Fourth Nat Bank of City of New York v. Francklyn, Ex

• Citation: 7 S.Ct. 757,30 L.Ed. 825,120 U.S. 747
• Parties: FOURTH NAT. BANK OF CITY OF NEW YORK v. FRANCKLYN, EX'r, etc
• Decision Date: 21 March 1887
• Court: United States Supreme Court

120 U.S. 747

7 S.Ct. 757

30 L.Ed. 825

FOURTH NAT. BANK OF CITY OF NEW YORK v. FRANCKLYN, EX'r, etc.

March 21, 1887.

This was an action at law, brought December 10, 1879, by a national bank against the executor of Edwin Hoyt, a stockholder in the Atlantic De Laine Company, to recover the amount of a debt for upwards of $100,000 due from that corporation to the plaintiff on promissory notes made and payable in December, 1873, and January, 1874. The parties duly waived a jury, and submitted the case to a referee under a rule of court; and also agreed in writing upon 'a statement of certain of the facts in this action,' which defined the amount of the debt due from the corporation to the plaintiff; and the material parts of the rest of which were as follows:

The Atlantic De Laine Company was a manufacturing corporation, extablished in the state of Rhode Island, under a charter granted in 1851 by the general assembly of that state, which fixed and limited its capital stock at $300,000; and by section 8 of which 'the liability of the members and officers of this corporation for the debts of the company shall be fixed and limited by, and the corporation, its members and officers, shall in all respects be subject to, the provisions of an act' mentioned below. Laws R. I. May Sess. 1851, pp. 33-36.

'Fourth. In and by an act entitled 'An act in relation to manufacturing corporations,' passed at the June session of 1847 by the aforesaid general assembly of the state of Rhode Island, it was provided, among other things, as follows: 'The members of every manufacturing company that shall be hereafter incorporated shall be jointly and severally liable for all debts and contracts made and entered into by such company until the whole amount of the capital stock, fixed and limited by the charter of said company, or by vote of the company in pursuance of the charter, shall have been paid in, and a certificate thereof shall have been made and recorded in a book kept for that purpose in the office of the city or town clerk of the city or twon wherein the manufactory is established, and no longer, except as hereinafter provided.' It was also therein provided that 'when the stockholders in a manufacturing company shall be liable, by the provisions of this act, to pay the debts of such company, or any part thereof, their persons and property may be taken therefor, on any writ of attachment or execution issued against the company for such debt, in the same manner as no writs and executions against them for their individual debts. The person to whom said officers or stockholders may render themselves liable as aforesaid may, instead of the proceedings aforementioned, have his remedy against said officers or stockholders by a bill in equity in the supreme court.' [Laws R. I. June Sess. 1847, pp. 30, 35.] The foregoing provisions were substantially continued in force by chapter 128 of the revision of the statutes of the state of Rhode Island of 1851, and by chapter 142 of the revision of said statutes of 1872, and continued to be, and at all times mentioned and set forth herein were, and still are, in full force and effect as statutes of the state of Rhode Island.'

The whole amount of the capital stock of the Atlantic De Laine Company was never paid in, nor a certificate filed, as required by these provisions. Hoyt was a resident of New York, and stockholder in that company, from its incorporation until his death in May, 1874. He left a will, under which letters testamentary were issued to the defendant in New York; but it was never proved in Rhode Island, nor were letters testamentary or of administration upon his estate ever issued there.

'Tenth. No writ of attachment or execution has ever been issued against the Atlantic De Laine Company for or on account of the claim of the plaintiff upon the aforesaid promissory notes; and no suit in equity has ever been begun in the supreme court of Rhode Island against any of the officers or stockholders of the Atlantic De Laine Company, founded upon the plaintiff's claim herein. Upon the thirtieth day of March, 1874, the said Atlantic De Laine Company was duly adjudicated a bankrupt by the United States district court for the district of Rhode Island.'

The referee found the facts as agreed by the parties, and, against the objection and exception of the plaintiff, admitted in evidence the reports of the cases, adjudged in the supreme court of Rhode Island, of New England Bank v. Stockholders of Newport Factory, 6 R. I. 154, and Moies v. Sprague, 9 R. I. 541, as proof of the law of Rhode Island, and found the following as an additional fact:

'Twelfth. Prior to the making of the aforesaid notes, it had been judicially determined by the supreme court of the state of Rhode Island, that court being the highest judicial tribunal of the said state, that the remedies provided in favor of creditors of corporations therein referred to against their stockholders by said act of June session of 1847 were exclusive of, and did not include, the remedy of an action in favor of such creditor against such stockholder.'

'Upon the foregoing facts,' the referee reported as a conclusion of law that the defendant was entitled to judgment. The court confirmed his report, specially found the facts as stated by him, and gave judgment for the defendant. The plaintiff sued out this writ of error.

B. H. Bristow and Wm. S. Opdyke, for plaintiff in error.

Wm. Allen Butler, for defendant in error.

Mr. Justice GRAY, after stating the case as above reported, delivered the opinion of the court.

This was an action at law, brought in the circuit court of the United States for the Southern district of New York, by a creditor of a Rhode Island manufacturing corporation, against the executor of a stockholder in that corporation, to enforce the liability which the statutes of Rhode Island impose upon stockholders in such corporations for the corporate debts. In the court below, statutes and decisions of Rhode Island were agreed or proved and found as facts, in seeming forgetfulness of the settled rule that the circuit court of the United States, as well as this court on appeal or error from that court, takes judicial notice of the laws of every state of the Union. Hanley v. Donoghue, 116 U. S. 1, 6, 6 Sup. Ct. Rep. 242, and cases there collected. No reference was made to the statute of 1877, (chapter 600,) to which the plaintiff has now referred, and which repeals and modifies in some respects the statutes agreed and found in the record to be still in force; and it is contended for the defendant that this court should not review a judgment on a ground which was not presented to the court below. That is doubtless the general rule. Klein v. Russell, 19 Wall. 433; badger v. Ranlett, 106 U. S. 255, 1 Sup. Ct. Rep. 346, 350. But it would be unreasonable to apply it when the effect would be to make the rights of the parties depend upon a statute which, as we know, and are judicially bound to know, is not the statute that governs the case. And under either statute the result is the same, as will appear by a sketch of the history of the legislation and of its judicial construction, and a consideration of the principles upon which that construction rests.

The statutes of h ode Island, upon which the case was argued and decided in the circuit court, were sections 1 and 14 of the manufacturing corporation act of 1847, re-enacted in the Revised Statutes of 1851, c. 128, §§ 1, 19, 20, and in the General Statutes of 1872, c. 142, §§ 1, 20, 21. By the first section of each of those statutes, the members of every manufacturing company afterwards incorporated 'shall be jointly and severally liable for all debts and contracts made and entered into by such company,' until the whole amount of the stock shall have been paid in, and a certificate thereof made and recorded in a certain public office; and by the other sections, when the stockholders shall be so liable to pay the debts of the company, or any part thereof, 'their persons and property may be taken therefor, on any writ of attachment or execution issued against the company for such debt, in the same manner as on writs and executions against them for their individual debts;' or the creditor may, instead of such proceedings, have his remedy against the stockholders by bill in equity. These provisions were substantially copied from the Revised Statutes of Massachusetts of 1836, c. 38, §§ 16, 30, 31, as clearly appears on a comparison of the statute books of the two states, and as has been expressly recognized by the supreme court of Rhode Island. Moies v. Sprague, 9 R. I. 541, 544.

The provisions of the Revised Statutes of Massachusetts, as well as the similar provisions of the earlier statutes therein embodied and re-enacted, were always construed by the supreme judicial court of Massachusetts to allow the stockholders to be charged for the debts of the corporation by no other form of proceeding than that given by the statutes themselves. This was clearly laid down, before the enactment of the statute in Rhode Island, in judgments delivered by Chief Justice SHAW, as follows: 'The individual liability of stock- holders, created by the statute of 1808, was of a particular and limited character, and could only be enforced in the manner pointed out by the statute.' Ripley v. Sampson, (1830,) 10 Pick. 370, 372. 'The construction uniformly put upon St. 1808, c. 65, § 6, has been that it was a new remedy, given by statute; and as the mode of pursuing it was specially pointed out, that mode must be pursued; that it did not create a legal liability, to be enforced by an action.' Kelton v. Phillips, (1841,) 3 Metc. 61, 62. 'This liability of an individual to satisfy an execution on a judgment to which he was not a party, and to which he had no opportunity to answer, is created and regulated by statute, and is not to be extended, by construction, beyond the plain enactments of the statute,...