First National Bank of Barre v. Hingham Manufacturing Company

• Decision Date: 27 October 1879
• Citation: 127 Mass. 563
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court
• Parties: First National Bank of Barre & others v. Hingham Manufacturing Company & others. Same v. Same

127 Mass. 563

First National Bank of Barre & others v. Hingham Manufacturing Company & others. Same v. Same

Supreme Court of Massachusetts

October 27, 1879

Suffolk. The first case was a bill in equity filed March 8 1877, brought by twenty judgment creditors, under the St. of 1870, c. 224, § 42, "in behalf of themselves and all other creditors of the Hingham Manufacturing Company," a corporation established under the laws of the Commonwealth, against said corporation, and David Whiton Andrew C. Cushing, Eleazer P. Dunbar, Richard Harrison and Charles M. Strauss, its directors, to enforce the personal liability of the latter, on the ground that on December 17 1875, the time of the commencement of the action of the Broadway National Bank (one of the plaintiffs), the debts of the corporation exceeded its capital to the amount of $ 72,110.60.

The second case was a bill in equity brought by the same plaintiffs, under the same statute, against the same defendants, with the exception of Strauss, and against Lewis Hecht and others, to enforce the personal liability of the persons named, as stockholders, on the ground that the capital stock of the corporation had never been paid in.

The cases were heard together, by Ames, J., on the bills, answers and the report of a master, and were reserved for the determination of the full court. The principal facts appear in the opinion.

R. M. Morse, Jr., for the plaintiffs.

A. Hemenway, for Whiton, Cushing and Dunbar.

H. C. Hutchins, for Harrison.

G. O. Shattuck & G. Morse, for Hecht.

Soule J. Ames & Lord, JJ., absent.

OPINION

Soule, J.

The answers of the defendants contain demurrers to each bill, and assign two causes of demurrer; first, that it is not brought by one creditor, but by several creditors; second, that it is not brought in behalf of the plaintiffs and all other creditors of the corporation.

The first cause of demurrer is based on a literal construction of the St. of 1870, c. 224, § 42, which provides that "the judgment creditor, or any other creditor, may file a bill in behalf of himself and all other creditors of the corporation," &c. It is provided by the Gen. Sts. c. 3, § 7, that in the construction of statutes words importing the singular number may extend and be applied to several persons or things, unless such construction would be inconsistent with the manifest intent of the Legislature, or repugnant to the context of the same statute. The proceeding authorized by § 42 of the St. of 1870 is intended for the benefit and relief of all the creditors, and must appear by the statement of the bill to be brought in their behalf. Those only, however, who become parties to the proceeding at the outset, or by means of subsequent petition, can derive the benefit which is contemplated by the statute. There is nothing inconsistent with the intent of the Legislature, or repugnant to the context of the statute, therefore, in construing the singular as including the plural, so that two or more creditors may join in the bill.

The second cause of demurrer has no foundation in fact. Each bill purports to be brought in behalf of all the creditors. It says in terms that the plaintiffs "bring this bill of complaint in behalf of themselves and all other creditors of the Hingham Manufacturing Company." It is true that the prayer is that the persons named as defendants "be ordered and decreed to pay to the plaintiffs and to such other creditors as may become parties to this bill" the amounts due them. But this prayer does not do away with the declaration that the bill is brought in behalf of all. The prayer is properly framed, because no person can share in the benefits of a bill brought in behalf of a class, except those who become parties to the proceedings. Still, as the bill is stated to be in behalf of all, it complies with the requirements of the statute, though none but the plaintiffs become parties, and the plaintiffs therefore reap all the benefit from the proceedings.

It is further contended by the persons who are defendants in both bills, that neither bill can be maintained against them because of the pendency of the other bill against them. Their position is that the same bill should have proceeded against them in both capacities, as directors and as stockholders; or that there is a remedy against them in one capacity only, and that the plaintiffs by proceeding against them as stockholders have elected that remedy, and therefore have waived or lost their remedy against them as directors. This objection cannot be sustained in either part. Their liability as stockholders is not the same with their liability as directors. It is not for the same amount, and does not grow out of the same facts. The liability as stockholders alleged in the second case grows out of the fact that the capital stock was never paid in. St. 1870, c. 224, § 39, cl. 1, as amended by St. 1875, c. 177, § 1. The liability as directors alleged in the first case grows out of the fact that the debts of the corporation exceed the amount of the capital stock by the sum of more than seventy thousand dollars. St. 1870, c. 224, § 38, cl. 3. The liability, if it exists at all, exists to the full amount of such excess, without reference to the amount of stock held by the several directors. The liability as stockholders is for all the debts of the corporation, but no stockholder is to be liable beyond the par value of his stock. In case the corporation has no property whatever, the creditors need the aid of both remedies in order to obtain full payment of their debts. From the stockholders, if all respond to the full limit of the statute liability, they obtain an amount equal to the capital. From the directors they obtain an amount equal to the sum in which the debts of the corporation exceed the capital. If the claim against the directors, as such, were included in the same bill with the claim against them and others as stockholders, the bill would be multifarious. Pope v. Leonard, 115 Mass. 286.

The bankruptcy of the corporation when the demand was made on the execution, and the pendency of bankruptcy proceedings against it when the plaintiffs filed their bills, constitute no defence so far as the directors are concerned. The statute requires the bill to be brought against the corporation and the directors, although the main purpose of the proceeding is to hold the directors liable. The statute authorizes the filing of the bill when the corporation shall have neglected for thirty days, after demand made on execution, to pay the amount due, with the officer's fees, or to exhibit to him real or personal estate of the corporation, subject to be taken on execution, sufficient to satisfy the same, and the execution has been returned unsatisfied. § 40. It is immaterial whether the neglect proceeds from lack of property, or from fraudulent concealment of property. The fact that the corporation was in bankruptcy and its property assigned did not affect the right of the plaintiffs to proceed by bill, after demand made on the execution, a failure by the corporation to pay or exhibit property, and a return of the execution unsatisfied. The right to proceed against the directors did not pass to the assignees of the corporation. The remedy against them never belonged to the corporation, and was no part of its assets. Chamberlin v. Huguenot Manuf. Co. 118 Mass. 532. New Lamp Chimney Co. v. Ansonia Brass & Copper Co. 91 U.S. 656. The same principles apply to the case against the stockholders.

The demand of the officer under the execution was made under an execution properly issued, upon the proper officers of the corporation in the city of Boston, where, as the master found on competent and sufficient evidence, the corporation had a place of business. It was, therefore, a sufficient demand under the statute. ^[*]

The fact that the plaintiffs have proved their demands in bankruptcy against the corporation, and have received dividends thereon, is no bar to these bills. It would not bar an action at law to recover against the corporation. Athol National Bank v. Hingham Manuf. Co. 121 Mass. 399. And no good reason can be assigned why it...