Easton Nat. Bank v. Am. Brick & Tile Co.

• Decision Date: 10 August 1906
• Citation: 64 A. 917,70 N.J.E. 732
• Parties: EASTON NAT. BANK v. AMERICAN BRICK & TILE CO. et al.
• Court: New Jersey Supreme Court

64 A. 917

70 N.J.E. 732

EASTON NAT. BANK

v. AMERICAN BRICK & TILE CO. et al.

Court of Errors and Appeals of New Jersey.

Aug. 10, 1906.

(Syllabus by the Court.)

Appeal from Court of Chancery.

Bill by the Easton National Bank against the American Brick & Tile Company and others. From the decree rendered (60 Atl. 54), Frederick Green, individually and as executor, appeals. Reversed as to such appellant.

S. C. Smith and R. C. Stewart, for appellants. Guild & Martin, for respondent Potter. Richard V. Lindabury, for respondents Wilbur and Fidelity Trust Co.

PITNEY, J. In the winding up of the American Brick & Tile Company as an Insolvent corporation, the appellant Frederick Green, in his individual right, presented to the receiver a sworn claim for moneys loaned by him to the company amounting with interest to $6,655, and in his capacity as executor of his father, Henry Green, deceased, presented a sworn claim for moneys advanced by the latter in his lifetime showing a balance due of $22,947.88, besides interest. In a proceeding instituted by the receiver against certain stockholders for enforcement of their liability for unpaid subscriptions, the learned vice chancellor, while upholding the right of the receiver to recover for the benefit of other creditors (and in this his decree has just been affirmed by this court) held that the Green claims were not properly chargeable against the delinquent stockholders. From this part of the decree, the present appeals are taken.

The grounds upon which the vice chancellor decided against the Green claims were that Henry Green was a director in, and the president of, the defendant corporation, and Frederick Green was its secretary and treasurer at the time the stock found to be unpaid was issued; that each of them at the time they became creditors knew the exact condition of the company, and knew that the stock in question was not issued for property at its value, as it purported to be. He held that the right to hold subscribers for unpaid balances on account of stock issued depends entirely upon the fact that the stock was issued fraudulently as to creditors, and that in the present case, if it was so issued, it was by act of the directors, including Henry Green, and with the knowledge of the treasurer, Frederick Green, and that they each extended credit to the company with notice that the stock was not full paid and that the company had entered into a contract with its stockholders that no further payments would be required.

Before dealing with this matter some questions of practice require to be disposed of. First, it is insisted that the present appeals are not properly taken and ought to be dismissed, and this on the ground that Frederick Green, either individually or as executor, was not a party to the proceeding in the court below except so far as he appeared in his capacity as executor resisting the claim of the receiver to hold Henry Green's estate liable for the unpaid subscription upon his stock. It is true, as pointed out by counsel, that, so far as the Green claims are concerned, they were represented in the proceedings below solely by the receiver, who filed his petition in their behalf as well as in behalf of other creditors. It is, however, obvious that the present appellant, both in his individual and in his representative capacity, is directly concerned in the decree so far as it denies relief with respect to his claims, and he is therefore, in a substantial sense, a party aggrieved. Promptly after the filing of the decree he entered notices of appeal, and, in due season, filed petitions of appeal in this court. Answers were filed to these petitions, and in the answers no question was raised of his right to appeal. If the objection that is now raised had been promptly taken, he could have intervened formally as a party, or have applied to the receiver to enter an appeal in his interest. The objection to the form of the procedure having been withheld until the appeals were brought on here for final argument, the matters at issue will be determined upon the merits, and the proceeding amended if necessary in such a manner as to support the status of the appellant.

It is next insisted that the Frederick Green claim is wholly barred by the statute of limitations, and that the Henry Green claim is likewise thus barred, with the exception of items aggregating $2,300. The insistment is that, with this exception, all the loans and advances in question were made more than six years before the filing of the bill in the insolvency matter, and that certain payments on account thereof, proved to have been made within the six years, were made under such circumstances as not to evidence a new promise by the company. Upon the evidence that is before us, there would seem to be some question whether the claims are not barred by the statute. But can the respondents be permitted here to raise the question? The receiver's petition filed in the court below against the delinquent stockholders (among whom were the present respondents) set forth sundry claims that had been presented to him against the company, and among them the above-mentioned claims of the appellant, averring that he had accepted and admitted them as claims against the corporation. The present respondents severally answered the petition, and in their answers neither admitted nor denied the truth of this averment, leaving the petitioner to make proof thereof. The answers of Wilbur and Paxson set up that, inasmuch as Henry Green procured the company to be organized, and, as a member of the board of directors and president of the company, took part in the purchase of the patents and patent rights and the issue therefor of the capital stock, and himself caused the certificates to be issued as for property purchased, he and his executor were estopped from alleging that the stock was not full paid and nonassessable. And as to the claim of Frederick Green in his own behalf, they set up that the claim was contracted by him with full knowledge that all the capital stock had been issued either for cash or for property at par. Beyond this they did not challenge the Green claim. Each of these answers contained this further averment: "Tills respondent further says that any liability that may be asserted against him as the holder of stock of said corporation cannot be based upon any contractual obligation upon his part, but only a statutory liability in favor of creditors, and that the claimants are now precluded by their laches and by the statute of limitations from asserting or enforcing the same." The effect of this is clearly to raise the bar of the statute of limitations only with respect to the stockholder's liability to contribute unpaid stock subscriptions for the benefit of creditors—a ground that is not now pressed. The answers contain no averment invoking the statute as a bar to the validity of any of the creditors' claims as against the company. The answer of Potter did not in any wise challenge the Green claims, nor raise any question of the statute of limitations. Subsequently Judge Paxson filed a petition averring himself aggrieved by the proceedings and determination of the receiver in allowing the said several claims and appealing to the chancellor from the allowance of the claims and each of them, but without setting up any matter of defense to the claims. In this state of the pleadings, the matter came on for hearing before the vice chancellor upon the petition of the receiver for relief against the stockholders and the answers thereto. At the beginning of the hearing, counsel for Judge Paxson and Mr. Wilbur stated to the court that doubts had arisen in the minds of counsel whether a full inquiry into the claims presented could be made under this proceeding, although, as he said, the answers challenged the claims. In the language of counsel: "It is said that they were outlawed and presented too late, and other defenses set up, such as the want of authority on the part of the corporation to contract some of the debts or claims. These are questions that go to the validity of the claims altogether, and, while it may be true that parties against whom this assessment is asked would have the right to challenge those claims in this proceeding and to deny their validity for any purpose, yet, I think it would be more in accordance with the practice of the court if they should appeal from the allowance of the claims by the receiver." To this counsel for the receiver responded, objecting that the time for such appeal had gone by, but submitting it to the discretion of the court to allow an appeal. The learned vice chancellor thereupon announced that he would permit the creditors to first prove their claims as if appeals had been filed. And the parties then proceeded with their proofs, first to establish the validity of the creditor's claims as against the company, and afterwards to establish the liability of the stockholders for unpaid subscriptions to capital. It is clear, we think, that in this informal method of proceeding the only questions that can be deemed as having been raised for determination by the vice chancellor respecting the validity of the claims are the questions that were raised by the answers of Wilbur and Paxson to the receiver's petition. The opening of counsel, just quoted, had the effect of referring the court and opposing counsel to the answers for a specification of the grounds of his opposition to the affirmance of the claims. Those grounds did not include the bar of the statute of limitations as between the creditors and the company. The statutory bar must be specially pleaded, unless the facts that raise it appear to be admitted, which is not the case here. Brand v. Longstreet, 4 N. J. Law, 325; Gulick v. Loder, 13 N. J. Law, 68, 23 Am. Dec. 711; Partridge v. Wells, 30 N. J. Eq. 176; Wells v. Partridge, 31 N. J. Eq. 362. And indulgence will not be granted to a party who fails in...