9 R.I. 541 | R.I. | 1870
Lead Opinion
This action is brought against the defendant, as administrator of the estate of the late Byron Sprague, deceased, to charge the estate by reason of certain alleged statutory liabilities incurred by the decedent as a stockholder, a director, and the president, of the Union Horse Shoe Company, upon four promissory notes of the company, or upon said notes, alleging that they have been reduced to a judgment against the company.
The first and fourth counts of the declaration declare upon the liability of the decedent as a stockholder, — the first in respect of the four notes, and the fourth in respect of said notes, alleging they have been reduced to a judgment, with other allegations. There is an obstacle, which is, in our opinion, insuperable to the plaintiff's recovery upon those counts, for the reason that, where the liability is that of a stockholder, the nineteenth and twentieth sections of chapter 128 of the Revised Statutes provide certain remedies, neither of which is by an action on the case against him personally; and the rule is, that where a statute creates a *544
right or liability and prescribes a remedy, the remedy prescribed is the only remedy. 1 Chitty's Pl. 112. Smith v. Drew,
Whether the liability of a stockholder, especially if he die before judgment recovered against the corporation, (Handrahan
v. Cheshire Iron Works, 4 Allen, 396,) survives in any manner at law against his estate, we need not determine. See Dane v.Dane Manufacturing Co. 14 Gray, 488; Child v. Coffin,
We may further remark, that one of the four notes mentioned in the declaration was not made until after the death of Byron Sprague. As to that note, we do not see how it can be claimed that he ever incurred any, even an incipient, liability, either as a stockholder or as an officer of the company.
The second count declares upon the four notes, as a claim against the estate by reason of a liability incurred by the decedent as a director of the Union Horse Shoe Company, under section 13 of chap. 128; and the third count declares upon the four notes, as a claim against the estate by reason of liability incurred by him as president of the company, under sections 2 and 3 of chapter 128. It is not denied but that each of these counts states a case upon which the decedent, if he were still alive, would have been liable, either in an action on the case brought against *545 him personally, as provided by section 18 of chapter 128, or by a suit in equity under the twentieth section. But he is dead, and the question is, whether the notes, or any of them, are a claim against his estate, upon which his administrator can be sued in in this action.
After the death of Byron Sprague, his estate was represented insolvent, and commissioners appointed thereon, to whom the plaintiff in due time presented the notes, as a just claim and debt against the estate, and, the same having been rejected by the commissioners in their report, he has proceeded under the statute to bring this action against the administrator.
The counsel for the defendant contends, that the plaintiff has no claim or debt against the estate, within the meaning of the statute regulating the settlement of insolvent estates of deceased persons, by reason of any of the liabilities incurred by the decedent, as alleged in the plaintiff's declaration.
The statute regulating the settlement of insolvent estates of deceased persons, (Rev. St. ch. 158,) uniformly speaks of the persons entitled under its provisions against the estate as "creditors," and of the right by virtue of which they shall be so entitled, as a "claim" or "debt." The first section provides (subject to certain preferences) that "when the estate of any person deceased shall be insolvent, or insufficient to pay all the just debts which the deceased owed, the same shall be distributed to and amongst all the creditors in proportion to the sums to them respectively owing, so far as the said estate shall extend." The statute further provides for having the estate represented insolvent, and for commissioners to examine the claims against the estate, and to make their report and present a list of the claims by them allowed. The eighth section provides that "notwithstanding the report of the commissioners, any creditor whose claim is wholly or in part rejected may have the same determined at common law, in case he shall give notice thereof in writing in the office of the clerk of probate within forty days, and bring and prosecute his action within sixty days, after such report shall be received."
We do not find it necessary, for the purposes of this case, to *546 decide whether every liability of a decedent which gives an action or cause of action that survives, either by statute or at common law, constitutes a claim which is provable before the commissioners upon his estate, the same being represented insolvent. But supposing that it does, we think that at least we cannot go beyond that, and hold that a liability which does not give an action or cause of action that survives, will constitute such a claim; for by the eighth section, above quoted, any creditor whose claim is wholly or in part rejected may have the same determined at common law, in case he shall give notice, etc., and bring and prosecute his action within sixty days.
Do the liabilities, upon which the second and third counts of the plaintiffs declaration are based, give actions or causes of action that survive? If they do, it is because the actions or causes of action which they give survive at common law, for they are not within the statutory provision for the survivorship of certain causes of action and actions in addition to those which survive at common law. (Rev. Sts. c. 176, § 10.)
According to the leading case of Hambly v. Trott, Cowp. 372, which has been uniformly recognized as authority in subsequent cases; Cravath v. Plympton,
In this case there is no contract between the plaintiff and the decedent expressly alleged or proved; nor is it shown that the estate of the decedent has been increased by any thing done or *547 omitted to be done, whereby the liabilities alleged in the second and third counts were incurred, which would warrant the presuming of any contract, — each of these counts being framed simply with a view to show a case of statutory liability; and therefore, under the rule laid down in Hambly v. Trott, the plaintiff cannot recover by reason of these liabilities, or either of them, unless the statute gives them, or one of them, the effect of a contract on the part of the decedent to assume the debts of the corporation, to the extent of its liability, as his own individual debts.
The statute does not expressly declare, nor does it in our opinion contain language which necessarily imports, that this shall be the effect of the liabilities, or of either of them, when incurred; and, such being the case, we do not think we ought to construe them, or either of them, as equivalent to such a contract. The liabilities accrue in consequence of a neglect and a violation of duty, or, in other words, of a tort, which signifies not merely misfeasance, but also nonfeasance, where there is duty to be done. The action brought is that which is given by the statute, to wit, an action on the case, which, conforming to the statute, alleges no promise on the part of the decedent, — as indeed, it properly could not, without the authority of the statute, there being in the view of the law no privity of contract between a creditor of the corporation and its officers, in the absence of special agreement. We are therefore, brought to the conclusion that the liability alleged, either in the second or the third count, does not give a cause of action which survives the person affected by the liability, or which constitutes at law a valid claim against his estate. We refer to the following cases as cases which, though not precisely in point as precedents, throw light upon the subject; Kelton v.Phillips, 3 Met. 61; Knowlton v. Ackley, 8 Cush. 93; Gray v. Coffin, 6 Cush. 192; Sanford v. Haskell. 50 Maine, 86;Erickson others, v. Nesmith others, 4 Allen, 233.
In Massachusetts, in the case of Bangs v. Lincoln, 10 Gray, 600, it was held that the liabilities of officers of a manufacturing corporation for the corporate debts, under the Mass. Rev. Sts. ch. 88, §§ 19, 20, were not provable against their estates in insolvency, *548 "because the liability thereby created is not a debt, but a right of action in behalf of a creditor, for neglect or omission to perform certain official duties."
There are cases from Ohio and New York in which similar liabilities have been considered as penal, and not in the nature of contracts. Thus, in Lawler et als. v. Burt, 7 Ohio State, 340, in an action brought to charge certain stockholders and directors of a corporation upon an individual liability imposed by statute, to pay the amount of certain notes issued by the corporation so made as to circulate as money, it was held that the liability was not in the nature of a contract but of a penalty, an action on which would be barred in four years. And see also Sturgess v. Barton, 8 Ohio State, 215.
In Andrews v. Murray, 33 Barb. 354, under an act making the trustees of an incorporated company jointly and severally liable for its debts, in case of neglect to make and file the report mentioned in the act, it was held that one trustee who had paid for the company a large sum of money at their request, could not by reason of this liability recover of co-trustees a proportionate amount thereof, upon the ground that where the liability arises ex delicto, there is no contribution among the wrongdoers. And in the case of The Shaler Hall Quarry Co. v.Bliss, 34 Barb. 309, the court, speaking of the same liability, say: "The liability of the trustees, by that section, is of the nature of a penalty or punishment for the omission of duty." And see Abbott's Dig. Law of Corp. p. 392, §§ 150, 151, citingMerchants' Bank of New Haven v. Bliss, 1 Rob. 391; Bird v.Hayden, 1 Rob. 383.
In Halsey v. McLean, 12 Allen, 438, the Supreme Court of Massachusetts refused to enforce a liability, incurred under the New York acts, because of the "qualified and penal character" of the provision creating the liability according to the construction given to it by the New York Court of Appeals, citingGarrison v. Howe,
These decisions support the view which we have taken of the nature of the liabilities incurred by the decedent, as president and director of the Union Horse Shoe Company. *549
Whether the plaintiff still has any remedy in equity, or whether he has any remedy under chapter 128, section 23, of the Revised Statutes, are questions which do not in our view arise in this case, and as to which we express no opinion. We think the plaintiff is not entitled, upon the case which he makes by his declaration, to recover, and we therefore give the defendant judgment for his costs.
Judgment for the defendant.
After the rendition of the foregoing opinion, the plaintiff moved for a rehearing, and also filed a bill in equity against the defendant.
This bill claimed that the amount of the promissory notes therein described; made by the Union Horse Shoe Company, a manufacturing corporation incorporated at the May session, 1864, of the General Assembly, and included within and subject to the provisions of chapter 128 of the Revised Statutes, and of the acts in amendment of and in addition thereto, and of which company the said Byron Sprague was a member, stockholder and director from its organization in 1864, until his decease in July, 1866, was a claim or debt against the estate of the decedent, and should be added to the claims and debts theretofore allowed by the commissioners appointed, upon representation that said estate was insolvent, to examine the claims against the said estate.
The bill alleged that Byron Sprague in his lifetime became liable for the debts aforesaid due from said corporation to the complainant, as a member of said corporation under the provisions of sections 1 and 2 of chapter 128 of the Revised Statutes, as a stockholder under the provisions of sections 11 and 12 of said chapter 128 and chapter 266 of the Statutes of said state, and as a director under the provisions of section 13 of said chapter 128; and also that the estate and funds in the hands of the respondent, who as administrator of the estate of Byron *550 Sprague, and since his decease had held the shares in said corporation which were owned by the said Byron Sprague in his life time and voted upon and represented the same as a stockholder of said corporation at the meetings thereof held since the death of said Byron Sprague, were liable for the payment of the debts aforesaid under the provisions of section 23 of said chapter 128.
The bill also averred that the moneys advanced by the complainant to said corporation upon the notes aforesaid were applied to the payment of the debts of said corporation, for the payment of which the said Byron Sprague then in full life was personally and individually liable, that the complainant recovered judgment at the October term, 1867, of this court upon said notes against the said corporation, that the respondent was duly appointed administrator of the estate of said Byron Sprague, that said estate had been represented insolvent, that commissioners had been appointed to receive and examine claims against said estate, to whom the complainant's said claim was within the time limited therefor presented, and who in their report wholly rejected the same. The bill further averred that after payment in full of said claims allowed, the respondent would have in his hands, of the estate of Byron Sprague, sufficient to pay the claim aforesaid of the respondent.
The bill prayed that the respondent might be decreed to pay to the complainant the amount due and owing to him as aforesaid, or that his said claim might be decreed to be valid against the said estate and might be added to the debts allowed and reported by said commissioners, to be paid in the regular course of the administration of said estate, and for general relief.
The answer admitted all the allegations and averments of the bill, excepting as to the allegations that the capital stock had not been paid in according to section 1 of chapter 128, as to the extent of the excess of the debts over the capital stock paid in under section 13 of said chapter 128 and as to any surplus after the payment of the claims which had been allowed.
And it was agreed between the parties that if the complainants claim in the judgment of the court depended upon any liability *551 under the 13th section of said chapter 128, the amount of such excess should be thereafter ascertained, and if the complainant's claim depended upon the fact of a surplus after the payment of the claims allowed, that the bill should be retained until it was ascertained whether there was any such surplus or not. Under this agreement, the cause came on for hearing upon the bill and answer.
The action at law also stood for re-hearing with the bill, and the question was, whether or not the complainant's said claim was a valid claim, either in whole or in part, at law or in equity, against the estate of the said Byron Sprague.
Addendum
In a case at law between these parties, formerly tried, we decided that the plaintiff could not maintain his action against the defendant, as administrator of the estate of Byron Sprague, deceased, on a liability to pay certain notes of the Union Horse Shoe Company, incurred by the said Byron Sprague under Revised Statutes, chapter 128, sections 2, 3 and 13, for the reason that the liability created by those sections is a tort, and does not survive. In the same case we also decided that a liability to pay said notes, incurred by the said Byron Sprague, under the 11th and 12th sections of chapter 128, which had been made the basis of a claim against his estate, represented insolvent, and disallowed by the commissioners, could not be prosecuted at law by an action of the case, for the reason that the statute creating the liability gives different remedies, and in such case the rule is, that the prescribed remedy is the only remedy. The plaintiff has moved for a rehearing, upon the ground that the decision was erroneous. We are not, however, convinced by the arguments which have been addressed to us, that the decision ought to be either reversed or modified.
The plaintiff also has now filed a bill in equity, to charge the estate of the said Byron Sprague with the payment of the said notes, and relies for relief not only on the sections of chap. 128, above named, and on the twenty-third section, but also, and more especially, on the first section of that chapter.
We agree with the plaintiff, that the liability imposed by chapter 128, section 1, is direct and primary. We also think it in the nature of a debt. The section provides that, until the capital is paid in and a certificate thereof recorded, the members *556 of the company shall be jointly and severally liable for all debts and contracts made and entered into by the company, leaving it optional with them to incur the liability or not. There is no requirement that they shall pay in more capital and record the certificate, the neglect to observe which might be regarded as atort, entailing the liability by way of penalty.
Does it follow from this construction, that the estate of a deceased member, who has incurred the liability, is bound for its payment on the same footing as his personal debts ? If the estate is so bound, it will follow that it may be charged with all the debts of the corporation contracted before the member's decease, whether due or to become due, and whether the corporation is solvent or insolvent. The question is, therefore, one of great interest, in its relations to the settlement of the estates of persons deceased.
The statute regulating the settlement of insolvent estates of deceased persons, (Rev. St. ch. 158,) provides, in regard to any claim rejected by the commissioners or stricken from their report, that the claimant may proceed at common law in the manner therein prescribed, and specifies no other relief except by reference under a rule of court. The inference is, that any claim which cannot be prosecuted at common law, is not provable against the estate; for it is not to be supposed that it was intended that any person having a claim provable against the estate should be without relief, if the same were improperly rejected, or that any claim should be prosecuted at common law to which a common law action is inapplicable.
Of course this construction excludes all claims, which can be pursued only in equity, from proof before the commissioners. The argument against this construction, from the injustice of the exclusion, is cogent; but in view of the fact that there was a time when a claim which could only be pursued in equity necessarily failed for want of chancery jurisdiction in the courts, and that these provisions of the statute remain now substantially as they were at that time, we do not deem the argument conclusive. In fact, the defect of the statute, if it can be regarded as such, is probably owing to its having remained so long without *557 material change, notwithstanding the changes which have been made in other parts of the law of the state. We are of the opinion that a claim which cannot be prosecuted in an action at law, cannot be proved, under chapter 158, before commissioners on an insolvent estate.
The plaintiff contends, that his claim, in so far as it arises from a liability incurred under chapter 128, section 1, can be prosecuted in an action at law, upon the ground that the members of a manufacturing company are not to be considered as incorporated, whatever else may have been done, until the capital has been paid in, and a certificate thereof recorded; and that, until then, the company debts and contracts may be regarded as the personal debts and contracts of the members. He contends that, agreeably to this view, the word "members" is used in the first section, and the word "stockholders" in the other sections, as if a distinction were intended between them. We think, however, that this construction is inadmissible, and that it would be going too far to infer a distinction between members and stockholders, from the manner in which the two words are used in the statute. We think, further, that the remedies prescribed by sections 19 and 20 are applicable in respect to the liability created by the first section, as well as in respect to that created by the 11th and 12th sections of chapter 128.
But may not the plaintiff's claim, even if not provable before the commissioners, be ascertained in equity, and added by decree to the report of the commissioners? We think not. We know of no principle which would authorize a court of chancery to add to the claims allowed by the commissioners any claim which is not provable before them. The statute requires that the estate represented insolvent, subject to certain preferences, shall be applied pro rata to the payment of creditors who have proved their claims before the commissioners, and provides for no modification of their report, except by an action at law, or by a reference under a rule of court. If it be said, that to confine the payment to such claims is to allow an unjust discrimination against claims which cannot be prosecuted at law, we can only repeat in reply, that the injustice, if any, is attributable to *558 a defect in the statute; and it is not within the province of a court of chancery, in the absence of any special ground of jurisdiction, to supply a defect in the statute of the state. We therefore refuse to add the plaintiff's claim to the claims reported by the commissioners.
We think section 23, chapter 128, which has been referred to in aid of the plaintiff's claim to payment in common with other creditors, does not support that claim. The section exempts executors, administrators, guardians, trustees, and pledgees, from personal liability, and leaves the pledger and the estates in the hands of such executors, administrators, guardians, and trustees, to respond to any liability incurred under the chapter. It gives no new common law remedy, by reason of which the liability is entitled to proof against an estate which has been represented insolvent.
But although we cannot add the plaintiff's claim to the allowed claims for payment with them, we are nevertheless of the opinion, that in so far as it is a claim arising upon a member's or stockholder's liability, it is entitled to participate in the surplus, if any, remaining after the payment of allowed claims. For the liability of a member or stockholder, even if it be not of a nature to survive at law, would yet devolve on the defendant, as administrator, under chapter 128, section 23, and bind the decedent's estate in his hands, not required to meet the charges specially imposed upon it by chapter 158.
One of the notes in respect of which the plaintiff makes claim, was not given by the Union Horse Shoe Company until after the decease of Byron Sprague. We think the claim in respect of this note must stand on the same footing as the claims in respect of the others, inasmuch as it can no more be prosecuted by an action at law than the others. It is true the 23d section of chapter 128, in declaring the extent of the liability of an estate in the hands of an executor or administrator, uses very broad language; but nevertheless, the liability can only be enforced to the full extent implied by that language when the estate is solvent; where the estate has been represented insolvent, regard must be had to the chapter regulating the settlement of *559 insolvent estates, and the section construed so as not to conflict with its provisions. Indeed, the defendant being liable not only as administrator, but also as the successor of the decedent, the claim on the latest note cannot be entitled to any right of payment out of the estate which would not likewise, under section 23, accrue to the claims on the earlier notes.
We therefore decide that the plaintiff's petition for a rehearing of the action at law must be dismissed, and that his bill in equity shall be retained, according to the agreement of the parties, till the surplus, remaining after the payment of the claims payable under the report of the commissioners, if any, is ascertained.
Decree accordingly.