Coquard v. Prendergast , 47 Mo. App. 243 ( 1891 )

Rombaueb, P. J.

This is a proceeding by motion under the statute (R. S. 1879, sec. 736), for execution against a stockholder, on the ground that there cannot be found any property or effects of the corporation whereon to levy the same. Upon the first trial of the motion the court declined to issue the execution, but upon appeal to this court its judgment was reversed, for reasons fully stated in our former opinion reported in 35 Mo. App. 237. Upon the last trial the court awarded an execution against the stockholder for the entire amount of the stock owned by him and unpaid, together with interest at the rate of six per centum per annum, from the date of the filing of the motion by the creditor. The stockholder, appealing, assigns for error that the order of the court was erroneous under the evidence, and that, even if the award of execution was warranted, it was excessive, and he was individually liable only for the amount of the stock owned by him and remaining unpaid, and in no event for interest over and above that amount.

The first assignment of error must be ruled against the defendant. His defense was, that he, himself, was a creditor of the corporation by virtue of certain scrip issued by it which he held ; but he failed to show on the last trial, as well as on the preceding one, that he had acquired such scrip prior to the time when the plaintiff’s execution against the corporation was returned nulla bona. We held upon the last appeal that such showing was indispensable to make the defense available, which ruling was binding upon the trial court, being the law of the case. The propriety of such ruling, although that question is no longer open for discussion, has been sufficiently vindicated in our former opinion.

The question of charging the defendant with interest is the only debatable question, and is' one which, both upon principle and authority, is very close. The provisions of the statute on this subject, which, in the opinion of all the members of the court, must determine this question one way or the other, are as follows : “Creditors shall be allowed to receive interest at the rate of six per cent, per annum, when no other rate is agreed upon, for all moneys after they become due and payable, on written contracts, ahd on accounts after they become due and demand of payment is made.” R. S. 1889, sec. 5972. The statute under which this proceeding is had provides: “If any execution shall have been issued against any corporation, and there cannot be found any property or effects whereon to levy the same, then such execution may be issued against any of the stockholders to the extent of the amount of the unpaid balance of such stock by him owned, provided, always, that no execution shall issue against any stockholder except upon an order of the court, in which the action, suit or other proceedings shall have been brought or instituted, made upon motion in open court, after sufficient notice in writing to the persons sought to be charged, and upon such motion such court may order execution to issue accordingly; and, provided further, that no stockholder shall be individally liable in any amount over and above the amount of stock owned.”

There is no decision in this state, which expressly or by analogy decides the question now under consideration. The one nearest by analogy is the case of Stevens v. Gwathmey, 9 Mo. 636, where it was- held that a garnishee is liable for interest upon his indebtedness, where he denies his indebtedness to the defendant and his answer is found untrue. At the time when that decision was made, the statute on the subject of interest permitted its recovery “ on moneys dire and withheld by an unreasonable and vexatious delay of payment, or settlements of accounts,” — a clause which was omitted in the revision of 1865, and has never been re-enacted since.

The decisions in other states are conflicting. In Sacketts Harbor Bank v. Blake, 3 Rich. Eq. 225; Cole v. Butler, 43 Me. 401; Crease v. Babcock, 10 Mt. 525, and Munger v. Jacobson, 99 Ill. 349, it was decided that interest was not recoverable on the unpaid stock liability of a stockholder ; while in Burr v. Wilcox, 22 N. Y. 551, and Mason v. Alexander, 44 Ohio St. 318, it was held that it was recoverable. It will be noticed, however, that the case in New York was prosecuted under a .statute which gave a direct action by the creditor against the stockholder, and that in the Ohio case, which was a-credi tor’s bill in equity against the corporation and its stockholders, the court refrains from deciding how the question of interest should be determined on principle, and bases its decision exclusively on the fact that the trial courts years before had so decided, and that such decisions had met with the implied approval of the supreme court; That case, therefore, rests solely on the rule of stare decisis, and is of very little value as persuasive authority.

In a case where the statute gives a direct action to the creditor against the stockholder, and interest runs on all contract debts from demand, there is good reason for holding that the creditor may recover interest from date of demand. .The statute, so to speak, turns the contract between the stockholder and corporation, in case of the latter’s insolvency, into a direct promise on part of the stockholder to pay his unpaid subscription to the creditor upon demand. That seems to be the. ground' upon which Judge Selden in the New York case puts his decision. But such is not the statute under which the present proceeding is had. No contractual relation between the creditor and stockholder is created by the statute. In case of a judgment obligation of the corporation, where an execution has been issued thereon, and no property of the corporation can be found whereon to levy the same, the excution, by order of the court and not otherwise, may be issued against the stockholder to the amount of his unpaid stock. The case is one in its nature similar to a call made upon the stockholders, but the call is to be made not by the creditor, but by the court wherein the judgment was rendered, and then only upon the previous ascertainment .of certain facts. As it is well settled that no interest runs upon unpaid stock prior to its call, and as the call in this case is not the stockholder’s motion, but the order of the court, it seems to be an almost unavoidable conclusion that no interest runs upon the unpaid stock obligation until such call is made.

The case of Cole v. Butler, 43 Me. 401, goes much further in holding the stockholder exempt from interest than we need go in support of that view in this case. The statute of Maine, under which the decision was had, authorized a demand to be made upon the stockholder by the officer holding the execution against the corporation, when he could find no corporate property, and such demand was not dependent on an intervening order of the court. In that respect the statute was similar to ours before the revision of 1865, which also dispensed with an order of court. The court of Maine held that the stockholder could not be charged with interest from date of demand in excess of his stock liability, although he was chargeable with costs, as the creditor was the prevailing party. This result was reached, although the statute of Maine did not expressly provide as ours does, that the stockholder should not be liable for any amount over and above the stock owned, the court evidently holding that such limitation was implied.

Another reason, entitled.to some weight at least, is that the construction placed upon the statute by trial courts heretofore was different from the one adopted by the trial court in this case, although the statute in its present form has been in force for over twenty-five years. This is the first case, as far as we are aware, where interest from date of the motion is sought to be exacted from the stockholder. Under such circumstances the reasons for holding that he is liable for such interest should be very conclusive, to warrant a construction at variance with a construction of the statute, abided in for a long period of time.

It results from the foregoing that the judgment must be reversed, and the cause remanded with directions to the trial court to award execution against the defendant for the sum of $500, the amount of his unpaid stock, such execution to bear interest from May 18,. 1891, the 'date when it was first awarded by the trial court. So ordered. Judge Biggs, concurs. Judge Thompson concurs in the result reached as to the principal, but not as to the disposition made of the question of interest.