Bauman v. Kiskadden

Newman, J.,

dissenting. I do not concur in the judgment in this case, as I am of the opinion that Section 8687, General Code, imposes a liability on stockholders for unpaid stock in favor of creditors, and that under the requirement of Section 8688 an action upon such liability must be brought within eighteen months after the debt or obligation becomes enforcible. In the majority opinion several cases are cited in support of the judgment. It is *141to be remembered, however, that the limitation section (8688), formerly Section 3258a, Revised Statutes, was not enacted until 1902. In 1903, Section 3, Article XIII of the Constitution, was amended, doing away with the double liability of stockholders. Section 8687, formerly a part of Section 3258a, Revised Statutes, was not enacted until after this amendment to the constitution. We are advised of no case in which either Section 8687 or Section 8688 has been considered or passed upon by this court. These sections had not been enacted when the cases cited in the majority opinion were decided, and I do not think those cases are helpful in arriving at the meaning of the sections under consideration here.

Section 8686 imposes a double liability upon stockholders. It is said that the section following (8687) is merely a qualification or limitation upon the preceding section. It - is true that this section (8687) releases stockholders in corporations created subsequently to November 23, 1903, from a double liability, and further provides that Section 8688 shall not apply' to debts or liabilities of a corporation incurred after such date. But if its sole purpose was to place a qualification or limitation upon the liability imposed by Section 8687, that purpose would have been answered in the use of the language contained in the first sentence: “The next preceding section shall not apply to the stockholders in a corporation created after the twenty-third of November, 1903, nor to debts or liabilities of a corporation incurred after such date.” This provision, enacted in pursuance of the amended *142constitutional provision, would have been sufficient, but the general assembly went further and provided: “As to all debts and liabilities of corporations for profit incurred after such date, the stockholders thereof shall be under no liabilities other than those stated in Article XIII, Section three, of the Constitution of Ohio.” In the use of this language the general assembly certainly had reference to some form of liability. We are referred to the amended constitutional provision, which reads: “Dues from private corporations shall be secured by such means as may be prescribed by law, but in no case shall any stockholder be individually liable otherwise than for the unpaid stock owned by him or her.” Section 8687, in plain and unambiguous language, says that a stockholder shall be under no liability other than the liability mentioned in the constitutional provision. The latter says that a stockholder shall not be individually liable otherwise than for the unpaid stock owned by him or her. What can this mean except that the stockholder is liable for unpaid stock? It is said that this language in Section 8687, to which we have just referred, is merely a recognition of an existing obligation on the part.of the stockholder to pay his stock subscription. If this were its only purpose it would seem to me to be a most unusual enactment on the part of the general assembly. If, as is said, the obligation of the stockholder rests upon the contract between him and the corporation, irrespective of the constitution and the statute, it was a waste of words to use such language.

Again, the general assembly, when in Section *1438688 it used the language, “An action upon the liability of stockholders under the two next preceding sections,” recognized a liability under both Section 8686 and Section 8687. Section 8686, as we have seen, relates solely to the double liability. Section 8687 does not again impose the double liability, but on the contrary relieves certain stockholders from that liability. So that the only liability under Section 8687, which is referred to in Section 8688, is liability for unpaid stock.

It is said that it cannot be well insisted that it was intended to give a corporate creditor a less limitation of time to enforce payment of stock subscription than the corporation itself has. It is true that in certain cases, when Section 8688 is applied, a corporate creditor would have less time within which to enforce payment of stock subscription than the corporation itself would have, yet it is equally true that in no instance, under my view of the matter, would a creditor be deprived of his right to enforce a liability for unpaid stock. Regardless of the contract existing between the stockholder and the corporation, the creditor would have eighteen months from the legal insolvency of the corporation in which to proceed. In the present case, of course, it is advantageous to the trustee, representing the creditors, to have the fifteen-year statute applied, in view of the fact that he did not proceed within eighteen months from the time the claim of the creditors became enforcible. But in many instances the right of creditors to recover unpaid stock will be wholly defeated under the holding in this case. Corporations may be prosperous *144and solvent for years after their incorporation and creditors of course would have no right to interfere. After the expiration of fifteen years, in the case of a written contract of subscription, or six years where the contract is implied, a creditor would be without a remedy, for his claim would be barred if his right were based upon the contract. If, under any theory, a creditor could have fifteen years, or six years, from the time his claim became en-forcible, it would prolong the time for the winding up of corporations beyond all reasonable needs. It is conceded that in 1902 the general assembly shortened the time from six years to eighteen months within which the double liability could be enforced. This was done to compel creditors to act promptly. In keeping with this policy the general assembly, having imposed this liability for unpaid stock in the enactment of Section 8687, requires an action therefor to be commenced within eighteen months from .the time the claims of creditors become enforcible. Eighteen months were deemed sufficient time within which to enforce the double liability, and I do not see how it could work any hardship to place the same limitation upon an action for unpaid stock. I think the general assembly, in the enactment of Section 8687, was safeguarding the rights of creditors of a corporation and was imposing upon the stockholder a liability for unpaid stock regardless of any contract or agreement that might exist between the stockholder and the corporation, and in the enforcement of this liability the creditor was limited to eighteen months.

Donahue, J., concurs in dissenting opinion.