Waterman Appeal from Probate

26 Conn. 96 | Conn. | 1857

Ellsworth, J.

It appears from the record, that Thomas J. Fales and John S. Gray were copartners under the name of Fales & Gray, in September, 1854, in the business of manufacturing railroad cars. The value of their estate, real, and personal, was, as then estimated, $5440,000, and their indebtedness was $5205,000. Being somewhat embarrassed, in order to obtain relief, on the 5th day of September, they agreed with their creditors, (with exception of a few,) to form a joint stock company,'under the statute law of the state, with a capital of $5200,000. They w.ere at once to convey all their property above mentioned to this joint stock company, $5200,000 of it to be considered as the capital, and the surplus to be held by them, the better to enable them to pay the debts of the firm of Fales & Gray.

The corporation was formed, and being organized took a conveyance from Fales &‘Gray of said property to the estimated value of $5440,000. They took the name of !£ The Grove Car Works,” and passed a resolution to appropriate the avails and earnings of the business to the payment of the said debts of Fales & Gray.

After carrying on the business a few months, the corporation failed, and on the 5th day of March, 1855, assigned its property under the statute for the benefit of creditors, and Mr. Waterman was appointed trustee by the court of probate, The appellees and others presented their claims to the commissioners for allowance. Bo far as they consisted of the old debts of Fales & Gray, (and this was one of them,) the trustee claimed that they should not be allowed by the commissioners, for the reason that the new corporation could not and in fact did not assume them ; and upon this appeal from the allowance of these claims by the commissioners, the chief question is, whether the corporation had the power to do this, and in fact did it.

We think there is no question but that the corporation assumed the debt now in question, and the other existing debts of Fales & Gray, so far as the creditors of Fales & Gray signed and became parties to the instrument of the 5th of September. The entire arrangement proceeds upon this idea, as its very basis and motive. These creditors were to renounce their claims against Fales & Gray, so far as the property of Fales & Gray was concerned, and allow it to pass into the hands of the corporation, in order to enable the corporation to carry on its business and pay the old and any new creditors as agreed. They likewise as a part of the arrangement executed their notes to the corporation, still more to aid it in the execution of the trust. And more than this, such assumption of the debts of Fales & Gray is expressly stated in the instrument as the condition of its receiving and enjoying the property. After this, it would be strange indeed if the corporation could retain the property and repudiate the conditions upon which it was received. So too, the corporation, by its express vote, passed in all good faith, undertook to apply the earnings and avails towards this class of debts. On the whole, we do not entertain any. doubt but that the Grove Car Works assumed the debt in question.

But it is said that the corporation was not authorized to assume the debts of Fales & Gray. If by this is meant that the corporation had no power to purchase the stock, tools, &e., of Fales & Gray, and contract to pay for them by assuming debts, provided it was done bona fidé, so as to continue the same business under the new organization, we must say the appellant is mistaken. It could purchase this property as well as any other property without injuring the creditors of the company. The property necessary for carrying on the business must be had from somebody, and why may it not be purchased of Fales & Gray, especially with the consent of their creditors. But if it is meant that this transaction is not consistent with the certificate lodged by the joint stock corporation with the clerk of the town of Hartford, that the corporation started with a capital of $200,000 free of charge, and that bona fide creditors of the Grove Car Works, who, relying on the certificate as true, gave credit to the corporation, may complain that they were deceived and are in danger of being injured, we are not prepared to say that there may not be force in the objection; but then-this is no reason why the commissioners should not allow this claim, for at all events, if our first position is correct, the debt is a good one against the corporation, and the question of priority among creditors must be raised, if any where, in the court of probate, when the order for distribution of the effects shall be obtained. The unpaid debts of Fales & Gray amount to $99,000, and the unpaid debts contracted by the Grove Car Works are $18,000. How these debts are to stand in relation to the property to be divided, we shall not undertake to say, for no such decision is called for.

The statute of frauds has been urged as an objection to the assumption of the debts of Fales & Gray by the Grove Car Works. There is no such assumption proved by writing it is said.. Our answer is, 1st. There is a good one in law, against the corporation, created by its receiving and retaining the property of Fales & Gray, which it received and retains upon the terms and conditions expressed in the instrument upon which their title to it depends; 2d. The corporation, by a vote in writing, assumed to pay these debts; and 8d. The corporation assumed the debts upon a new and original consideration. It received property, as then valued, to the amount of $440,000, and in consideration thereof promised to pay these debts. 1 Smith. Lead. Cases, 329, 33J. Besides, a special promise to answer for the debt, default, or miscarriage of another, is one which is made to the person to whom another is answerable, and not to the debtor himself, as this court held in Pratt v. Humphrey, 22 Conn., 317. See also Hilton v. Dinsmore, 21 Maine, 410.

We attach no importance to the circumstance that the instrument of the 5th of September contains a provision that it shall not take effect until signed by all the creditors of Fales & Gray whose claims exceed $200. The appellees and most of the creditors signed the instrument, and thereupon the property of Fales & Gray was granted and delivered to the corporation, who accepted it and have made use of it in their business as they saw fit. The corporation can not now object because some others of the creditors of Fales & Gray did not sign the instrument. This is no injury to them. The corporation should not have taken the property and gone on under the new arrangement, if it intended to require that this condition of the instrument should be complied with.

We advise judgment for the appellees.

In this opinion the other judges concurred.

Judgment for the appellees.