averment is necessary. Read v. Cutts, 7 Me. | 186. We think the declaration contains all

the averments which are necessary to charge the defendants as guarantors of payment of the note, and that it is not demurrable on the ground that the note as described is nonnegotiable.

But, as we have already seen, the plaintiff has failed to aver by what right he is entitled to sue. Hence the ruling of the justice below overruling the demurrer was erroneous, and the exceptions must be sustained. Exceptions sustained.

In an action brought by a receiver of a foreign corporation in this state to enforce the double liability of the defendant, who was a nonresident stockholder in a Minnesota banking corporation, and which was heard on demurrer to plaintiff's declaration setting out all the facts, it is held:

1. That the defendant, a nonresident stockholder, is bound by the decrees of the Minnesota court in which the parent suit was instituted under the statutes of that state, and whereby, the assets of the corporation having been sequestered, the plaintiff was appointed receiver for creditors.

2. That it is not essential that nonresident stockholders who were not in reach of the process of the court, and against whom it could not render a personal judgment, should be made parties to such a suit, and that for the purpose of ascertaining the assets and liabilities of the corporation they were represented by the corporation, or by its general receiver, appointed prior to the institution of the suit, and as to such matters they are bound by the adjudication though not personally made parties.

3. Such nonresident stockholders, however, are not concluded by the finding upon the ultimate question of their individual liability, nor as to the measure of such liability, which is not an asset of the corporation, and in which neither the corporation nor its receiver has any legal interest to render them representatives of the stockholders.

4. That for the purpose of enforcing the liability of stockholders under the Minnesota statute the plaintiff, in his capacity of creditors' receiver, may maintain an action in a state jurisdiction other than that of his appointment.

5. It is not necessary to hold that the plaintiff's receiver succeeded to the rights of either the corporation or of the creditors. His authority emanates directly from the statute under which he was appointed. It appears from the declaration in the writ that he was expressly authorized and directed by a decree of the Minnesota court to institute in his own name as receiver all auxiliary actions necessary to enforce the liability of nonresident stockholders.

6. The principle of comity between states is broad enough to extend recognition to the plaintiff in the courts of this state.

7. It concerns the due administration of justice that all stockholders, wherever they reside, should be compelled by proceedings somewhere to perform the statutory obligations towards creditors of the corporation, which they have assumed by becoming stockholders.

8. An increasing tendency has been observable in both state and federal jurisdictions during the last decade to sanction the enforcement of these obligations extraterritorially in any court of competent jurisdiction, except where the rights of a citizen in the state of the forum are thereby prejudiced, or the public policy of such state is contravened.

9. It is apparent that no rights of domestic creditors can intervene, since the law creating the stockholders' liability declares that it shall be enforced for the benefit of all creditors of the corporation.

10. The Minnesota statute authorizing the collection from stockholders of only so much as may be necessary to satisfy the debts of the corporation, and requiring a pro rata distribution of it among all the creditors, is seen to be free from the less equitable features of those statutes which authorize a single creditor, without a pro rata assessment, to maintain an action against a single stockholder for his own benefit, and not for the benefit of all the creditors.

(Official.)

Exceptions from supreme judicial court, Cumberland county.

Action by Clarence H. Childs, receiver of the Bank of New England, a foreign corporation organized under the laws of Minnesota, against Henry B. Cleaves, to enforce defendant's personal statutory liability as a stockholder under the laws of Minnesota. From an order overruling a demurrer to plaintiff's declaration, defendant brings exceptions. Overruled.

Argued before WISWELL, C. J., and EMERY, WHITEHOUSE, SAVAGE, FOGLER, and POWERS, JJ.

E. M. Rand, for plaintiff. J. W. Symonds, D. W. Snow, C. S. Cook, and C. L. Hutchinson, for defendant.

WHITEHOUSE, J. This is an action at law, in which the defendant is summoned to answer to the plaintiff, Clarence H. Childs, of Minneapolis, "as receiver for the collection and enforcement of the liability of stockholders of the Bank of New England," a corporation organized under the laws of the state of Minnesota. The action is brought to enforce the double liability of the defendant, who was a nonresident stockholder in the corporation.

In 1893 the bank in question, upon complaint filed by the state of Minnesota, one of its creditors, was adjudged insolvent by a district court in Minnesota, and a general receiver was appointed, by whom all of the existing assets of the bank were received and distributed. The administration of the estate by this receiver was completed in July, 1897.

In the meantime, in 1895, it having become apparent that the existing assets were insufficient to discharge the entire indebtedness of the bank, an order was issued by the court, upon petition of another creditor, to have all of the resident stockholders impleaded in the original complaint upon which the adjudication of insolvency was made, for the purpose of enforcing their statutory liability to the creditors of the bank who might

thereafter intervene. Thereupon all of the resident stockholders became parties to that proceeding, an order was entered by the court limiting the time within which creditors might intervene and present their complaints, and on the 9th day of July, 1897, a final decree was entered in favor of the intervening creditors as follows, to wit:

"First. That the several sums due and owing to the several creditors who had intervened in said action by the defendant Bank of New England, which said indebtedness was therein adjudged and decreed, aggregated the sum of ninety-three thousand three hundred fifteen dollars and thirty cents.

"Second. That the total capital stock of said Bank of New England was one hundred thousand dollars, all of which was issued and outstanding at the time of the contracting of said indebtedness and the date of the assignment of said bank, as aforesaid.

"Third. The names of the several resident stockholders and the amount of stock held by each.

"Fourth. That each of said stockholders was liable upon said stock to the creditors therein ascertained for an amount equal to double the par value of stock held by him.

"Fifth. That said other intervening plaintiffs and said intervening creditors so ascertained recover from each of the several stockholder defendants within the state of Minnesota a sum equal to double the par value of the stock held by each stockholder.

"Sixth. That this plaintiff be appointed receiver therein for the purpose of collecting the judgment so rendered against each of the defendants therein, and for the further purpose of instituting all necessary actions and proceedings for the purpose of collecting from the nonresident stockholders of said corporation, to the end that any and all sums so collected by him be divided ratably among the creditors of said corporation so enumerated in said judgment, and in proportion to the amount of their respective claims.

"Seventh. That the court retain jurisdiction of said cause for the furtherance of justice and equity."

The plaintiff duly qualified as receiver, and gave his bond to the court in the sum of $50,000 for the faithful performance of his duties; and on the 15th day of August, 1898, a further order of the court was made authorizing and directing him to institute, in his own name as receiver, all auxiliary actions necessary to enforce the liability of nonresident stockholders. The corporate assets had proved sufficient to pay only the preferred claim of the state of Minnesota, so that at the time of the entry of judgment against the stockholders there was due to the intervening creditors the sum of $93,315; and at the time of the commencement of this action the receiver, in discharge of his duty under the decree, had been able to collect no more than $35,000.

This defendant was never served with pro

cess, and never in any manner entered his appearance in the proceeding in the district court of Minnesota.

1. The case comes to the law court on a general demurrer interposed by the defendant to the plaintiff's declaration, which duly set out the facts above stated. The presiding justice overruled the demurrer, and adjudged the declaration good. Two questions are thus presented to the court:

First, to what extent, if at all, is this defendant, a nonresident stockholder, bound by the decrees of the Minnesota court in which the parent suit was instituted? and, second, whether the plaintiff, in his capacity as receiver for the creditors, appointed by the Minnesota court for the purpose of enforcing the liability of stockholders, is entitled to maintain this action in a state jurisdiction other than that of his appointment, either on grounds of comity or otherwise.

Article 9, § 13, of the constitution of MinDesota, provides as follows:

"Third. The stockholders in any corporation and joint association for banking purposes, issuing bank notes, shall be individually liable in an amount equal to double the amount of stock owned by them for all the debts of said corporation or association; and such individual liability shall continue for one year after any transfer or sale by any stockholder or stockholders."

And in chapter 33, § 21, of the statutes of Minnesota, is found this provision:

"And the stockholders in each bank shall be individually liable in an amount equal to double the amount of stock owned by them for all the debts of such bank, and such individual liability shall continue for one year after any transfer or sale of stock by any stockholder or stockholders."

The only provisions found in the statutes of Minnesota for enforcing this liability are contained in Gen. St. 1894, c. 76, §§ 59055911, which are as follows:

"Sec. 5905. Whenever any creditor of a corporation seeks to charge the directors, trustees, or other superintending officers of such corporation, or the stockholders thereof, on account of any liability created by law, he may file his complaint for that purpose in any district court which possesses jurisdiction to enforce such liability.

"Sec. 5906. The court shall proceed thereon as in other cases, and, when necessary, shall cause an account to be taken of the property and debts due to and from such corporation, and shall appoint one or more receivers.

"Sec. 5907. If, on the coming in of the answer, or upon the taking of any such account, it appears that such corporation is insolvent, and that it has no property or effects to satisfy such creditors, the court may proceed, without appointing any receiver, to ascertain the respective liabilities of such directors and stockholders, and enforce the same by its judgment, as in other cases.

"Sec. 5908. Upon a final judgment in any such action to restrain a corporation, or against directors or stockholders, the court shall cause a just and fair distribution of the property of such corporation, and of the proceeds thereof, to be made among its creditors.

"Sec. 5909. In all cases in which the directors or other officers of a corporation, or the stockholders thereof, are made parties to an action in which a judgment is rendered, if the property of such corporation is insufficient to discharge its debts, the court shall proceed to compel each stockholder to pay in the amount due and remaining unpaid on the shares of stock held by him, or so much thereof as is necessary to satisfy the debts of the company.

"Sec. 5910. If the debts of the company remain unsatisfied the court shall proceed to ascertain the respective liabilities of the directors or other officers, and of the stockholders, and to adjudge the amount payable by each, and enforce the judgment, as in other cases.

or

"Sec. 5911. Whenever any action is brought against any corporation, its directors other superintending officers, or stockholders, according to the provisions of this chapter, the court, whenever it appears necessary or proper, may order notice to be published, in such a manner as it shall direct, requiring all the creditors of such corporation to exhibit their claims and become parties to the action, within a reasonable time, not less than six months from the first publication of such order, and in default thereof, to be precluded from all benefit of the judgment which shall be rendered in such action, and from any distribution which shall be made under such judgment."

It thus appears that the several orders and decrees made by the court of Minnesota in the course of its proceedings requiring an account to be taken of the corporate property and debts, and ascertainments to be made respecting the names of the several stockholders and the amount of stock held by each, were in harmony with the provisions of the constitution and laws of Minnesota above quoted. It will be observed, however, that while the court rendered personal judgment only against the Minnesota stockholders, it expressly authorized the receiver to institute all necessary actions for the purpose of collecting from the nonresident stockholders. The defendant claims that the proceedings under the Minnesota statute instituted by the creditors, and which form the basis of this action, were essentially an action against the stockholders to enforce their individual liability, and not an action against the corporation, and therefore res inter alios, and of no effect against this defendant, a nonresident stockholder, who did not become a party to the action.

This question has been the subject of frequent examination in recent years in both

the federal and state courts, and the great weight of authority in both jurisdictions is undoubtedly against the defendant's contention.

In considering the scope and purpose of a statute, regard is properly had, in the first instance, to the construction placed upon it by the courts of the state in which it was enacted, this being deemed a part of the law itself.

In Hanson v. Davison, 73 Minn. 454, 76 N. W. 254, the court say: "Equitable considerations and the statute require that an action of the character prescribed by chapter 76 be brought by and on behalf of all the creditors, and against the corporation and all of the stockholders of whom the court has jurisdiction, to determine the amount remaining due to such creditors, respectively, after the assets of the corporation have been exhausted; thereby providing a basis for determining the extent of the liability of the respective stockholders. The judgment in such original action, determining the amount of the corporate debts remaining unpaid, is binding on all of the stockholders, whether parties to the action or not, unless impeached for fraud. A judgment against the corporation is, in effect, a judgment against the stockholders in their corporate capacity. They are represented by the corporation in the action.

"In principle, there can be no difference in this respect between an action to enforce an unpaid subscription and one to enforce a stockholder's liability. The action required to be brought by chapter 76 is the original action for the sequestration and distribution of the fund to be derived from the stockholder's liability, and the decree entered therein is a final and conclusive determination of the amount (unless impeached for fraud) for which the stockholders are liable, not exceeding the maximum limit of liabilities as fixed by law. As the amount and par value of the stock issued and outstanding is a matter of record, and readily proven in any action, there is nothing to prevent the prosecution, after such decree is entered, of an ancillary action in another jurisdiction by the receiver appointed to. collect and distribute its funds arising from stockholders' liability in the original action, or by any other party or person who may be appointed by the court for that purpose, against any stockholder who was not made a party to the original action, to collect from him the amount of his liability on account of the debts of the corporation, for the benefit of all the the creditors." See, also, Holland v. Development Co., 65 Minn. 324, 68 N. W. 50, 60 Am. St. Rep. 480; Marson v. Deither, 49 Minn. 423, 52 N. W. 38; Olson v. Cook, 57 Minn. 552, 59 N. W. 635; First Nat. Bank v. Gustin Minerva Consol. Min. Co., 42 Minn. 327, 44 N. W. 198, 6 L. R. A. 676, 18 Am. St. Rep. 510.

But the principle that stockholders repre

sent the corporation, and that a judgment against the corporation is conclusive against the stockholders with respect to corporate matters, may properly be termed familiar and well settled. It is established beyond question by both state and federal authority. In Hawkins v. Glenn, 131 U. S. 329, 9 Sup. Ct. 742, 33 L. Ed. 191, the chief justice says: "Sued after such an order of court, the defendant does not deny the existence of any one of the facts upon which the order was made, but contends that there has been no call as to him, because he was not a party to the cause between creditors and corporation. We understand the rule to be otherwise, and that the stockholder is bound by a decree of a court of equity against the corporation in enforcement of a corporate duty, although not a party as an individual, but only through representation by the company. A stockholder is so far an integral part of the corporation that, in the view of the law, he is privy to the proceedings touching the body of which he is a member."

But a more recent case to this effect is Bank v. Farnum, 176 U. S. 640, 20 Sup. Ct. 506, 44 L. Ed. 619, in which it is said: "Now, as the judgment rendered in the Kansas court is in that state not only conclusive against the corporation, but also binding upon the stockholder, it must, in order to have the same force and effect in other states of the Union, be adjudged in their courts to be binding upon him, and the only defenses which he can make against it are those which he could make in the courts of Kansas. The question to be determined in this case was, not what credit and effect are given in an action against a stockholder in the courts of Rhode Island to a judgment in those courts against the corporation of which he is a stockholder, but what credit and effect are given in the courts of Kansas in a like action to a similar judgment there rendered. Thus, and thus only, can the full faith and credit prescribed by the constitution of the United States and the act of congress be secured.

"The law and usage in Kansas, prescribed by its legislature and enforced in its courts, make such a judgment not only conclusive as to the liability of the corporation, but also an adjudication binding each stockholder therein. We do not mean that it is conclusive as against any individual sued as a stockholder that he is one, or, if one, that he has not already discharged by payment to some other creditor of the corporation the full measure of his liability, or that he has not claims against the corporation, or judgments against it, which he may, in law or equity, as any debtor, whether by judgment or otherwise, set off against a claim or judgment; but in other respects it is an adjudication binding him. He is so far a part of the corporation that he is

represented by it in the action against it." See, also, Glenn v. Liggett, 135 U. S. 533, 10 Sup. Ct. 867, 34 L. Ed. 262; Telephone Co. v. Purdy, 162 U. S. 329, 16 Sup. Ct. 810, 40 L. Ed. 986; Ball v. Reese, 58 Kan. 614, 50 Pac. 875, 62 Am. St. Rep. 638.

In the recent case of Whitman v. Bank, 176 U. S. 559, 20 Sup. Ct. 477, 44 L. Ed. 587,-an action brought by an individual creditor to enforce a nonresident stockholder's liability,-the court say: "The liability which, by the constitution and statutes, is thus declared to rest upon the stockholder, though statutory in its origin, is contractual in its nature. While the statute of Kansas permitted the forming of the corporation under certain conditions, the action of these parties was purely voluntary; in other words, they entered into a contract authorized by statute. And as this

* *

liability is one which is contractual in its nature, it is also clear that an action therefor can be maintained in any court of competent jurisdiction." See, also, Bank v. Ellis, 172 Mass. 39, 51 N. E. 207, 42 L. R. A. 396, 70 Am. St. Rep. 232; Bell v. Farwell, 176 Ill. 489, 52 N. E. 346, 42 L. R. A. 804, 68 Am. St. Rep. 194; Bank v. Lawrence, 117 Mich. 669, 76 N. W. 105; Paine v. Stewart, 33 Conn. 516; Cushing v. Perot, 175 Pa. 66, 34 Atl. 447, 34 L. R. A. 737, 52 Am. St. Rep. 835; and Guerney v. Moore, 131 Mo. 650, 32 S. W. 1132, --in which the court say: "The ordinary statutory liability of a stockholder is a contractual liability. * * It does not follow that because people in this commonwealth have restricted the liability of stockholders in corporations created by virtue of our own laws to the amount of their stock they will refuse to enforce in their courts the contracts of its own citizens who voluntarily go into other states and become stockholders in corporations under their laws, which impose upon stockholders a personal liability in excess of the amount of stock taken. Such a contract is not against public policy. It contravenes no principle of good morals, and has no mischievous tendency. It is not in any sense repugnant to our ideas of honesty or justice."

But one of the most valuable of all the recent contributions to the discussion of this subject is found in Hale v. Hardon, 37 C. C. A. 240, 95 Fed. 747. This, like the case at bar, was an ancillary suit brought in the United States circuit court for the district of Massachusetts by a receiver appointed in Minnesota to enforce the liability of a nonresident stockholder to the creditors, and it was held in an elaborate opinion by Judge Aldrich that for the purpose of ascertaining the assets and liabilities of the corporation nonresident stockholders were represented by the corporation, or by its general receiver, and as to such matters they were bound by the adjudication, though not personally made parties; but as the individual liability is directly to the creditors, and not an asset of the corporation, it was considered that the non

resident stockholder was not concluded by a finding upon the ultimate question of his individual liability, nor as to the measure of such liability. In the opinion it is said: "As our conclusion is that the proceedings in Minnesota were sufficiently comprehensive as to domiciliary adjudications and ascertainments, and such as the constitution and statutes of Minnesota contemplated, and such as the statutes required, it follows that the defendant's liability results by force of the constitutional provision and the statutes in respect to which he, by implication, contracted by becoming a stockholder, and that the plaintiff is entitled to recover, provided he is entitled to maintain his action in this jurisdiction as a receiver or representative of the creditor interests in and of the parent proceedings in Minnesota."

In like manner, as it appears from the declaration in the case at bar that the decree of the court in the corporate domicile respecting the indebtedness of the corporation and the ascertainments to be made in regard to the stockholders were such as were authorized and required by the statute of Minnesota, it is clear that upon the first question presented the demurrer was properly overruled.

2. But it is insisted in behalf of the defendant that, as the plaintiff receiver is not vested with any of the rights or assets of the corporation, he is not entitled to maintain a suit against a stockholder in another jurisdiction. It is contended that his official character is not essentially different from that of an ordinary master in chancery, appointed as the hand of the court to render incidental aid in the litigation.

It has been seen that under the provisions of chapter 76 of the Minnesota statutes, above quoted, authorizing proceedings by creditors to enforce the statutory liability of officers, directors, and stockholders, "the court shall proceed thereon as in other cases, and, when necessary, shall cause an account to be taken of the property and debts due to and from such corporation, and shall appoint one or more receivers"; that, if it appears that the corporation is insolvent, the court may proceed without appointing any receiver to ascertain the liabilities of stockholders, "and enforce the same by its judgment as in other cases"; that upon final judgment the court shall cause a just and fair distribution of the proceeds of the property of the corporation to be made among its creditors; that, if the property of the corporation is insufficient to satisfy its debts, the court shall enforce the payment of anything unpaid on the shares of stock, and, if the debts still remain unsatisfied, the court shall proceed to ascertain the liabilities of the stockholders, and adjudge the amount payable by each, and enforce the judgment "as in other cases."

Here, again, we should look to the decisions of the Minnesota courts for some declaration of the true purpose and policy of

the legislature in enacting this statute. In the first place, as has already appeared, it has been held repeatedly in that state that this constitutional or statutory liability of the stockholders is a liability to the creditors. It forms no part of the assets of the corporation, and it cannot be enforced by the corporation. Hence it is obvious that the receiver originally appointed in this case to receive and distribute the existing assets of the bank, unless expressly authorized by the statute, would have no authority to enforce the individual liability of stockholders for the purpose of paying the debts of the corporation. In re People's Live Stock Ins. Co., 56 Minn. 180, 57 N. W. 468; Olson v. Cook, 57 Minn. 552, 59 N. W. 635, supra. And, inasmuch as the general scheme of liquidation devised by the Minnesota statute requires an accounting and a pro rata distribution among all the creditors, it follows that individual creditors could not maintain an action under this statute against an individual stockholder either in Minnesota or elsewhere. The practical result would be that, unless the plaintiff receiver, appointed by the court under authority of the statute for the express purpose of "instituting all necessary actions and proceedings for the purpose of collecting from the nonresident stockholders" any sums due for the benefit of all the creditors, can be permitted to maintain a suit for that purpose in extraterritorial jurisdictions upon the principle of comity or otherwise, the remedy provided by the statute would be a barren and inoperative one except as against the stockholders in Minnesota; and, while nonresident stockholders would thus have the right to share in all the profits of a successful enterprise, they could not be compelled to fulfill their promises to creditors in the case of a losing one.

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Again, it has already been seen that Hanson v. Davison, 73 Minn. 454, 76 N. W. 254, contains an express recognition of the right of such a receiver as this plaintiff to maintain an action in another jurisdiction to enforce the liability of a nonresident stockholder; and in Railway Co. v. Gebhard, 109 U. S. 537, 3 Sup. Ct. 369, 27 L. Ed. 1024, it is said: "A corporation must dwell in the place of its creation, and cannot migrate to another sovereignty. Whatever legislative control it is subjected to at home must be recognized and submitted to by those who Ideal with it elsewhere. 串 * * Such being the law, it follows that every person who deals with a corporation impliedly subjects himself to such laws of the foreign government, affecting the affairs and obligations of the corporation with which he voluntarily contracts, as the known and established policy of that government authorizes."

In volume 3 of Thompson on Corporations (section 3492), referring to the "two courses open to creditors," the author says: "The other course * * is to bring the suit on behalf of the creditors, to procure the ap