Freeland v. McCullough

1 Denio 414 | Court for the Trial of Impeachments and Correction of Errors | 1845

By the Court, Jewett, J.

By the ninth section of the statute, by which the “ Rossie Galena Company” was incorporated, {Laws of 1837, p. 445,) it is enacted that “ the stockholders of said corporation shall be jointly and severally personally liable for the payment of all debts or demands contracted by the said corporation or their authorized agent or agents, and any person having any demand against the said corporation may sue any stockholder, director or directors, in any court having cognizance thereof, and recover the same with costs.”

The defendant to the first, second and third counts in the declaration, has pleaded in bar that the suit was not commenced against him within three years next after the cause of action in those counts mentioned accrued. To this the plaintiff has put in a general demurrer, to which there is a joinder. The question then is, whether the plea be a good bar to the action set forth in these counts, as there is no question raised as to their soundness. It is insisted, on the part of the defendant, that his liability is purely one created by, and that the action is brought directly upon the statute, and is therefore barred unless brought within three years next after the cause of action accrued. The provisions of the statute supposed to sustain the plea are contained in 2 R. S. 298, § 31, and are in these words: “ An action upon any statute made, or to be made, for any forfeiture or cause, the benefit and suit whereof is limited to the party aggrieved, or to such party and the people of this state, shall be commenced within three'years after the offence committed, or the cause of action accrued, and not after.” This section prescribes the same limitation to actions, upon any statute, by the party aggrieved, which was provided by the sixth section of the act for the limitation of actions of April, 1801, (1 R. L. 186,) and provides a like limitation of three years as a bar to an action upon any statute, for any forfeiture or cause, the benefit and suit whereof is limited to the party aggrieved and the people of this state. This last provision is now, being first enacted in the revised statutes. Before their enactment it was held that there was no statute of limitation to an action upon a statute giving what was called a qui tam action for a penalty. ( Wilcox, qui tam, &c. v. Fitch, 20 John. 472.) Independently of the provisions'of the ninth section of the act incorporating the “ Rossie Galena Company,” a creditor of such company could have had no legal or equitable cause of action against any stockholder, individually, for a debt owing by the company.

This provision then comes within the legal definition of a remedial statute. (1 Black. Com. 87.) Blackstone defines such statutes to be those which are “ made to supply such defects, and abridge such superfluities in the common law, as arise either from the general imperfection of all human laws, from change of time and circumstances, from the mistakes and unadvised determinations of unlearned (or even learned) judges, or from any other cause whatsoever.” It has a further signification, viz. “ a statute giving a party a mode of remedy for a wrong when he had none or a different one before.” In giving a construction to this class of- statutes, three points are to be considered; “ the old law, the mischief, and the remedy; that is, how the common •law stood at the making of the act; what the mischief was for which the common law did not provide ; and what remedy the legislature hath provided to cure this mischief. And it is the business of the judges so to construe the act as to suppress the mischief and advance the remedy.” (1 Black. Com. 87.) By the common law, the property and effects of the corporation only would be liable for the payment of its debts. The mischief was that individuals, through the medium of a corporation, might engage in any enterprise, and yet incur no responsibility to those with whom, in the name of the corporation, they might contract, or to whom they might become indebted, beyond the funds or effects advanced as capital to such corporation; and in the e\rent that'such enterprise or business proved successful, they could enjoy the profits of it to the full limit of the gains; but if it proved adverse, however recklessly it had been conducted, the loss fell upon those who had confidingly given credit to it. No remedy remained to the creditors beyond sharing in the wasted remnant of effects which the legal being might have on hand. In effect, the law organized a partnership of individuals in the shape of a corporation, who could, without limitation, enjoy the profits of the business engaged in without incurring the hazard of any loss beyond the funds contributed as capital. To remedy this mischief the legislature, in the creation of this company, deemed it fit and proper to provide that the stockholders should be jointly and severally personally liable for the payment of all debts or demands contracted by it while they were stockholders; and accordingly declared that any person having a demand against such corporation might sue any stockholder, and recover the same with costsj after judgment and an execution returned unsatisfied against the corporation, or after the corporation had been dissolved. The question then recurs, Is this action founded upon any statute for any cause, the benefit and suit,whereof is limited to the party aggrieved 1 Nothing can be clearer to my mind, than that it is. Without the provision' of the statute, there is no legal liability, no cause of action against the defendant, assuming him to have been a stockholder at the time the debt was contracted. If I am not mistaken in this construction, it follows as a consequence, that such action is barred after three years, by the express enactment of the legislature above referred to. (Van Hook, adm’r, &c. v. Whitlock and others, 2 Edw. Ch. R. 304; 7 Paige, 373,S. C.) I am aware that in that case, when on appeal from chancery, in the court for the correction of errors, (26 Wend. 43,) the late Ch. Justice Nelson expressed an unqualified dissent from the construction given the statute under consideration; but I am persuaded that the learned chief justice was led to the observations which he made in regard to it, by seeing or supposing he saw, in that construction, evils that could not be endured. If such apprehensions were well founded, in my judgment the remedy is not with the court, whose duty, I need not in this place suggest, is to declare, not to make law. It is proper, perhaps, for me to say, that this question \yas not directly in issue or material to the decision of the case of Van Hook v. Whitlock. I have referred to the opinions given upon the construction of the clause of the statute in question, as expressed by eminent judges and entitled to high consideration, although perhaps, strictly, they may be regarded as obiter. I am of opinion that the plea setting up the statute of limitations to the first three counts is well pleaded, and that the defendant is entitled to judgment on the demurrer to that plea.

The defendant has demurred to the fourth, fifth and sixth counts of the declaration, on the ground that they do not show any title in the plaintiffs to recover in their names against the defendant for goods sold to “The Rossie Galena Company” by Barker. That is not necessary in this action. All that is requisite here is, that the declaration should set forth a good legal demand due to the plaintiffs from “The Rossie Galena Company,” that the defendant was a stockholder in the company at the time of the contracting of the debt constituting the demand, and that before the commencement of the suit the plaintiffs had recovered judgment against the company and issued execution thereon and which had been returned unsatisfied, or that the corporation had been dissolved. These averments being made and proved on the trial, the provisions of the ninth section of the act cast a legal liability upon the defendant for the payment of the demand. The debt must be due to the plaintiff from the company, not from the defendant. (Moss v Oakley, 2 Hill, 265 ; Moss v. M’Cullough, 5 id. 131.)

Assuming, as the defendant’s counsel insists, that the endorsement to the plaintiffs of the draft drawn by the corporation on Ransom, payable to the order of Barker, for the debt due to him from the corporation, did not at law transfer the debt for which the draft was given so as to enable the plaintiffs as assignees to recover in their own names against the company for goods sold, nevertheless if the draft was made upon the consideration-of goods previously sold, and was transfer-red for value, and was a valid demand against the company, (it being negotiable in terms,) I am unable to discover any objection to the plaintiffs being deemed creditors of the company for such debt upon such draft, or any reason why the company must not be considered as having contracted a demand which the plaintiffs show a legal right to recover. The plaintiffs, as holders of the draft, certainly have a demand against the company, and the statute does not limit the liability of the stockholder to the party who was the creditor when the demand was originally contracted. The provision extends to all and every person who subsequently acquires title to such demand.

It is, however, objected that the fourth and fifth counts do not set forth the indebtedness of “ The Rossie Galena Company” to Barker, nor the consideration of such indebtedness with sufficient certainty. In the third count, such indebtedness and consideration are particularly set forth as inducement to the promise of the company; and then these counts which immediately follow contain an averment that the company “were justly indebted to the said Sylvanus Barker hereinbefore named in certain other large sums of money, to wit, in the same respective amounts and for the same respective consideration in the ■ last preceding count of this declaration set forth; and being so indebted,” &c. I am of opinion that this statement is sufficiently certain, and that such reference to a preceding count is admissible according to the rules of pleading. The counsel for the defendant has made a point, that the counts now under examination should contain an averment that the defendant was a stockholder of the company at the time when the drafts were made. The averment actually made in these counts is, that “at the time of the contracting of the debts and claims for which the said last mentioned bill of exchange was given, to wit, on, &c. at, <fcc. the said defendant was one of the stockholders of said company.” I think the objection in this particular cannot be sustained. The debt for which the draft is alleged in each of these counts to have been made, is averred, though under a videlicet, to have been contracted on the 27th day of April, 1839, and the draft is alleged to have been drawn afterwards, on the 4th day of May in the same year. At the time of drawing the draft the defendant may have ceased to be a. stockholder; yet, under a liberal and beneficial construction of the provisions of the statute, (which courts are bound to extend to all statutes remedial in their object,) I am of opinion that the averment that the defendant was a stockholder at the time the- debt was contracted, for which the draft was made, is sufficient. The debt arising upon the sale of the goods by Barker to the company'was not paid or extinguished by the draft; and although the plaintiffs could not in their own names at law recover against the company upon the original consideration, for goods sold by Barker, without an assignment of it and an express promise to pay, by the company made to them, yet the draft was negotiable, and upon that they could recover against the company: and the debt or demand for the goods sold remained unpaid— not discharged or cancelled until the draft should be paid. By the construction given to the ninth section of the act incorporating the “ Rossie Lead Mining Company,” in Moss v. Oakley, (2 Hill, 265,) the suit against stockholders must be brought against those who were such when the debt was contracted. This being the law, it seems to me that when we find that the debt was contracted at a time anterior to the making of negotiable paper given for such debt, the averment that the defen dant was a stockholder at the former period is the only one proper to be made in the case. The plaintiffs own and are entitled to recover the debt, not indeed as for goods sold, but upon the evidence of such debt in the shape of negotiable paper, and that the defendant was a stockholder when that debt was contracted. Suppose Barker had not transferred the draft, was still the owner, and had sued as the plaintiffs have, upon the draft merely, having no counts under which he could recover for goods sold, could there be any .well founded objection to an averment that the company owed him on the 27th of April, •1839, for goods sold; and that the draft was made for that demand, not in payment or satisfaction until paid, so as to charge the defendant with a liability to pay, on the ground that he was a stockholder when the debt was contracted? I think not; and if not, it seems to me that the conclusion at which I have arrived, that the plaintiffs may aver and show that fact in order to establish the defendant’s liability under the statute to them for that demand, is sound. It does not follow that the plaintiffs must be in a situation to recover against the company upon the evidence, which would be required to recover upon the original promise, express or implied, in order to charge the defendant. All that is requisite is, that they should set up a demand due to them, contracted by the company when the defendant was a stockholder, which they can recover against the company ; that they have once recovered a judgment against the company, and had execution which has been returned unsatisfied. This they have averred; and if true, they are in my opinion entitled to recover their debt.

An objection is made to the last count, that the averment of a recovery of judgment and a return of an execution thereon unsatisfied in 1840, and that afterwards, in August, 1843, the company were dissolved, are inconsistent and repugnant to each other, and that this count is therefore bad. Mr. Chitty, (1 Chit. Pl. 2d Am. ed. 231.) says: “ If, however, the matter unnecessarily stated, be wholly foreign and impertinent to the cause, so that no allegation whatever on the subject was necessary, it will be rejected as surplusage, and it need not be proved, nor will it vitiate, it being a maxim, that utile per inutile non vitiatur; except when, by this unnecessary allegation the plaintiff shows that he has no cause of actionand again, at page 232: “ So though the superfluous allegation be repugnant to what was before alleged, it is void and will be rejected, and whatever is redundant and which need not have been put into the sentence, and contradicting what was before alleged, will not in general vitiate the pleading.” The objection should have been, 1 think, for duplicity, rather than for repugnancy. The statute (§ 10) made it necessary for the plaintiffs to show before they commenced this suit, either that they had obtained judgment against the corporation upon their demand, and had had execution thereon, which had been returned unsatisfied in whole or in part, or that said corporation had been dissolved. The count avers both judgment and execution, and dissolution of the corporation, either of which would of itself, independent of the other, constitute a sufficient ground of action in that particular. The reason of th§ rule requiring a pleading to be single, is that it would be unnecessary and vexatious to put the opposite party to litigate and prove two points, when one would be sufficient to establish the matter in issue. (1 Chit. Pl. 230.) But however this may be, this demurrer is put in to three counts, and the rule is, if one is good the plaintiff must have judgment. Here two of them are held to be good. (Mumford and another v. Filzhugh and another, 18 John. R. 457; Brown v. Stebbins, 4 Hill, 154; Whitney v. Crosby, 3 Caines' R. 89; Gidney v. Blake, 11 John. R. 54; Martin v. Williams, 13 id. 264; Morell v. Colden, id. 395.)

The defendant must have judgment on the demurrer to the plea of the statute of limitations to the first, second and third counts, and the plaintiff must have judgment on the demurrer to the fourth, fifth and sixth counts of the declaration. Each party has leave to amend on the usual terms.

Judgment accordingly.

Case Details

Case Name: Freeland v. McCullough

Court Name: Court for the Trial of Impeachments and Correction of Errors

Date Published: Jul 15, 1845

Citation: 1 Denio 414