Attrill v. Huntington

• Citation: 16 A. 651,70 Md. 191
• Parties: ATTRILL v. HUNTINGTON.
• Decision Date: 08 February 1889
• Court: Court of Appeals of Maryland

16 A. 651

70 Md. 191

ATTRILL v. HUNTINGTON.

Court of Appeals of Maryland

February 8, 1889

Appeal from circuit court of Baltimore city.

Bill in equity by C. P. Huntington to set aside transfers of stock made by Henry Y. Attrill. Elizabeth Attrill, one of the beneficiaries of the transfer, appeals from judgment for complainant.

Argued before ALVEY, C.J., and MILLER, IRVING, STONE, YELLOTT BRYAN, and MCSHERRY, JJ.

S Teakle Wallis and William A. Fisher, for appellant.

John K. Cowen and E. J. D. Cross, for appellee.

BRYAN J.

Collis P. Huntington filed a bill in equity to set aside certain transfers of stock made by Henry Y. Attrill. They were made to himself, as trustee for his wife and daughters. The present appeal involves the stock transferred for the benefit of Elizabeth Attrill, the appellant, who is one of his daughters. It is alleged in the bill of complaint that Attrill made these transfers of stock without valuable consideration, and with intent to delay, hinder, and defraud his creditors, and especially the complainant, who is alleged to be a creditor. The bill is filed by the complainant in his own behalf, to procure the payment of his own debt. No other creditor has been made a party to the suit, and no claims against this stock are presented for adjudication, except those asserted by the complainant in his own interest. The bill shows that the complainant, in June, 1886, recovered against Attrill and one Soutter a judgment for nearly $100,000 in the supreme court of New York for the county of Kings; and it is alleged that the cause of action on which the judgment was rendered arose in June, 1880, and was in this wise: That a certain corporation had been formed under the laws of New York, entitled "The Rockaway Beach Improvement Company, Limited," of which the said Attrill was an incorporator and director; that the complainant loaned the said corporation $100,000 to be repaid on demand; that only $932 of this sum had been repaid; that the amount of the capital stock of the corporation was $700,000; that Attrill as director of the corporation, signed and verified by his oath a certain certificate under the statutes of New York stating that the full amount of the capital stock of the corporation, to-wit, the sum of $700,000, had been paid in; that said Attrill, when he signed and swore to said certificate, knew that it was false; and that the law of New York made Attrill liable to pay the debts of the corporation by reason of his making under oath said false certificate. An exemplification of the judgment was filed with the bill of complaint. It showed that judgment was demanded and obtained against Attrill and Soutter on the ground that they had made the false certificate under oath. We were informed at the argument that by agreement of counsel the New York statute was to be considered as set forth in the bill. A demurrer was filed by the defendant, which was overruled by the court below. The twenty-first section of the statute is in these words: "If any certificate or report made, or public notice given, by the officers of any such corporation, shall be false in any material representation, all the officers who shall have signed the same shall be jointly and severally liable for all the debts of the corporation contracted while they are officers thereof." Act 1875, c. 611, (New York.) For doing any of these forbidden acts, the officers of a corporation are made liable for its debts. No inquiry is to be made whether the creditor has been deceived, and induced by deception to lend his money, or to give credit, or whether he has incurred loss to any extent by the inability of the corporation to pay; nor is the recovery limited to the amount of the loss sustained. All that it is necessary to show is that the act has been committed, and thereupon any creditor is entitled to recover the full amount of his debt. In an action for an injury to the person or property of an individual it must be first shown that his rights have been in vaded, and then the extent of the damage must be shown. It is true that in some cases the law allows a recovery far beyond the amount of actual damage,--as where the injury was inflicted from fraudulent or malicious motives; but in these cases the recovery is founded on the injury to rights of person or property, and the circumstances which justify an exceptional measure of damages must be proved in evidence. There is a very marked and obvious difference between these cases and a case where a statute enacts that, because of the commission of a certain act, without reference to any other circumstance, a party shall incur a liability,--because thou hast done this thing, thou shalt pay the debts of another. It is extremely difficult to conceive that the statute was not intended to provide a punishment for the obnoxious acts. The payment of a sum of money which a party would not otherwise be obliged to pay, is no less a punishment because it is inflicted through the medium of a civil suit, instead of criminal prosecution. And such has been the uniform opinion of the courts of the state where this statute was enacted. In Bank v. Bliss, 35 N.Y. 412, an action was brought against the defendants, as trustees of a corporation created under the general act of 1848, to recover a debt due to the plaintiff from the corporation; and the question was whether the action was barred by limitations. The Code prescribed six years as the period of limitations, where the action was upon a liability created by statute other than a penalty or forfeiture; and three years for "an action upon a statute for a penalty or forfeiture, where action is given to the party aggrieved." The defendants were alleged to be liable under the twelfth and thirteenth sections of the act. The twelfth section required every corporation organized under the act to make a report annually, within 20 days from the 1st of January, stating the amount of capital, and the proportion actually paid in, and the amount of existing debts; and provided that, "if any of said companies shall fail so to do, all the trustees of the company shall be jointly and severally liable for all the debts of the company then existing, and for all that shall be contracted before such report shall be made." The thirteenth section enacted that, "if the trustees of any such company shall declare and pay any dividend, the payment of which would render it insolvent, or which would diminish the amount of its capital stock, they shall be jointly and severally liable for all the debts of the company then existing, and for all that shall thereafter be contracted while they shall respectively continue in office." We will quote somewhat freely from the opinion of the court: "Under these sections the trustees are declared to be jointly and severally liable for all the debts of the company in case of a violation of their provisions. The liability, it must be observed, is not limited to the injury or damage sustained by the creditors in consequence of the violation; but upon failure to file the report, or upon making a prohibited dividend, however small or trifling the amount, the trustees are subjected to the payment of the whole amount of the debts of the company then existing, and for all that shall be contracted, in the one case before the report shall be made, and in the other while they shall respectively continue in office. These provisions appear to be severely punitive, inflicted on grounds of public policy, for the protection of creditors, and the prevention of frauds upon the public in respect to the financial condition of such corporations. It is clear that the liability of the trustees is not imposed as an indemnity, because it has no relation to the actual loss or injury sustained by the party in whose favor the action is given. The action depends wholly upon the statute. There never was any such remedy or cause of action, in whole or in part, at common law. If any action could have been maintained at common law for either of the causes mentioned in sections 12 and 13 of the general act in relation to manufacturing corporations, it could extend only to the actual damages or injury sustained. But those elements have nothing to do with the actions given by these sections. Nor, indeed, is it necessary that the creditor should have sustained any injury or damage by reason of a violation of these sections. It is sufficient that the party prosecuting the action should be a creditor when the violation of the law takes place. The right of action is given to the creditors, and they must be held to be the parties aggrieved. For these reasons I am satisfied that the sections 12 and 13 impose a penalty, or a disability in that nature, to which the shorter limitation of three years applies." In Stokes v. Stickney, 96 N.Y. 323, this decision was fully approved. Referring to what was said in reference to the twelfth section, the court said: "Since that decision the subject of actions under that section of the statute has frequently been under the consideration of this court, with the uniform conclusion that the actions therein provided for are penal in character, and are not in any respect based upon the theory of affording compensation to the injured party for damages sustained by reason of the omission complained of;" and they quote a number of decisions of their own court. In this state, in construing a similar provision in a statute, it was held "that the liability of the director was not one arising upon contract, but one imposed upon him by the statute as a wrong-doer, and therefore in the nature of a penalty." Bank v. Price, 33 Md. 498. Section 10 of the New Ycrk act of 1848 makes the stockholders of every company incorporated under its provisions indvidually liable to the...