50 Me. 271 | Me. | 1862
The opinion of the Court was drawn up by
By the provisions of § 17, c. 77, R. S., cases in equity, presented on demurrer to the bill, or when prepared for final hearing, come before the law Court. This case comes up on demurrer, and is therefore legitimately in this Court. But a question has been raised as to the condition of the bill at the time of the joinder in demurrer. The respondents contend that the pleadings apply to the bill as originally filed in the Court below; while the complainants maintain that they are now applicable only to the bill in its amended form.
There seems to have been some' irregularity in the pro
Were, then, the amendments allowable, within the rules of practice in equity?
The first amendment, of which complaint is made, consists in striking out the name of Kennedy, as a plaintiff, and inserting it as a defendant. The bill was originally commenced by three persons, of whom Kennedy was one, in the capacity of receivers of the Shipbuilders’ Bank. It appeared that Kennedy was a stockholder in the bank and necessarily should have been made a defendant. Wiswell & al. v. Starr, 48 Maine, 401.
It will be seen that amendments to a bill are of two kinds, those which relate to parties and those which affect the substance of the bill. And amendments that relate to parties are by the addition or omission of them. There is also another class of amendments relating to parties; to wit, the changing of their situation by striking out the name of a co-complainant and making him a defendant. Amendments being regarded with reference to the furtherance of justice,
The name of one co-plaintiff may be stricken out and the party made a defendant, when justice will not be done without the change. 1 Dan. Chan. Prac., 457.
The next amendment, to which particular objection is made, is in the stating part of the bill, wherein the ground of the defendants’ liability is set out.
In the original bill it is alleged in substance, that, on the twenty-sixth' day of October, A. D., 1854, said bank suspended and refused payment of its bills, styled bank notes, which it had issued and by law was bound to pay, and the complainants claim that those who were stockholders on that day, or their legal representatives, are by law liable to contribute to the payment of the deficiency of the assets of said bank, to the-amount of the stock then owned by them respectively, or such portion thereof as shall be necessary to make such deficiency good.
In the bill as amended, the allegation’ of refusal to pay its bills, is made substantially as in the original bill; it also contains an allegation of deficiency, or loss of capital stock, and the insolvency of the bank by reason of the official mismanagement of the directors, before and on the 26th day of October, 1854, and of the inability of said directors to pay such loss or deficiency, by reason whereof the stockholders became liable to contribute to the payment of such loss and deficiency, to the amount of their stock.
The amended bill also alleges that, at the expiration of the charter of said bank, to wit, on the tenth day of January, A. D., 1855, that being the day on which the injunction against said bank was made perpetual, and on which receivers were appointed, there was outstanding and unpaid a large amount of the bills of the said bank, which had been issued thereby,' and for the redemption and payment of which the stockholders were by law liable to contribute, in proportion to the stock held by them respectively at the -time of the dissolution of the charter of said bank. .
The bill, as amended, also contains an allegation of liability on the part of the stockholders to contribute to the redemption of the bills of the bank, which were unpaid at the time of the dissolution of its charter, in proportion to the amount of stock held by them respectively at that time. The original bill contained no such allegation.
These amendments, it is contended, are inadmissible, because they introduce a new cause of action, which, if introduced would make the bill multifarious, and therefore bad on demurrer. ■
To determine whether these objections are well taken, it may be well to examine the statutes on which the liabilities of stockholders in banks are founded.
Sect. 41 of c. 77, K. S. of 1841, provides that stockholders shall be liable, to the amount of their shares, in case payment of any bill, note, check, or draft, issued by any bank and which it is liable to pay shall be delayed or refused for the term of fifteen days.
Sect. 44 provides for the liability of stockholders to the amount of their stock, to pay any loss or deficiency in the, capital stock of any bank occasioned by the official mismanagement of the directors, in case of the inability of the directors to pay such loss or deficiency. 'This liability attaches to stockholders who are such at the time of the official mismanagement of the directors.
Sect. 45 provides for the liability of stockholders for the redemption of the unpaid bills of the- bank, at the time of
It will be perceived that the liability of stockholders under § § 41 and 44 are to the same extent, though for different causes, to wit: to the amount of the shares held by them; but under § 45 the liability is only limited by the amount of unpaid bills.
The amendment' alleging loss by the official mismanagement of the directors, as the ground of liability, is not inconsistent with the allegations in the original bill, so far as the extent of liability, or the ground of that liability is concerned, and may therefore properly be deemed a specification of that claim. A declaration so defective that it woxxld exhibit no sufficient cause of action, may be cured by an amendment without introducing any new cause of action. This is often the very purpose of the law authorizing amendments. Pullen v. Hutchinson, 25 Maine, 249. Courts of equity are even more liberal in allowing amendments than courts of law.
It is also suggested that, in this amendment, the cause of action or ground of liability is not set out with sufficient distinctness. The proposed amendment may not be as specific as could be desired. But it is not fatally defective on that ground. ■ The general obligation of liability, its extent and the grounds on which it rests, are distinctly made. This is sufficient. A general charge, or statement of the matter of fact, is sufficient, and it is not necessary to chai’ge minutely all the circumstances which may conduce to prove the general chax’ge; for these cix’cumstances are properly matters of evidence which xxeed not be chai’ged, to let them in as proofs. Story’s Eq. PI., 24; 2 Dan. Ch. Prac., 994; Wheeler v. Trotter, 3 Swanst., 174, n.
It is also contended that the stockholders cannot be held to answer to the individual creditors of the bank, xxnder the provisioxxs of § 44, axxd the case of Baker v. Atlas Bank, 9 Met., 182, is relied upon as authority upon that point.
It is also objected that this amendment, if made and al
A majority of the Court are of opinion that these facts must be judicially determined as an independent preliminary proceeding, before a bill can be maintained against stockholders under the provision of the statute. This amendment is therefore denied.
The amendment based on § 45, is also objected to, on the ground that it introduces a new .cause of action. The original bill was brought by the receivers in their own names, but in behalf of the claimants of said bank, against the persons liable as stockholders thereof, to contribute to the payment of said claims. The substance of the claim is the liability of the defendants as stockholders. The specific grounds of that liability and its extent are imperfectly set forth in the original bill. It was, however, based upon the statute, and must be controlled and limited thereby. The amendment in this case seeks to make more specific and definite the ground of the defendants’ liabilities, and at the early stage of the proceedings in which the amendment was introduced, and in view of the authorities already cited, no valid objection is perceived to its allowance, on the ground that a new cause of action is thereby introduced. No answer has yet been made, and the defendants cannot be holden beyond their statute liabilities, by reason of the amendment.
But it is said that the amendment will be unavailing if allowed, for the reason that no demand is alleged to have been made for the payment of these unpaid bills, either at the bank, or its last and usual place of transacting business, as provided in § 46. The proceedings now under consider
No claim is made under § 41.
The legal capacity of tlje plaintiffs to prosecute this bill has also been called in question, on the ground that the board of receivers was never legally constituted; that the statute requires the appointment of three disinterested persons as receivers, and that Kennedy, being a stockholder, was not a disinterested person within the meaning of the law. The fact that Kennedy was a stockholder was not known to the Judge by whom ho was appointed, nor did the fact come to the knowledge of the Court until it was asserted in the bill now before us. But does this fact r.ender the proceedings of the receivers void? We think not.
In the case of Wiswell & al. v. Starr, already cited, the same objection existed, but was not held fatal. It does not appear, however, that the point was distinctly taken in that case, or that it received the particular attention of the Court. That case, therefore, may not be deemed conclusive or a precedent. But, on principle, the objection cannot prevail. First, for the reason, that the interest of Kennedy, if any he had, was in favor of the respondents, and not prejudicial to them. Therefore they are not in a condi
The receivers provided for, in § 67, are to be appointed on the application of bill holders or depositors, and the succeeding sections of the Act apply to them, and not to receivers appointed under § 62, unless so prescribed by the Court. In one case, the application is to be made when, in the opinion of the Bank Commissioners, the bank is insolvent, or its condition is such as to render its further progress hazardous to the public, in which case the action contemplates the closing up of the affairs of the bank. In the other case, the application is by a bill holder or a depositor to whom payment has been refused for the space of fifteen days after demand, and the action contemplates holding the assets of the bank by the receivers until such bills or deposits have been paid, and then a surrender of the balance to the bank. The proceedings have a different origin and contemplate different results.
It was not until the passage of the Act of 1855, c. 164,
When his legal position became incompatible with his private relations, and that fact became known to the Court, it became not only a matter of right to other parties to have his position changed, but a matter of duty on the part of the Court to see that such change Avas made. By allowing the amendment, by which his name was stricken out as plaintiff and inserted as defendant, his appointment as receiver was in effect revoked. The statute, § 62, requiring no specific number of receivers, the,suit may properly proceed in the name of the remaining plaintiffs of record.
It is contended that this bill cannot be maintained against certain parties thereto, who are charged as cestuis que trust, the trustees also being parties. In the case of Grease v. Babcock, 10 Met., 525, the Court decided the trustees must be parties, and, from the language used, the implication is strong that the cestuis que trust should not -be, or need not be parties, though there was no express decision on the latter point. The general rule is, that all cestuis que trust are necessary parties to suits against the trustees, by which their rights are likely to be affected. 1 Dan. Ch. Prac., 303; Story’s Eq. PL, §§ 192, 193, 207; Helm v. Hardin, 2 B. Monroe, 231.
In the case, in this bill, in which the trustees are alleged to bo Avives holding in trust for their husbands, the application of the general rule appears to be eminently proper.
This construction is the more apparent in view of the provisions of § 75, of the same chapter, wherein it is provided that no action shall be maintained against any bank after the appointment of receivers thereof, but all its creditors must seek their remedy under the provisions of the five preceding sections. Creditors, here, being used in the same sense as claimants in § 73.
In view of these considerations, we come to the conclusion that the demurrer must' be overruled, and that the question of costs, to be imposed as terms for amendment, will be reserved for the future consideration of the Court.
Demurrer overruled. —Defendants to answer.
The only method by which stockholders in a bank can be reached, and their liability enforced against them, "after the appointment of receivers,” is by a bill in equity, like this, — instituted by the receivers. R. S., c. 47, § 75. Actions pending die, under the provision that "no action can be maintained.” Costs in pending actions, which thus die, may be allowed as claims against the bank.
The right and duty of receivers to commence this process is specified in § 73. Before the statute of 1855, re-enacted as above, no such provision existed. Suits and actions and
It seems to bo contended, that, as by § 46, authority is given to a creditor of the bank, who is a holder of any unpaid bill, to bring a bill in equity against the stockholders, if the bill has been duly presented and demanded of the bank, at its last place of business, that no bill by the receivers can be sustained without proof of such prior demand. But it is manifest that the liability for unpaid bills, at the expiration of the charier, is expressly imposed on
It is true, that according to a strict and literal construction of § 47, when a creditor himself institutes a bill, he must allege and prove such demand, however useless or absurd it may be. But the general liability of the stockholder is created by § 45, and that is distinctly stated to be for the payment of all unpaid bills, at the time of the expiration of the charter, and nothing is there said about a demand. The receivers are to institute a bill against all persons liable as stockholders, and this, whether an individual creditor or bill holder might or might not sustain such a bill. The question is, does the law impose the liability? Nothing but the most imperative language, used in" such connection with the declared liability that it could not be separated, would lead us to hold a demand necessary, when so manifestly useless, if not absurd.
It seems to me, that the stockholders are to be held for the bills, if the bill alleges and the allegations are sustained by proof of the three following propositions. First — that the charter has expired, either by limitation or by injunction, and that receivers have been appointed. Secondly- — that bills issued remain unpaid, and that there are not sufficient assets to pay them. Thirdly, — that the respondents named were stockholders within the contemplation of law at the time of the expiration of the charter.. The liability arises from these facts. The rule of apportionment and assessment by this section is declared by the statute, to be according to the number of shares held by each stockholder.
It appears, on inspection of the original bill, that the
We are not to regard the bill with the strictness with which wc should pass upon a declaration for a gui tam penalty. The amendment comes within the rules of equity on that subject. Story’s Eq. PL, § 885. The only essential alteration is in the rule of assessment. The amendment will be made before any plea or answer to the merits is required, and cannot injuriously affect the respondents. They will have every reasonable opportunity to meet the allegations in the bill. It would be useless to dismiss this bill for this error, and to require the receivers to file a new one, on the ground of a mistake in stating the exact extent of the liability, when its nature and the grounds on which it rests are set out. It is but the common case of a good case defectively set out.
If this amendment is allowed, it covers the unpaid bills, and would seem to be sufficient to charge the stockholders to the extent of such bills remaining unpaid, but nbt for the other debts of the bank. It would seem that these bills constitute the principal part of the debts of the bank.
2. There is, however, another amendment proposed, based on the assumed liability of the stockholders for the loss or deficiency in the capital stock, occasioned by the ofiicial mismanagement of the directors. This amendment, if allowed, may cover, to. the extent of the stock owned, all the debts of the bank. In case of unpaid bills, the stockholders are hold liable to pay them all, in proportion to the stock owned by each stockholder. This may be a sum 'beyond
It is manifest, that, in order' to hold a stockholder for such loss of capital stock, certain facts must first be established; to wit — that there had been a loss or deficiency in the capital stock; that- it was occasioned by the official mismanagement of the directors ; that the directors, who were guilty, and who were liable to pay the same in the first instance, were unable to pay or to make good the deficiency.
The question is, how are these facts to be determined? Can the receivers, representing the creditors, insert in the bill, they are authorized and required to bring, a claim against the stockholders, based on this section of the statute? It was decided in Massachusetts, in a case involving the construction of a section of a statute, almost identical with our § 44 of c. 73, stat. 1841, that a creditor of a bank could not sustain a bill on this ground; that the bank alone could maintain a claim against the stockholders or the directors, to make good such deficiency, in the capital stock. This decision .might be satisfactory with us, if there were no other provisions in our statute. But, as shown in the opinion of Judge Rice, there is a positive and distinct provision in § 46, authorizing "any creditor of any bank, which may have sustained a loss or deficiency of its capital stock, through the official mismanagement of its directors, * * * to pursue his remedy, and avail himself of the liabilities of its directors and stockholders, specified in the two preceding sections, by a bill in equity in the Supreme Judicial Court.” This seems to give a creditor a clear right to bring such a bill, however difficult it may be to make it practically effective. By the existing law the receivers are to bring a bill, after their appointment, in their own name, instead of creditors, but in behalf of the claimants (not merely bill holders) against’the persons liable as stockholders, to "contribute to
It is to be observed, that whilst, in case of unpaid bills, the liability is immediate and absolute, resting on the simple fact of ownership of stock, in case of deficiency of capital stock, the liability of stockholders is contingent, and dependent upon certain preliminary facts — a loss of such capital — that it was occasioned by the mismanagement of the directors, and that the directors liable are unable to pay, or to make good such loss. How can these facts be determined in a bill, in which the directors, as directors, are not parties ?
The allegation must be of culpable mismanagement' — official delinquency — involving charges which seriously affect character. It would be unjust, and contrary to the genius of our institutions, for the Court to proceed to adjudicate upon such grave matters, without notice to the persons directly implicated.
If the directors are made parties to this bill, for the purpose of trying these issues, it may be insisted that such issues can only be tried by a jury, in a court of law. It is true that the statute, before referred to, giving a right to a creditor to'bring a bill, authorizes Mm to pursue by such bill his remedy against the directors as well as stockholders. But the statute, authorizing receivers to bring a bill in equity, does not, in terms, give any right to them to bring such bill against directors.
There is another difficulty. It is clearly not enough, in order to charge the stockholders, to show a loss of capital stock, and that it was occasioned by official mismanagement of the directors. There is another fact to be established, before a stockholder is liable therefor, viz., — that the directors, who are liable, are unable to pay such loss or deficiency. Now, before it can be judicially determined, that a person is unable to pay or make good a loss, for which he is liable, the fact and the exact amount of such liability,
It is true, that the receivers are to institute their bill on behalf of all claimants, — i. e., of all who are creditors of the bank. But against whom is it to be brought? The statute answers; " against the persons liable as stockholders of the bank to contribute to the payment of its debts.” There is no authority given the receivers to institute a bill against the directors, for the loss of capital stock. But a creditor may bring such bill, and the provision in § 74, c. 47, R. S., 1857, that no action shall be maintained, after the appointment of receivers, against the bank, does not repeal the provision giving a creditor a right to institute process against the culpable directors, even after the appointment of receivers. Such suit would not be an action against the bank, and such actions only are prohibited or discontinued by this section of the statute. The claim or right of action, given to a creditor against a delinquent director, is not a claim against the bank, but primarily a pei’sonal liability of the director, which may be enforced against him, and, if he is able, may be collected from his property, without any action against the bank or the stockholders. But, if a creditor had instituted such proceedings in equity, before the appointment of receivers, and had obtained a judgment or decree against the directors, for a certain amount, and thereupon'had taken out an execution against them, which had been returned nulla bona, before the receivers had filed their bill, and the inability of the directors had been legally established, we see no reason why the receivers might not properly set out in their bill these facts, as grounds for the stockholders’ liability under the statute. And perhaps all
I do not deem it necessary to discuss any other questions than those relating to the proposed amendments.
The opinion is not in the hands of the Reporter.