1. Where a bank charter provides that on the failure of the
bank, "each stockholder shall be liable and held bound . . . for
any sum not exceeding twice the amount of . . . his . . . shares,"
held, 1. that a suit in equity by or for all creditors is
the appropriate mode of enforcing the liability incurred on such
failure; 2. that were an action at law maintainable by one
creditor, the stockholders must be separately sued, as their
liability is several.
2.
Pollard v.
Bailey, 20 Wall. 520, cited and approved.
By sec. 4 of the charter of the Merchants' Bank of South
Carolina, at Cheraw, it was provided that, in case of the failure
of the bank,
"each stockholder, copartnership, or body politic having a share
or shares in the said bank at the time of such failure, or who
shall have been interested therein at any time within twelve months
previous to such failure, shall be liable and held bound
individually for any sum not exceeding twice the amount of his,
her, or their share or shares."
It is alleged in the declaration that the bank failed March 1,
1865. The general assets have since been collected and applied to
the payment of debts under the provisions of an Act of the
Legislature of South Carolina, passed March 13, 1869, placing the
bank in liquidation. Debts to the amount of several hundred
thousand dollars are still unpaid. The capital stock was $400,000,
divided into shares of $100 each. Of these shares, the defendant
Benjamin F. Little owned at the time of the failure one hundred and
ten, and John P. Little one hundred and fifty-eight. On the 21st of
August, 1875, Terry, the plaintiff, commenced an action at law in
the court below, against the defendants jointly, to recover from
them, on account of their individual liability as stockholders,
$5,440, the amount due him from the bank on its bills which he
held. The defendants demurred to the declaration, and among others
assigned for cause, in substance -- 1, that the individual
liability of the stockholders as created and defined by this
charter could not be enforced in an action at law by one creditor
for his sole use to the exclusion of others, and 2, that even if it
could, the
Page 101 U. S. 217
defendants cannot be joined in one such action because their
liability is not joint but several. The circuit court sustained the
demurrer and gave judgment for the defendants. This writ of error
has been brought to reverse that judgment.
MR. CHIEF JUSTICE WAITE, after stating the case, delivered the
opinion of the Court.
The individual liability of stockholders in a corporation is
always a creature of statute. It does not exist at common law. The
first thing to be determined in all such cases is therefore what
liability has been created. There will always be difficulty in
attempting to reconcile cases of this class in which the general
question of remedy has arisen unless special attention is given to
the precise language of the statute under consideration. The remedy
must always be such as is appropriate to the liability to be
enforced. The statute which creates the liability may declare the
purposes of its creation and provide directly or indirectly a
remedy for its enforcement. If the object is to provide a fund out
of which all creditors are to be paid share and share alike, it
needs no argument to show that one creditor should not be permitted
to appropriate to himself, without regard to the rights of others,
that which is to make up the fund.
The language of the charter is peculiar. The stockholders are
not made directly liable to the creditors. They are not in terms
obliged to pay the debts, but are "liable and held bound . . . for
any sum not exceeding twice the amount of . . . their . . .
shares." This, as we think, means that on the failure of the bank
each stockholder shall pay such sum, not exceeding twice the amount
of his shares, as shall be his just proportion of any fund that may
be required to discharge the outstanding obligations. The provision
is, in legal effect, for a proportionate liability by all
stockholders. Undoubtedly, the object was to furnish additional
security to creditors, and to have the payments when made applied
to the liquidation of debts. So too it is clear that the obligation
is one that may be enforced by the creditors, but as it is to or
for all creditors, it must be
Page 101 U. S. 218
enforced by or for all. The form of the action, therefore,
should be one adapted to the protection of all. A suit at law by
one creditor to recover for himself alone is entirely inconsistent
with any idea of distribution. As the liability of the stockholder
is not to any individual creditor, but for contribution to a fund
out of which all creditors are to be paid alike, the appropriate
remedy is by suit to enforce the contribution, and not by one
creditor alone to appropriate to his own use that which belongs to
others equally with himself. We think this case comes clearly
within the rule laid down in
Pollard v.
Bailey, 20 Wall. 520, to which we adhere.
The second ground of demurrer is equally fatal. The liability of
the stockholders is several, and not joint. Each stockholder is
bound for his own share and no more. No judgment can be rendered
against him for what another should pay. It follows that in an
action at law, each stockholder must be separately sued. In equity
it is different, for there, the decree can be molded to suit the
exigencies of the case, and each stockholder can be held liable and
proceeded against for what he is bound to pay, and no more.
Undoubtedly, under the provisions of some charters, suits at law
may be maintained by one creditor against one or more of the
stockholders. The form and extent of a statutory liability of this
kind depend upon the particular phraseology of the statute which
creates the liability. All we decide is that under this charter,
the suit to enforce the liability should be in the nature of a suit
in equity, by or for all creditors, and that it cannot be at law by
one creditor for himself alone against two stockholders who are not
jointly liable on account of the shares standing in their
respective names.
Judgment affirmed.
