Lamkin v. Baldwin & Lamkin Manufacturing Co.

43 A. 593 | Conn. | 1899

Lead Opinion

A corporation known as the Baldwin Lamkin Company acquired, in payment of subscriptions to its capital stock, certain real and personal property formerly belonging to the firm of Baldwin Lamkin, under conveyances, part of the consideration for which was its undertaking to pay certain of the partnership debts. The company is now in the hands of a receiver, who holds the property. But one *62 claim against the partnership has been presented to him for allowance, and that is a bill for taxes due the town of Milford. Other claims to a large amount have been presented for liabilities contracted by the corporation in the course of its business, after receiving the conveyances in question.

The corporation stepped into the shoes of the partnership, in respect to certain property and certain debts. There is no legal objection to such a contract, and the receiver is bound to fulfill its obligations so far as he has assets which are equitably applicable to the purpose. Waterman's Appeal, 26 Conn. 96,108.

No right of action at common law was given to the creditors whom it was designed to secure. Clapp v. Lawton,31 Conn. 95; Baxter v. Camp, 71 id. 245. If the town of Milford be one of them, it has only an equitable claim derived from the partners, who made this provision for it. But their manifest object in the conveyances from Baldwin to Lamkin and Lamkin to the corporation, was to shift the firm liabilities in whole or part upon a corporation which should succeed to its property and continue its business. It was to be little more than the partnership under a new form. To accomplish this it was necessary (General Statutes, §§ 1947, 1948) to represent it to the world as possessed of a certain capital, of which twenty per cent had been paid in, in cash; and this was done. Upon the credit of this capital the corporation afterwards contracted debts of its own, to a considerable amount, which have been allowed by the receiver. These must be satisfied in full before anything can be paid on the partnership debts. The provisions as to the latter, in the deeds of conveyance, created no specific charge in terms upon the property conveyed. They were referred to as part of the consideration; but the title transferred was absolute. No equity to such a charge followed it, unless in favor of the partners; and those now claiming under them must work through their equities and can have no rights superior to theirs. Case v. Beauregard, 99 U.S. 119. It is plain that neither Baldwin nor Lamkin could divert to the discharge of his own liabilities, property on the faith of which the corporation, *63 with his aid and consent, had gained credit for itself, and which was necessary to satisfy the indebtedness thus contracted. The partnership creditors must be postponed under the same rule. Ashmead's Appeal, 27 Conn. 241, 247.

Subject to such postponement, so many of their claims areprima facie entitled to be allowed as were embraced in those amounting to $61,000, which the corporation assumed by vote of the directors on February 14th, 1898. The conveyance to it by Lamkin, its principal stockholder, made the next day, in which it is part of the expressed consideration that it shall assume and pay all the liabilities of the partnership, cannot avail in his favor, or in favor of those claiming through him, to enlarge its obligation, in the absence of proof that the insertion of this clause was authorized or ratified by the corporation.

It is found that the firm in fact owed a sum exceeding $61,000 by several thousand dollars. The burden is upon the town of Milford to show that its claim for taxes was included in the debts estimated at $61,000. Unless that be shown, its claim for the taxes assessed against the partnership should be disallowed. If that be shown, this claim should be treated as if it had been presented by Lamkin, after he had paid the amount due upon it to the town. The equities that might arise in that event between him and the receiver we cannot fully determine upon the facts found. It may be that the latter could properly set up as a defense in whole or part the falsity of the estimates upon which the capitalization of the corporation was based.

The taxes assessed against the corporation upon the real estate in the hands of the receiver should be allowed and are entitled to a preference. As to them, the only effect of the receivership was to change the mode of collection. To levy a warrant upon property thus in the custody of the court would be inadmissible, but this is because the fund is already in course of judicial administration and may be said to be held by the receiver in equitable execution. In re Tyler,149 U.S. 164, 183.

In the settlement of the estate of an insolvent debtor, in *64 the Court of Probate, "all lawful taxes" are entitled to a priority of payment. General Statutes, § 532; Public Acts of 1889, p. 20. If such an estate is settled in a court of equity, through the agency of a receiver, the same rule must be applied. The principles which determine the rights of creditors cannot be varied because presented in one forum rather than another, under the same government. In re Waddell-EntzCo., 67 Conn. 324, 338; In re Greeley Co., 70 id. 494. The title to the land remained in the corporation; only the possession passing to the receiver. It was therefore properly listed for taxation in the name of the corporation. General Statutes, § 3805. As to cash realized by a receiver from sales, and held temporarily to await an order of distribution, a different rule may, under certain circumstances, be applied.Brooks v. Hartford, 61 Conn. 112.

This preference can in no event extend to the claim founded on the taxes due from the partnership. The statute refers only to taxes assessed against the insolvent debtor. It is not one to be extended by construction beyond the plain meaning of its terms. Taxes assessed against third parties which the insolvent debtor has promised them to pay, may be a proper foundation of a claim against his estate, but the claim itself will be simply on his own contractual obligation.

The form in which the town presented its claim was not well adapted to express the real matter in demand. There should have been a statement that the taxes against the partnership were assumed by the corporation and that Lamkin with whom the contract was made has presented no claim upon it against its estate. For want of this, the equity which the town intended to set up was left without any proper support. No exception on this score, however, having been taken to the claim, the informality is to be treated as waived. Cothren'sAppeal, 59 Conn. 545.

The evidence offered by the town and objected to by the receiver was relevant and admissible. It went to show the true character of the transaction out of which the equities in favor of the town accrued, as compared with the outward form which it assumed in the proceedings incident to the *65 organization of the corporation. It did not follow from the facts so proved that the corporation never came into existence. There was at least a corporation de facto, and it is immaterial, as respects the claims of the town, whether it was or was not one de jure, also. Canfield v. Gregory, 66 Conn. 9,17. A corporation de facto is in plain English a corporation in fact. It can incur obligations as a corporation which do not bind those who associated to constitute it, in their individual capacities, and from which they cannot, by procuring the appointment of a receiver, enable it to escape. Every liability of the Baldwin Lamkin Company is the proper subject of a claim against its estate in the present action.

The receiver is its receiver, not that of the partnership, nor is he bound to fulfil the partnership obligations except so far as they may have been assumed by the corporation. That liability rests on a mere personal contract, and is secured by no lien upon the property which it received. The town, so far as the partnership taxes are concerned, must claim under the contract of the corporation, and has no claim, unless there was a corporation capable of contracting with it. As to its demand for taxes assessed against the corporation, that rests equally upon the existence of the corporation as a holder of the legal title to the land assessed. They are due from the corporation, or its representatives, and the claim was properly presented against its estate, and against that only.

That the partnership was insolvent did not show that the corporation originally was, since some of the partnership creditors were subscribers to its capital, and thus converted their claims into stock. But had it been insolvent from the beginning, this would not have varied its character as a corporationde facto, nor the relations of the receiver to the property which came down from the partnership, so far as concerns the claims for taxes presented in this proceeding.

The receiver claims that in no event could the corporation be bound to respond to the partnership obligations, because of the statute of frauds. General Statutes, § 1366. The vote of the directors of a corporation, duly recorded, is a *66 sufficient memorandum in writing, and the signature of the recording officer in attestation of the minutes a sufficient signing by the party to be charged. It is found that the vote of the directors of the Baldwin Lamkin Company was passed at a meeting at which all of them were present. It thereupon became the duty of the clerk of the board to record it, and at a proper time to verify the record by his signature. The law presumes, in the absence of evidence to the contrary, that all this was done. Lane v. Brainerd,30 Conn. 565; Chase v. Tuttle, 55 id. 455, 468.

The Superior Court is advised that the taxes assessed against the corporation on the list of 1898 should be paid next after the expenses of executing the trust and settling the estate, agreeably to the rule prescribed in General Statutes, § 532; that the claim for taxes assessed against the partnership is not a lien or charge upon any of the property in the hands of the receiver, and can in no event be a preferred claim, or paid at all, until after all claims, other than those founded on the assumption by the corporation of the partnership obligations, have been paid in full; and that whether it should be allowed at all should be determined upon the principles laid down in the foregoing opinion, with the aid of any further evidence which may be necessary to present all the material facts.

In this opinion the other judges concurred, except HAMERSLEY, J., who dissented.






Dissenting Opinion

The substantial condition, as affecting the claim of the town of Milford, is this: Mr. Lamkin, as a partner, as well as by agreement, was the immediate debtor of the creditors of the firm of Baldwin Lamkin to an amount exceeding the sum of $61,000. He was, as a partner, as well as by agreement, the sole owner of property valued at $61,000, which in his hands was subject to attachment for the satisfaction of these partnership debts. He conveyed this property to the Baldwin Lamkin Manufacturing Company, and the corporation in consideration of *67 that conveyance promised Lamkin to assume and pay obligations of the firm to the amount of $61,000. The corporation received and has ever since enjoyed the property or its proceeds, but has not paid the obligation of the partnership to the town of Milford. In presenting its claim to the receiver the town, in legal effect, brings an action to enforce the obligation of that corporation to it. No question of the statute of frauds is involved; if the promise must be treated as one to answer for the debt of another, it is in writing. That the town has (assuming that the taxes are an obligation of the partnership within the meaning of the agreement) a right of action against the corporation, is admitted. The material question is one of marshaling the assets. Shall the claim of the town be postponed to the claims of other creditors? The majority of the court hold that it shall; and the reason implied in the opinion of JUDGE BALDWIN is, that the town's right of action is one to enforce Lamkin's rights against the corporation under its promise to him, and therefore the town, deriving its right from Lamkin, can have in the marshaling of assets no equities superior to his; and as Lamkin could not divert to the discharge of his own liabilities, property on the faith of which the corporation with his aid had gained credit for itself and which was necessary to satisfy the indebtedness thus contracted, so the town standing in his shoes comes under the same rule.

I cannot let this implication pass unchallenged. It is not essential to the decision of the case, and involves a view of the ground of action in similar cases which seems to me untenable, and which I believe the court, if the question should be directly presented, would be obliged to hold untenable.

The rights of Lamkin against the corporation arise from the promise to him. The promise to him gives no right of action to the town against the corporation, either at law or in equity. There are authorities which hold that in every instance where a promise is made to one for the benefit of another, the latter can maintain a suit upon that promise; but such is not the law in this State. The true distinction is clearly stated in Treat v. Stanton, 14 Conn. 445, 453, 454. See *68 also Meech v. Ensign, 49 id. 191, 203; Waterman's Appeal, 26 id. 96, 107; Clapp v. Lawton, 31 id. 95, 104; Baxter v.Camp, 71 id. 245, 248, 249. The case last cited stands upon the doctrine of Treat v. Stanton, and was not intended to and does not modify or extend that doctrine.

It is inconsistent with this settled law, to hold that the town has a right of action derived from Lamkin to enforce the promise made to him. When a promise is made by one to another for the benefit of a third party, that third party has no right of action on the promise, unless the promisee is in fact, or can be considered in law, his agent; and has no right of action at all unless the benefit to him involves something more than a mere gratuity. In the latter case, that is, when the rights or interests of the third party are involved in the consideration of the contract, or are affected by the transaction, he may have a right of action, not upon the promise or contract to which he was not a party, but upon the obligation arising in his favor from the transaction of which the contract is one element. Such right of action may be at law or in equity, according to the circumstances; but in any event it is a right to enforce a direct obligation from the promisor to the third party. Sometimes cases of this kind have been treated as furnishing evidence of an agency between the third party and the promisee, and for this reason an action upon the promise has been maintained. But unless such agency is clearly shown, the true ground of action is, not upon the promise, but upon the duty arising from the facts of the transaction. Meech v. Ensign, supra, p. 203.

When the corporation accepted the property valued at $61,000, — knowing that in Lamkin's hands it was subject to attachment by his creditors who had claims exceeding that amount, and that Lamkin in conveying it intended to appropriate it for the benefit of the creditors whose rights in enforcing their claims would otherwise be seriously damaged by the transfer, — the law imposed upon the corporation a duty to the creditors, independent of its duty to Lamkin under its promise to him; and this duty the creditors, taking proper steps for that purpose, could enforce by action, independent *69 of any right of action in Lamkin against the corporation. Had the corporation assumed to pay each creditor a sum named and received property actually the equivalent of that sum, an action at law might be maintained; but the facts in this case render an action in equity the proper remedy.

As the town of Milford is not suing upon a right derived from Lamkin, but upon a direct obligation from the corporation to itself, the reason given in the opinion for postponing its claim to the claims of other creditors is insufficient. A postponement, or at least a reduction of the claim, may be justifiable for other reasons; but it is unnecessary for me to discuss the question. The liability of the opinion as written, to invite inferences as to the nature of actions of this kind which I believe the court will be unable to accept when such question shall come before us directly, is the main reason for my dissent.