Emmert v. Nicodemus

Stewart, J., delivered the opinion of the Court. The Antietam Manufacturing Company of Washington county, not having sufficient means to meet all of its liabilities, its property has been sold under a decree for their payment. The contest over the proceeds of the sale, is between the parties here, as creditors, as to their proper application between them. The capital stock of the Company, not having been paid up, and the appellant claiming as creditor, but having been a stockholder in the Company, and participating as a director in its operations, and thus liable, under the 52nd sec. of 26th Art. of the Code, to the creditors, to the amount of his stock, objection has been made by them to his equal participation in this fund. Without going into further detail of the proceedings, the chief question for our review, is whether he is entitled in this proceeding to equal distribution with the appellees, who are creditors, but not stockholders in the Company; or, in other words, ought the appellant’s claim to be [130] reduced to the amount of his stock, as an equitable set off, for the benefit of the appellees ? The provisions of the Code are clear, that the appellant is responsible as a stockholder,rinder the circumstances, to the extent of his stock, for all debts and contracts made by the Company, of which he was a stockholder, until the whole amount of the stock has been paid in. In a suit at law by the appellees or creditors against the appellant, as a stockholder, he is unquestionably liable to the amount of his stock. Matthews, et al. vs. Albert, et al., 24 Md., 527 ; Norris vs. Johnson, 34 Md., 485, and Norris vs. Wrenschall, 34 Md., 492; Booth vs. Campbell, 37 Md., 522. But fhe counsel for the appellant insists, that as this is a proceeding originating against the Company itself, in a Court of Equity, and the proceeds of sale under its decree are to be distributed by such Court amongst the creditors, the liability of the appellant ought not to be enforced, as the matter stands, but that the entire assets of the Company ought to be administered; and other stockholders, equally liable with the appellant, made parties, and compelled to contribute, so as to render justice between him and such stockholders, without resort to a distinct trial, for the settlement of their relative equities. Such interposition of the Court would give unnecessary complexity to the proceedings, and be attended with useless delay, and so far from giving to the general creditor, in a contest between him and the stockholder‘creditors, the benefit of the remedy designed by the law, against a stockholder, would, in effect, require him, for the special benefit of the stockholder creditor, to abide a settlement between other parties, liable as between themselves, it may be, to contribute to the payment of the debts of the Company. In the distribution of this fund in equity, the creditors are severally actors, and each entitled to set up any equitable defence against another. The provisions of the statute, without undertaking to prescribe any specific mode of [131] recovery, make tlie stockholders of the Company individually responsible to the creditors, and were designed for the relief of the creditors, and to afford them an ample and expeditious remedy before any forum competent to administer the law. These provisions are as applicable and obligatory in a Court of Equity as at law, in any and every case where they can be enforced, according to its rules of proceeding. Whether a Court of Equity in the exercise of its just discretion, and conformably to its form of proceeding, can afford to a creditor against a stockholder, the benefit of the law, must be determined from the circumstances of the case. Where a fund like this is in equity for distribution, and creditors appear, asserting their relative claims to a distributive portion, some occupying the relation of stockholder debtors, under the statute, to other creditors of the Company, to an amount equal to their stock, for all debts and contracts created While they were stockholders, the Court would not be carrying out the letter or spirit of the law regulating the rights of creditors and imposing responsibility upon stockholders, to postpone the distribution until measures could be matured compelling other stockholders of the Company to contribute to the payment of debts of the- Company. The appellant, as a stockholder, is only answerable for the debts or contracts of the Company created whilst he was a stockholder, and cannot be held to account for subsequent claims accruing after the assignment of his stock. It appears from the information furnished by the auditor’s report and statement of the account and the proceedings, that the claims of the creditors who are entitled to hold the appellant responsible, to the extent of his stock, are sufficient to absorb the balance of this fund for distribution. If the creditors who became such after the assignment of the appellant’s stock were excluded, so far [132] as we can discover, it would only give to the creditors who are entitled under the statute to claim the benefit of his stock debt, a larger dividend. The correction of the auditor’s account, if erroneous, in not making the distinction between the creditors of the Company prior or subsequent to the appellant’s assignment of his stock, could not benefit him. (Decided 22nd April, 1874.) If there is error in fact on that ground, the only parties prejudiced thereby have not appealed, and the appellant could not he benefitted by remanding the case for correction of the account in such particular. The order of the Circuit Court of April 4, 1812, overruling the exceptions of the appellant and ratifying the auditor’s report, No. 3, must he affirmed. Order affirmed.