bearing on different branches of the subject, Coffin v. Rich, 71 Id. 559; Commercial Bank v. Steam Factory, 75 Id. 688. Under the present title, it is merely proposed to collect the more recent decisions of the courts having reference to the nature of such liability.

The individual liability of stockholders in a corporation for the payment of its debts does not exist at common law. It is always a creature of statute, and can be enforced only as therein provided: Pollard v. Bailey, 20 Wall. 520; Fourth Nat. Bank v. Francklyn, 120 U. S. 747; Knower v. Haines, 31 Fed. Rep. 513 (Vt.). According to the prevailing view, statutes which impose the liability are to be strictly construed: Appeal of Means, 85 Pa. St. 78; O'Reilly v. Bard, 105 Id. 569; Priest v. Essex Hat Mfg. Co., 115 Mass. 380; Salt Lake City Nat. Bank v. Hendrickson, 40 N. J. L. 52; Bassett v. St. Albans Hotel Co., 47 Vt. 313; being in derogation of the common law, they cannot be extended beyond their literal terms: Chase v. Lord, 77 N. Y. 1. But the rule of strict construction is not to be applied where the intent is manifest from the words of the law: Moyer v. Penn. Slate Co., 71 Pa. St. 293; and see Bohn v. Brown, 33 Mich. 257.

The usual statutory liability imposed upon stockholders for the corporate debts is not regarded by the courts as in the nature of a forfeiture or penalty, but as virtually and in effect a liability on a contract, and the mutual agreement of the parties: Norris v. Wrenschall, 34 Md. 492; Sullivan v. Sullivan Mfg. Co., 14 S. C. 494; Blakeman v. Benton, 9 Mo. App. 107; Queenan v. Palmer, 117 Ill. 619; Woods v. Wicks, 7 Lea, 40; Brown v. Hitchcock, 36 Ohio St. 678; Hawkins v. Furnace Co., 40 Id. 507; Flash v. Conn, 109 U. S. 371; Carrol v. Green, 92 Id. 509; the liability arises out of the implied promise of the stockholder to assume and discharge the individual liability imposed by the statute under which the corporation was created: Nimick v. Iron Works, 25 W. Va. 184; Hodgson v. Cheever, 8 Mo. App. 321; Manville v. Edgar, 8 Id. 324. And where the liability is regarded as in the nature of contract, it will be enforced in the courts of a state other than that in which it was created: Woods v. Wicks, 7 Lea, 40; Aultman's Appeal, 98 Pa. St. 505; Flash v. Conn, 109 U. S. 371; and see Chase v. Curtis, 113 Id. 452; Jessup v. Carnegie, 80 N. Y. 441; unless the statute imposing the liability also prescribes a peculiar remedy for its enforcement, which cannot be made available in another state: Christensen v. Eno, 106 N. Y. 97; Nimick v. Iron Works, 25 W. Va. 184; and see Rice v. Hosiery Co., 56 N. H. 114; Knower v. Haines, 31 Fed. Rep. 513; Patterson v. Lynde, 112 Ill. 196; S. C., 106 U. S. 519; only the remedy given by the statute creating the liability, if the statute gives a remedy, is available, whether the proceedings are taken in the state creating the corporation or elsewhere, and whether in state or federal courts: Fourth Nat. Bank v. Francklyn, 120 Id. 747. And if the liability is penal in its nature, as where it is imposed upon the corporate authorities for doing that which the statute expressly or by implication forbids, or for the omis sion to do something which the law directs to be done, it will not be enforced outside of the state creating it: Woods v. Wicks, 7 Lea, 40; Derrickson v. Smith, 27 N. J. L. 166; Moier v. Sprague, 9 R. I. 541; Sturges v. Burton, 8 Ohio St. 215; and see Chase v. Curtis, 113 U. S. 452; Gridley v. Barnes, 103 Ill. 211.

The statutory liability of stockholders is created for the exclusive benefit of the creditors of the corporation, over which the corporate authorities have no control: Wright v. McCormack, 17 Ohio St. 86; Umsted v. Buskirk, 17 Id. 113; and the liability is to be enforced by the creditors in their own right, and for their own especial benefit, by appropriate legal proceedings taken for

AM. DEC. VOL. XCIX-28

that purpose: Farnsworth v. Wood, 91 N. Y. 308; Mason v. New York Silk Mfg. Co., 27 Hun, 307; Billings v. Trask, 30 Id. 314. The liability does not exist in favor of the corporation itself. Hence a receiver of "all the estate, property, and equitable interests" of an insolvent corporation cannot enforce the liability: Jacobson v. Allen, 20 Blatchf. 525; Arenz v. Weir, 89 Ill. 25; Farnsworth v. Wood, 91 N. Y. 308.

The statutory liability imposed upon stockholders is not generally regarded by the courts as a primary resource or fund for the payment of the corporate debts. And the general rule is, that a creditor must first exhaust his remedy against the corporation before he can proceed against a stockholder upon his individual liability: See Bush v. Cartwright, 7 Or. 329; Appeal of Means, 85 Pa. St. 75; Wright v. McCormack, 17 Ohio St. 95; Jacobson v. Allen, 20 Blatchf. 525. There must be a judgment recovered against the corporation, and execution returned unsatisfied: Brown v. Eastern Slate Co., 134 Mass. 590; Wheeler v. Millar, 24 Hun, 541; S. C., 90 N. Y. 353; Handy v. Draper, 89 Id. 334; and see Viele v. Wells, 9 Abb. N. C. 277; Cleveland v. Burnham, 64 Wis. 347; though the fact that the corporation had been adjudged bankrupt was held to be a sufficient excuse for not proceeding against it, before suing a stockholder, under the New York statute: Shellington v. Howland, 53 N. Y. 371; S. C., 67 Barb. 14; and see Flash v. Conn, 109 U. S. 371. But liability under the Rhode Island statute cannot be enforced by action at law against the stockholder or his executor, without previously recovering judgment against the corporation, although the corporation is in bankruptcy: Fourth National Bank v. Francklyn, 120 Id. 747. In giving construction to the California statute, the obligations of stockholders to pay their respective proportions of the corporate debts is held to be direct and primary: Faymonville v. McCollough, 59 Cal. 285, 286, citing the principal case; Mitchell v. Beckman, 64 Id. 117; and that a creditor is not bound to exhaust the remedies against the corporation, which the law has provided for his protection, before proceeding against the stockholder: Morrow v. Superior Court, 64 Id. 383. It is held that the stockholders of a corporation are not, as regards the creditors of such corporation, sureties, but principal debtors: Sonoma Valley Bank v. Hill, 59 Cal. 107; and stockholders are not generally regarded as sureties or guarantors of the corporation: See Craig's Appeal, 92 Pa. St. 396. It is, however, held by the supreme court of Michigan that stockholders occupy, as regards creditors, the position of sureties for the corporation: Hanson v. Doukersley, 37 Mich. 184; Grand Rapid Savings Bank v. Warren, 52 Id. 557. Compare Wheeler v. Faurot, 37 Ohio St. 26.

In some of the states the statutory liability of stockholders is extended to all persons who were stockholders when the debt sought to be enforced was contracted, and also to all persons who are stockholders when the liability is sought to be enforced, although they may have become such since the debt was contracted; but is not extended to persons who had become stockholders after the debt was contracted and had ceased to be such before the debt became payable and action was brought: Curtis v. Harlow, 12 Met. 3; Johnson v. Somerville Dyeing etc. Co., 15 Gray, 216; Sales v. Bates, 6 East. Rep. 703 (R. I.); S. C., 14 Am. & Eng. Corp. Cas. 106; and compare Weber v. Fickey, 47 Md. 196; Phillips v. Therasson, 11 Hun, 141; Wheeler v. Faurot, 37 Ohio St. 26; Wheeler v. Millar, 90 N. Y. 353. To make a subscriber to stock an owner, so as to be liable for the corporate debts, it is not necessary that he should have paid for his stock, nor that a certificate therefor should have been issued. Where the corporation has agreed that a person shall be entitled to certain shares of its stock, to be paid for in a certain manner, and

he consents to take the stock, he becomes owner: Mitchell v. Beckman, 64 Cal. 117. So where stock is transferred by one acting as agent for the owner, and the assignee receives a certificate and appears as a stockholder on the books of the corporation, he is, as between himself and the creditors of the corporation, a stockholder within the purview of the statute: Wakefield v. Fargo, 90 N. Y. 213. If a certificate of stock has been issued to a party by a wrong christian name, through mistake, parol evidence is admissible to show the mistake, in an action brought to enforce his liability as a stockholder: Cleveland v. Burnham, 64 Wis. 347.

The "debts" of a corporation for which the stockholders are by statute made liable do not, in their legal sense, ordinarily include liabilities for torts not reduced to judgment: Child v. Boston etc. Iron Works, 137 Mass. 516. A liability for a tort is not a "debt under a statute which is to be construed strictly: Esmond v. Bullard, 16 Hun, 65; and see Bohn v. Brown, 33 Mich. 257; Dryden v. Kellogg, 2 Mo. App. 87; Zimmer v. Schleehauf, 115 Mass. 52. Whether a judgment recovered by a creditor against the corporation be conclusive against the stockholders when sued individually on their statutory liability is a question upon which the decisions are conflicting. In Massachusetts, the judgment is held to be conclusive against the stockholders: Thayer v. New England etc. Printing Co., 108 Mass. 523; or if not conclusive, is at least prima facie evidence of the plaintiff's claim: Hawes v. AngloSaxon Petroleum Co., 101 Id. 385; and see also Grand Rapids Savings Bank v. Warren, 52 Mich. 557; Grund v. Tucker, 5 Kan. 70. But a different view is taken in New York, and a creditor who pursues the stockholders is not permitted to rely upon the judgment against the corporation, but is compelled to make proof of the indebtedness upon which the judgment was recovered: Miller v. White, 50 N. Y. 137; McMahon v. Macy, 51 Id. 155; Hastings v. Drew, 76 Id. 9; Wheeler v. Millar, 24 Hun, 541; S. C., 90 N. Y. 353; Kraft v. Coykendall, 34 Hun, 285. The judgment against the corporation is held to be of no virtue or effect in the action against the stockholder, and is only evidence as proving the performance of the condition precedent: Kincaid v. Dwinelle, 59 N. Y. 551; and see, as favoring the New York view, Trippe v. Huncheon, 82 Ind. 307; Union Bank v. Wando Mining Co., 17 S. C. 339.

BLOOD V. MARCUSE.

[38 CALIFORNIA, 590.]

SECRETARY OF CORPORATION HAS NO POWER, BY VIRTUE OF HIS OFFICE, to make assignment of promissory notes of the company, nor unless ex. pressly authorized to do so in his official capacity.

MONEY COLLECTED UPON JUDGMENT UNDER INVALID ASSIGNMENT MAY BE RECOVERED of the assignee by a judgment creditor of the party rightfully entitled thereto.

JUDGMENT IN FAVOR OF ASSIGNEE OF NOTE UNDER INVALID ASSIGNMENT DOES NOT ESTOP the claimant of the proceeds of such judgment, under the rightful owner, unless it appears that the fact of the assignment was put in issue between debtor and assignee.

ESTOPPEL BY MATTER OF RECORD MUST BE PLEADED.

ACTION upon a promissory note. It appeared that the Whitney Quartz Mining Company, a corporation, brought an

action against the Crescent Quartz Mining Company, upon the latter's note for twelve thousand dollars, and attached all of defendant's property. Thereafter the defendants in this action, M. and M. A. Marcuse, sued the Crescent Quartz Mining Company, and attached all its property. After the bringing of the latter action, the defendants in this action (plaintiffs therein) purchased of the Whitney Quartz Mining Company the note upon which the first-mentioned action was brought, under an arrangement by which the purchasers of said note were to credit one Bollinger, who was indebted to them, with the amount thereof, and that Bollinger, to whom the Whitney Quartz Mining Company was indebted in a greater sum, should also credit the amount of said note upon said indebtedness. This arrangement was carried out, Chambers, the secretary, and a trustee, and Bollinger, another trustee, making the transfer of the note: Thereafter the plaintiff in the present action brought an action against the Whitney Quartz Mining Company, and had a writ of attachment issued therein, which was served upon the present defendants, with notice of garnishment. Judgment was afterwards rendered for plaintiff in the said action. One Holthouse and Whitlock, about the same time, recovered a judgment against the Whitney Quartz Mining Company, and transferred the same to the plaintiffs in the last-mentioned action, who had execution issued thereon, and served upon the present defendants as garnishees. The defendants answered upon both garnishments, denying any indebtedness to the Whitney Quartz Mining Company, and the plaintiff then brought this action against the defendants to recover the amount of the note transferred to them by the Whitney Quartz Mining Company. Plaintiff was nonsuited, on the ground that there was no evidence that defendants were ever indebted to the Whitney Quartz Mining Company. A motion for a new trial was overruled, and plaintiff appealed.

Van Cleif and Gear, for the appellant.

Charles E. Filkins, for the respondents.

By Court, RHODES, J. The note of the Crescent company was assigned by the secretary of the Whitney company in his official capacity. The assignment purports to be made by the Whitney company, but it was not executed by the corporation. It is not, therefore, a corporate act, unless the secretary was

not only authorized to make the assignment, but also to make it in his official capacity. The secretary is not vested with such authority by virtue of his office, and no delegated authority from the corporation is shown; and under the authority of Gashwiler v. Willis, 33 Cal. 16, and the cases therein cited, the assignment was void. No ratification by the corporation of the assignment is shown. The alleged settlement made between the corporation and Bollinger, and the giving of the credit by the latter to the corporation, was only an arrangement between Bollinger and the secretary of the company; but it does not purport to be a corporate transaction; and no corporate authority to the secretary to conclude such an arrangement appears, nor has the corporation adopted the act of the secretary in that behalf.

The money received by the defendants on the note—or rather on the judgment obtained by them on the note-was the money of the Whitney company, unless the latter was estopped by the judgment from setting up a claim to the money. An action had been commenced by the Whitney company against the Crescent company, the maker of the note, before the attempted assignment of the note to the defendants, and judgment was afterward rendered in the action against the Crescent company, and in favor of one of the present defendants, the assignee of the note, but for the benefit of both defendants. The position of the defendant as to the effect of the judgment is fully met by either of these considerations: it does not appear that the fact of the assignment of the note was in issue between the Whitney company and the alleged assignee; and if that fact was in issue, and was determined in favor of the assignee, the estoppel is not pleaded in this

cause.

For these reasons, we think the court was in error in granting a nonsuit.

Order reversed, and cause remanded for a new trial.

CROCKETT, J., did not participate in the decision.

CORPORATION 18 NOT BOUND BY UNAUTHORIZED contract of its secretary See Hall v. Crandall, 89 Am. Dec. 64, and note.