Cuykendall v. Miles

• Decision Date: 31 January 1882
• Citation: 10 F. 342
• Parties: CUYKENDALL v. MILES.
• Court: U.S. District Court — District of Massachusetts

10 F. 342

CUYKENDALL v. MILES.

United States Circuit Court, D. Massachusetts.

January 31, 1882

F. P Goulding, for defendant.

I. D Van Duzee, for plaintiff.

LOWELL C.J.

The assessment sought to be recovered in this action was made under the general law of New York governing manufacturing corporations, as modified in relation to those established in Herkimer and Cayuga counties by later laws. These statutes are construed and passed upon in Walker v. Crain, 17 Barb. 119; Story v. Furman, 25 N.Y. 214; Hurd v Tallman, 60 Barb. 272; Cuykendall v. Douglass, 19 Hun. 577; Re Dodge & Stevenson Manuf'g Co. 77 N.Y 101. The last two of these decisions relate to this assessment and maintain its validity. The allegations of the declaration are sufficient to bring the defendant within the class of persons subject to assessment, until he shall show something to the contrary. Supposing this to be so, will an action lie in this court to recover the defendant's share of the assessment?

That the receiver of an insolvent corporation, having powers like those of an assignee in insolvency, may sue in his own name in this court, I cannot doubt. Hurd v. Elizabeth, 41 N.J. (12 Vroom.) 1; Ex parte Norwood, 3 Biss. 504; Hunt v. Jackson, 5 Blatchf. 349. These are direct decisions. The cases in which such actions have been maintained without objection, and others, in which the most eminent judges, while asserting the superior title of domestic attaching creditors, have said that the action itself was maintainable, are very numerous. Goodwin v. Jones, 3 Mass. 517, per Parsons, C.J.; May v. Breed, 7 Cush. 15, 42, per Shaw, C.J.; Dunlap v. Rogers, 47 N.H. 281, 287, per Sargent, J.; Hoyt v. Thompson, 5 N.Y. 320, per Ruggles, C.J.; S.C. 19 N.Y. 207, 226, per Comstock, J.; Merrick's Estate, 2 Ashm. 435, Musselman's Estate, 5 Watts & S. 9; Mann v. Cooke, 20 Conn. 178.

As the rule of the common law concerning the assignment of ordinary non-negotiable debts still obtains in Massachusetts, the receiver might be required to sue on such causes of action in the name of the corporation. Blane v. Drummon, 1 Brock. 62; Bird v. Pierpoint, 1 Johns. 118; Jeffrey v. McTaggart, 6 M.& S. 126. But this demand is one which accrued to the receiver himself in his official capacity.

The supreme court hold that the mode in which a liability of this sort is to be enforced depends entirely upon the particular law governing the corporation. If that law merely provides for a proportionate liability of all stockholders for all debts, there should be a bill in equity for the benefit of all the creditors and against all the stockholders. Pollard v. Bailey, 20 Wall. 520; Terry v. Tubman, 92 U.S. 156; Terry v. Little, 101 U.S. 216. But if the law of the state authorizes an action by one creditor against one stockholder, that remedy may be pursued. Mills v. Scott, 99 U.S. 25. The decisions in New York, above cited, show that such actions will lie in the courts of that state by the receiver against the several shareholders.

Then, the question is whether such an action can be maintained outside the state of New York. There is a dictum of Mr. Justice Clifford that all such statutes are penal, and can only be enforced in the state which passed them. Steam-engine Co. v. Hubbard, 101 U.S. 188, 192. I agree with the plaintiff's argument that the authorities which the learned judge cites decide that point only in respect to officers of corporations made liable for a neglect of duty. Halsey v. McLean, 12 Allen, 438; Derrickson v. Smith, 27 N.J.L. 166; Sturges v. Burton, 8 Ohio St. 215, etc. Even in such cases the doctrine seems narrow and provincial. If a citizen of Massachusetts assumes the obligations of an officer in a corporation in New York, I see no sound reason for making the courts of Massachusetts a house of refuge from these responsibilities. Still, a law which imposes certain duties upon an officer, and makes him responsible, in case of neglect, for all the debts of a company, without regard to the nature of the default or the amount of the debts, or whether he is a shareholder or is paid for his services, has something penal about it. It was held in one case, and in only one, so far as I know, that where stockholders were made liable to all the debts, if the directors failed to file an annual statement of the company's affairs, the statute was penal, and to be narrowly construed. It was a domestic controversy, and not precisely in point here. Cable v. McCune, 26 Mo. 371. I have found no case, and counsel have found none, which holds that a liability of shareholders, as such, is penal. The courts of New York have always held such statutes to be remedial, and so have the courts of the other states, so far as I am informed. Thompson, Stockholders, Secs. 80-86; Corning v. McCullough, 1 N.Y. 47; Carver v. Braintree Manuf'g Co. 2 Story, 432. See Crease v. Babcock, 10 Metc. 557.

In the cases cited by the defendant (Erickson v. Nesmith, 15 Gray, 221; 4 Allen, 233; 46 N.H. 371) the courts of Massachusetts refused to sustain an action at law or a bill in equity against one stockholder of a New Hampshire corporation, and the courts of New Hampshire approved the decision; but the ground was, not that the statute of New Hampshire was penal, but that it provided a specific remedy in behalf of all creditors against all shareholders, and that this remedy could not be conveniently pursued excepting in the domestic forum. According to the reasoning of those cases, this action may be maintained, for the laws of New York, as we have seen, permit a similar action to be brought.

No one can contend that the assessment of national bank shares may not be enforced wherever shareholders are found. Casey v. Galli, 94 U.S. 672. The technical reason is that the act of congress operates throughout the country, while the laws of New York are local. But what reason is there, upon principle, why the courts should refuse to enforce, the same remedy against the same person for the same liability when the charter happens to be a state charter which has not been turned into a national charter, as it may be at any time by a resolution of the shareholders?

The decisions which bear...