Stockholder Corporation Relationship.

The protections of the Full Faith and Credit Clause extend beyond transitory actions. Some legal relationships are so complex, the Court holds, that the law under which they were formed ought always to govern them as long as they persist.121 One such relationship is that of a stockholder and his corporation. Hence, if a question arises as to the liability of the stockholders of a corporation, the courts of the forum state are required by the Full Faith and Credit Clause to determine the question in accordance with the constitution, laws and judicial decisions of the corporation’s home states.122 Illustrative applications of the latter rule are to be found in the following cases. A New Jersey statute forbidding an action at law to enforce a stockholder’s liability arising under the laws of another state and providing that such liability may be enforced only in equity, and that in such a case the corporation, its legal representatives, all its creditors, and stockholders, should be necessary parties, was held not to preclude an action at law in New Jersey by the New York superintendent of banks against 557 New Jersey stockholders in an insolvent New York bank to recover assessments made under the laws of New York.123 Also, in a suit to enforce double liability, brought in Rhode Island against a stockholder in a Kansas trust company, the courts of Rhode Island were held to be obligated to extend recognition to the statutes and court decisions of Kansas whereunder it is established that a Kansas judgment recovered by a creditor against the trust company is not only conclusive as to the liability of the corporation but also an adjudication binding each stockholder therein. The only defenses available to the stockholder are those which he could make in a suit in Kansas.124

Footnotes

121
Modern Woodmen v. Mixer, 267 U.S. 544 (1925). [Back to text]
122
Converse v. Hamilton, 224 U.S. 243 (1912); Selig v. Hamilton, 234 U.S. 652 (1914); Marin v. Augedahl, 247 U.S. 142 (1918). [Back to text]
123
Broderick v. Rosner, 294 U.S. 629 (1935). See also Thormann v. Frame, 176 U.S. 350, 356 (1900); Reynolds v. Stockton, 140 U.S. 254, 264 (1891). [Back to text]
124
Hancock Nat’l Bank v. Farnum, 176 U.S. 640 (1900). [Back to text]