4

the debt was refused, stockholders at the time of suit brought, or stockholders at the time insolvency impended," are meant. It is held even that both the stockholders at the time the debt was contracted and when the action was brought are liable. Where, a stockholder who is such at the time the debt was contracted is made liable, a transfer does not relieve him of this liability, and the contraction of the debt would seem to cover an instalment of a debt falling due. Where those are made liable who were stockholders at the time the action was brought or insolvency impended, a transfer in good faith, and not colorable nor for the purpose of evading the responsibility, nor made after insolvency, relieves the transferror of liability. The fact that the stock is not paid for in full of the subscription price has no bearing upon the statutory responsibility.9

8

§ 67. Remedy, whether at law or in equity. This subject is involved in the greatest confusion. It seems extraordinary that courts can reach such totally different conclusions about a simple matter. In the first place, it is conceded that if the statute gives a special remedy in the particular forum where the suit is brought, that remedy must be followed. Since no one has a vested right in a mere remedy, the remedy may be changed, but not so as to deprive the complainant of all remedy. But the statutes are

3 Bond v. Appleton, 8 Mass. 472.

4 Cleveland v. Burnham, 55 Wis. 598; Middleton Bank v. Magill, 5 Conn. 28.

7 See 3 Am. St. R. 860 et seq., in

note.

8 See $$ 46-53, ante.

9 See Matthews v. Albert, 24 Md.

5 As under national bank act. 527; Wheeler v. Millar, 90 N. Y. 353.

See $ 70, post.

6 Curtiss v. Harlow, 12 Met. 3; Holyoke Bank v. Burnham, 11 Cush. 183; Brown v. Hitchcock, 36 Ohio St. 667; Sayles v. Bates, 15 R. I. 342; Freeland v. McCullough, 1 Denio, 414; Root v. Sinnock, 120 Ill. 350. The transferror is sometimes made surety for the transferee. Marr v. Bank of West Tennessee, 4 Lea, 578.

1 Thompson on Liability of Stockholders, § 73; Hawthorne v. Calef, 2 Wall. 10. All matters of remedy are governed by the law of the forum where suit is brought. Special remedies given where the right accrued, but not where remedy is sought, will not be applied in the latter forum. Lowry v. Inman, 46 N. Y. 119; Christensen v. Eno, 106 N. Y. 97.

frequently silent as to the remedy, and the courts are left to fix some rule that will be followed. If, as already pointed out, this liability is one of quasi-contract or contract, there ought to be no doubt that an action at law would lie upon it. There might difficulty arise in the matter of proof, but that ought not to affect the legal right. It is perfectly consistent with the foregoing proposition that a suit in equity would also lie for the purpose of avoiding a multiplicity of actions. It is also perfectly consistent with this proposition that the action at law would not lie until the party had exhausted his remedy against the corporation. The advantage for the action at law is that thereby the first creditor suing, or at any rate first getting a judgment, obtains a priority, of which he cannot be deprived by the person owing the liability, and he is not compelled to share the fruits of his diligence with any other creditor, as he would be compelled in equity. In the next place the creditor can single out one stockholder who is most conveniently situated to be sued, and sue him alone without being troubled with the delay or the expense of services upon numerous parties defendant. Again, the stockholder in such an action could not set off any debt which the corporation owed to him, as he might do if sued in equity." Nor if the suit is at law could it be treated as a creditor's bill and the judgment at law required to be that of the forum where the equitable remedy is sought." But when the decisions are consulted they speak "a various

2 Parker v. Carolina Sav. Bank, Harrison, 12 Bradw. 457, semble, 31 S. E. R. 673 (S. C.). contra, and Boyd v. Hall, 56 Ga. 563.

3 Thebus v. Smiley, 110 Ill. 316; Cole v. Butler, 43 Me. 401; Jones v. Wiltberger, 42 Ga. 575; Bates v. Lewis, 3 Ohio St. 459. Compare City of Chicago v. Hall, 103 Ill. 342; Savings Ass'n v. Kellogg, 63 Mo. 540. 4 In re Empire City Bank, 18 N. Y. 199; Buchanan v. Meisser, 105 Ill. 638; Burnap v. Harkins Engine Co., 127 Mass. 586; Paine v. Stewart, 33 Conn. 516. But compare Gauch v.

5 Welles v. Stout, 38 Fed. R. 807. But this is not the general rule. See Hobart v. Gould, 8 Fed. R. 57; Sowles v. Witters, 39 Fed. R. 403. Except where the claim of the stockholder is good as against the creditors in general. But see Wheeler v. Millar, 90 N. Y. 353.

6 Patterson v. Lynde, 112 Ill. 196, which case is clearly wrong upon this point.

language." It was originally held in one court that the creditor had a remedy at law alone, but this court has receded from this position. So in the case of national banks it was held that the receiver's suit for an assessment levied by the comptroller was at law. But courts applying the analogy of a creditor's bill, the analogy consisting of the fact that the assets of the corporation must first be exhausted, have held that where the stockholders were held liable in proportion to the amount of their stock the remedy is in equity and not at law.10 But in reason the better rule is that where the liability is to the amount of or in proportion to the stock, the creditor may sue either at law or in equity," unless, of course, he is also a stockholder, when he would be compelled to sue in equity, as he would be himself liable for part of his own claim.

§ 68. Where legal remedy obtainable.- Where an action at law upon the statutory liability can be brought, it may be under a statute which does not require the exhausting of the bank's assets. In such case the remedy consists in suing the individual stockholder upon his contract. Such was the old method of enforcing the liability for a state bank's circulating notes. But where the right to sue the stockholder is held to be dependent upon the bank's lack of assets, that fact

7 McCarthay v. Lavasche, 89 Ill. Walsh, 25 Minn. 543. Alabama, Ar270. kansas, Michigan, Massachusetts, New Jersey, Ohio, Rhode Island and Wisconsin seem to hold this rule, though not all as to bank statutes. 11 Carroll v. Green, 92 U. S. 509; Mills v. Scott, 99 U. S. 25, under laws of two different states.

8 Earnes v. Doris, 102 Ill. 350; Tunesma v. Schuttler, 114 Ill. 156. 9 Casey v. Galli, 94 U. S. 673. But a suit in equity lies now by the statute. Irons v. Manufacturers' Nat. Bank, 27 Fed. R. 591; Richmond v. Irons, 121 U. S. 27. The action at law remains and both remedies exist.

10 Pollard v. Bailey, 20 Wall. 520; Terry v. Tubman, 92 U. S. 156: Cuykendall v. Miles, 10 Fed. R. 342; Terry v. Martin, 10 S. C. 263; Terry v. Little, 101 U. S. 216; Allen v.

1 Adkins v. Thornton, 19 Ga. 325. See also on this subject, where bonds and notes were given by stockholders to secure circulation, Duncan v. Biscoe, 7 Ark. 175; Van Steenwyck v. Sackett, 17 Wis. 645; Rusk v. Sackett, 28 Wis. 400.

necessarily must appear by allegation and proof. The judgment at law and return of nulla bona is sufficient, nor can that judgment be disputed. If the liability is several, and it would seem to be such in most cases where an action at law lies, but one stockholder can be sued. By the action the creditor obtains a priority, which the stockholder sued cannot avoid by payment to any other creditor. No set-off lies on behalf of the stockholder for a debt owing to him by the corporation," for the creditor sues in his own right, not by right of the corporation. The question of contribution among the stockholders cannot of course be litigated. The method of recovery, where the liability is in proportion to the stock or some equivalent expression is used, would require allegation and proof as to the exhaustion of the bank's assets, where that is necessary, proof of the whole liability of the stock and of the amount of the stockholder's holding, from which his liability is a mere matter of computation. But if the liability was held to be an equal and ratable one, proof would be required of the total debts, and the proportion of the creditor's debt thereto would be a matter of inference. It is believed, however, that in this latter case an action at law never lies except in the case of national banks, where the amount of the receiver's claim against each stockholder is determined by the assessment of the comptroller of the currency, or unless the suit is upon an assessment made under an order of a court.

2 Marsh v. Burroughs, 1 Woods, 463. See next section, note 4.

3 Perry v. Turner, 55 Mo. 418; Terry v. Little, 101 U. S. 216.

199; Buchanan v. Meisser, 105 Ill. 638; Burnap v. Harkins Engine Co., 127 Mass. 586; Paine v. Stewart, 33 Conn. 516. The same rule would apply in equity as at law. But Wheeler v. Millar, 90 N. Y. 353, is contra. And see Boyd v. Hall, 56 Ga. 563.

Thebus v. Smiley, 110 Ill. 316; Cole v. Butler, 43 Me. 401; Jones v. Wiltberger, 42 Ga. 575; Bates v. Lewis, 3 Ohio St. 459. But see City of Chicago v. Hall, 103 Ill. 342; 6 See $ 70, infra; Pickering v. Savings Asso. v. Kellogg, 63 Mo. Hastings, 76 N. W. R. 587; Gager v. 540. Bank of Edgerton, 77 N. W. R. 920. "In re Empire City Bank, 18 N. Y. But see Boyd v. Hall, 56 Ga. 563.

§ 69. Suit in equity.- Where the rule is held that the suit to enforce the stockholder's liability must be brought in equity, or wherever such a suit is brought on grounds of convenience, although an action at law lies, the suit should be brought on behalf of all the creditors similarly situated,' and against all the stockholders liable, unless certain of them cannot be made parties because beyond the court's jurisdiction. Where it is necessary to show, as a condition precedent to maintaining the suit, that the bank has no available assets, the recovery of a judgment and a return of nulla bona must appear; but facts that excuse such a proceeding may be alleged and proven, as that the bank is insolvent or in the hands of a receiver, or any other facts that render such a proceeding useless. The suit must necessarily be brought by the creditors unless the statute permits some one else to sue. There can be no set-off pleaded in favor of a stockholder on account of claims against the bank," but there are exceptions. One is the exception under a peculiar

1 Irons v. Manuf. Nat. Bank, 27 ceiver will not sue (Anderson v. Fed. R. 591.

2 Terry v. Martin, 10 Rich. 263; Coleman v. White, 14 Wis. 700. 3 Terry v. Martin, supra; Kennedy v. Gibson, 8 Wall. 498.

4 Hodgson v. Cheever, 8 Mo. App. 318. There is such a confusion between courts as to whether this is necessary without a statute that no general rule can be found. See 3 Am. St. R. 851, in note, and § 63, ante.

5 See cases cited in note 1, § 65, supra. And see Howarth v. Ellwarger, 86 Fed. R. 54; Watterson v. Masterson, 15 Wash. 511; State v. Union Stock Yards Bank, 70 N. W. R. 752. But even if the suit is given to the receiver or a particular officer it may be brought by a creditor (Worth v. Piedmont Bank, 28 S. E. R. 488), if the officer or re

Seymour, 73 N. W. R. 171), without applying to the corporation. Foster v. Bank of Abingdon, 88 Fed. R. 604. This case decides that creditors suing for negligent injuries to bank by the officers are not within the ninety-fourth equity rule, which required an application to the corporation and a refusal by it to sue. But of course the bank or its receiver must be a party to the action.

6 Hobart v. Gould, 8 Fed. R. 57; Sowles v. Witters, 39 Fed. R. 403; Witters v. Sowles, 32 Fed. R. 130; Thompson v. Meisser, 108 Ill. 359; In re Empire City Bank, 18 N. Y. 119; Buchanan v. Meisser, 105 Ill 638; Burnap v. Harkins Engine Co., 127 Mass. 586; Paine v. Stewart, 33 Conn. 516; Parker v. Carolina Sav. Bank, 31 S. E. R. 673.