Ball v. Anderson

Opinion by

Mr. Justice Mitchell,

The question of the right of an individual creditor of an insolvent Kansas corporation to sue an individual stockholder in this state, came before us in Cushing v. Perot, 175 Pa. 66. We there expressed the opinion that the liability of the stockholder, though imposed by statute was contractual in its nature, and should be enforced by any court having jurisdiction of the parties.

We further held that the extent and character of the obligation under the Kansas statutes must be determined by the law as interpreted by the Kansas courts. But the statute was full of unnecessary hardship and injustice to the stockholder and of dangerous opportunity of fraud by the creditor, through suits against individuals all over the country with no guard against the collection of his full debt successively from each. We therefore endeavored to mitigate the hardship and obviate the injustice of the statute as far as practicable by a construction in harmony with the general principles of equity and our own modes of proceeding. Finding that there was no express decision of the Supreme Court of Kansas to the contrary we felt free to hold that on the appointment of a receiver, the right of action against the stockholder on his individual liability passed to the receiver as an asset for the benefit of all the creditors.

In the present case however our attention has been called to a subsequent decision of the Supreme Court of Kansas upon the exact point. In Sleeper v. Norris, 59 Kan. 555, it was held that the statute gave the individual creditor an action in his own right against the individual stockholder, the court saying, “ it may be as contended, that the assignee can proceed against the stockholders, and thus obtain a fund for the settlement of the corporate indebtedness, but, however that may be, the statute in plain terms confers this right upon the creditor himself and hence the contention of the defendant that the right of action is vested exclusively in the assignee cannot be upheld.”

This closes the question for us. As we have already held the obligation of the stockholder is to be measured as to its extent and charactor by Kansas law, and whatever our opinion may previously have been we are bound to conform our administration of the law to the decisions of the Kansas courts. The learned judge below followed the case of Cushing v. Perot, supra, and for this, through no fault of his we must reverse the judgment.

It appears in the present case that since the decisions quoted, the legislature of Kansas has recognized the justice of the criticisms on the statute and has accordingly amended it to conform to the general equitable principles of collection and distribution. This however cannot affect the rights of the plaintiff in the present case. It is not a change of remedy only within the entire control of the legislature, but of substantive rights. See Dexter v. Edmands, 89 Fed. Repr. 467.

The clear weight of authority appears to be in favor of the right of the stockholder to set off the indebtedness of the corporation to him, and it is claimed by appellee that appellant has already proceeded against other stockholders in Kansas whereby he may have collected part or all of his claim. Both defenses should be held open to this defendant.

Judgment reversed and venire de novo awarded.