Converse v. Ayer

• Decision Date: 28 February 1908
• Parties: CONVERSE v. AYER.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

197 Mass. 443

84 N.E. 98

CONVERSE v. AYER.

Supreme Judicial Court of Massachusetts, Suffolk.

February 28, 1908

COUNSEL

Elmer P. Howe and Benjamin D. Hyde (C. A. Severance, of counsel) for appellant.

J. H Benton, Jr., and C. P. Searle, for appellee.

OPINION

BRALEY J.

This is an action of contract to recover the amount of an assessment levied upon the defendant as a stockholder in the Minnesota Thresher Manufacturing Company, a foreign corporation, by the laws of whose domicile his liability must be determined. New Haven Horse Nail Co. v. Linden Spring Co., 142 Mass. 349, 355, 7 N.E. 773. Article 10, § 3, of the Constitution of Minnesota provides that 'each shareholder in any corporation (except those organized for the purpose of carrying on any kind of manufacturing or mechanical business) shall be liable to the amount of stock held or owned by him.' If the company comes within the exception, this provision is inapplicable. But while there is much weight in the defendant's argument, that the mercantile purpose of reorganization having been to take over the assets, and continue the manufacturing business of the old concern, whose creditors were to be paid in preferred stock of the new company, its stockholders are exempt, this question must be considered as no longer open under the adverse decisions of the Supreme Court of Minnesota, in State v. Minnesota Thresher Mfg. Co., 40 Minn. 213, 41 N.W. 1020, 3 L. R A. 510, and in Re Receivership of the Minnesota Thresher Mfg. Co. (Converse, Receiver, v. Morgan) 90 Minn. 144, 95 N.W. 767. Inasmuch as that court possessed exclusive jurisdiction of the subject-matter, and of the corporation, the judicial construction given to this section cannot be reinvestigated in our courts, and the judgments therein rendered must be deemed conclusive. Van Norman v. Gordon, 172 Mass, 576, 53 N.E. 267, 44 L. R. A. 840, 70 Am. St. Rep. 304; Harding v. Harding, 198 U.S. 317, 25 S.Ct. 679, 49 L.Ed. 1066. This provision, therefore, entered into the corporate organization, constituting a part of the contract between the company and the state, and each member, whether he became such at organization, or afterwards, assented to this condition imposed for the benefit of creditors. The obligation, even if created by operation of law nevertheless was essentially contractual in character, and if the corporate assets were insufficient to satisfy the debts of creditors, the defendant while he remained a stockholder, voluntarily had entered into an implied contract, to assume the deficiency, to the amount of the par value of his holding. Howarth v. Lombard, 175 Mass. 570, 574, 575, 56 N.E. 888, 49 L. R. A. 301; Anglo-American Land, Mortgage & Agency Co. v. Dyer, 181 Mass. 593, 595, 64 N.E. 416, 92 Am. St. Rep. 437; Pulsifer v. Greene, 96 Me. 438, 52 A. 921; Olson v. Cook, 57 Minn. 552, 59 N.W. 635; First National Bank v. Winona Plow Co., 58 Minn. 167, 59 N.W. 997; Whitman v. Oxford National Bank, 176 U.S. 559, 20 S.Ct. 477, 44 L.Ed. 587; Bernheimer v. Converse, 206 U.S. 516, 27 S.Ct. 755, 51 L.Ed. 1163. See Cook on Corp. (5th Ed.) § 223, note 2, for a collection of cases. Compare McClaine v. Rankin, 197 U.S. 154, 25 S.Ct. 410, 49 L.Ed. 702.

It becomes of no importance to consider the question upon which there is some conflict in the cases, whether the organic law was self-executing without the aid of a specific remedy to enforce it, and the defendant who had become bound could have been compelled to perform his promise by suit either at common law, or in equity, as a statutory remedy had been provided. Willis v. Mabon, 48 Minn. 140, 50 N.W. 1110, 16 L. R. A. 281, 31 Am. St. Rep. 626; McKusick v. Seymour, Sabin & Co., 48 Minn. 158, 50 N.W. 1114; Marshall v. Sherman, 148 N.Y. 9, 42 N.E. 419, 34 L. R. A. 757, 51 Am. St. Rep. 654; Windham Provident Institution v. Sprague, 43 Vt. 502; Gen. St. Minn. 1894, c. 76, §§ 5897, 5905, 5911. But it was decided in the cases of Minneapolis Base Ball Club v. City Bank, 66 Minn. 441, 69 N.W. 331, 38 L. R. A. 415, and Hale v. Allinson, 188 U.S. 56, 23 S.Ct. 244, 47 L.Ed. 380, that under the equitable remedy provided by this chapter, as the action must be brought in behalf of all creditors against the corporation, and delinquent stockholders over whom the court had jurisdiction, the receiver appointed to collect the assessments, had no authority by virtue of his office, to proceed against nonresident stockholders in the courts of their domicile. It thus being obvious that as the law stood, while resident stockholders could be made to respond, foreign stockholders escaped, further legislation was enacted to supplement existing statutes, by providing a form of procedure which would remove the jurisdictional difficulty. Gen. Laws Minn. 1899, p. 315, c. 272. The authority of the Legislature to enlarge the remedy by which nonresidents who were stockholders at the date of enactment could be reached, and made to respond, must be considered as established by the local decisions, in which this statute has been construed. Straw & Ellsworth Co. v. Kilbourne Co., 80 Minn. 125, 83 N.W. 36; London & Northwestern A. M. Co. v. St. Paul Park Improvement Co., 84 Minn. 144, 86 N.W. 872. It is well settled that the Legislature may enlarge the remedy, if the substantive right is left unimpaired. Danforth v. Groton Water Co., 178 Mass. 472, 59 N.E. 1033, 86 Am. St. Rep. 495; Dunbar v. Boston & Providence Railroad, 181 Mass. 383, 63 N.E. 916; Rogers v. Nichols, 186 Mass. 440, 71 N.E. 950; Ewell v. Daggs, 108 U.S. 143, 2 S.Ct. 408, 27 L.Ed. 682; Campbell v. Holt, 115 U.S. 620, 6 S.Ct. 209, 29 L.Ed. 483. And the defendant, although a nonresident, had acquired no vested immunity from liability upon an unbarred existing contract, simply because until suitable legal procedure could be provided, the pursuing creditor must turn back at the state line. By the provisions of the supplemental act, where a receiver had been appointed, the court was authorized to ascertain the probable indebtedness, and value of corporate assets which could be applied in payment. If found inadequate, authority is conferred to levy upon stockholders for the deficit, including the estimated expenses of the receivership, and costs of collection. Gen. St. Minn. 1894, c. 76, § 5897; Gen. Laws Minn. 1899, pp. 315, 316, c. 272, §§ 1, 2. It accordingly follows, that the plaintiff's right to maintain this suit, depends upon the regularity of the proceedings in which decrees were entered appointing him receiver, and levying the assessment. If sustained as valid, then the plaintiff who had become the representative of the creditors, was empowered to enforce in the courts of the defendant's domicile his obligation as a debtor, which attached to and followed his person. Minnesota Thresher Manufacturing Co. v. Langdon, 44 Minn. 37, 46 N.W. 310; St. Louis Car Co. v. Stillwater Street Railway Co., 53 Minn. 129, 54 N.W. 1064; Howarth v. Lombard, ubi supra; Howarth v. Angle, 162 N.Y. 179, 56 N.E. 489, 47 L. R. A. 725; Broadway National Bank v. Baker, 176 Mass. 299, 57 N.E. 603; Putnam v. Misochi, 189 Mass. 421, 75 N.E. 956, 109 Am. St. Rep. 648; Hancock National Bank v. Farnum, 176 U.S. 640, 20 S.Ct. 506, 44 L.Ed. 619.

We proceed to consider the requirements with which a full compliance must be shown before the defendant can be concluded by the decrees. Having obtained judgment, upon which the execution issued had been returned wholly unsatisfied, the petitioning creditor then became entitled to have a receiver appointed, not only to sequestrate and marshal any corporate property applicable to the payment of debts, but who thereafter, if such action became requisite could institute further proceedings to...