Opinion
05-10-1909
JOHNSON v. TENNESSEE OIL, GAS & MINERAL DEVELOPMENT CO. et al.
W. J. Knight, for complainant. Mr. Bradner, Mr. Stein, and Abner Kalisch, for defendants.
Action by Joseph B. Johnson against the Tennessee Oil, Gas & Mineral Development Company and others. From a former decision in this case (69 Atl. 788), the following statement of facts is taken: A resolution was adopted by the directors of the Tennessee Oil, Gas & Mineral Development Company assessing each director a specific amount to be placed in the company's treasury to meet current expenses and cost of further development. The stock held by the directors was nonassessable. In an action against the corporation by a judgment creditor, a decree was entered against the directors fixing the amount payable by each under the resolution in order to pay the amount of plaintiff's judgment. One of the directors did not pay the amount assessed against him, and application is made under leave reserved in the decree to fix the liability of the other directors for the amount assessed against such nonpaying director. Application granted.
W. J. Knight, for complainant.
Mr. Bradner, Mr. Stein, and Abner Kalisch, for defendants.
EMERY, V. C. The decree in this case settled the amount of the debts or obligations incurred by the company under the resolution for assessment, and, after declaring "that each defendant is individually responsible for his pro rata portion of the debt and interest," fixed the amount each defendant should pay as such proportion. The amount fixed was the pro rata portion for each defendant and was less than the amount assessed against each defendant by the resolution. Leave was reserved in the decree to apply for further directions as to the liability of any defendant for the portion of the decree unpaid by any other defendant; the question as to whether the liability of the defendants for the said debt and interest is collective, as well as individual, being expressly reserved for further hearing.
Five of the six defendants have paid their pro rata portion as fixed by the decree. The other defendant, Reitlinger, has not paid his portion. He is a nonresident, and, although he appeared and answered in the suit, he has no property in the state which can be reached for satisfaction of the decree, and the execution issued on the decree has been returned unsatisfied. Application is now made by complainant under the leave reserved for further direction or decree as to the liability of the other defendants to pay or contribute toward the satisfaction of the debt, up to the limit of their assessment under the resolution. The obligation of the defendants under the resolution is several, andnot joint, in the sense that each defendant is liable to the extent of his own assessment under the resolution, and not liable beyond this sum for the assessment made against any other defendant under the resolution; but the real question is whether, in working out by a decree the full liability of each of the defendants to the complainant under the resolution, any defendant should be liable at all for the proportion of the debt which any other defendant may, in the first instance, be directed by the decree to pay. At law each defendant liable to the company under this resolution would have been separately liable for the whole amount of his subscription, so far as necessary to pay the debts or obligations covered by the resolution, and any defendant who, by reason of such recovery in the suit at law, paid more than his proportion of the debt, would then have himself been put to an action for contribution against his co-directors or co-obligors. In an action at law for contribution, recovery against any defendant would have been limited to the proportionate share of each, independent of the question whether any of the other contributors were insolvent or without the state. In equity the contributor or co-surety would be liable to contribute to the payment of his proportionate share of any co-surety insolvent or beyond the reach of process. This is the essential difference between the legal and equitable basis of contribution in an action for contribution by one contributor or co-obligor who has overpaid; but this question of the right or limit of contribution between themselves, which arises only after full payment to the creditor by one or more of the debtors liable, does not affect or impair the right of the complainant, as creditor under the resolution, to recover from each of the defendants liable, up to the amount of his separate assessment, if necessary for the payment of his debt. By filing a bill in equity for the recovery of the debt against all of the defendants, the complainant subjects himself to the equity of submitting to such decree in the case as may be equitably made for contribution among the defendants themselves; but the enforcement or working out in the creditors' suit of the equities between the defendants themselves does not require, and should not permit, any limitation by decree, condition, or otherwise, of complainant's right against each defendant, up to the full amount of his assessment, if necessary for paying the debt. By the decree already made, the proportionate liabilities of the defendants were fixed as between the defendants liable, who appeared in the suit, and who were not claimed to be insolvent, on the basis of each paying his pro rata share; but it now appears by the return of execution unsatisfied that the complainant's right to have from the nonresident defendant his proportionof the debt or decree cannot be worked out because he has no property subject to execution within the state. Complainant's whole debt or claim, under the resolution, being therefore established by the decree, he is entitled under the leave reserved to a further decree declaring and directing that the remaining defendants, up to the amount of their several assessments fixed by the resolution, are each further liable for the payment of so much of the amount directed to be paid by Reitlinger as has not been paid by him.
It was claimed by the defendant that no such decree should be made, until the remedy against Reitlinger had been exhausted by suit upon the decree in the state of his residence; but this I think would be an unjustifiable limitation of the complainant's right to recover in this suit or at law against each defendant severally the whole amount of his assessment so far as necessary to pay his debt. The appearance, answer, and trial on the merits make the decree final against the nonresident, both as against complainant and between the parties themselves. The failure to find property within this state to satisfy the decree puts the complainant, so far as the courts of this state are concerned, in the same condition as if Reitlinger were insolvent, or not within reach of process, and, as this situation has developed in the attempt to work out the decree for complainant's rights which was based on Reitlinger's appearance and answer and the absence of any suggestion of his insolvency, the remedy is to be found in a further decree. This is the course pointed out as the one proper and equitable to be taken, where, after assessments upon stockholders to pay debts of the company, some of the stockholders assessed do not pay and have no property within the jurisdiction subject to execution. Godfrey v. Terry (1877) 97 17. S. 171, 177, 24 L. Ed. 944, Miller, J. The course directed here was a new assessment against the other stockholders to pay the share of the stockholders as to whom nulla bona was returned, and to continue until all should be paid, or the sum of the several liabilities exhausted. The expression of Vice Chancellor Pitney in See, Receiver, v. Heppenheimer, 69 N. J. Eq. 36, 63, 61 Atl. 843, that in an action of this character the stockholders who are solvent and within the reach of process of the court must bear the whole burden, if it be taken to refer only to process for appearance, must not be taken as any adjudication upon the point now raised, as the point was not involved or argued.
As the resolution in this ease expressly fixed the amount of each assessment, my present view is that complainant cannot be further required to take another decree for the proportionate assessment of Reitlinger's decree, but is entitled to a decree against allof the remaining defendants for Reitlinger's assessment; the recovery against any defendant, however, not to exceed the amount of his assessment as fixed by the resolution, less the amount already paid. The decree may contain a clause providing that if any of the defendants other than Reitlinger should pay the decree against him, or any portion of it, then they shall be subrogated as against the other defendants to the rights of the complainant against Reitlinger, and complainant must, if required, assign the benefit of the decree. Such right to enforce contribution was recognized in Masters v. Rossie, etc., Co., 2 Sandf. Ch. (N. Y.) 301 (1845), and the method of subrogation is the practice indicated in Boice v. Conover, 63 N. J. Eq. 273, 275, 53 Atl. 910 (Err. & App. 1901).
The decree will be settled on notice.