of this suit, would not, under section 79, Revised Statutes, apply in this case. The plaintiffs in error were not prejudiced by the omission to render judgment against Blossom, nor by the refusal of the district court to delay, nor did the absence of Fuller, or Senter’s representative, deprive the court of jurisdiction.

Third. It was held by the district court that interest should be charged against the stockholders as of the date of the commencement of suit. The contention on part of plaintiffs in error is that in no case can the stockholder be liable for a sum beyond the amount of his stock, to be determined at the time the liability is finally fixed by judicial decree. In other words, that the liability is one created by statutory enactment under the constitution, to be enforced by decree, and interest can not be added except by virtue of the decree of the court declaring the liability, and no interest can accrue against the stockholder until the liability is thus declared. On the other hand, the claim is that, while the liability is created by the constitution and the statute, yet the stockholder places himself under liability by contract when he subscribes for or acquires the stock; and, resting as'well upon contract as upon statute, the interest follows the maturing of the obligation, which is at the time when the corporation becomes insolvent and refuses to pay.

We agree with the counsel that the question is one which, upon principle, is of very considerable difficulty. But we do not feel disposed to enter upon a discussion of it here, inasmuch as it was involved in the case of Wehrman v. Reakirt, decided in the superior court of Cincinnati in 1871, 1 C. S. C. R. 230, by Judge Taft, in a well considered opinion. It is stated by Judge Hagans, of that court, in Hooker v. Kilgour, 2 C. S. C. R. 350, that the case was brought to this court on motion for leave to file petition in error, which was refused. The district court, in holding the stockholders for interest after the commencement of the suit, evidently followed the law of that case, and, inasmuch, as it has been generally acquiesced in as furnishing the true rule, we are not prepared to say it is not the law in this state. The necessities of the case do not require us to go farther. Support for the proposition advanced by counsel for defendant in error will be found in the cases of Corning v. McCullough, Comstock, 58; Burr v. Wilcox, 22 N. Y. 551; Baker v. Bank, 9 Metcalf (Mass.), 182, and Terry v. Anderson, 95 U. S. 628.

Fourth. As to the allowance of attorney’s fees: It is urged that there was no power in the court to make any allowance at all. The proceeding was in equity. Its purpose was to bring into court a fund for distribution among creditors. Quoting from the brief of counsel for plaintiff in error: “ The action is for the equal benefit of all the creditors. No one creditor can ever obtain any advantage or preference over the remaining creditors. All are to share in the fund recovered from the stockholders pro rata.” The labor of the plaintiff’s counsel being, therefore, for the equal benefit of all the creditors, why should the whole expense of attorney’s fees be borne by the plaintiff? Should the other creditors, sitting by and observing counsel do work which inured as much to their benefit as to that of plaintiff, be heard to say that in good faith and fairness they should not contribute to a reasonable recompense? Indeed, there is much reason for the claim that the circumstances raise a presumption of a promise to pay on their part. But, however that may be, the court, in the exercise of its power over the fund, and in the discretion of doing full and exact justice to all the parties, had ample power to order paid from the fund reasonable counsel fees, the same as power to order payment of costs. It is'insisted that such allowance is unfair to the other creditors, inasmuch as they were required to pay counsel for like services. Doubtless they were required, so far as they answered, to employ counsel for that purpose. Beyoud this it is not perceived that any labor in the interest of creditors was performed by counsel other than those representing plaintiff. It happens that many stockholders were likewise creditors, and the same counsel appeared for them in both capacities. The proceedings bristle with evidences of their efforts in defense of the stockholders, but traces of their labors in behalf of creditors, as such, have some way been omitted from the printed record. We see no hardship. As to the amount of such allowance the trial court was in better position to judge what sum would be reasonable than is this court, and as no showing is made that the amount allowed was excessive, this court does not feel called upon to reduce it.

Fifth. As to Homer C. Nellis: This defendant disposed of his stock to parties who were insolvent, or beyond the jurisdiction. During the time he held it certain debts accrued against the corporation, and upon this showing a judgment was rendered against him for his proportion of the same. To hold this to be erroneous would require a review of the judgment of this court in Brown v. Hitchcock, 36 Ohio St. 667, a responsibility which we arc not prepared at this time to assume. And discussion of the question is unnecessary.

Upon the whole case we are disposed to look at the alleged errors presented as technical, at best, and not substantial. And we are the more reluctant to disturb a judgment of this character because of the well known difficulty which surrounds the enforcement of the constitutional liability of stockholders for the debts of corporations. By reason of the great number of stockholders, the frequent transfers of stock, the decease of parties, and of other causes, delays — vexatious, expensive and almost interminable — seem to be inevitable in all such proceedings; so much so, indeed, that such liability has grown to be looked upon as furnishing next to no security at all for the debts of corporations. The present case well illustrates it. Commenced in January, 1877, it was not until March, 1888, that a judgment available to the creditor was reached.

Judgment affirmed.


author: Owen, C. J.

text:
    Braiden v. Mercer.

      Guardian and ward — Settlement in probate court— Conclusiveness of as against sureties.

    In an action upon a guardian’s bond for the recovery of the amount found due the wards upon a final settlement of the guardian’s accounts in the probate court, the sureties are concluded by the settlement, and will not be beard, in the absence of fraud and collusion, to question its correctness or to demand a rehearing of the accounts.
    Error to the District Court of Belmont county.

      Sees ft (ralla,her and L. Danford, for plaintiff in error.

      C. W. Carroll and Alexis Cope, for defendant in error.
   Owen, C. J.

In October, 1873, Milton W. Junkins was appointed guardian of the estates of two of his minor children. He gave bond, with Samuel Braiden, plaintiff in error, as surety, conditioned that his principal should “faithfully discharge all his duties as such guardian, as is required by law.”

He entered upon the discharge of his trust. A considerable sum of money belonging to his wards came into his hands as guardian, which he neglected to account for.

He thereafter died, and in Eebruary, 1880, D. W. Cooper was appointed his administrator, and in Eebruary, 1881, as such administrator, and as required by section 6291, Eevised Statutes, filed in the probate court of Belmont county an account of the doings of his intestate as such guardian. In June, 1881, the count passed upon this account and found that in his life-time the guardian, as such, had received of his wards’ money $953.48, which, with the interest thereon, amounted to the sum of $1,384.06, which was adjudged against the estate of the late guardian, and ordered to be paid by the administrator to the then and present guardian, the defendant in error. There being no assets in the hands of the administrator, the action below was brought in the court of common pleas by the present guardian of the wards, against Braiden and the administrator of his principal upon the bond of the latter for the recovery of the amount found due from the estate of the guardian, and interest. To the petition, Braiden made answer as follows :

“ That the said Milton W. Junkins, as guardian, did not file any account of his trust as guardian; that the account filed by his administrator was filed without the knowledge of this defendant, and this defendant was no party thereto. The defendant further says,'that for many years prior to the death of the said Junkins, he, the said Junkins, was a man of intemperate habits; that he was for a very long time unable to work; that he had no real or personal estate, and no income except what he derived from his practice as a physician, when able to practice, and from an estate by curtesy he had in certain real estate; that at the time he was appointed guardian hisyvards were infants of tender years, requiring great care and attention; that they had in addition to the moneys claimed to have been received by their guardian the remainder in fee-simple of a piece of real estate in the city of Bellaire, Ohio, of the value of at least forty-five hundred ($4500) dollars; that while they were possessed of an estate as aforesaid, and their father and guardian unable to provide for himself, he, the guardian, did, at great cost to himself, support, clothe, and educate said children, and on them and in their behalf did expend large sums of money exceeding in the- aggregate the amount this defendant is sought to be charged with, and that the said real estate of said wards is still held and possessed by them free of incumbrance. The defendant, Samuel Braiden, further says, that for a long time previous to the death of the said Junkins, he, the said Junkins, was not in condition to transact business ; that on that account he did not, in his life-time, claim or ask an allowance for the maintenance of his wards, nor did his administrator for him in the final settlement of his accounts.
“ The defendant further says, that the said Juukius was entitled to an allowance for maintaining, clothing, and educating his wards; that his failure to do so was owing to his condition as aforesaid ; and that said guardian was not in fact indebted to his wards in any sum at the time of his death, and that the said claim against him is not valid or equitable.”

The plaintiffs demurrer to this answer was sustained, the defendant excepted, and, on his failure to answer further, judgment was rendered against him for the amount demanded in the petition. The district court on error affirmed this judgment.

To reverse the judgments below the present proceeding is prosecuted.

If Braiden was entitled to the relief demanded in his answer, the judgments below are erroneous and should be reversed.

The single proposition to which we address our consideration is the right of Braiden to a review, in the action below, of the finding and order of the probate court upon the settlement of the guardian’s dealings by his administrator. Braiden was not made a party to, and it is assumed that he had no actual knowledge of, the settlement proceeding in the probate court. That the settlement was final as tween the wards and their guardian’s administrator, in the absence of an appeal from it or a proceeding to open it in accordance with the statutes, will be conceded. Section 6289, Revised Statutes; Woodmansie v. Woodmansie, 32 Ohio St. 18.

Whether a surety upon a guardian’s bond is concluded by a settlement in the probate court of his principal’s accounts has not, heretofore, been determined by this court. In State v. Humphreys, 7 Ohio (1 pt.) 224, it was held that an action against the sureties in a guardian’s bond was sustainable without previous liquidation of'the amount due from the principal. This case was explained in Newton v. Hammond, 38 Ohio St. 435, and the principle established that a right of action- against the sureties first accrues to the ward for the amount remaining in the hands of the guardian when such amount is ascertained by the probate court on the settlement of the guardian’s final account. It is said in that case by Mcllvaine, J.: “ The statement of accounts in the probate court must be verified by the oath of the guardian-- — a requirement alike important to the sureties and the ward.” If the liability of the sureties is not fixed, nor they concluded, by the settlement, it is not apparent why the verification of the accounts is of equal importance to them and the wards.

The principle that a final settlement of a guardian’s accounts and the determination by the probate court of the amount due his wards should, in the absence of fraud and collusion, conclude the sureties in an action against them upon the guardian’s bond, finds strong support in both reason and authority. The sureties undertake that their principal will faithfully discharge his duties as guardian. Section 6259, Revised Statutes. With other duties the law requires him to render on oath to the proper court an account of his receipts and expenditures, verified by vouchers or proof, etc. ... At the expiration of his trust fully to account for and pay over to the proper person all of the estate remaining in his hands. ... To obey and perform all the orders and judgments of the proper courts touching the guardianship. Section 6269, Revised Statutes.

By their bond the sureties contract with reference to the action of a court and that their principal will obey its orders and conform to such action. Can they say they are strangers to such proceedings? Upon their principal’s failure to obey the orders of the court there is clearly a breach of the bond. The i-elation they assume to such court and its action so far makes them privy to the proceedings affecting their principal as to deny to them the right, when called upon to answer for the breach of the bond, to call in question the grounds upon which the court based its action, and to have the same cause retried. We find in our law numerous illustrations of this principle. The sureties in an undertaking in attachment contract to pay the defendant all damages sustained by reason of the attachment if the order prove to have been wrongfully obtained. Has it ever been doubted that the determination by the court in the attachment proceeding that the order was wrongfully obtained concluded the sureties upon that question in an action upon their undertaking 1 By an undertaking in replevin the sureties contract that their principal will duly prosecute the action and pay all costs and damages which may be awarded against him. Nobody will claim that the award of damages in the replevin suit is not final against the sureties in an action against them upon the undertaking. An undertaking in an injunction proceeding is conditioned to secure the party enjoined the damages he may sustain if it be finally decided that the injunction ought not to have been granted. It has never been supposed that the sureties in an action against them could be heard to say that they were strangers to the injunction proceeding and that the decision of the court that the injunction ought not to have been granted should be disregarded and that question again litigated.

It is not easy to distinguish the principle involved in these proceedings from the °one we are considering.

Indeed it may well be considered an established principle that whenever a surety has contracted with reference to the conduct of one of the parties in some suit or proceeding in court, he is, in the absence of fraud and collusion, concluded by the judgment. Shepard v. Pebbles, 38 Wis. 373; Lothrop v. Southworth, 5 Mich. 436, 448; Towle v. Towle, 46 N. H. 434; Willey v. Paulk, 6 Conn. 74; Stovall v. Banks, 10 Wall. 588; Heard v. Lodge, 20 Pick. 58; Sturgis v. Knapp, 33 Vt. 521; Black v. Caruthers, 6 Humph. 87; Dowling v. Polack, 18 Cal. 625; Warner v. Matthews, 18 Ill. 86; Evans v. Commonwealth, 8 Watts (Pa.), 398; Garber v. Commonwealth, 7 Pa. St. 266; Watts v. Gayle, 20 Ala. 817; Casoni v. Jerome, 58 N. Y. 322; Douglass v Howland, 24 Wend. 35; Brandt Suretyship, §§ 533, 534.

This principle was applied in an action on an injunction bond in Lathrop v. Southworth, 5 Mich. 448, where it was held that a surety was bound by a decree against his principal and could raise no question of its correctness. It was said in this ease that the surety undertook that his principal should abide the judgment of the court. “ He can, therefore, raise no question of the correctness of the decree, nor impeach it in this collateral proceeding.” The same holding was made in a similar case — Towle v. Towle, supra, where the court say: “By signing the bond in suit with Towle, the plaintiff in the suit in equity, the sureties voluntarily assumed such a connection with that suit that they are concluded by the decree in it in the present suit upon the bond so far as the same matters are in question.”

The supreme court of the United States applied the same rule to the sureties upon an administration bond, in Stovall v. Banks, 10 Wall. 583. It is there said that the surety “ can not attack collaterally a decree made against an administrator for whose fidelity to his trust he has bound himself.” The same application of this principle was made in Heard v. Lodge, 20 Pick. 58, where the court say: “ To most purposes, it seems to us, that the sureties in an administration bond are, as well as the principal, estopped from controverting the validity of a judgment ascertaining the amount of a debt to be paid by the administrator. They are, in many respects, like the sureties in a bail bond, and equally bound by the proceeding against the principal. The duty they have assumed is that the principal will pay on demand all debts ascertained by judgment of a court of law against him in his capacity as administrator, if the estate be solvent. His failure to make payment is a breach of the administration bond.” In the case of an administrator’s bond, the court say, in Casoni v. Jerome, 58 N. Y. 322: “ Sureties are bound by the decree of the surrogate in such a case, because by their contract they have made themselves privy to the proceedings' against their principal, and when the principal is concluded, tbe surety, in the absence of fraud or collusion, is con-eluded.”

In Shepard v. Pebbles, 38 Wis. 373, it was held that the sureties on a guardian’s bond are concluded by the order of the county court on the guardian’s accounting, as to the amount due from him to the ward. Cole, J., said “The general rule of course is, that a judgment is conclusive only as against parties and privies ; but to this there are exceptions. And it is conceded that whenever the surety has contracted in reference to the conduct of one of the parties in some suit or proceeding in the courts, he is concluded by the judgment. ... In the case before us, the order of the county court fixed the amount of the proceeds of the sale in the hands of the guardian, and directed its payment to the ward. The sureties had contracted that the guardian should and would justly account for the proceeds, and dispose of them according to law, and would perform all orders of the county court by him to be performed. There was a breach of the obligation on the default of the guardian to pay over as he was ordered to do ; and the sureties, as well as the principal, are estopped from controverting the correctness of the order ascertaining the amount. They occupy, in many respects, a position like that of sureties in a replevin or bail bond, and are equally concluded by the proceedings against the principal.” The strong analogy of this case to the one at bar is apparent. The settlement by the administrator of the deceased guardian is the same in effect as if made by the guardian himself. Section 6291, Revised Statutes. The amount due the wards was ascertained by the court and its payment to the plaintiff below ordered. In this default has been made. No fraud or collusion is alleged in the settlement, but a rehearing of the matter of the account is asked, as if no settlement had been made.

The only case cited by the plaintiff in error to support the claim that the surety may be heard to have a new accounting and settlement, is Dawes v. Howard, 4 Mass. 97. This was an action of debt on a bond of a guardin, the wards being minor children of the guardian. The guardian had made no claim in his life-time, but the court allows it to the sureties. There is no intimation in the report of the case that there ever had been a settlement of the guardian’s accounts prior to the action upon the bond. The/piestion we have considered was not suggested by court or counsel, and did not arise upon the record.

The more recent ease of Heard v. Lodge, 20 Pick. 58, supra, presents the view of the same court upou this question, and fully supports the conclusion we have reached, which, is, that m an action upon a guardian’s bond for the recovery of the amount found due the wards upon a final settlement of the guardian’s accounts in the probate court, the sureties are concluded by the settlement, and will not be heard, in the absence of fraud and collusion, to question its correctness or to demand a rehearing of the accounts. There was no error in sustaining the demurrer to the answer.

Judgment affirmed.


author: By the Court.

text:
    Newberry v. Alexander et al.

      Corporation — Action to enforce statutory liability of stockholders — Consolidation of actions.

    Error to the District Court of Lake county.

      J. H. IngersoU and Alvord $ Alvord, for plaintiffs in error.

      Perry Bosworth and J. B. Burroughs, for defendants in error.
   By the Court.

The questions involved in this case are disposed of by the disposition of Mason v. Alexander, ante, p. 318, at the present term, except as to the matter of consolidation.

The plaintiff in error is administratrix de bonis non of Henry Blair, deceased. Elizabeth Blair, administratrix, was made party in the original case of Steele v. The Little Mountain Association et al., in the common pleas, and duly served with process. In that court she joined in the consent to refer the ease for trial to a referee, and subsequently-filed exceptions to the referee’s report, but deceased before they were disposed of. Her death being suggested the present plaintiff in error was ordered brought in by summons. Before this was done judgments were taken against the other stockholders and the case as to them appealed. At a later term the plaintiff in error answered to the jurisdiction. This was found against her and a judgment rendered. Erom this she appealed to the district court. In that court, the original case still being pending there, at the March term, 1881, on motion, the two cases were ordered consolidated, and afterward were tried together.

We see no error in the order of consolidation. The two cases .were properly joined at the outset, and their separation meantime, while it may have been an irregularity, did not so change the character of either as to prevent a joinder. The district court, having acquired jurisdiction of the person of the plaintiff in error, by the appeal and the steps taken to perfect it, and the two cases being in that court for trial, it was but the exercise of familiar jurisdiction to bring them again together, and no substantial prejudice accrued to the plaintiff in error by such consolidation.

Judgment affirmed.


text:
    White v. Woodward et al.

      Taxation — Assessment of penalties for non-payment.

    Error to the Circuit Court of Clermont county.

      Frazier ‡ JRaudebush, for plaintiff in error.

      Alfred Yaple and John M. Pattison, for defendants in error.
   By the Court.

Sections 2844 and 1053 of the Revised Statutes, when construed together, and with the exactness that all statutes imposing penalties should be, only author ize the imposition of a penalty of fifteen per cent on the non-payment of the taxes assessed and levied upon a tract or lot of land for the first default in the payment of the same; and do not permit the assessment of a penalty on the same taxes, or the penalty thereon, in any succeeding year or years by reason of the continued non-payment of such taxes and penalty.

Judgment affirmed.