The creditor of a corporation organized under the general laws
of Oregon cannot, to recover his debt against it, enforce, by an
action at law, the liability of a stockholder upon an unpaid
subscription to its capital stock.
Patterson, a judgment creditor of a mining company organized
under the general laws of Oregon "in relation to the formation of
private corporations," brought this action against Lynde to enforce
his liability to the company upon an unpaid stock subscription, and
thus sought to apply Lynde's indebtedness to the payment of the
Page 106 U. S. 520
Lynde demurred, and judgment was rendered in his favor.
Patterson then brought this writ of error.
The constitutional and statutory provisions applicable to the
case are set forth in the opinion of the Court.
MR. CHIEF JUSTICE WAITE delivered the opinion of the Court.
The only question we deem it necessary to consider in this case
is whether a creditor of a corporation, formed and organized under
the general laws of Oregon "in relation to the formation of private
corporations," can maintain an action at law against a stockholder
to recover, out of an unpaid balance of subscription to the capital
stock, the debt due to him from the corporation.
Section 3 of article 11 of the Constitution of Oregon provides
"The stockholders of all corporations and joint-stock companies
shall be liable for the indebtedness of said corporation to the
amount of their stock subscribed and unpaid, and no more."
Section 14 of the statute "in relation to the formation of
private corporations" is as follows:
"All sales of stock, whether voluntary or otherwise, transfer to
the purchaser all rights of the original holder or person from whom
the same is purchased, and subject such purchaser to the payment of
any unpaid balance due or to become due on such stock. But if the
sale be voluntary, the seller is still liable to existing creditors
for the amount of such balance, unless the same be duly paid by
Since this case was decided below, the Supreme Court of Oregon
has passed on the same question, and in Bush v.
7 Or. 329, determined that the individual
liability of stockholders for the indebtedness of the corporation
is limited to the amount of their stock subscribed and unpaid, and
that the remedy of the creditor to enforce this liability is in
equity, where the rights of the corporation, the stockholder, and
all the creditors can be adjusted in one suit. Of the correctness
of this decision we have no doubt. The liability of the
Page 106 U. S. 521
is upon his subscription -- that is to say, upon his obligation
to contribute to the capital stock, which is a trust fund for the
benefit of those to whom the corporation, as a corporation, becomes
liable. Sawyer v.
17 Wall. 610. The Constitution of Oregon
created no new right in this particular; it simply provided for the
preservation of an old one. The liability under this provision is
not to the creditors, but for the indebtedness. That is no more
than the liability created by the subscription. The subscription is
part of the assets of the corporation, at least so far as creditors
are concerned. The liability of the stockholder to the creditor is
through the corporation, not direct. There is no privity of
contract between them, and the creditor has not been given, either
by the constitution or the statute, any new remedy for the
enforcement of his rights. The stockholder is liable to the extent
that the subscription represented by his stock requires him to
contribute to the corporate funds, and when sued for the money he
owes, it must be in a way to put what he pays, directly or
indirectly, into the treasury of the corporation for distribution
according to law. No one creditor can assume that he alone is
entitled to what any stockholder owes, and sue at law so as to
appropriate it exclusively to himself.