234 U.S.

Statement of the Case.

A foreign stockholder of a Minnesota corporation is not concluded by an order of the state court in sequestration proceedings under the statute, and in which he was served only by publication without the State, as to any matter relating to his being a stockholder or as to other personal defense.

When his ownership of the stock ceases, a stockholder in a Minnesota corporation ceases to be liable for debts of the corporation thereafter incurred, although liable for debts previously incurred.

Under the state statute, the Minnesota court, in a proceeding to assess stockholders for liability, may assess persons who previously were stockholders for liability for debts incurred during the period they owned the stock.

While a stockholder not personally served may urge his personal defenses in a suit to recover the assessment made in sequestration proceedings of an insolvent Minnesota corporation, he may not reopen the amount of the assessment or the question of the necessity therefor.

What the Minnesota court determines as to the nature of the as

sessment and its application to present and former stockholders must be ascertained from the order itself.

Whether a former stockholder is ratably or otherwise liable with present stockholders is not a question which goes to the jurisdiction of the Minnesota court making the order, but a question to be submitted for correction, if any, to the court making the order and not to another court in a collateral attack.

In a proper judicial proceeding to determine the amount of indebtedness of an insolvent corporation and the dates of origin of such indebtedness, the individual stockholders are sufficiently represented by the presence of the corporation itself; and the decree establishing such indebtedness is admissible as evidence thereof in a suit against a stockholder.

Bernheimer v. Converse, 206 U. S. 516, followed to the effect that § 394, New York Code of Civil Procedure, does not apply where the corporation is not a moneyed one or a banking association and that the six year period does apply under § 382 to the claim of a receiver of a foreign business corporation for personal liability of a stockholder assessed under the state statute.

THE facts, which involve the validity of a judgment of the District Court of the United States for the Southern District of New York enforcing the liability of a stock

Argument for Plaintiff in Error.

234 U. 8,

holder of an insolvent Minnesota corporation, are stated in the opinion.

Mr. Abram I. Elkus, with whom Mr. Wesley S. Sawyer was on the brief, for plaintiff in error:

The order of assessment does not purport to decide defendant's liability, but only the amount of probable debts and assets and the extent to which it was necessary on the basis of all debts to resort to the liability of stockholders.

The decree allowing the claims filed did not adjudge when they accrued. Stockholders are not bound by this decree.

The sole determination is that an assessment on a basis of all debts of such a percentage on the capital stock will not more than pay the corporate debts. No other question was considered by the court in making the order of assessment.

Defendant is liable only ratably on an assessment based on debts which existed on September 5, 1904, and are unrenewed, and based on all stockholders liable to contribute toward such debts. No such assessment has been made.

The Minnesota court did not have jurisdiction to render a decree with the effect, as construed by the trial court, of adjudging the liability of defendant.

The order of assessment cannot be conclusive upon points other than those properly before the court and necessarily decided.

The action is barred by the statute of limitations contained in § 394 of the New York Code.

In support of these contentions, see Alsop v. Conway, 188 Fed. Rep. 568; Balkam v. Woodstock Co., 154 U. S. 177; Bernheimer v. Converse, 206 U. S. 514; Bauserman v. Blunt, 147 U. S. 647; Clark v. Wells, 203 U. S. 163; Commercial Bank v. Azotine Mfg. Co., 66 Minnesota, 413;

Commonwealth Ins. Co. v. Hayden, 60 Nebraska, 636; Converse v. Hamilton, 224 U. S. 242; Covell v. Fowler, 144 Fed. Rep. 535; Fairfield v. Gallatin, 100 U. S. 47; French v. Busch, 189 Fed. Rep. 480; Gt. West. Tel. Co. v. Purdy, 162 U. S. 329; Green v. Neal, 6 Pet. 291; Hamilton v. Loeb, 186 Fed. Rep. 7; Harper v. Carroll, 66 Minnesota, 486; Harpold v. Stobart, 46 Oh. St. 397; Howarth v. Lombard, 175 Massachusetts, 570; Manhattan Ins. Co. v. Albro, 127 Fed. Rep. 281; McDonald v. Dewey, 202 U. S. 510; Moores v. Nat. Bank, 104 U. S. 625; Morgan v. Hedstrom, 164 N. Y. 224; Mutual Fire Ins. Co. v. Phænix Co., 108 Michigan, 170; Old Wayne Life Assn. v. McDonough, 204 U. S. 7; San Diego Co. v. Souther, 90 Fed. Rep. 164; Schrader v. Mfr's Nat. Bank, 133 U. S. 67; Shepard v. Fulton, 171 N. Y. 184; Staten Island Co. v. Hinchcliffe, 170 N. Y. 473; Stokes v. Foote, 172 N. Y. 327; Straw Mfg. Co. v. Kilbourne, 80 Minnesota, 125; Swing v. Humbird, 94 Minnesota, 1; Tiffany v. Giesen, 96 Minnesota, 488; Ward v. Joslin, 186 U. S. 140; Willius v. Mann, 91 Minnesota, 494; Constitution of Minn., Art. 10, § 3; act of June 30, 1876, c. 176, § 1, as amended in 1892 and 1897; Rev. Stat., §§ 5151, 5152, 5234; Laws of Minn., 1894, c. 76; Laws of Minn., 1899, c. 272; Laws of Minn., 1899, c. 34, § 2599; Laws of Minn., 1905, c. 58; N. Y. Code Civ. Pro., § 394.

Mr. James E. Trask, with whom Mr. E. H. Morphy and Mr. John J. Clark, were on the brief, for defendant in

error.

MR. JUSTICE HUGHES delivered the opinion of the court.

This action was brought in the District Court of the United States, for the Southern District of New York, to enforce the liability of a stockholder of an insolvent Minnesota corporation.

Opinion of the Court.

234 U. S.

In 1902, the Evans, Munzer, Pickering Company, was incorporated under the laws of Minnesota for the purpose of transacting a mercantile business. In 1904, its name was changed to the Evans, Johnson, Sloane Company. Its capital stock consisted of 1,500 shares of common and 1,000 shares of preferred stock of the par value of $100 each. The plaintiff in error, Arthur L. Selig, became the owner of 50 shares of preferred stock in 1902 and held the same until September 5, 1904, when they were transferred on the books of the Company to Max Mayer. On September 25, 1905, a petition in bankruptcy was filed against the Company in the United States District Court for the District of Minnesota; adjudication followed on October 13, 1905, and trustees in bankruptcy were appointed.

On May 28, 1906, a creditor of the Company, on behalf of itself and all other creditors, brought a sequestration suit in the District Court of Ramsey County, Minnesota, for the purpose of enforcing the liability of the stockholders of the Company. In that suit, on June 25, 1906, Charles E. Hamilton (the defendant in error here) was appointed receiver. Further order was made on June 28, 1906, requiring creditors to exhibit their claims, and become parties to the suit, within six months from the date of the first publication of the order. On July 6, 1906, in the same suit, the receiver filed a petition for an assessment upon the stockholders. The court set a date for hearing and directed notice to be given by publication and mailing. Thereupon, on September 4, 1906, the court entered its order assessing the sum of $100 against each share of the capital stock and against those liable as stockholders on account of such shares; the latter were directed to pay to the receiver the amount of the assessment within thirty days, and the receiver was authorized in default of payment to institute an action against any one liable as a stockholder, in any court having jurisdiction, whether in the State of Minnesota or elsewhere. On April 23, 1907,

the court entered a decree-in the sequestration suitallowing the claims against the Company as set forth in an annexed schedule, which showed the nature of each claim, its amount and when it arose. A further decree allowing an additional claim was entered on February 13, 1908. It appeared from these decrees, and the schedules to which they referred, that of the claims thus allowed, upwards of $11,000 wholly arose prior to September, 1904, and in addition over $20,000 in part arose prior to that date.

Pursuant to the order of September 4, 1906, the present action was brought in December, 1909, to recover from Selig the amount assessed on 50 shares. The complaint set forth the proceedings in the sequestration suit, the statutes under which they were instituted and the order of assessment. It was also alleged that Selig, on or about September 5, 1904, had transferred his stock, when the Company was in an unsound financial condition, for the purpose of concealing his ownership, but that he remained the owner of the entire beneficial interest in the shares in question and that the transfer was fraudulent as against the creditors; and also that, under the law of Minnesota, a stockholder in a corporation could not avoid his liability for prior debts by a bona fide sale of his shares to a solvent person and a recorded transfer. In his answer, Selig admitted the transfer of the shares at the time mentioned, alleged that it was duly made and entered on the corporate books, and denied the other allegations pertinent to his liability.

Upon the trial the record of the proceedings in the sequestration suit, including the order of assessment and the decrees allowing the claims of creditors, were received in evidence. The entry in the stock-book showing the record of the issuance of 50 shares to Selig and its transfer, together with the original certificate as canceled, was introduced. Aside from what was contended to be the effect of the proceedings in the sequestration suit, there VOL. CCXXXIV-42