bility on the part of stockholders for a debt which has become barred as against the corporation by the statute of limitations.86 It has been held that a stockholder is not relieved from liability pro tanto on notes of the corporation held by a bank by reason of the fact that the corporation has deposits in the bank.87 § 4260. Release by corporation. Since the statutory or constitutional liability for corporate debts is imposed upon stockholders for the benefit of creditors, and not for the benefit of the corporation,88 neither the corporation nor its officers can release a stockholder from the liability without the consent of the creditors.89 So the directors of a national bank have no power to release its stockholders from their statutory liability.90 Nor can their liability "be affected, discharged, or released by any action taken by the corporation, or by the combined action or agreement of the corporation and its stockholders," 91 nor by anything done or omitted to be done by the bank or its officers after the bank has failed and a receiver has been appointed.92. 86 See 84173, supra. 87 Thomas v. Matthiessen, 232 U. S. 221, 58 L. Ed. 577, rev'g judgment 192 Fed. 495. 88 See §4210, supra. 89 Northwestern Trust Co. v. Brad- St. Rep. 620, 9 S. W. 225. Cover to a liabilities to creditors and for stock, and providing that any payment on a note so given should amount discharge pro tanto of the payor's statutory liability, was held to be enforceable by the bank's receiver on its subsequent insolvency. It was held that the fact that the creditors of the bank were not parties to the agreement did not render it invalid on the ground of a failure of the consideration that payment should discharge statutory liability, since payments made under it would constitute a trust fund to be so administered that the statutory liability of those making such payments would be discharged pro tanto, and the creditors could not participate in such fund except by releasing, pro tanto, their rights against the stockholders under the statute. Such a provision does not, as against the corporation, invalidate an agreement whereby the corporation issues stock as full paid and nonassessable. Lum v. American Wheel & Vehicle Co., 165 Cal. 657, Ann. Cas. 1915 A 816, 133 Pac. 303. 90 American Nat. Bank of Macon v. Commercial Nat. Bank of Macon, 246 Fed. 721. 91 Scott v. Latimer, 89 Fed. 843, aff'd 181 U. S. 202, 45 L. Ed. 822. 92 They cannot release a stockholder from liability after that time. The effect in this regard of payments to the corporation will be considered in a subsequent section.93 Payments by stockholders. § 4261. When stockholders are made severally liable to creditors of the corporation to the extent or amount of the stock owned by them respectively, so that any creditor may proceed against any stockholder to collect his debt to the extent of the stockholder's liability, a stockholder is discharged from any further liability when he pays a valid judgment recovered against him by a creditor for the full amount of his liability, or to the extent of the payment, when the judgment is for less than the amount of his liability.94 And a voluntary payment to a creditor has the same effect, if the creditor might have maintained an action or issued an execution and compelled the payment.95 And the same is true under Lantry v. Wallace, 182 U. S. 536, 45 L. Ed. 1218, aff 'g 97 Fed. 865, 89 Fed. 1023 (mem. dec.), followed in Hood v. Wallace, 182 U. S. 555, 45 L. Ed. 1227, aff'g 97 Fed. 983 (mem. dec.), 89 Fed. 11. 93 See § 4261, infra. 94 Thebus v. Smiley, 110 Ill. 316; Buchanan v. Meisser, 105 Ill. 638; Manville v. Rower, 11 Mo. App. 317; Mathez v. Neidig, 72 N. Y. 100; Garrison v. Howe, 17 N. Y. 458; Woodruff & Beach Iron Works v. Chittenden, 4 Bosw. (N. Y.) 406. 95 Florida. Hood v. French, 37 Fla. 117, 19 So. 165. Illinois. Buchanan v. Meisser, 105 Ill. 638; Schrader v. Heinzelman, 51 Ill. App. 31, aff'd 150 Ill. 227, 37 N. E. 235. Missouri. Washington Sav. Bank v. Butchers' & Drovers' Bank, 130 Mo. 155, 31 S. W. 761. New York. Mathez v. Neidig, 72 N. Y. 100; Garrison v. Howe, 17 N. Y. 458; Young v. Brice, 19 Abb. N. Cas. 79, note; Richards v. Brice, 15 Daly 144, 16 N. Y. Civ. Proc. 398. He may interpose such payment as an equitable defense when sued at law in another state, where the statutes of the forum permit the pleading of equitable defenses in actions at law. Sargent v. Stetson, 181 Mass. 371, 63 N. E. 929; Broadway Nat. Bank v. Baker, 176 Mass. 294, 57 N. E. 603. In Maine, under a former statute, it was held that the liability of a stockholder for corporate debts depended upon the making of a return by the officer holding an execution against the corporation that he could find no corporate property, and that payments made before the existence of such an execution and return were merely voluntary and did not relieve a stockholder from liability. This rule was changed by Act June 2, 1851, c. 210, but it was held that its provisions were prospective merely. Grose v. Hilt, 36 Me. 22. See also Ingalls v. Cole, 47 Me. 530. Kansas. Munson v. Warren, 63 Kan. 162, 65 Pac. 222; Sedgwick City Bank v. Sedgwick Milling & Elevator Co., 59 Kan. 654, 54 Pac. 681; Kendall v. Underhill, 8 Kan. App. 521, 56 Pac. 544; Campbell v. Reese, 8 Kan. App. 518, 56 Pac. 543; Musgrave v. Glen Elder Ass'n, 5 Kan. App. 393, 49 Pac. 338; Brown v. Trail, 89 Fed. 641; Sargent v. Stetson, 181 Mass. 371, 63 N. E. 929; Broadway Nat. Bank v. Baker, 176 Mass. 294, 57 N. E. 603 (under the Kansas statute). a statute making stockholders severally liable to each creditor in an action at law, or on an execution in proportion to the amount of his stock.96 A stockholder, however, cannot discharge himself from liability by paying, to the full extent of his liability, a debt due from the corporation to a firm of which he is a member, for the firm could not maintain an action against him.97 Nor can a stockholder discharge himself from liability to a creditor who has acquired a priority as against him by commencement of an action to enforce his liability,98 by voluntarily paying another creditor to the extent of his liability,99 or even by paying a judgment recovered by another creditor in an action commenced after the commencement of the first action. The rule is otherwise, however, where the creditor first suing acquires no lien, and no indefeasible priority of right. And it has also been held that a stockholder is discharged by payment to another creditor after a petition has been filed and summons issued in an action against him but before the summons has been served, even though he has actual notice of the commencement of the suit.3 A stockholder who in good faith purchases for full value a claim against the corporation and has received no reimbursement, is thereby 56 Pac. 543. Payment of debts in real estate is a good defense pro tanto. Kendall v. Underhill, 8 Kan. App. 521, 56 Pac. 544. 96 Eva v. Andersen, 166 Cal. 420, 137 Pac. 16; Larrabee v. Baldwin, 35 Cal. 155; In re South Mountain Consol. Min. Co., 5 Fed. 403 (under the California statute); Boyd & Son v. Hall, 56 Ga. 563; Branch v. Baker, 53 Ga. 502; Jones v. Wiltberger, 42 Ga. 575; Belcher v. Wilcox, 40 Ga. 391; Lane v. Harris, 16 Ga. 217. Where the purchaser of stock agrees to hold the seller harmless from any or liabilities of the company for debts which he may be obligated or liable as a stockholder, the seller may pay the claim of a creditor of the corporation for which he is liable as a stockholder without suit and recover the amount so paid from the purchaser. Eva v. Andersen, 166 Cal. 420, 137 Pac. 16. 97 Buchanan v. Meisser, 105 Ill. 638. Compare, however, Hall v. Klinck, 25 S. C. 348, 60 Am. Rep. 505. 98 See § 4247, supra. 99 Jones v. Wiltberger, 42 Ga. 575; Thebus v. Smiley, 110 Ill. 316; Cole v. Butler, 43 Me. 401. 1 Cole v. Butler, 43 Me. 401. 2 State Sav. Ass'n v. Kellogg, 63 Mo. 540; Manville v. Roever, 11 Mo. App. 317. 3 Munson v. Warren, 63 Kan. 162, 65 Pac. 222. In Campbell v. Reese, 8 Kan. App. 518, 56 Pac. 543, the stockholder was held to have been discharged where he had no actual notice of the filing of the suit. relieved from liability. But according to the weight of authority, a stockholder cannot discharge his liability by buying up claims against the corporation at a discount, for the purpose of setting them off at their face value against his liability.5 On the other hand, it has been held that a stockholder who has purchased the claims of creditors at a discount and had the same assigned to him may bring them in at their face value and share ratably with the claims of the other creditors in the enforcement of the statutory liability. It has been held that a stockholder cannot escape liability to a creditor who has commenced an action against him by inducing a friend to buy up claims against the corporation at a discount, and then confessing judgment in his favor, and satisfying the same. But there is authority to the effect that he is relieved from liability under such circumstances where there is no conspiracy or collusion between the stockholder and the judgment creditor to defeat a recovery in the pending action.8 Where the liability exists in favor of the creditors collectively, and 4 Sargent v. Stetson, 181 Mass. 371, 63 N. E. 929; Broadway Nat. Bank v. Baker, 176 Mass. 294, 57 N. E. 603 (under the Kansas statute). So a stockholder who purchases in good faith and for full value a note and mortgage guaranteed by the corporation, and which exceeds in amount his liability, and has received nothing in reimbursement, is thereby relieved from liability. He may plead the fact of the purchase as an equitable defense to an action against him in another state, where the statutes of the forum permit equitable defenses to be interposed in actions at law. It is immaterial that the note and mortgage are not transferred to his name. Sargent v. Stetson, 181 Mass. 371, 63 N. E. 929. In American Freehold Mortg. Co. v. Brower (Miss.), 32 So. 906, a stockholder was permitted to set off a judgment which he had obtained by assignment, where the evidence was insufficient to show bad faith, and he had paid the full amount of his liability for it. 5 United States. Manville v. Karst, 16 Fed. 644, 5 McCrary 142; Id., 16 Illinois. Holland v. Heyman, 60 Thompson v. Meisser, 108 Ill. 359; Kunkelman v. Rentchler, 15 Ill. App. 271; Gauch v. Harrison, 12 Ill. App. 457. Kansas. Abbey v. Long, 44 Kan. 688, 24 Pac. 1111. See also Brown v. Trail, 89 Fed. 641. Minnesota. See Balch v. Wilson, 25 Minn. 299. Missouri. Lingle v. National Ins. Co., 45 Mo. 109. New York. Bulkley v. Whitcomb, 121 N. Y. 107, 24 N. E. 13, 49 Hun 290, 1 N. Y. Supp. 748; Briggs v Cornwell, 9 Daly 436. Tennessee. See Smith v. Mosby, 9 Heisk. 501. 6 Covington Stone & Sand Co. v. Rosedale Elec. Light Jockey Club, 25 Ky. L. Rep. 963, 76 S. W. 506. 7 Manville v. Karst, 16 Fed. 644, 5 McCrary 142; Id., 16 Fed. 173. 8 Manville v. Roever, 11 Mo. App. 317. 9 can be enforced only in proceedings instituted for that purpose in behalf of all of them, a stockholder cannot discharge his further responsibility by the voluntary payment of the full quota of his liability to a particular creditor or set of creditors.10 Since the liability is to the creditors, it cannot be satisfied by payment to the corporation.11 So under a statute making stockholders liable for corporate debts in proportion to the amount of their stock, payment of money by certain stockholders to the president of the corporation, to discharge their proportionate liability for the entire indebtedness, and application of the same to the payment of corporate debts to the extent of the proportionate liability of such stockholders, does not relieve other stockholders from liability for their proportions of the indebtedness.12 Nor is a stockholder who has paid to the company for his stock an amount in excess of its par value entitled to have his liability reduced to the extent of such excess payment.13 And while a stockholder who has paid for his stock twice has a claim against the corporation for the excess, he is not thereby relieved from his statutory liability to creditors. 14 Even though the liability is directly to the creditors so that it could not be enforced by a receiver,15 it has been held that a stockholder nay set off an indebtedness due him as a result of payments made by him to the receiver, where the money so paid was distributed by the receiver to the creditors under an order of court.16 Payments made by a stockholder of a national bank, pursuant to an assessment levied for the purpose of restoring impaired capital to enable the bank to continue in business, cannot be applied either at law or in equity to extinguish or reduce his liability under an assessment made by the comptroller of the currency on the subsequent 9 See § 4218, 4228, supra. Trust Co. v. Bradbury, 117 Minn. 83, 11 Golden v. Cervenka, 278 Ill. 409, 116 N. E. 273. 12 Knowles v. Sandercock, 107 Cal. 629, 40 Pac. 1047. 13 Richards V. Schwab, 101 N. Y. Misc. 128, 167 N. Y. Supp. 535. The amount of a premium paid to the corporation for the stock cannot be set off against the statutory lia bility. Robertson v. Conway, 188 Fed. 579. 14 Golden v. Cervenka, 278 Ill. 409, 116 N. E. 273. 15 See § 4214, supra. 16 It was so held where payment of a note by the corporation just prior to its insolvency was held to be an illegal preference, and a stockholder who had indorsed it was required to repay to the receiver the amount of such preference. Strauss v. Denny, 95 Md. 690, 53 Atl. 571. |