Selig v. Hamilton

Background

A Minnesota mercantile corporation became insolvent after a bankruptcy and a later state sequestration proceeding. A creditor’s receiver in Minnesota obtained a court order assessing $100 per share against the corporation’s stockholders. Arthur L. Selig had owned 50 preferred shares and transferred them on the corporate books in September 1904. The receiver sued Selig in New York in 1909 to collect the assessment, claiming some corporate debts arose while Selig still owned the shares.

Reasoning

The central question was whether Selig’s recorded transfer freed him from liability for debts incurred before that transfer, and whether the Minnesota assessment could be enforced in another court. The Court relied on Minnesota law holding that stockholders are contractually liable to creditors for debts measured by par value and that transfers do not relieve a transferor of prior liabilities. The Court held that the Minnesota court’s assessment, made under a statute allowing collection from all parties liable as stockholders, was valid and conclusive as to the necessity and amount of the assessment. Selig remained free to raise personal defenses, but he could not relitigate whether the assessment was needed or its amount in a collateral action.

Real world impact

The decision means creditors and receivers can enforce state assessments against former shareholders for debts that arose while they held stock, even if the shares were later transferred on the books. Challenges to the scope or necessity of an assessment must be pursued in the state proceeding that issued the assessment, not in collateral suits elsewhere. The Court also found the New York limitations period did not bar this timely action.