TYER v. COLE

TYER v. COLE
1926 OK 623
248 P. 601
118 Okla. 279
Case Number: 16736
Decided: 07/13/1926
Supreme Court of Oklahoma

TYER et al.
v.
COLE.

Syllabus

¶0 1. Corporations--Res Adjudicata -- Stockholders' Liability. A judgment against a corporation is generally recognized as res adjudicata as to the validity and amount of a creditor's claim in a subsequent action to enforce the statutory liability of the stockholders for unpaid amounts on the capital stock or for double liability thereon, and such rule would be applicable in an action under Comp. Stat. 1921, sec. 5345.
2. Same -- Default Judgment Foreclosing Statutory Lien not Res Judicata. But where an employee of an oil company has procured a judgment establishing and foreclosing a statutory lien on specific property of the company, such judgment being entered on default without notice to the stockholders of the amount of the claim or the items thereof, in a subsequent action to enforce liability of the stockholders under section 5463, Id., such stockholders are not precluded from questioning the correctness of plaintiff's claim by competent evidence tending to show that it has been paid in whole or in part, or that it exceeds the contract price.
3. Mechanics' Liens--Decree--Execution -- Deficiency--Basis of Action to Enforce Stockholders' Liability. A mechanic's lien which has been established and foreclosed against a corporation by decree, specifically naming the real and personal property against which the same shall be enforced, must be enforced, or attempt be made to enforce it, by special execution conforming to the decree of the court (Comp. Stat. 1921, sec. 692, subdiv. 3, and sec. 758) before any cause of action accrues to the holder of the lien to enforce liability of the stockholders for a deficiency under the provisions of Comp. Stat. 1921, sec. 5463, and a general execution issued under such decree is not such a process of the court within the meaning of the law as will impart verity and conclusiveness to a return of no property found, endorsed thereon, so as to preclude proof of the existence of the property and assets of the corporation impressed with the lien by the original decree.
4. Costs--Attorneys' Fees in Lien Action Taxed As Costs Not a "Debt." Where a court awards an attorneys' fee to plaintiff in a decree foreclosing a lien it is taxed as costs, and plaintiff assumes the risk of its collection by sale of the property impressed with the lien. It is not a "debt" within the definition of Comp. Stat. 1921, sec. 3535, so as to subject one to its payment who is secondarily liable for the debts of defendant.

Dolman & Dyer, for plaintiff in error.
Thos. Norman, for defendant in error.

LOGSDON, C.

¶1 Defendant presents his argument for reversal of the judgment under three propositions, as follows:"

"(1) Is the default judgment rendered against the Michorn Oil Company conclusive against this defendant as to the correctness of the amount claimed by plaintiff?

"(2) That plaintiff's original action against the oil company, being to establish and foreclose a mechanic's lien, an exhaustion of the assets of that company impressed with the lien is a prerequisite to plaintiff's right to maintain the instant action.

"(3) That there is no legal authority for including in the instant judgment the sum of $ 100 for attorney's fees allowed in the original judgment against the oil company."

¶2 In the arguments under the first proposition the brief of neither party has cited any prior decision of this court to support the contentions made by each respectively. Numerous decisions from other jurisdictions are cited and quoted from freely, but by reason of their diverse holdings, and the variance of statutory language considered in rendering them, they cannot be otherwise than inconclusive. It is unquestionably the generally accepted rule, that in actions or proceedings to enforce a stockholder's statutory liability for the general debts of the corporation, a prior judgment against the corporation is conclusive as to the validity and amount of the claim. This is upon the theory that the statutory liability of the stockholder is primary up to the par value of his stock, and that he has had due notice of the action through representation by the corporation. (Thompson on Corporations [2nd Ed.] vol. 4, sec. 4970, et seq.) This rule would be applicable here if the instant action were based on Comp. Stat. 1921, sec. 5345. Does it apply to actions based on section 5463, Id.? In comparing these two sections for the purposes of this discussion, only the first sentence of section 5345, and section 5463 down to its first proviso, are material. This is that language:

"5345. Individual Liability of Stockholders. Each stockholder of a corporation is individually and personally liable for the debts of the corporation to the extent of the amount that is unpaid upon the stock held by him.

"5463. Stockholders Liable to Laborers and Mechanics. The stockholders of any corporation formed for the purposes mentioned in this article shall be jointly and severally liable, in their individual capacities, for all debts due to mechanics, workmen and laborers employed by such corporation, which said liability may be enforced against any stockholder by an action at any time after an execution against such corporation shall be returned not satisfied."

¶3 Under the above quoted language of section 5345, the liability is absolute to the amount that is unpaid on the stock, and it is of no moment to the stockholder whether the debt is just, true, correct, and due. His ability can be neither increased nor diminished by the existence or nonexistence of either or all of these elements of the debt of any individual creditor. When he has paid the amount which he has obligated himself to pay by his subscription his liability ceases whether the debt be paid or not. No such limitation exists on, nor does any such element of contract enter into, the stockholder's liability under sec. 5463. His stock may be fully paid, yet his liability continues. The liability of the stockholders to mechanics, workmen, and laborers under section 5463 is analogous to the liability of the owner to a subcontractor under section 7463, Id. Both are the ultimate paymasters. Under section 7463 the owner must be served with a copy of the lien statement, so that he may inform himself as to its correctness, and no lien can be fixed upon the owner's property for labor or material in excess of the amount which the contractor agreed to pay the subcontractor. Steger Lumber Co. v. Haynes et al., 42 Okla. 716, 142 P. 1031. If the owner, whose property is benefited by the labor or material of a subcontractor, is required to be notified and furnished a copy of the itemized lien statement it would seem that equitable principles and the right of due process would require notice to and an opportunity for investigation and intervention by a stockholder before the amount of his liability under section 5463 could be conclusively established by a judgment against the corporation. He is not in privity with the corporation or its officers as to this extraordinary personal liability, nor can he be correctly said to be represented by them. It can work no hardship on the mechanic, workman, or laborer claiming the benefit of this statute to require him either to notify the stockholder of his action against the corporation, or to make proof of the correctness of his claim in his action against the stockholder. In the instant case the judgment against the corporation, relied on by plaintiff to conclusively show the amount of the stockholder's liability, was entered on default. In this situation the language of the court in Assets Realization Co. v. Howard (N.Y.) 105 N.E. 680, seems peculiarly apposite:

"It seems to be conceded that this theory of conclusive effect on a stockholder of a judgment against the corporation opens up to allow proof that the judgment was secured by fraud or collusion. But why confine the exceptions to this class? It is of no material consequence to the stockholder who is asked to pay an unjustified judgment whether it resulted from fraud or whether, as alleged in this case, it was negligently or ignorantly allowed to be entered by default on claims which either never existed or had been fully paid. What he desires, and as it seems to me plainly ought to have, is an opportunity to compel proof of the existence of a claim before he is compelled to pay it."

¶4 Four elements must concur to establish res adjudicata: (a) Identity of subject-matter; (b) identity of causes of action; (c) identity of parties to the action; (d) identity of quality in the persons for or against whom the claim is made. The subject matter of the first action was a lien claim; of the instant action, a statutory liability. The cause of action in the first case was for failure or refusal of the corporation to make payment; in the instant case, alleged insufficiency of corporate assets to satisfy the first judgment. The party defendant in, the first action was a corporate entity; in the instant case, an individual stockholder. The party plaintiff was it lien claimant in the first action and a statutory beneficiary in the instant action, while the party against whom the claim was made in the first action was an artificial person; in the instant action, a natural person. It is therefore concluded upon the first proposition, that the trial court erred as a matter of law in holding that the judgment in cause No. 11392 was res adjudicata of the amount for which defendant is liable under section 5463, and in excluding on motion defendant's evidence tending to impeach the correctness of plaintiff's claim. Defendant's second proposition, and the contrary contention of plaintiff thereon, raises the question of the sufficiency of the general execution issued on the first judgment to fix liability on plaintiff in the instant action. Incidental to this main question is that of defendant's right to impeach the return on this general execution, but as the conclusiveness and verity of this return rest on the sufficiency of the general execution to satisfy the requirements of the law in this character of action, a determination of the main question will dispose of its subsidiary. At the time of the adoption of section 5463, Id., in the Statutes of 1890, it had no application to the character of claim here involved because there was then no lien statute in force in favor of mechanics, workmen, and laborers employed in the oil industry. It then applied only to general claims of mechanics, workmen, and laborers not secured by a statutory lien. A general execution was the only direct process for enforcing such a judgment. In 1905 the Territorial Legislature enacted a lien statute for the protection and security of the claims of all persons employed in the oil industry. The first and second sections of that act are sections 7464 and 7465, Comp. Stat. 1921, except that the first section was amended in 1919 by adding a provision that the lien should follow the property and be enforceable against the same in the hands of any purchaser or incumbrancer having constructive notice of the lien. The third section of the 1905 act provided that the enforcement of all liens thereunder should be governed by article 27, chapter 66, Statutes of 1893. The eighth section of that article and chapter reads:

"In all cases where judgments may be rendered in favor of any person or persons to enforce a lien under the provisions of this act, the real estate or other property shall be ordered to be sold as in other cases of sales of real estate, such sale to be without prejudice to the rights of any prior incumbrancers, owner or other person not a party to the action."

¶5 The statutes then in force providing forms of execution and proceedings for sale of property thereunder were the same as those now in force in the state, except that execution against the person, as then provided, has been abolished. Section 656, Statutes of 1893, now appears as section 7481, Comp. Stat. 1921, and is a part of the lien law of this state. Executions, and the proceedings thereunder, are of three kinds: First, against the property of the judgment debtor; second, for delivery of possession of real or personal property, with damages for withholding the same; third, executions in special cases. (Comp. Stat. 1921, sec. 692.) It has been long settled in this state that special execution is the proper process for enforcing decrees of foreclosure of mortgages and other liens. In Price et ux. v. Citizens' State Bank et al., 23 Okla. 723, 102 P. 800, the second paragraph of the syllabus announces the rule in this state as follows: