Larrabee v. Baldwin , 35 Cal. 155 ( 1868 )

Rhodes, J., concurring:

■ The solution of the questions upon which the rehearing was granted, depends, in my judgment, upon the construction of section sixteen, and not of section thirty-two.

The first clause of section sixteen declares the liability of stockholders. “ Each stockholder shall be individually and personally liable for his proportion of all the debts and liabilities of the company contracted or incurred during the time that he was a stockholder.” The remainder of the section relates to the mode of procedure in ascertaining and determining the amount of the debts for which each stockholder ’ is liable. Joint and several actions may be instituted. The stockholder may prove, and there shall be allowed to him, in reduction of the amount for which he would otherwise be liable, in a suit brought by a creditor, the amount which he may have paid upon '“any debt or liability of such corporation,” and, thereupon, judgment shall be given for a sum not exceeding his “ proportion of the debts and liabilities of such corporation,” less the amount previously paid by him. That is to say, each stockholder is liable for his proportion of all the debts and liabilities of the corporation, and for nothing beyond; and upon his payment of such proportion, his liability ceases. Suppose the debts of the corporation amount to one hundred thousand dollars, and that there are one hundred stockholders, each holding the same amount of stock. When one stockholder has paid a creditor one thousand dollars he is no longer liable to the other creditors. Under that section he is clearly authorized to exhaust his whole liability in the satisfaction of the debt of one creditor, and the other creditors must look to the corporation and the other stockholders for the payment of their demands. This construction, it is true, may enable the diligent creditor to secure the payment of his demand from the only solvent stockholder in the company, and leave the other creditors without remedy, except against the corporation, which may, perhaps, be insolvent. This result certainly would ensue should the only solvent stockholder exhaust his liability for his proportion of all the debts of the corporation in the payment, without suit, of the claims of one or more of the creditors. This results, not from construction, but from the positive terms of the Act.

Should the opposite construction be given, consequences more injurious to the creditors and more absurd in their results would ensue. The solvent stockholder in the supposed corporation pays ten dollars on any debt or liability of the corporation; and in each of the suits brought by creditors whose claims do not severally exceed one thousand dollars, he relieves himself from responsibility by proving his one payment of ten dollars. Had the stockholder paid one hundred dollars he would not be liable to any creditor whose claim did not exceed ten thousand dollars.