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People's Bank v. National Bank/Opinion of the Court

This case was submitted to the court without the intervention of a jury. The court found the facts and gave judgment for the defendant. The plaintiff thereupon sued out this writ of error and brought the case here for review. The act of Congress regulating the procedure adopted seems to have been carefully complied with.

The People's Bank of Belleville, plaintiff, and the Manufacturers' National Bank of Chicago, defendant, in the court below, are respectively the plaintiff and the defendant in error here. For convenience, we shall speak of them in this opinion by their former designations.

The facts lie within a narrow compass, and there is no controversy about any of them.

On the 8th of August, 1873, Henry E. Picket made his ten promissory notes of that date, each for $5,000, all payable one year from date to his own order, indorsed by him, and bearing interest at the rate of ten per cent, payable semi-annually. Eight of these notes are described in the plaintiff's declaration. Picket delivered the notes to the defendant to be negotiated to the plaintiff, pursuant to a prior agreement between him and the defendant, that the latter should so negotiate the notes and apply the proceeds to the cancellation of other indebtedness then due from him to the defendant. On the 8th of August, 1873, M. D. Buchanan, vice-president, and one of the directors of the defendant, with the knowledge and consent of the president and cashier of the defendant, who were also directors, but without any authority from the board of directors as a board, or of a majority of them individually, or any notification to the board of directors as a board, transmitted the notes to the plaintiff with a letter, in which occurs the following language: 'In accordance with your telegram I herewith hand you ten notes of $5,000 each, &c. . . . We debit your account $50,000. . . . This bank hereby guarantees the payment of the principal sum and interest of said notes.' This letter was written below one of defendant's letter-heads, and signed 'M. D. Buchanan, vice-president.' The notes were also indorsed, 'Pay to the order of the People's Bank of Belleville. Henry E. Picket;' and below, 'This bank hereby guarantees the payment of this note, principal and interest, at maturity. M. D. Buchanan, Vice-President Manufacturers' National Bank of Chicago.' The defendant was the plaintiff's correspondent at Chicago, and the plaintiff's account with the defendant was debited with $50,000 on account of the notes. At the same time, Picket's paper in the defendant's hands was cancelled to the same amount. All the notes were protested at maturity for non-payment, and due notice was given to the defendant. Nothing has been paid on either of the notes. Besides a special count in the declaration upon the guaranty of each of the eight notes involved in this suit, there was a common count for money had and received.

The case was submitted in this court without an oral argument. The opinion of the learned judge who decided the case in the Circuit Court is not in the record, and no brief has been submitted on behalf of the defendant. A few remarks will suffice to give our view of the law touching the rights of the parties.

The National Banking Act (Rev. Stat. 999, sect. 5136) gives to every bank created under it the right 'to exercise by its board of directors, or duly authorized agents, all such incidental powers as shall be necessary to carry on the business of banking, by discounting and negotiating promissory notes, drafts, bills of exchange, and other evidences of debt, by receiving deposits,' &c. Nothing in the act explains or qualifies the terms italicised. To hand over with an indorsement and guaranty is one of the commonest modes of transferring the securities named. Undoubtedly a bank might indorse, 'waiving demand and notice,' and would be bound accordingly. A guaranty is a less onerous and stringent contract that that created by such an indorsement. We see no reason to doubt that, under the circumstances of this case, it was competent for the defendant to give the guaranty here in question. It is to be presumed the vice-president had rightfully the power he assumed to exercise, and the defendant is estopped to deny it. Where one of two innocent parties must suffer by the wrongful act of a third, he who gave the power to do the wrong must bear the burden of the consequences.

The doctrine of ultra vires has no application in cases like this. Merchants' Bank v. State Bank, 10 Wall. 604.

All the parties engaged in the transaction and the privies were agents of the defendant. If there were any defect of authority on their part, the retention and enjoyment of the proceeds of the transaction by their principal constituted an acquiescence as effectual as would have been the most formal authorization in advance, or the most formal ratification afterwards. These facts conclude the defendant from resisting the demand of the plaintiff. Wharton, Agency, sect. 89; Bigelow, Estoppel, 423; Railroad Company Howard, 7 Wall. 392; Kelsey v. The National Bank of Crawford County, 69 Pa. St. 426; Steamboat Company v. McCutchen & Collins, 13 id. 13.

A different result would be a reproach to our jurisprudence.

Whether, if the guaranty were void, the fund received by the defendant as its consideration moving from the plaintiff could be recovered back in this action upon the common count, is a point which we do not find it necessary to consider. See United States v. State Bank, 96 U.S. 33.

The judgment of the Circuit Court will be reversed, and the case will be remanded with directions to enter a judgment in favor of the plaintiff in error; and it is

So ordered.


text: Talk:People's Bank v. National Bank/Opinion of the Court

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text:
Ayers v. Chicago

APPEAL from the Circuit Court of the United States for the Northern District of Illinois.

The facts are stated in the opinion of the court.

Mr. Melville W. Fuller for the appellant.

Mr. W. C. Goudy, contra.

MR. CHIEF JUSTICE WAITE delivered the opinion of the court.

title: Ayers v. Chicago


text: Talk:Ayers v. Chicago

title: Talk:Ayers v. Chicago


text:
Ayers v. Chicago/Opinion of the Court

On the 27th of December, 1873, David A. Gage and Eliza M., his wife, citizens of Illinois, conveyed to George Taylor, also a citizen of Illinois, a large quantity of real estate in Cook County, Illinois, in trust to secure the city of Chicago, an Illinois municipal corporation, against loss by reason of the indebtedness of Gage as treasurer of the city. The trustee was authorized to take possession of and manage the property, collect the income, pay taxes, &c., and, under the direction and with the concurrence of the comptroller of the city, sell and convey the property as soon as it could be done to the interest of all concerned, paying the proceeds into the treasury of the city in liquidation, pro tanto, of whatever sum shall be found due from Gage, as late treasurer, to the city. If, when the debt was paid, any of the property remained unsold, it was to be reconveyed to Gage. Should the debt not be paid in eight months, the comptroller was authorized to order a peremptory sale, on such terms as to him seemed best. The amount of the debt to the city was not stated in this deed of trust.

On the 20th of October, 1874, the city of Chicago filed a bill in equity in the Superior Court of Cook County against Gage and his wife and Taylor to enforce this trust. In the bill it was alleged that the debt of Gage to the city amounted to something more than $500,000; that more than eight months had elapsed since the execution and delivery of the deed of trust; and that the comptroller of the city had directed Taylor, the trustee, to make a peremptory sale of the property, or so much thereof as was necessary, for cash, but that he had refused to do so. The prayer of the bill was that the amount due from Gage to the city might be determined, and that Taylor might be directed to sell the property to pay the debt.

On the 17th of November, 1874, Gage and his wife answered, admitting the execution of the trust-deed, but denying 'that there was any indebtedness due from said David A. Gage to the said city, which it was his duty to pay over to his successor,' and denying 'that said Gage neglected, failed, or refused so to do.' To this answer a replication was filed December 22, and, December 30, Taylor answered, admitting all the allegations of the bill except as to the amount due the city, and declaring his willingness to proceed with the execution of the trust as soon as the amount of the debt was ascertained. April 2, Gage moved the court for a continuance of the cause on his affidavit showing the absence of a material witness, by whom he expected to prove his defence against the account as made out by the city.

On the 5th of April, 1875, while this motion for a continuance remained undisposed of, William T. Ayers, a citizen of Alabama, executor of the will of Charles P. Gage, also at his death a citizen of Alabama, obtained a judgment in the Circuit cuit Court of the United States for the Northern District of Illinois against David A. Gage for $3,065.92, and on the 8th of the same month filed a petition in the State court setting forth that he, as a judgment creditor of David A. Gage, claimed a lien on the property included in the trust-deed, and asking that he might be made a party defendant to the suit pending in that court, with leave to answer. The prayer of this petition was granted, and at once Ayers filed an answer setting up his judgment and averring that the trust-deed was void for want of consideration, and further, that even if found to be valid, there was but a small amount of the debt it was intended to secure still unpaid, and that there was enough of the trust property to pay his judgment after the claim of the city was satisfied. On the same day he filed a cross-bill, which was in the nature of a creditor's bill, to subject the trust property to pay his judgment. In this bill he alleged that there was nothing due from Gage to the city, and set forth with much particularity the defences which Gage had against the claim made by the city. As soon as these pleadings were filed he presented his petition, accompanied by a sufficient bond, for the removal of the suit to the Circuit Court of the United States for the Northern District of Illinois, alleging for cause that he was a citizen of the State of Alabama, and all the other parties were citizens of Illinois; 'that in the said original bill there is a controversy which is wholly between the said complainants and your petitioner, and which can be fully determined as between them;' and that, as to the cross-bill, 'the controversy therein is wholly between citizens of different States.' The State court ordered the cause transferred, and on the 1st of May Ayers filed a transcript of the record in the Circuit Court, and had the suit docketed there. Afterwards the parties appeared, and on motion of the city the cause was remanded to the State court. From that order Ayers appealed to this court. After the appeal was docketed the city moved to dismiss because the order remanding the cause was not one from which an appeal is allowed, and because the order was not on the merits of the cause, nor a final order, judgment, or decree from which an appeal lies. This motion was submitted with the case on its merits.

There is no doubt of our jurisdiction. Sect. 5 of the act of 1875 (18 Stat., part 3, 472) is as follows:--

'That if, in any suit commenced in a circuit court, or removed from a State court to a circuit court of the United States, it shall appear to the satisfaction of said circuit court, at any time after such suit has been brought or removed thereto, that such suit does not really and substantially involve a dispute or controversy properly within the jurisdiction of said circuit court, or that the parties to said suit have been improperly or collusively made or joined, either as plaintiffs or defendants, for the purpose of creating a case, cognizable or removable under this act; the said circuit court shall proceed no further therein, but shall dismiss the suit or remand it to the court from which it was removed, as justice may require, and shall make such order as to costs as shall be just; but the order of said circuit court dismissing or remanding said cause to the State court shall be reviewable by the Supreme Court on writ of error or appeal, as the case may be.'

The order appealed from in this case comes directly within the last clause of this section. It follows that the motion to dismiss must be overruled.

The original bill and cross-bill constitute one suit. Ayres v. Carver, 17 How. 591; Ex parte Railroad Company, 95 U.S. 221. A cross-bill, too, must grow out of the original suit. It cannot bring in new and distinct matters. It is 'a proceeding to procure a complete determination of a matter already in litigation.' 2 Dan. Ch. Pr. 1549, and note 2.

Ayers was permitted to make himself a party because he claimed to have acquired a lien on the trust property pending the suit. He was allowed to take part in a controversy then existing between Gage and the city. He has no dispute with Gage; neither has he any separately with the city. The most that can be said is that he and Gage have a controversy with the city as to its lien on the property, and that Gage, who is on the same side of that controversy with him, is a citizen of the same State with the city. Such being the case, the suit was not removable under the rule settled in Removal Cases, 100 U.S. 457.

The order of the Circuit Court remanding the cause will be affirmed; and it is

So ordered.

title: Ayers v. Chicago/Opinion of the Court


text: Talk:Ayers v. Chicago/Opinion of the Court


text:
Page:Folk-lore - A Quarterly Review. Volume 2, 1891.djvu/360

304 of the year. Cormac says nothing, it will be noticed, as to one of the cattle or the sheep being sacrificed for the sake of prosperity to the rest. However, Scotch May-day customs point to a sacrifice having been once usual, and that possibly of human beings, and not of sheep, as in the Isle of Man. I have elsewhere tried to equate these Celtic Mayday practices with the Thargelia of the Athenians of antiquity. The Thargelia were characterised by peculiar rites, and among other things then done, two adult persons were lead about, as it were scapegoats, and at the end they were sacrified and burnt, so that their ashes might be dispersed. Here we seem to be on the track of a very ancient Aryan practice, although the Celtic date does not quite coincide with the Greek one.

It is probably in some ancient May-day custom that we are to look for the key to a remarkable place-name occurring several times in the island: I allude to that of Cronk yn Irree Laa, which literally means the Hill of the Rise of the Day. This is the name of one of the mountains in the south of the island, but it is also borne by one of the knolls near the eastern end of the range of low hills ending abruptly on the coast between Ramsey and Bride Parish, and quite a small knoll bears the name near the church of Jurby. I have heard of a fourth instance, however


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Steam-Engine Company v. Hubbard

ERROR to the Circuit Court of the United States for the District of Connecticut.

This is an action by the Providence Steam-Engine Company, a creditor of the Odorless Rubber Company, a joint-stock corporation organized under the laws of Connecticuit, to recover from Charles Hubbard, president of the latter company, the amount due by it to the plaintiff.

The remaining facts, and the statute of Connecticut under which the action is brought, are set forth in the opinion of the court.

Mr. Charles E. Perkins for the plaintiff in error.

Mr. A. P. Hyde, contra.

MR. JUSTICE CLIFFORD delivered the opinion of the court.

title: Steam-Engine Company v. Hubbard


text: Talk:Steam-Engine Company v. Hubbard

title: Talk:Steam-Engine Company v. Hubbard


text:
Steam-Engine Company v. Hubbard/Opinion of the Court

Statutory regulations were enacted by the State to enable the business public to ascertain the pecuniary standing of joint-stock corporations, and for that purpose it was made the duty of the president and secretary of every such corporation annually to make a certificate showing the condition of the affairs of the corporation, as nearly as the same can be ascertained, on the first day of January or of July next preceding the time of making such certificate, stating the amount of paid capital, the cash value of its credits, the amount of its debts, and the name and number of shares of each stockholder, which certificate it is required shall be deposited, on or before the 15th of February or of August, with the town clerk of the town, who shall record the same at full length. Conn. Rev. Stat., sect. 404, p. 172.

Such an officer, whether president or secretary, if he intentionally neglects or refuses to comply with that requirement and perform the duty therein specified, is declared to be liable to an action founded on the statute for all debts of such corporation contracted during the period of such neglect or refusal. Id., p. 174, sect. 413.

Sufficient appears to show that the Odorless Rubber Company was a joint-stock corporation legally organized in 1870, at Middletown, under the laws of the State. About the time of its organization, to wit, on the 9th of September of that year, C. C. Post was elected president, and it appears that he was twice re-elected at the annual meetings of the stockholders, each held in April of the two succeeding years, and that he continued to hold the office until the 17th of June following his last election, when he resigned. During all the period he was in office there was a secretary.

Neither the president nor the secretary during that period deposited with the town clerk any certificate required to be so filed by the law of the State, except as follows: On the 20th of June, 1871, the president and secretary did deposit such a certificate, showing the condition and assets of the company on the first day of April of that year.

Prior to the 10th of June of the next year the defendant was not even a stockholder of the company, but it appears that he on that day signed the subscription paper exhibited in the record for two hundred shares of new stock of the company, and that eight day later he paid $1,800 towards his subscription. His promise to pay was conditional, that is, he was to pay $6.25 per share whenever cash subscriptions to the amount of $118,000 should be obtained, and the balance in equal monthly instalments of ten per cent each from the date of the subscription,. . . it being understood that none of said subscriptions shall be valid or obligatory until at least said amount of $118,000 shall have been subscribed and thirty per cent deduction is made in the old stock. Subscriptions to the required amount were obtained, but no evidence was offered to show that the thirty per cent deduction in the old stock was ever made.

Evidence to show that the defendant was ever elected a director is entirely wanting, but it is shown that on the day the old president resigned, the board of directors elected him president of the corporation in the place made vacant by the resignation of his predecessor, and that thereafter he acted as president and stockholder, and that he continued to act as such until the 2d of September in that year, when he resigned said office.

Beyond all doubt, he was during that period the acting president of the corporation, and the bill of exceptions shows that he never made any statement of the condition and assets of the company until the day he resigned his office. Attempt is made by the plaintiffs to show that he was culpably guilty of neglect in that regard; but the bill of exceptions also shows that on that day he, with the secretary, made out in due form and deposited a certificate of the condition and assets of the company as they existed on the first day of July, two weeks subsequent to the day of his election as president of the corporation.

More than three months before the defendant was elected president, the plaintiffs entered into a written agreement with the rubber company, by which they contracted to furnish the company a steam-engine for $5,700, and it appears that they constructed the engine and shipped and delivered it to the purchasers; that the manufacturers subsequently placed it in position and put it in good running order, to the satisfaction of the buyers. Due delivery of the same having been made, the buyers made a cash payment and gave a note for a part of the price, which was never paid, leaving more than $5,000 unpaid when the rubber company was adjudged bankrupt. Payment being refused, the plaintiffs brought this suit against the defendant as president of the rubber company, claiming that the debt was contracted during the period that he was guilty of neglect in not making and depositing the before-described certificate, and that in consequence of such neglect he is liable for all the debts of such corporation contracted during that period.

Service was made, and the defendant appeared and denied the truth of all the matters alleged in the declaration. Subsequently the parties went to trial, and the verdict and judgment were in favor of the defendant. Exceptions were filed by the plaintiffs, and they sued out a writ of error and removed the cause into this court.

When the plaintiffs rested their case, the defendant requested the court to instruct the jury to return a verdict in his favor and the bill of exceptions shows that the Circuit Court, being of the opinion that there were no disputed questions of fact, gave the instruction as requested, and that the verdict was in conformity with the instruction. Opposed to that, the plaintiffs insist that the facts proved entitled them to the verdict, and they assign for error the instruction given by the Circuit Court to the jury.

Three principal defences are set up by the defendant, as follows: 1. That he was never legally elected president of the corporation. 2. That the debt was not contracted while he was acting in the capacity of president of the company. 3. That by the proper construction of the State statute he is not liable for the debt due to the plaintiffs, even if the first two points cannot be sustained.

Preliminary to those inquiries, the defendant contends that the statute upon which the action is brought is penal and should be strictly construed; in which proposition the court unhesitatingly concurs. Statutes somewhat similar in character have been passed in several of the States, in all of which States it is held that the statutes are penal, and that for that reason their provisions must receive a strict construction. Take, for example, the statute of New York, which provides that, on failure of the company within twenty days from the 1st of January to make, publish, and file an annual report, all the trustees of the company shall be jointly and severally liable for all the debts of the company then existing, and for all that shall be contracted before such report shall be made, it has repeatedly been held that the act was penal, and that it could not be extended by construction to cases not fairly within its language. Hence it was decided that the trustees could not be held liable on account of the failure to publish and file the annual report, unless the debt was contracted during the default, or unless it existed at the time of a subsequent default. Garrison v. Howe, 17 N. Y. 458; Boughton v. Otis, 21 id. 261.

Repeated instances have occurred where suit was brought in one State to enforce the statute liability for the debts of a corporation created by the legislature of another State, in all which it is held that the statute is penal, and that it can only be enforced in the State where the statute was passed. Halsey v. McLean, 12 Allen (Mass.), 438; Derrickson v. Smith, 3 Dutch. (N. J.) 166; Sturges v. Burton, 8 Ohio St. 215; Bank v. Price, 33 Md. 487; Irwin v. McKeon, 23 Cal. 472.

Corresponding decisions have been made in other courts, and to such an extent as to justify the remark that the rule is universal. Bird v. Hayden, 1 Robt. (N. Y.) 383; Moier v. Sprague, 9 R. I. 541.

Suppose that is so, then it is contended by the defendant that the act cannot be enforced against him unless it appears that he was legally elected president, and that he was under legal obligation to perform the duties of that office.

Persons acting publicly as officers of a corporation are ordinarily presumed to be rightfully in office. Bank of the United States v. Dandridge, 12 Wheat. 64; Angell & Ames, Corp. (9th ed.), sect. 139. Individuals elected and serving as such officers may incur the statute liability for the corporate debts of the company, even though irregularities occurred in their election, if in all other respects the evidence brings them within the category of legal default. Newcomb v. Reed, 12 Allen (Mass.) 362; Hagner v. Brown, 36 N. H. 545, 563.

Stockholders elect the directors, and it is claimed by the defendant that he was not legally elected president, because he was not a stockholder, the condition of his subscription having never been fulfilled; but he paid the first instalment, and the evidence reported shows that he acted as a stockholder from the time of his election as president until his resignation. His subscription to the new stock was made before he was elected president, and the bill of exceptions shows that on the following day he paid the required amount of his subscription.

Power to elect the president is vested in the directors; and the record shows that he was formally elected to the office, and that he acted in that capacity for a month and a half, when he resigned. Beyond controversy, he was the acting president, and in view of the circumstances the court is not inclined to rest the decision of the case upon the ground that the defendant was not, during the period he performed the duties devolved upon the president of the company, legally responsible for the neglect to comply with the requirement of that statute. He acted as president during that period, and, therefore, is liable, if any liability exists, notwithstanding the informality of his election. Thayer v. New England Lithographic Co., 108 Mass. 521.

Three months before he was elected president the company contracted with the plaintiffs for a steam-engine, but it was not shipped for delivery to the purchasers until four days after he was elected president and commenced to perform the duties of his office.

Certificates of the kind are required to be deposited with the town clerk on or before the 15th of February or of August, and the provision is that the persons neglecting or refusing to comply with such requirements 'shall jointly and severally be liable to an action founded on the statute for all debts of such corporation contracted during the period of such neglect or refusal.' Intentional neglect and refusal create the liability, and the liability extends to the debts contracted by the company during the period of such neglect and refusal, and to no others, which of itself is sufficient to disprove the theory of the plaintiffs that the defendant can in any view be held liable for the default of his predecessor.

Officers of the kind are responsible for the consequences of their own neglect or refusal to comply with the statute requirement while they remain in office, and they continue to be liable for those consequences even after they go out of office; but they are not responsible for the consequences of subsequent defaults committed by their successors, nor are the successors in such offices in any way responsible for the consequences of such defaults committed by their predecessors in office, for the plain reason that the language of the statute is that the persons so neglecting or refusing. . . shall be liable in an action founded on the statute for all debts of the corporation contracted during the period of such neglect or refusal. Boughton v. Otis, 21 N. Y. 261.

Much aid in construing the statute in question is not required, as the language employed by the legislature speaks its own construction; but if more be needed, it will be found in another decision of the same tribunal as that just cited. Quarry v. Bliss, 27 id. 277.

Statutes of the kind are passed for the benefit of creditors, and their reliance always is upon the officers who are such when they give the credit, and not upon persons who had ceased to be officers, or who might subsequently become such when those in office should go out.

Three things must concur in order that it can be held that the defendant is liable: 1. That he was president of the corporation. 2. That he intentionally neglected or refused to deposit the described certificate, as required by the statute. 3. That the debt was contracted during the period of such neglect or refusal.

Where all these things concur, the president is liable, not for all the debts of the corporation, but for all such as were contracted while he was guilty of such default. If he was not the president at the time of the default, or if the debt was contracted before he was in default, then he is not liable, as the case is not brought within the letter or spirit of the statute. Liability in such a case, as imposed, is in its nature penal, and in order to render such an officer responsible it must appear that he has neglected or refused to do some act which the law made it his duty to perform. Craw v. Easterly, 4 Lans. (N. Y.) 513, 521, Bond v. Clark, 6 Allen (Mass.), 361-363; Harrisburg Bank v. Commonwealth, 26 Pa. St. 451.

Marked differences exist between the provisions of the New York statute and those of the State of Connecticut, the latter being much less stringent than the former. By the New York law the duty of making the annual return is required of the corporation itself, and the penalty for neglect is imposed upon the trustees who are intrusted with the management of its affairs. Consequently it is a corporate duty, and being such each succeeding board is bound to perform it if it has been neglected by their predecessors. Unlike that, the duty to deposit the certificate under the Connecticut statute is devolved on the president and secretary in terms which show that a new president does not inherit the consequences of neglect of duty or pecuniary liability from his predecessor in office. He is made liable for his own neglect and not for that of a prior officer, as clearly appears from the closing sentence of the penal section. In New York the trustees, upon default, are made liable for all the outstanding debts of the corporation, whenever contracted, but in Connecticut the president and secretary are liable only for debts contracted during the period of such neglect or refusal.

Prior to his election the president, as such, had no duty to perform in respect to such a certificate, which is a self-evident proposition, and it is equally clear that his duty in that regard ceased when he ceased to be president of the corporation. Certificates of the kind are required to be made and deposited with the town clerk on or before the 15th of February or of August, as explicitly provided by the statute. On the 15th of February of that year his predecessor was in office, and of course the defendant was under no obligation to deposit any such certificate on that day, nor was he in any manner in default because his predecessor did not perform that duty. Argument to show that he could not make and deposit such a certificate before he was elected is unnecessary, as such a proposition would be absurd, from which it follows that he was not under any legal obligation to perform such a service until the 15th of August of the same year, it appearing that his election as president took place less than two months prior to that time.

Concede that it became his duty as president to make and deposit such a certificate with the town clerk on the 15th of August next after his election, still it by no means follows that the present action can be maintained, as it clearly appears that he was not in default before that time. Proof of default in the defendant without more will not maintain the action, as it is also incumbent upon the plaintiffs to prove that the debt alleged was contracted during the period of such neglect or refusal. Apply that test to the case exhibited in the record, and it is clear that the defendant is not liable and that the decision of the court below is correct.

When the agreement for the steam-engine was made, the defendant was not president of the corporation, and of course he was not in default at that time, nor was he in default when the engine was delivered and placed in position, because that took place, in any view of the evidence, one month before the 15th of August, when the default of the defendant commenced. Prior to that time the defendant was never in default, and inasmuch as the debt of the plaintiffs was not contracted during the period of his default, he was not liable for that debt. Garrison v. Howe, 17 N. Y. 458, 462.

Judgment affirmed.


text: Talk:Steam-Engine Company v. Hubbard/Opinion of the Court


text:
Pompton v. Cooper Union

ERROR to the Circuit Court of the United States for the District of New Jersey.

The facts are stated in the opinion of the court.

Mr. Frederick T. Frelinghuysen and Mr. Thomas N. McCarter for the plaintiffs in error.

Mr. Barker Gummere, contra.

MR. JUSTICE SWAYNE delivered the opinion of the court.

title: Pompton v. Cooper Union


text: Talk:Pompton v. Cooper Union

title: Talk:Pompton v. Cooper Union


text:
Pompton v. Cooper Union/Opinion of the Court

This is a controversy touching the validity of certain municipal bonds issued by the inhabitants of the township of Pompton, in the county of Passaic, N. J., which came into the hands of The Cooper Union for the Advancement of Science and Art. The latter brought suit on them, and recovered judgment. The case was then removed here. There is no conflict as to the facts. The questions to be considered all involve the effect of the facts as matter of law upon the rights of the parties.

The Montclair Railway Company was incorporated by an act of the legislature of New Jersey, approved March 18, 1867. The sixth section authorized the company to construct a railway from the village of Montclair, in the township of Bloomfield, to the Hudson River, at one or the other of certain designated points, and also to attach a branch to the main stem in the township named, and 'to extend the said railway into the townships of Caldwell and Wayne.'

Sect. 1 of an act approved April 9, 1868, provided that on the application in writing of twelve freeholders, residents of any township, town, or city 'along the routes of the Montclair Railway Company or at the termini thereof,' except the town ship of Bloomfield, it should be the duty of the circuit judge of the county, within ten days after receiving the application, to appoint three freeholders, residents of such township, town, or city, to be commissioners to carry into effect the provisions of the act. They were to hold their offices five years and until their successors were appointed. The third and fourth sections of the act are also necessary to be considered. Their provisions may be thus summarized and sufficiently presented for the purposes of this opinion. The commissioners were authorized to borrow money, not exceeding in amount twenty per cent of the valuation of the real estate in such township, town, or city, according to the assessment rolls, at a rate of interest not exceeding seven per cent per annum, to be paid half-yearly, and to execute under their hands and seals bonds therefor, in such sums and payable at such times and places as they might deem proper; but no bonds were to be issued or debt contracted until the written consent of those owning at least two-thirds of the real estate of the township, town, or city on the assessment roll, according to the valuation on such roll, should have been obtained. The consent was to state the amount of money to be borrowed, and that the fund was to be invested in the bonds of the railway company. The signatures of those consenting were to be proved by the oath of one or more of the commissioners. The valuation of the property owned and represented was to be proved by the affidavit of the assessor. The consent and affidavit were to be filed in the office of the clerk of the proper locality. The commissioners were authorized to sell the bonds as they might think proper, but not for less than par. The proceeds were to be invested in the bonds of the railway company issued for the purpose of building and equipping the road, and not otherwise. The commissioners were to subscribe for the purchase of bonds to the amount they were authorized to borrow. By the first section of the supplementary act of March 16, 1869, the railway company was authorized to extend the road from any point upon it to any point in the township of West Milford. By the fourth section it was provided that the operation of the last-named prior act should not be extended to any township, town, or city through or to which the road was not authorized to be extended before the passage of this act. On the 6th of July, 1868, the proper previous steps having been taken, the judge appointed the commissioners for Pompton Township. On the 4th of May, 1870, the commissioners issued bonds to the amount of $100,000, all of which subsequently came into the hands of the defendant in error. When the bonds were disposed of by the commissioners, no route of the road west of Montclair had been surveyed, but it was distinctly proved on the trial that the southeast line of Pompton was then the contemplated and intended soughwestern terminus. On the 6th of April, 1870, a survey was filed which commenced at that village and extended to a point between Mead's basin and the Pequannock River, in the southern part of Wayne Township. On the following 9th of June another survey was filed, which began at the terminus last mentioned, crossed the line between Wayne and Pequannock Townships; then proceeded to the line between Pequannock and Pompton (the latter being a parallelogram), and after traversing Pompton diagonally about two-thirds of its length, crossed its west line into West Milford, and thence proceeded in that township to the boundary line between New Jersey any New York. This line was finally adopted, and the road was built accordingly. Thus, though Pompton did not get a terminus on its southeast line, as originally contemplated, it got for the same consideration the length of the road within its territory and the extension beyond its limits. The change was obviously beneficial to the township. No ground is disclosed for the slightest imputation of bad faith against any one, touching either the road or the sale of the bonds. It does not appear that the township authorities made the slightest complaint. Doubtless all believed that what was done was best for all concerned.

According to the record the defendant in error is clearly a bona fide holder of the bonds. Full value was paid for them, and they were taken underdue without knowledge or notice of any infirmity, if there were any, belonging to them. The learned judge who tried the case below so instructed the jury, and properly withdrew the subject from their consideration.

It is objected to the validity of the bonds,--

1. That they could not be competently issued until the route of the road had been surveyed and the termini thus fixed.

2. That no terminus at Pompton was ever so fixed or designated as to be effectual.

3. That, when the route of the road was changed and fixed pursuant to the act amending the charter of the company, the necessary consideration for the bonds became in a vital part impossible or failed, and that the bonds were thereupon void.

These several points may well be grouped and considered together.

The act under which the bonds were issued must be regarded in the light of the circumstances. At the outset, it is material to note that the power of the commissioners was hedged about by checks, limitations, and safeguards, with the most careful elaboration. Yet it is nowhere said or intimated when or under what circumstances the bonds should be sold. In these respects there was no restriction. The discretion of those who were empowered and directed to make the sale was left unfettered. The bonds were to be issued to aid the company to complete the road. Such is the language of the act. Without such help the road might not be begun, or, if begun, might not be finished. After the work was done, assistance would not be needed. Fraud and abandonment of the enterprise were possible as well after the survey was definitely made as before. Such results touching a work in the hands of persons of known good character were not to be anticipated and could hardly occur. The commissioners being constituted the sole judges as to the points mentioned with reference to parting with the bonds, their decision was conclusive. There could be no appeal and no review. It was a matter with which a bona fide purchaser had nothing to do. The phrases 'along the route' 'or at the termini' have a meaning as plain and clear as that of any other terms the law-makers could have employed. It was expressly declared that the road might go 'into' the township of Wayne,-which meant to any part of it,-and it was intended that it should stop at the line between Wayne and Pompton. There the two territories came in contact. The boundary of one was the boundary of the other, and to stop at that line made Pompton one of the termini of the road. This brought the case within the category expressly defined by the statute, and justified the action of the commissioners. That the terminus was potential and contemplated was sufficient. It was not required to be fixed or unalterable. We hold, therefore, that the bonds were rightfully issued. That under the act amending the charter Pompton, instead of being a terminal township, became thereafter a township 'along the route' of the road, cannot affect the previously vested rights of a bona fide transferee of the securities. It would be a singular result if a larger and better consideration than was contemplated when the bonds were issued should be held to destroy their validity. There was in effect an exchange of obligations between the company and the township, but the motive and object of the latter was the benefit expected to accrue from the road.

There are several things which go strongly to sustain the construction and effect we have given to the act of 1868.

The coupons for the half-yearly interest upon the township bonds, and those for the half-yearly interest upon the railroad bonds belonging to the township, were paid to the respective holders to Nov. 1, 1872, inclusive. Up to that time it does not appear that the validity of the township bonds was questioned by any one. There seems to have been entire acquiescence on the part of all concerned, including the township authorities.

By the fourth section of the act of 1869 the legislature declared in effect that the authorized and not the actual routes were those intended by the bonding act of 1868.

By the first section of the act of 1874 the office of the commissioners of Pompton Township was abolished, and their duties were devolved upon the township committee. One of those duties was to provide the necessary funds in the ways prescribed, and to pay the interest upon the bonds involved in this controversy.

In cases like this, legislative ratification is the equivalent of original authority, and what is clearly implied in a statute is as effectual as what is expressed. 1 Dillon, Mun. Corp., sect. 46; United States v. Babbit, 1 Black, 55. Whether this statute was a ratification of the sale of the bonds as made, if such ratification were needed, is a point which the view we take of the case renders it unnecessary to consider. It was certainly a clear recognition of Pompton as one of the townships authorized to issue bonds in aid of the railroad company,-a legislative construction entitled to great respect.

The bonds of the railroad company held by the commissioners are still in the hands of the township. It does not appear that there has been any offer to return them.

In County of Scotland v. Thomas (94 U.S. 682), the county was authorized to issue bonds in aid of the construction of a railroad authorized to be built by the Alexandria and Bloomfield Railroad Company, a Missouri corporation. Pursuant to law, that company became consolidated with an Iowa corporation, bearing the name of the Iowa and Southern Railway Company, whereby an important elongation of the road originally authorized was secured. The combined corporations took the name of the Missouri, Iowa, and Nebraska Railway Company. The bonds were issued to that company. This court held them to be valid. It was said, in effect, that this conclusion was the result of 'a broad and general view' of the facts of the case.

In County of Callaway v. Foster (93 id. 567), a statute authorized the stock of a railroad company to be subscribed for, and bonds to provide the means of paying for it to be issued and sold 'by the county court of any county in which any part of said railroad may be.' The stock was subscribed and the bonds were issued and sold before the route of the road was surveyed or located. In construing the phrase may be,' this court said: May be what? This expression is incomplete, and is to be construed with reference to the subject-matter. If used in a statute where a road already built was the subject-matter, it would refer to the presence or existence there of the road. . . . But when used in reference to a railroad not yet built, not located or surveyed, and, indeed, not yet organized, it must have quite a different meaning.' 'Upon any reasonable construction it embraces Callaway, which was one of the possible sites, and a site ultimately occupied in fact.' The bonds were sustained.

In County of Ray v. Vansyckle (96 id. 675), the facts were as follows:--

In 1860, Ray County, in Missouri, under authority conferred by a statute, and the sanction of its legal voters, subscribed by its county court for the stock of railroad company A., and agreed to issue its bonds in payment. Under an act passed in 1864, and pursuant to a popular vote of the county, company A. transferred all its rights, privileges, property, and effects to company B. By an agreement between companies B. and C. and the county court, the subscription of the county for the stock of A. was released, and in consideration of the release the county court subscribed for the same amount of the stock of C., and issued its bonds in payment. By this arrangement the county secured increased railroad facilities, and it still held the certificates of stock. There had been no offer to return them. The county paid the interest on its bonds continuously for five years. It then repudiated. It was held by this court,--

1. That B. was entitled to the bonds of the county by reason of the first subscription.

2. That as against a bona fide holder it could not be objected that the qualified voters had not assented to the subscription to C.

3. That the tax-payers were concluded by the act of the county court and by their failure to take action, if it could have availed them, to prevent the transfer from one company to the other.

In County of Schuyler v. Thomas (98 U.S. 169), County of Callaway v. Foster and County of Scotland v. Thomas were cited and strongly approved.

The analogies of all these cases to the one in hand are too obvious to need comment.

If any error or wrong was committed in issuing these bonds, it was the act of the agents of the plaintiffs in error.

Where one of two innocent persons must suffer a loss, and one of them has contributed to produce it, the law throws the burden upon him and not upon the other party. Hearn v. Nichols, 1 Salk. 289; Merchants' Bank v. State Bank, 10 Wall. 604.

The bonds in question recite on their face that they were issued 'in pursuance of an act of the legislature of New Jersey, approved April 9, 1868, entitled 'An Act to authorize certain townships, towns, and cities to issue bonds and to take the bonds of the Montclair Railway Company.''

In Orleans v. Platt (99 U.S. 676) this court said: 'The bonds in question have all the properties of commercial paper, and in the view of the law they belong to that category. Murray v. Lardner, 2 Wall. 110. This court has uniformly held, when the question has been presented, that where a corporation has lawful power to issue such securities and does so, the bona fide holder has a right to presume the power was properly exercised, and is not bound to look beyond the question of its existence. Where the bonds on their face recite the circumstances which bring them within the power, the corporation is estopped to deny the truth of the recital. Mercer County v. Hacket, 1 id. 183; San Antonio v. Mehaffy, 96 U.S. 312; County of Moultrie v. Savings Bank, 92 id. 631; Moran v. Commissioners of Miami County, 2 Black, 722; Knox v. Aspinwall, 21 How. 539; The Royal British Bank v. Turquand, 6 El. & Bl. 325.'

These rules are the settled law of this court, and they are decisive of the case in hand. The constitutional objection was not taken in the court below; but aside from this, we are of opinion that it is without validity. It would be supererogatory to discuss the minor points set forth in the assignment of errors to which we have not specifically adverted. They are all covered and concluded by what we have said.

Judgment affirmed.

MR. JUSTICE FIELD and MR. JUSTICE BRADLEY dissented.


text: Talk:Pompton v. Cooper Union/Opinion of the Court


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Hatch v. Dana

APPEAL from the Circuit Court of the United States for the Southern District of Illinois.

On April 12, 1871, Charles A. Dana recovered a judgment in the Circuit Court of the United States for the Northern District of Illinois, against the Chicago Republican Company, a corporation organized and existing under the laws of the State of Illinois, for the sum of $6,419.17 and costs.

An execution issued upon this judgment was by the marshal of the United States for that district returned nulla bona.

Thereupon, on Aug. 23, 1871, Dana, on behalf of himself and all other creditors of the company who might come in and seek relief by and contribute to the expense of the suit, exhibited in the Circuit Court of the United States for the Southern District of Illinois his bill in equity against the company, Hatch, Williams, and other resident stockholders, averring the incorporation of the company in February, 1865, with a capital stock of $500,000, divided into shares of $100 each; that at a meeting of the incorporators, held in Chicago in April, 1865, certain stock subscriptions were made, Hatch and Williams each subscribing for one hundred shares; that a complete organization of the company was effected, and an assessment of twenty per cent declared upon the stock subscribed, the company thereupon commencing business; that eighty per cent of the subscriptions to stock so made still remains unpaid; that in October, 1870, the company so organized sold and transferred all its tangible property, credits, and subscription lists to a corporation of a very similar name, and thereupon ceased to do business; that the company is wholly insolvent; avers the recovery of the judgment aforesaid, the issue and the return unsatisfied of an execution thereon; that there are no other unpaid creditors than the complainant. It prays that, upon an accounting of the amount unpaid upon the stock subscriptions of the stockholders named as defendants, they may be decreed to pay so much of the balance found unpaid on their respective subscriptions as will be sufficient to pay the ascertained debts of the corporation, including the judgment aforesaid; and for general relief.

The complainant dismissed the bill as to all of the defendants except Hatch and Williams. They, in their answer, admit the incorporation and organization of the company, as alleged in the bill; do not deny that they were of the original stockholders therein to the amount alleged in the bill, but aver that they paid in thirty per cent of the amount subscribed by them; admit the sale of its property in October, 1870, and that since then it has done no business; do not know whether it is indebted to the complainant or any other person, or whether or not it is insolvent; deny the recovery of the said judgment and call for full proof thereof, but admit that, if such judgment was lawfully rendered, it still remains in full force and unsatisfied; aver that about Aug. 1, 1866, the company determined to reduce its capital stock from $500,000 to $200,000, and did so, calling in all existing certificates, and reissuing to the holders thereof new certificates for two-fifths of the amount which they originally held, since which time various transfers of portions of the new or substituted stock have been made, but the respondents do not know to whom or by whom they have been made; state the names of certain persons who, together with the defendants, are holders and owners of portions of the stock; and ask that all said persons be made parties, and that an accounting be had, in conformity with the prayer of the bill.

A replications to the answers was filed.

The facts of the case are set out in the complainant's bill. A decree was rendered Jan. 6, 1879, that the complainant, Charles A. Dana, recover of Hatch and Williams the sum of $9,398.72, being the amount due on that day upon the said judgment, and that they pay the costs of the suit to be taxed; it being provided, however, that of the sum so decreed to be paid not more than $7,000, together with interest thereon from the date of the decree, at the rate of six per cent per annum, shall be made and collected from either said Hatch or Williams, the said sum of $7,000 being the amount the court finds each of them to owe and be indebted to the Chicago Republican Company.

From this decree Hatch and Williams appealed.

Mr. D. T. Littler for the appellants.

The remedy sought in this case by the complainant is in virtue alone of the general equity jurisdiction of the court in the rpemises.

A court of equity will never allow a trust to fail on account of the failure or refusal of a trustee to perform his duty. When, therefore, the creditors of a corporation are unable to obtain satisfaction in the ordinary mode, if the stockholders are indebted to the corporation on account of subscriptions made by them to the capital stock, and the board of directors fail or refuse to raise the money to pay such debts by making and enforcing against the members the necessary assessments, a court of equity will interfere, and either compel the directors to perform this duty, or, according to the modern practice, perform it by its own proper officers. The rights of creditors being superior, and partaking somewhat of the character of a lien, equity will regard and work them out by the same means by which the corporation itself should have done so. Adler v. Milwaukee Patent Brick Co., 13 Wis. 57; Ward v. Griswoldville Manufacturing Co., 16 Conn. 601; Henry v. Vermillion, 17 Ohio, 187. The court will either compel the board of directors to make an assessment, or it will exercise its power through its own officers and processes to accomplish the same substantial result.

The bill must be filed against all the shareholders, unless some valid excuse is shown for not bringing them in. This must necessarily be so; otherwise the main object of asserting the jurisdiction of equty, the equalizing of the burden of the shareholders, and the preventing of a multiplicity of suits would be defeated. Under such a bill an account will be taken of the debts and assets of the corporation, of the amount of capital not paid in, and of the amount due from each shareholder. A receiver appointed in a creditor's suit against a corporation cannot maintain a bill in equity against a single shareholder to collect what is unpaid on his subscription. Thompson, Liability of Stockholders, sect. 353; Wood v. Dummer, 3 Mas. 312; Hadley v. Russell, 40 N. H. 109; Erickson v. Nismith, 46 id. 371; Mann v. Pentz, 3 N. Y. 415; Pierce v. ''Milwaukee Con. Co., 38 Wis. 253; Adler v. Milwaukee Patent Brick Co.'', 13 id. 57; Coleman v. White, 14 id. 700; Carpenter v. Marine Bank, id. 705; Umsted v. Buskirk, 17 Ohio St. 113; Story, Eq. Jur., sect. 1252; Pollard v. Bailey, 20 Wall. 520; Terry v. Tubman, 92 U.S. 156.

In 2 Story, Eq. Jur., sect. 1252, it is said: 'The property of private corporations is deemed a trust fund, and the creditors may enforce their claims against it into whosesoever hands it may come, as well before as after dissolution, unless it may have come to the hands of a bona fide purchaser. Upon the like ground the capital stock of an incorporated bank is deemed a trust fund for all the debts of the corporation, and no stockholder can entitle himself to any dividend or share of such capital stock until all the debts are paid; and if the capital stock should be divided, leaving any debts unpaid, every stockholder receiving his share of the capital would in equity be held liable pro rata to contribute to the discharge of such debts out of the funds in his own hands. This, however, is a remedy which can be obtained in equity only; for a court of common law is incapable of administering any just relief, since it has no power of bringing all the proper parties before the court, or of ascertaining the full amount of the debts, the mode of contribution, the number of the contributors, or the cross equities and liabilities which may be absolutely required for a proper adjustment of the rights of all parties, as well as of the creditors,' citing Wood v. Dummer, supra; Vose v. Grant, 16 Mass. 9; Carson v. African Company, 1 Vern. 121.

The unpaid subscriptions for stock in an insolvent corporation constitute a trust fund for the benefit of all creditors of the corporation alike or pro rata, and it is not permissible to one creditor to absorb the same to the exclusion of others.

The bill as framed and filed in this cause properly recognizes the above rule. It is in form a general creditor's bill, under which, if opportunity had been afforded by the court, all creditors might have come in and sought relief, subject to the condition of contributing to the expense of the suit. But no such opportunity was afforded them. There was neither a reference for ascertaining them, nor notice to them to come in.

Although the complainant was not bound to hunt up the creditors, it was incumbent upon the court to refer the cause to a master, with directions to cause notice, by publication or otherwise, to be given to all creditors before proceeding to a final decree appropriating the whole fund to complainant.

'The general rule is that a creditor who proceeds in chancery to subject the liability of the shareholders of an insolvent corporation must bring his bill on behalf of all other creditors who may come in and establish their debts according to the course of a court of chancery. Whilst liens and legal priorities are preserved, he does not obtain a preference over other creditors by the filing of such a bill; but the property of the corporation, or the sums due from shareholders in respect of their individual liability, are sequestered for the ratable benefit of all the creditors.' 2 Story, Eq. Jur., sect. 1252; Wood v. Dummer, supra; Morgan v. New York Railroad Co., 10 Paige (N. Y.), 290; Mann v. Pentz, 3 N. Y. 415; Masters v. Ressis L. Mining Co., 2 Sandf. (N. Y.) 301; Coleman v. White, 14 Wis. 700; Carpenter v. Marine Bank, id. 705; Crea v. Babcock, 10 Metc. (Mass.) 525; Umsted v. Buskirk, 17 Ohio St. 113; Pollard v. Bailey, 20 Wall. 520; Terry v. Tubman, 92 U.S. 156.

Mr. E. B. McCagg, contra.

1. Dana's judgment, the insolvency of the company and its withdrawal from business, entitled him to enforce from its delinquent stockholders, for his benefit, the collection of their unpaid stock subscriptions. Dalton & Morganton Railroad Co. v. McDaniel, 56 Ga. 191; Henry v. V. & A. R. R. Co., 17 Ohio, 187; Ogilvie v. Knox Insurance Co., 22 How. 380; Upton, Assignee, v. Tribilcock, 91 U.S. 45; Angell & Ames, Corporations, sect. 602.

2. It was not necessary to make all the delinquent stockholders parties defendant to his bill. Ogilvie v. Knox Insurance Co., supra; Bartlett v. Drew, 57 N. Y. 587.

MR. JUSTICE STRONG delivered the opinion of the court.

title: Hatch v. Dana


text: Talk:Hatch v. Dana

title: Talk:Hatch v. Dana


text:
Hatch v. Dana/Opinion of the Court

This bill is an ordinary creditor's bill, the sole object of which is to obtain payment of the complainant's judgment. It is true it is brought on behalf of the complainant and all other creditors of the corporation who might choose to come in and seek relief by it, contributing to the expense of the suit. But no other creditors came in; and it does not appear that there is any other creditor, unless it be one of the stockholders, who was made a defendant, and who filed a cross-bill which he afterwards dismissed. All the stockholders were not made defendants.

The bill was not a bill seeking to wind up the company. It sought simply payment of a debt out of the unpaid stock subscriptions.

That unpaid stock subscriptions are to be regarded as a fund, which the corporation holds for the payment of its debts, is an undeniable proposition. But the appellants insist that a creditor of an insolvent corporation is not at liberty to proceed against one or more delinquent subscribers to recover the amount of his debt, without an account being taken of other indebtedness, and without bringing in all the stockholders for contribution. They insist, also, that by the terms of the subscriptions for stock made by these appellants they were to pay for the shares set opposite their names respectively, 'as called for by the said company;' that the company made no calls for more than thirty per cent; that, therefore, this company could not recover the seventy per cent unpaid without making a previous call; and that a court of equity will not enforce the contract differently from what was contemplated in the subscription.

These positions, we think, are not supported by the authorities,-certainly not by the more modern ones,-nor are they in harmony with sound reason, when considered with reference to the facts of this case. The liability of a subscriber for the capital stock of a company is several, and not joint. By his subscription each becomes a several debtor to the company, as much so as if he had given his promissory note for the amount of his subscription. At law, certainly, his subscription may be enforced against him without joinder of other subscribers; and in equity his liability does not cease to be several. A creditor's bill merely subrogates the creditor to the place of the debtor, and garnishes the debt due to the indebted corporation. It does not change the character of the debt attached or garnished. It may be that if the object of the bill is to wind up the affairs of this corporation, all the shareholders, at least so far as they can be ascertained, should be made parties, that complete justice may be done by equalizing the burdens, and in order to prevent a multiplicity of suits. But this is no such case. The most that can be said is that the presence of all the stockholders might be convenient, not that it is necessary. When the only object of a bill is to obtain payment of a judgment against a corporation out of its credits or intangible property, that is, out of its unpaid stock, there is not the same reason for requiring all the stockholders to be made defendants. In such a case no stockholder can be compelled to pay more than he owes.

In Ogilvie v. Knox Insurance Company (22 How. 380) the question was considered. That was a case in which several judgment creditors of a corporation had brought a creditor's bill against it and thirty-six subscribers to its capital stock. The bill alleged that the complainants had recovered judgments against the company, upon which executions had been issued and returned 'no property;' that the other defendants had severally subscribed for its stock; and that the subscriptions remained unpaid, payment not having been enforced by the company. The prayer of the bill was that these other defendants might be decreed to pay their subscriptions, and that the judgments might be satisfied out of the sum paid. It was objected, as here, that the bill was defective for want of proper parties; but the court held the objection untenable. In delivering the opinion of the court, Grier, J., said: 'The creditors of the corporation are seeking satisfaction out of the assets of the company to which the defendants are debtors. If the debts attached are sufficient to pay their demands, the creditors need look no further. They are not bound to settle up all the affairs of this corporation, and the equities between its various stockholders, corporators, or debtors. If A. is bound to pay his debt to the corporation in order to satisfy its creditors, he cannot defend himself by pleading that these complainants might have got their satisfaction out of B. as well. It is true, if it be necessary to a complete satisfaction of the complainants that the corporation be treated as an insolvent, the court may appoint a receiver, with authority to collect and receive all the debts due to the company, and administer all its assets. In that way all the other stockholders or debtors may be made to contribute.' The court, therefore, directed a decree against the respondents severally for such amounts as appeared to be due and unpaid by each of them for their shares of the capital stock.

This case is directly in point, and it does not stand alone. In Bartlett v. Drew (57 N. Y. 587), it was ruled that when the property of a corporation had been divided amongst its stockholders before all its debts had been paid, a judgment creditor, after the return of an execution unsatisfied, might maintain an action, in the nature of a creditor's bill, against a stockholder to reach whatsoever was so received by him, and that he was not required to make all the stockholders parties to the action; that he had nothing to do with the equities between the stockholders, unless he chose to intervene to settle them. This is much beyond what the complainant needs in this case. It is enforcing against stockholders in severalty what the corporation could not enforce, without any regard to the equities of one against the others.

So in Pierce v. The Milwaukee Construction Co. (38 Wis. 253), which was a proceeding analogous to a creditor's bill, and brought to enforce payment to a judgment creditor of the company of unpaid subscriptions to its capital stock, it was ruled that the complaint was not bad because all the stockholders were not made defendants. This, it is true, was a proceeding under a statute, but it was a statute enacting substantially this equity rule.

In Marsh v. Burroughs (1 Woods, 468), a bill of certain creditors who had recovered judgments against a bank, to recover from some stockholders who had not paid in full their subscriptions, non-joinder of parties was set up in defence. Mr. Justice Bradley said: 'A judgment creditor who has exhausted his legal remedy may pursue in a court of equity any equitable interest, trust, or demand of his debtor, in whosesoever hands it may be. And if the party thus reached has a remedy over against other parties for contribution or indemnity, it will be no defence to the primary suit against him that they are not parties. If a creditor were to be stayed until all such parties could be made to contribute their proportionate share of the liability, he might never get his money.'

The case of Wood v. Dummer (3 Mas. 308), upon which the appellants largely rely, was not an attempt to reach unpaid stock subscriptions. It was sought to follow the property of a corporation paid over to its shareholders before its debts were paid. But even in that case the bill was sustained, though all the shareholders were not made defendants. Those not sued appear to have been treated only as convenient, not as necessary parties.

The cases of Pollard v. Bailey (20 Wall. 520) and Terry v. Tubman (92 U.S. 156) are not in conflict with Ogilvie v. Knox Insurance Company. They arose under statutory provisions imposing upon the stockholders of banks a liability for the debts of the corporation, 'in proportion to their stock held therein.' It was this liability beyond the stock subscription which was sought to be enforced, and as it was only a proportional liability, its extent could be ascertained only when the obligation of the other shareholders was taken into consideration. Hence it was ruled that the proper mode of proceeding was by bill in equity in which an account of the debts and stock could be taken and a pro rata distribution could be made. Not a hint was given that the latter case was intended to be questioned or qualified. Indeed, Pollard v. Bailey and Terry v. Tubman have little analogy to it, or to the case we have now before us. They were both suits at law. The debt due by these appellants to the corporation of which they are members is a fixed and definite one, and it is neither more nor less because other debts may be due to the company from other stockholders.

We hold, therefore, that the complainant was under no obligation to make all the stockholders of the bank defendants in his bill. It was not his duty to marshal the assets of the bank, or to adjust the equities between the corporators. In all that he had no interest. The appellants may have had such an interest, and, if so, it was quite in their power to secure its protection. They might have moved for a receiver, or they might have filed a cross-bill, obtained a discovery of the other stockholders, brought them in, and enforced contribution from all who had not paid their stock subscriptions. Their equitable right to contribution is not yet lost.

That the appellants are not protected by the fact, if such was the fact, that their subscriptions for stock were payable 'as called for by the company,' we think is clear. Assuming that such a clause in the subscription meant more than an agreement to pay on demand, and that it contemplated a formal call upon all subscribers to the stock of the company, the subscriptions were still in the nature of a fund for the payment of the company's debts, and it was the duty of the company to make the calls whenever the funds were needed for such payment. If they were not made, the officers of the company violated their trust, held both for the stockholders and the company. And it would seem to be singular if the stockholders could protect themselves from paying what they owe by setting up the default of their own agents. But in this case the company went out of business before the complainant obtained his judgment, and it does not appear that since that time it has had any officers who could make the calls. Before that time its president was dead. However this may be, it is well settled that a court of equity may enforce payment of stock subscriptions though there have been no calls for them by the company. In Henry v. Railroad Company (17 Ohio, 187), a suit brought by a judgment creditor of a corporation to enforce payment by its stockholders of their unpaid subscriptions, for which calls had not been made, it was held that when a company ceases to keep up its organization, and abandons all action under the charter, a proceeding at the instance of the creditor becomes indispensable. It was further said: 'When a company, becoming insolvent, as in this case, abandons all action under its charter, the original mode of making calls upon the stockholders cannot be pursued. The debt, therefore, from that time must be treated as due without further demand.' This means, of course, as between the debtor and the creditor of the corporation. After all, a company call is but a step in the process of collection, and a court of equity may pursue its own mode of collection, so that no injustice is done to the debtor.

In the English courts a mandamus is sometimes awarded to compel the directors to make the necessary calls. Queen v. The Victoria Park Co., 1 Ad. & El. N. S. 544; Queen v. Ledgard, id. 616; The King v. Katharine Dock Co., 4 Barn. & Ad. 360. But this remedy can avail only when there are directors. The remedy in equity is more complete, and it is well recognized. Ward v. The Griswoldville Manufacturing Co., 16 Conn. 593. In such cases it is nowhere held, so far as we know, that a formal call must be made before a bill can be filed. Indeed, the filing of the bill is equivalent to a call. Before it is filed, the court has no jurisdiction of the matter. In bankruptcy, an assessment or a call may be made, for the assignee of a bankrupt corporation succeeds to its rights and becomes the legal owner. Not so in equity.

In ''The Dalton, &c. Railroad Co. v. McDaniel'' (56 Ga. 191), a creditor's bill very like the present was filed. It was objected by the stockholders, who were defendants, that it was for the directors of the company and not for the court to call in the stock subscriptions, and that their contract only obligated them to obey a call emanating from the company; but it was ruled that 'principle and sound reason accord with authority that equity will grant relief in all such cases.'

In view of these considerations we think none of the assignments of error are sustained.

Decree affirmed.

title: Hatch v. Dana/Opinion of the Court


text: Talk:Hatch v. Dana/Opinion of the Court

title: Talk:Hatch v. Dana/Opinion of the Court


text:
Terry v. Little

ERROR to the Circuit Court of the United States for the Western District of North Carolina.

By sect. 4 of the charter of the Merchants' Bank of South Carolina, at Cheraw, it was provided that, in case of the failure of the bank, 'each stockholder, copartnership, or body politic having a share or shares in the said bank at the time of such failure, or who shall have been interested therein at any time within twelve months previous to such failure, shall be liable and held bound individually for any sum not exceeding twice the amount of his, her, or their share or shares.' It is alleged in the declaration that the bank failed March 1, 1865. The general assets have since been collected and applied to the payment of debts, under the provisions of an act of the legislature of South Carolina, passed March 13, 1869, placing the bank in liquidation. Debts to the amount of several hundred thousand dollars are still unpaid. The capital stock was $400,000, divided into shares of $100 each. Of these shares the defendant Benjamin F. Little owned at the time of the failure one hundred and ten, and John P. Little one hundred and fifty-eight. On the 21st of August, 1875, Terry, the plaintiff, commenced an action at law in the court below, against the defendants jointly, to recover from them, on account of their individual liability as stockholders, $5,440, the amount due him from the bank on its bills which he held. The defendants demurred to the declaration, and among others assigned for cause, in substance,-1, that the individual liability of the stockholders as created and defined by this charter could not be enforced in an action at law by one creditor for his sole use to the exclusion of others; and, 2, that even if it could, the defendants cannot be joined in one such action because their liability is not joint but several. The Circuit Court sustained the demurrer and gave judgment for the defendants. This writ of error has been brought to reverse that judgment.

Mr. Harvey Terry for the plaintiff in error.

Mr. Joseph J. Davis, contra.

MR. CHIEF JUSTICE WAITE, after stating the case, delivered the opinion of the court.

title: Terry v. Little


text: Talk:Terry v. Little

title: Talk:Terry v. Little


text:
Terry v. Little/Opinion of the Court

The individual liability of stockholders in a corporation is always a creature of statute. It does not exist at common law. The first thing to be determined in all such cases is, therefore, what liability has been created. There will always be difficulty in attempting to reconcile cases of this class in which the general question of remedy has arisen, unless special attention is given to the precise language of the statute under consideration. The remedy must always be such as is appropriate to the liability to be enforced. The statute which creates the liability may declare the purposes of its creation and provide directly or indirectly a remedy for its enforcement. If the object is to provide a fund out of which all creditors are to be paid share and share alike, it needs no argument to show that one creditor should not be permitted to appropriate to himself, without regard to the rights of others, that which is to make up the fund.

The language of the charter is peculiar. The stockholders are not made directly liable to the creditors. They are not in terms obliged to pay the debts, but are 'liable and held bound. . . for any sum not exceeding twice the amount of. . . their. . . shares.' This, as we think, means that on the failure of the bank each stockholder shall pay sch sum, not exceeding twice the amount of his shares, as shall be his just proportion of any fund that may be required to discharge the outstanding obligations. The provision is, in legal effect, for a proportionate liability by all stockholders. Undoubtedly, the object was to furnish additional security to creditors, and to have the payments when made applied to the liquidation of debts. So, too, it is clear that the obligation is one that may be enforced by the creditors; but as it is to or for all creditors, it must be enforced by or for all. The form of the action, therefore, should be one adapted to the protection of all. A suit at law by one creditor to recover for himself alone is entirely inconsistent with any idea of distribution. As the liability of the stockholder is not to any individual creditor, but for contribution to a fund, out of which all creditors are to be paid alike, the appropriate remedy is by suit to enforce the contribution, and not by one creditor alone to appropriate to his own use that which belongs to others equally with himself. We think this case comes clearly within the rule laid down in Pollard v. Bailey (20 Wall. 520), to which we adhere.

The second ground of demurrer is equally fatal. The liability of the stockholders is several and not joint. Each stockholder is bound for his own share and no more. No judgment can be rendered against him for what another should pay. It follows that in an action at law each stockholder must be separately sued. In equity it is different, for there the decree can be moulded to suit the exigencies of the case, and each stockholder can be held liable and proceeded against for what he is bound to pay, and no more. Undoubtedly, under the provisions of some charters, suits at law may be maintained by one creditor against one or more of the stockholders. The form and extent of a statutory liability of this kind depend upon the particular phraseology of the statute which creates the liability. All we decide is that, under this charter, the suit to enforce the liability should be in the nature of a suit in equity, by or for all creditors, and that it cannot be at law by one creditor for himself alone, against two stockholders who are not jointly liable on account of the shares standing in their respective names.

Judgment affirmed.

title: Terry v. Little/Opinion of the Court


text: Talk:Terry v. Little/Opinion of the Court


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Gas Company v. Pittsburgh

ERROR to the Supreme Court of the State of Pennsylvania.

This was a suit brought by the Pittsburgh Gas Company against the city of Pittsburgh, to recover certain moneys paid by the company to the United States.

That company was incorporated by an act of the legislature of Pennsylvania, approved March 16, 1848, the city of Pittsburgh being the owner of six hundred and ninety-eight shares, of the value of fifty dollars each, and having power to elect six of the twelve trustees of said company. A supplement to said act, approved Jan. 31, 1860, provided as follows, viz.:--

'SECT. 7. That whenever the provisions of this act shall have been accepted by the stockholders of said company and the councils of said city corporation, as hereinafter provided, the mayor, aldermen, and citizens of Pittsburgh shall forthwith cease to be stockholders in said company, and all the stock held by the city corporation or standing in its name on the books of the said company shall be surrendered to the company, and the said city corporation shall have no further right to or interest in said stock; but the same shall become a part of the the funds of the company, and be distributed among the stockholders pro rata.

'SECT. 8. That the said company shall, at the cost of the city corporation, construct, erect, and keep in order all such public lamps and burners in the streets as the city councils may direct, and shall also furnish all the gas required for consumption in the public street-lamps, market-houses, council-chambers, and public offices of the city, at the following rates, that is to say: Any quantity not exceeding twelve and one-half millions cubic feet of gas annually, free of charge, and any excess over that quantity that may be required annually at a rate not exceeding seventy-five cents for each one thousand cubic feet of gas in such excess. The price of such excess so furnished, together with the cost of constructing, erecting, and keeping in order the public lamps and burners in the streets, shall be paid to the company quarterly by the city corporation.'

In pursuance of said act the councils of the City of Pittsburgh, on the third day of February, 1860, passed an ordinance as follows:--

'That the provisions of an act of assembly approved the thirty-first day of January, A.D. one thousand eight hundred and sixty, entitled 'A supplement to an act to incorporate the Pittsburgh Gas Company,' approved the sixteenth day of March, A.D. one thousand eight hundred and forty-eight, be and the same are hereby approved and accepted by the councils of said city, and that a copy of this ordinance, properly authenticated by the presidents and clerks of councils, be delivered to the said gas company, and the mayor of the city of Pittsburgh is hereby authorized and instructed to make a proper surrender to the Pittsburgh Gas Company of all interest and ownership of said city in any stock or other property and effects in said gas company. That all ordinances or parts of ordinances inconsistent herewith be and the same are hereby repealed.'

Pursuant to said act and ordinance, the mayor of said city made and executed a surrender of its stock, which was accepted upon the terms of said act by the company. The latter, during the six months ending Jan. 1, 1870, furnished a large number of feet of gas, including 6,250,000 feet to be furnished free, under said act of assembly and agreement. By the ninety-fourth section of an act of Congress entitled 'An Act to provide internal revenue to support the government, to pay interest on the public debt, and for other purposes,' approved June 30, 1864, and a supplement thereto, approved July 18, 1866, it was provided as follows, viz.: -

'SECT. 3. Amendment to sect. 94. On gas, illuminating, made of coal, wholly or in part, or any other material, when the product shall not be above two hundred thousand cubic feet per month, a tax of ten cents per one thousand cubic feet; when the product shall be above two and not exceeding five hundred thousand cubic feet per month, a tax of fifteen cents per one thousand cubic feet; when the product shall be above five hundred thousand and not exceeding five millions of cubic feet per month, a tax of twenty cents per one thousand cubic feet; when the product shall be above five millions, a tax of twenty-five cents per one thousand cubic feet; and the general average of the monthly product for the year preceding the return required by law shall determine the rate of tax herein imposed. And where any gas-works have not been in operation for the next year preceding the return as aforesaid, then the rate shall be determined by the estimated average of the monthly product: Provided, that the product required to be returned by law by any gas company shall be understood to be, in addition to the gas consumed by said company or other party, the product charged in the bills actually rendered by the gas company during the month preceding the return; and until the thirtieth day of April, eighteen hundred and sixty-seven, all gas companies whose price is fixed by law are authorized to add the tax herein imposed to the price per thousand feet on gas sold; and all such companies which have heretofore contracted to furnish gas to municipal corporations are, in like manner, and for the same period, suthorized to add such tax to such contract price: Provided, further, that all gas furnished for lighting street-lamps, or for other purposes, and not measured, and all gas made for and used by any hotel, inn, tavern, and private dwelling-house, shall be subject to tax whatever the amount of product, and may be estimated, and if the returns in any case shall be understated or underestimated, it shall be to duty of the assistant assessor of the district to increase the same as he shall deem just and proper: And provided, further, that gas companies located within the corporate limits of any city or town, whether in the same district or otherwise, or so located as to compete with each other, shall pay the rate of tax imposed by law upon the company having the largest production: And provided, further, that coal-tar and ammoniacal liquor produced in the manufacture of illuminating gas, and the products of redistillation of coal-tar, and the products of the manufacture of ammoniacal liquor thus produced, shall be exempt from tax.'

By a supplement to said act, passed March 2, 1867, sect. 94 of said act of July 18, 1866, was further amended as follows: 'By striking out in the paragraph relating to gas the words, 'and until the thirtieth day of April, 1867." The city paid the amount of bill for gas and the tax upon all gas furnished up to Jan. 1, 1871, except the amount of tax on 6,250,000 feet of gas which it claimed said gas company had contracted to furnish free of charge. The tax on said 6,250,000 feet, amounting to $1,562.50, was paid by the gas company to the United States.

The foregoing facts were agreed upon by the parties and submitted to the court in the nature of a special verdict. Judgment was rendered for the defendant. It was affirmed by the Supreme Court of the State, and the company thereupon sued out this writ of error.

Mr. Charles A. Ray for the plaintiff in error.

Mr. George Shiras, Jr., contra.

MR. CHEIF JUSTICE WAITE delivered the opinion of the court.

title: Gas Company v. Pittsburgh


text: Talk:Gas Company v. Pittsburgh

title: Talk:Gas Company v. Pittsburgh


text:
Gas Company v. Pittsburgh/Opinion of the Court

Sect. 94 of the Internal Revenue Act of 1864 (13 Stat. 264), levying taxes on illuminating gas, to be paid by the manufacturer thereof, as amended in 1866 (14 id. 128), contained the following provision:--

'All gas companies whose price is fixed by law are authorized to add the tax herein imposed to the price per thousand feet on gas sold; and all such companies which have heretofore contracted to furnish gas to municipal corporations are in like manner. . . authorized to add such tax to such contract price.'

This, we think, does not make a municipal corporation liable for the tax in a case where a gas company has, for a valuable consideration, contracted to furnish the corporation with gas 'free of charge.'

Judgment offirmed.


text: Talk:Gas Company v. Pittsburgh/Opinion of the Court


text:
Pollard v. Railroad Company

ERROR to the Circuit Court of the United States for the District of New Jersey.

This was an action of assumpsit by Jerome B. Pollard, a citizen of Illinois, against the New Jersey Railroad and Transportation Company, a general carrier of passengers, for damages sustained by him in consequence of an injury to his wife, Sarah H. Pollard, caused by the negligence of the defendant while she was a passenger on its road, having a ticket from New York to Chicago, purchased for her by her husband.

The defendant, among other defences, pleaded a former recovery, setting out the record of a judgment in assumpsit in a former action in the same court, in which said Pollard and wife were plaintiffs and said company was defendant. The plea then sets out the contract for the transportation of said Sarah, the breach thereof and the judgment thereon, and avers that, before this writ was signed, said judgment was recovered by the said plaintiffs; that the promises and undertakings for the non-performance of which said judgment was recovered are the same promises and undertakings mentioned in the declaration in this action and none other; that said judgment still remains in full force, not having been reversed.

To this plea the plaintiff demurred. The demurrer having been overruled and judgment rendered for the defendant, Pollard sued out this writ of error.

Mr. Albert A. Abbott for the plaintiff in error.

A former recovery concludes the parties only as to the facts necessary to uphold it. It must appear that the claim in the pending action was litigated, or that the party was bound to present it in the former action; and that the matters which it involves were legitimately within the issue, and necessarily and directly passed upon by the jury. The same evidence must be sufficient to support both actions. Phillips v. Berick, 16 Johns. (N. Y.) 137; People v. Johnson, 38 N. Y. 65; Barwell v. Knight, 51 Barb. (N. Y.) 267; Royce b. Burt, 42 id. 663; Slauson v. Engelhart, 34 id. 202; Manny v. Harris, 2 Johns. (N. Y.) 30; Stowell v. Chamberlain, 60 N. Y. 272; Douglass v. Ireland, 73 id. 107.

The damages claimed by the present plaintiff were not claimed, and could not have been recovered, in the former action. Lewis et ux. v. Babcock, 18 Johns. (N. Y.) 443; Russell et ux. v. Corne, 1 Salk. 119; Holmes v. Wood, 2 Wils. 424; Whitcomb v. Barre, 37 Vt. 148; Kavanaugh v. Janesville, 24 Wis. 618; Hooper v. Haskell, 56 Me. 251; 1 Chitty, Pl. 35, 16th Am. ed.

The statute of New Jersey (Nixon's Dig. 4th ed. p. 735) affords no exception to this point. It relates to actions ex delicto only. In this connection see Brockbank v. Railroad Company, 7 H. & N. 834.

A former recovery is binding only upon parties or their privies, who have a mutual or successive relationship to the same right or thing. It concludes the parties only in the character and as to the right in which they sue or are sued. Bigelow, Estoppel (2d ed.), p. 65; Rathbone v. Hooney, 58 N. Y. 467.

The present plaintiff was a party to the former action, not in his own right, but in the right of his wife; and he was there joined as a party only because of their relationship. They had no joint right to recover for the damages which the present plaintiff alone sustained.

Mr. J. W. Scudder, contra.

MR. CHIEF JUSTICE WAITE delivered the opinion of the court.

title: Pollard v. Railroad Company


text: Talk:Pollard v. Railroad Company

title: Talk:Pollard v. Railroad Company


text:
Pollard v. Railroad Company/Opinion of the Court

A judgment in an action of assumpsit, brought by a husband and wife, on a contract by a carrier of passengers to carry the wife safely, for injuries to the wife while being carried, is a bar to another action of assumpsit on the same contract, by the husband alone, to recover for the same injuries. A different rule prevails when the action is in tort against the carrier for a breach of his public duty, except, perhaps, in States like New Jersey, where by statute the husband may, in such an action, add claims in his own right to those of his wife. Rev. Laws N. J. 851, sect. 22.

Judgment affirmed.


text: Talk:Pollard v. Railroad Company/Opinion of the Court


text:
Jones v. Clifton

APPEAL from the Circuit Court of the United States for the District of Kentucky.

The facts are stated in the opinion of the court.

Mr. Benjamin H. Bristow and Mr. James A. Beattie for the appellant.

Mr. Martin Bijur, contra.

MR. JUSTICE FIELD delivered the opinion of the court.

title: Jones v. Clifton


text: Talk:Jones v. Clifton

title: Talk:Jones v. Clifton