Rule 3.110.Stockholders' Liability Proceedings

MCR 3.110 supplies the procedure for an action under MCL 600.2909, in which a creditor asks a court to hold a corporation's stockholders individually responsible for a debt of the corporation. The rule assumes the underlying liability exists elsewhere and concerns itself with sequence, pleading, and proof.

Exhaust the corporation first

Subrule (B) makes the action conditional on three earlier events. A judgment must have been recovered against the corporation for the indebtedness. An execution on that judgment must have issued to the county where the corporation has its principal office or carries on its business. And that execution must have been returned unsatisfied in whole or in part. Until the corporation itself has been pursued and has come up short, the stockholders are out of reach.

Finding out who the stockholders were

Subrule (C) solves the plaintiff's information problem. Once the conditions are met, the plaintiff applies to the court that entered the judgment for an order served on the corporation's secretary or other proper officer. Within the time the order sets, that officer files a statement under oath listing the names and addresses of everyone who appears from the corporate books to have been a stockholder when the debt accrued, or whom the officer has reason to believe was one, along with the amount of stock each held.

The complaint and the trial

The action is commenced and carried on as other civil actions, but subrule (D) adds required allegations: the judgment against the corporation and its amount, the issuance and unsatisfied return of the execution and the amount still unpaid, that the defendants named are the people listed in the officer's statement, the amount of stock each defendant holds or that reasonable diligence could not establish it, the consideration the corporation received for the debt, and a request for judgment. Subrule (E) then draws a careful line at trial. The judgment against the corporation and the unpaid balance are prima facie evidence of the amount due to the plaintiff, but they are not evidence that the debt is one for which the defendants are personally liable. Subrule (F) keeps that element live even when a defendant admits the complaint or defaults by failing to answer: judgment for the unpaid balance of the corporate judgment may be entered only on proof that the debt is one for which that defendant is personally liable as a stockholder.

Dividing the liability

Subrule (G) allows the court to apportion the adjudged sum among the defendants pro rata according to the stock each holds, and if a defendant fails to pay the apportioned share within 21 days, execution may issue as in other civil actions. When an execution comes back unsatisfied, subrule (H) gives the court both the power and the duty, on the plaintiff's application, to reapportion the uncollected balance among the remaining defendants adjudged liable. Subrule (I) closes the circle among the stockholders themselves: one who has been compelled to pay more than a pro rata share may seek contribution from others who are liable for the debt and have not paid their portions.