48 A. 1038 | R.I. | 1901
The complainants are judgment creditors of the Providence Tool Company, and, having issued an execution against said company, which has been returned "nulla bona," bring this bill, alleging that the defendants were stockholders of the tool company at the time when the complainants' debts were contracted; that the company never made any return of its organization or any return of its standing, as required by its charter and the statute to which its charter is made subject; and that, therefore, the defendants are jointly and severally liable to satisfy the judgment against the company.
An analysis of the bill is given in the opinion rendered January 30, 1896,
Another opinion, December 12, 1896,
January 11, 1897, the bill was dismissed by consent as against Arthur Knight, Wilmarth H. Thurston, Cornelia R. Thurston, John R. Gladding, and John O. Thurston, and February 24, 1897, a decree was entered dismissing the bill as against Pallas S. Wheeler, Elizabeth G. King, and Elizabeth V. Andrews, upon the ground stated in the opinion of December 12, 1896.
The remaining defendants set up in their answers various defences. Amongst them the statutes of limitation are pleaded in various forms: First, as barring the present suit against the stockholders; and, secondly, as a defence which might *609 have been pleaded to the action of assumpsit wherein judgment was obtained against the corporation.
There was some contention, in the argument of the case, as so what statute the alleged liability of the defendants should be founded upon.
The charter granted at the June session, 1847, by its terms imposed upon the corporation and its stockholders the liabilities set forth in the general law applying to manufacturing corporations, passed at the same session but not taking effect till after adjournment. The latter statute contains a provision that it may be amended from time to time, and it was amended before the contracting of the debts in question. At that time the law upon the subject was contained in chapter 600 of the Public Laws, passed March 27, 1877, and the same provisions are now found in sections 1, 12, 13, and 22, of chapter 180 of the General Laws, 1896.
We have no doubt that the new provisions apply to stockholders under this charter. The language of Pub. Laws cap. 555, passed April 20, 1876, is: "The liability of a member of an incorporated manufacturing company provided by sections 1 and 12 of chapter 142 of the General Statutes, and of the members of such corporations under other statutory provisions for the debts of such company hereafter contracted, or for obligations hereafter incurred, shall be and hereby is limited," etc.
Section 2 of chapter 600 of the Public Laws is identical with section 22 of chapter 180 of the General Laws, and reads as follows:
"SEC. 2. All proceedings to enforce the liability of a stockholder for the debts of a corporation shall be either by suit in equity conducted according to the practice and course of equity, or by an action of debt upon the judgment obtained against said corporation; and in any such suit or action such stockholder may contest the validity of the claim upon which the judgment against such corporation was obtained upon any ground upon which such corporation could have contested the same in the action in which such judgment was recovered." *610
This section gives no action to the creditor against the stockholders until he has exhausted his remedy against the corporation. It was so argued in Third National Bank v.Angell,
It is argued by some of the defendants that the liability of the stockholder, at least under section 1, is primary and absolute from the time of contracting the debt, and that, therefore, the statute of limitations begins to run in his favor immediately. Such would doubtless be the case if an action against him were given immediately, as in some of the cases cited by counsel. In Stilphen v. Ware,
The case held that in a suit upon a debt due from a corporation the liability of the stockholder "was created" when the debt became due.
Hardman v. Sage,
Bassett v. Hotel Co.,
Sullivan v. Sullivan Mfg. Co.,
The liability attaches to the stockholder when the debt is incurred, but no statute of limitation begins to run in his favor until a right of action against him is acquired by the creditor.Bank of U.S. v. Dallas, 4 Dana, 574; Hawkins v. FurnaceCo., 40 O. St. 507; Bronson v. Schneider, 49 O. St. 438;Handy v. Draper,
When Judge Durfee, in Moies v. Sprague,
The statutes of limitation likewise affect remedies not obligations.
The creditor under our statute cannot bring debt on judgment until he has obtained the judgment; and when his right of action accrues, the statute of limitations begins to run against him.
It is argued, again, that the liability imposed by the provisions of the law is penal, and, hence, that the action or suit brought against the stockholder must be begun within one year from the time it accrues. But the statute of limitations which these defendants refer to has no application to civil actions, strictly so-called. Section 8 of chapter 288, which is referred to, is as follows:
"All suits or prosecutions founded upon any penal statute which are wholly or in part for the use of the prosecutor, shall be brought within one year, and all other suits and prosecutions on such statute within two years after the commission of the offence, unless otherwise provided."
A glance at the chapter in which these words appear will show that they refer to the recovery, by action of debt, of fixed pecuniary penalties which the statutes have imposed for misdemeanors or violations of the public law. The chapter is entitled, "Of fines, penalties, and forfeitures." Section 2 provides:
"All complaints and warrants, indictments, actions, and informations founded on any penal statute shall be brought within the county in which the offence was committed." Section 3:
"Unless otherwise specially provided for, all fines recovered shall be to the use of the state; and all penalties and pecuniary forfeitures, one-half thereof to the use of the state and one-half thereof to the use of the person who shall sue for *613 the same; all forfeitures of personal property shall be disposed of as by law shall be provided;" and section 4:
"All fines, penalties, and forfeitures, whether of money or property, of twenty dollars or under, shall be prosecuted before a district court; if upwards of twenty dollars in amount or value, before the common pleas division of the supreme court, unless otherwise specially provided."
The provisions of this chapter have no application to the recovery of the penalty of a bond or to any money claim, whether arising from agreement or tort, by promise or by operation of law, lying in the domain of private right and not affecting the course of public justice.
Penal statutes, in the meaning of this chapter, are statutes imposing penalties for some violation of public right.
That the effect of this statute is to impose a penalty upon the stockholder for the default of the corporation may be admitted. Sayles v. Bates,
The Supreme Court Commission of Ohio arrived at exactly the opposite conclusion in regard to the statute of that State, which was in the same words. Hawkins v. Furnace Co., 40 O. St. 507.
In Patterson v. Thompson, 86 Fed. Rep. 85, the statute of limitations of Oregon is not given. But we infer from the argument of the court that it resembles the New York statute rather than our own. The case was also against the *614 directors of a corporation, for declaring dividends when the corporation was insolvent.
In Attrill v. Huntington,
The Supreme Court of the United States, where this case was taken on writ of error, reversed the decision of the court and approved the minority opinion,
"In the municipal law of England and America the word `penal' and `penalty' have been used in various senses. Strictly and primarily they denote punishment, whether corporal or pecuniary, imposed and enforced by the state for a crime or offence against its laws. United States v. Reisinger,
"Penal laws strictly and properly are those imposing punishment for an offence committed against the State, and which by the English and American constitutions the executive of the State has the power to pardon. Statutes giving a private action against a wrongdoer are sometimes spoken of as penal in their nature, but in such cases it has been pointed out that neither the liability imposed nor the remedy given is strictly penal."
The statute of limitations we are considering is very clearly applicable only to penal actions strictly and properly so-called, and does not affect the present action. The statute here applicable is that which allows twenty years for bringing an action of debt on a specialty. Gen. Laws cap. 234, § 4; Atwood
v. Agricultural Bank,
It need hardly be said that this construction of chapter 288 is not a decision that the provisions of chapter 555, Public Laws, imposing special liabilities upon stockholders and officers of manufacturing corporations, in cases of non-performance of statutory duties, are not of a penal character. Chase v.Curtis,
From what we have said above, it follows that the defendants cannot rely upon any statute of limitations to bar the present suit, unless it is one upon which the corporation could have contested the suit against itself. The statute, however, permits the defendants to plead, as all of them have done, the statute of limitations as a defence which the corporation might have set up in the suit against it, and we are called upon to consider whether this defence, if it had been pleaded in that action, should have prevailed.
The claim sued upon consisted of a book-account for goods sold and delivered, and nine promissory notes, the last of which *616 became due July 14, 1882. Upon these notes and this account payments were made August 18, 1882, February 9, 1885, and December 5, 1885. The complainants contend that these payments constituted new promises, and the last one having been made within less than six years before the commencement of the suit, November 17, 1891, takes the case out of the statute.
The defendants contend that the circumstances in which these payments were made preclude any inference of a new promise.
The question came before the court in Peabody v. Tenney,
The case was heard upon bill and answer. No evidence was taken. The answers admitted that the payments were made by the corporation, but claimed that, inasmuch as the corporation was compelled by circumstances to allow the creditors' committee to make these dividends, it made them under duress and not voluntarily. This was the only point considered by the court, no contention being made that the payments were in any other way restricted. The decision was inevitable that the circumstances set up did not constitute duress, but that the payments were voluntary. Such payments are prima facie ground for inferring new promises, and, in the absence of other proof, the court gave the payments that effect.
There is nothing in that case to preclude a re-examination of the transaction in the present proceeding between different parties and with all the attainable facts in evidence.
April 19, 1882, the president of the company issued an invitation to the creditors to meet on the 22d of that month "for the purpose of hearing the statements to be made by the company and taking action upon the present condition of affairs." At the meeting a full statement was submitted to the creditors, and they unanimously appointed a committee to investigate and send a copy of their report to every creditor, and assumed to give the committee "power in their discretion to make use of and employ any of the funds and *617 assets of the company, for the purpose of finishing any of the manufactures of the company in process, to make such products of more value, and to permit them to be sold for the benefit of the company."
The committee issued a report, May 20, giving the creditors a detailed statement of the affairs of the company and recommending the selection of three trustees and the conveyance of the property to them, with the view of selling part of the property, not needed in the business, and paying the proceeds of sales and profits of the business on the debts of the company. A meeting of the creditors was held May 26, at which the creditors voted to adopt the recommendation of the committee, and, in the meanwhile, the record of the meeting says: "The original creditors' committee was requested to operate the works in their discretion until the trustees shall have been appointed and the papers executed."
On the 21st of August, 1882, the company, through its president, issued another circular to the creditors, in which it is said: "The company regrets to announce that it is now powerless, as, while its first object has been to pay its debts in full, the obstructive course taken by some of its creditors makes this impossible, and makes an assignment unavoidable as well. Immediately upon its failure, the company put the control of its affairs without reserve into the hands of a committee of creditors, and, moreover, offered the earnest services of its officers in aid of a prompt settlement. . . This sale (of the sewing-machine property) has finally been effected after much delay and under so many difficulties and humiliating negotiations that the company is utterly discouraged from further attempting a settlement of its affairs. We understand the creditors' committee also declines to do anything more. The two committees were chosen by the creditors without opposition, and in full meetings, without a nomination or the slightest suggestion on the part of the company as to its desire in the matter. The company, without hindrance of any kind, has endeavored to further the objects of the committee," c.
December 12, 1882, the following was issued: *618
"COMPANY'S CIRCULAR.
"To the creditors of the Providence Tool Company:
"Our last circular was dated May 21 last. Following this the committee called a meeting of creditors, which was held in Providence on the 29th of August, and was largely attended. At this time the committee of eleven made a report announcing that the object for which it was appointed (viz.: the choice of trustees and the conveyance of the company's property to persons so chosen for the benefit of all creditors) could not be accomplished. The resignation of the committee has accordingly been accepted.
"The first committee of five was requested to continue in charge of the property and business of the company. . . .
"The officers of the company have reported to the committee all their doings, submitted separate statements of its business and accounts, and sought the committee's advice in all matters.
"It is earnestly hoped that some means will speedily be found both to dispose of the property of the company and to divide the proceeds among its creditors.
"Respectfully submitted, "In behalf of the company, "JOHN B. ANTHONY, President.
"PROVIDENCE, R.I., December 12, 1882."
The evidence corroborates the statement of these circulars as to the relation of the committee of creditors to the corporation. The committee appointed by the creditors were allowed by the corporation to take the property and manage it as they saw fit, or as the general body of creditors directed, with the object at first of selling off surplus property and running the remainder in the hope of paying the debts in full; but it is clear that as early as August, 1882, all parties had abandoned any hope of doing more than turning the property into money and dividing the proceeds among the creditors. For this purpose the committee continued to exercise absolute control over the property of the company and *619 its business, using its officers to carry out their plans. The stockholders held no meetings until November 27, 1891, when they assembled to vote to make a general assignment to the survivor of the creditors' committee. The manufactory was shut down before the appointment of the committee, and was only run afterwards under their control. The directors of the corporation ceased to meet, and took no part in the management of the business. The creditors, by their committee, took actual possession and control of all the property of the company and out of the proceeds of the property paid themselves three dividends, amounting in all to fifty per cent. of the indebtedness. It is the payments of these dividends — August 15, 1882, February 9, 1885, and December 5, 1885 — that the plaintiffs rely upon as grounds for inferring a new promise by the company.
It may not be easy to define the exact legal status of this committee with reference to the corporation and the creditors. It is very plain that in fact they assumed the place and performed the duties which assignees have and perform in winding up the affairs of an insolvent debtor. After July, 1882, when the plan for a three years' extension and a conveyance of the property to trustees was abandoned (see circular), there was no hope or expectation that anything else could be accomplished than to make the most of the assets for the benefit of the creditors, and the committee were left in charge to do this. In the scope of this employment they managed the business, sold the property, and divided out the proceeds amongst the creditors who had appointed them. We do not see how the creditors who appointed them, who directed their action, and who shared in the dividends, can question their title or say that they were not assignees of the company de jure as well as de facto; but if we fall back upon the proposition that in what the committee did with the assets of the corporation by its sufferance they were in law the agents of the corporation, we must still limit their agency by reference to the object of their appointment, which was to do these acts, as assignees, for the purpose only of disposing of the assets and dividing them amongst the creditors; and so we *620
do not think that we can give to their acts, under this limited agency, any different construction than the law attaches to similar acts when performed by an assignee duly constituted. It is not enough that the agent is authorized to make the payment; his authority must bind the principal by a promise to pay, and such authority cannot be implied from the bare authority to make a payment. Winchell v. Hicks,
The agreement that they should act virtually as assignees was proposed by the creditors, assented to by the president of the company in its behalf, ratified by the silence of the directors and stockholders, and made binding on all parties by acts performed.
A fair deduction from the conduct of the parties is that the acts which the committee performed in the capacity of assignees should be given the same force and credit as if the legal title to the property had been conveyed to them in trust for the benefit of the creditors, but we do not think that the law requires us to give to their acts an interpretation which is not necessarily implied from the nature of their employment.
It is well settled that payments to a creditor by an assignee out of an assigned estate do not avoid the statute. I Wood on Lim., p. 278, § 99; p. 281, § 101; Roosevelt v. Marks, 6 Johns. Ch. 266; Pickett v. Leonard,
Again, the corporation is entitled to have these payments interpreted in connection with the declarations of the president to the creditors when he, on behalf of the company, turned over the business and assets to them. If, in making this transfer of control, he acted as agent of the company, and this act was ratified by the company's silent acquiescence, his declarations on the company's behalf were its declarations also. It must be remembered that the payments were not made by any vote *621 of the directors or of the corporation, but by direction of the committee after the president had put them in control and submitted the corporation officers to their orders. If the silence of the corporation ratified the payments, it ratified them only coupled with the president's declarations.
It was early declared by this court that a partial payment is only prima facie ground for inferring a new promise. It is said by Chief Justice Job Durfee in Read v. Johnson,
It is said in Wood on Limitations, section 104: "The principle upon which a part payment of principal or interest by a debtor will prevent his availing himself of the bar of the statute is that such a payment amounts to an acknowledgment of the debt, and from an absolute acknowledgment, as we have seen, the law implies a new promise founded in an old consideration to pay," citing, among other cases, Turner v. Ross,
And in section 105, page 289: "The rule is that a partial payment on a debt, whether of principal or interest, is primafacie evidence of an acknowledgment that the residue is unpaid, and suspends the running of the statute from that date, and such payment may be proved by parol. It follows, therefore that the implication of a promise derived from part payment of principal or interest is liable to be rebutted, and it will not take the case out of the statute unless under circumstances which do not negative the implied promise to pay the residue." See, also, 2 Smith's Lead. Cas., 9th Am. Ed. 909.
Now, nothing could be plainer than the declarations in the circular of August 21, 1882, which, according to the evidence, was sent to every creditor. It notified them, in substance, that every effort had been made so to continue the business as to pay the debts in full; that these efforts had been frustrated, and the company had turned over all its assets and had given the services of its officers into the hands of the committee for the purpose of turning all its property into money and dividing the proceeds amongst its creditors. It promised, in effect, to allow the committee to pay out the assets, but notified the creditors that beyond this the company could do nothing.
Such expressions as these: "The company, however, regrets to announce that it is now powerless, as, while its first object has been to pay its debts in full, the obstructive course taken by some of its creditors makes this impossible," and "The company is utterly discouraged from further attempting a settlement of its affairs," and "We believed our property to be ample to pay all debts; we offered our best *623 services in accomplishing such a result, but we have been prevented from doing this," c., and "This statement is made in the hope that the large body of creditors will understand that the company has done its utmost to obtain the best results from its property and to pay all proper claims in full," and, finally, "The up-town factory is now running, under the authority of the committee, for the purpose of completing some unfinished work, but it will be again stopped within a few days, and what remains of a business built up by thirty years' labor will be lost," are equivalent to saying, what was obvious to all the creditors as the simple truth, that the corporation could not pay any balance that might remain of its debts after the property then in the control of the creditors' committee should have been distributed. And the payments which were made afterwards from that fund were received by the creditors with this notice that the corporation undertook to do nothing further.
In the light of these declarations, we do not see how it is possible to infer a new promise from these payments. Such could not have been, in the words of Chief Justice Job Durfee, "the intent and meaning of the party." As was said in Phelps v.Stewart,
So it was held in Manning v. Wheeler,
Having reached this conclusion, we need not discuss the further defences raised by different defendants. As the debts on which the bill is brought are barred by the statute of limitations, the bill must be dismissed.