Hancock Nat. Bank v. Ellis

• Court: United States State Supreme Judicial Court of Massachusetts
• Writing for the Court: FIELD
• Citation: 51 N.E. 207,172 Mass. 39
• Decision Date: 23 September 1898
• Parties: HANCOCK NAT. BANK v. ELLIS.

172 Mass. 39
51 N.E. 207

HANCOCK NAT. BANK
v.
ELLIS.

Supreme Judicial Court of Massachusetts, Suffolk.

Sept. 23, 1898.

Exceptions from supreme judicial court, Suffolk county.

Action by the Hancock National Bank against D. Warren Ellis to enforce his statutory liability as a stockholder of a Kansas corporation under the laws and decisions of that state. Plaintiff brings exceptions. Sustained.

[172 Mass. 49]H.J. Jaquith and W.R. Bigelow, for plaintiff.

A. Hemenway and E.B. Adams, for defendant.

[172 Mass. 39]FIELD, C.J.

This case was once before considered by us, on demurrer to the declaration. Bank v. Ellis, 166 Mass. 414, 44 N.E. 349. The demurrer having been overruled, the defendant answered, and the cause was heard by a justice of the superior court without a jury. At the close of the evidence

[51 N.E. 208]

both the plaintiff and the defendant made numerous requests for rulings. The presiding justice gave the third, fourth, fifth, sixth, and eighth of the rulings requested by the plaintiff, and all of the rulings requested by the defendant, and made the following special findings: “(1) I find that the Commonwealth Loan & Trust Company ceased to do business on February 21, 1891. (2) I find from the evidence that such corporation did not resume business thereafter, and that by virtue of the statutory law of Kansas there was a dissolution of the corporation previous to the date of this writ. (3) There was no legal or competent evidence given at the trial which enabled me to find what were the assets or the liabilities of this corporation at the date of the original judgment against the corporation, or at the date of the issue of execution against it, or at the date of the writ in this action.” The first four rulings requested by the plaintiff, which the court gave, were as follows: “(3) Upon all the evidence in the case, as a matter of law the court is bound to find that, under the laws of Kansas, stockholders in corporations organized under the laws of Kansas are liable severally, and not jointly, to the judgment creditors of the corporation[172 Mass. 40]who pursue the remedy provided by paragraph 1192 of the General Statutes of Kansas of 1889. (4) Upon all the evidence in the case, as a matter of law the court is bound to find that, under the laws of Kansas, stockholders in Kansas corporations who appear as stockholders upon the books of the corporation are conclusively presumed to be stockholders of the corporation, within the meaning and liability of said paragraph 1192, already referred to. (5) Upon all the evidence in the case, as a matter of law the court is bound to find that under the laws of Kansas the stockholder's liability under said paragraph 1192, already referred to, is a contractual liability, and arises upon the contract of subscription to the capital stock made by the defendant in becoming a stockholder, and that in subscribing to said stock and becoming a stockholder he thereby guarantied payment to the creditors of the corporation of an amount equal to the par value of the stock held and owned by him. (6) Upon all the evidence in the case, as a matter of law the court is bound to find that under the laws of Kansas the stockholder, who is liable under said paragraph 1192, is liable to the judgment creditor of the corporation who first pursues his remedy under the statutes, and is discharged from all further liability by once paying the full amount thereof to such creditor.” Among the rulings requested by the plaintiff which the court declined to give is the seventh, which is as follows: “(7) Upon all the evidence in the case, as a matter of law the court is bound to find that, under the laws of Kansas, an action to enforce the stockholder's liability under said paragraph 1192, already referred to, is transitory, and may be brought in any court of general jurisdiction in the state where personal service can be made upon the stockholder.” The rulings requested by the defendant which the court gave are to the effect that the obligations imposed by the statutes of Kansas will be enforced in Massachusetts only as a matter of comity; that the courts of Massachusetts will not enforce them against a resident citizen of Massachusetts, unless it appears that no injustice will be done; that the courts of Massachusetts are unable to do justice to stockholders who have paid the debts of the corporation, and are entitled to sue other [172 Mass. 41]stockholders to enforce contribution, especially if the corporation has been dissolved or has suspended business; that the statutes of Kansas which provide for contribution are a part of a scheme established for ultimately compelling stockholders ratably to pay the debts of the corporation, and concerning as they do the relations between the corporation and its stockholders they can be effectually and completely enforced only by the courts of Kansas; and the enforcement of these should be left to those courts, as the whole scheme cannot properly be enforced by the courts of Massachusetts.

The Commonwealth Loan & Trust Company is a private corporation established under the laws of the state of Kansas on February 2, 1887, for the purpose of transacting the business of a loan and trust company, and having places of business at Kansas City, in Kansas and in Missouri, and in the city of Boston, in Massachusetts. The plaintiff, the Hancock National Bank of Boston, is the same corporation as the Traders' National Bank of Boston. On September 1, 1891, the Traders' National Bank of Boston, having previously lent the loan and trust company $25,000, received its promissory note therefor, signed by the loan and trust company, indorsed on which appear payments of interest, and certain sums of money on account of the principal. On September 9, 1893, the bank commenced suit against the loan and trust company on this note in the circuit court of the United States for the district of Kansas, and on December 8, 1893, recovered judgment therein against the loan and trust company in the sum of $16,136.76 damages, and $28.45 costs of suit; and on April 27, 1894, execution issued therefor, which was returned on May 29, 1894, by the marshal of the United States for said district, wholly unsatisfied, after he had made diligent search for any property of the defendant on which to levy the execution, and had found none. The present suit was brought in the superior court for the county of Suffolk, in this commonwealth, on May 25, 1895, and the defendant is a resident of the commonwealth. On April 27, 1894, the defendant owned one certificate of five shares of stock of the loan and trust company, and had in his possession, as collateral security for the payment of a debt due to him, another

[51 N.E. 209]

certificate of five shares, both of which he continued to hold down to the time of the trial, and the certificates of which [172 Mass. 42]were produced at the trial. The certificates are each dated February 7, 1887, and they each certify that the defendant is the owner of five shares in the capital stock of the loan and trust company, “transferable only on the books of the said company on the surrender of this certificate properly indorsed.” They differ only in this: That one certificate describes the defendant as “owner of, as collateral security, five shares,” etc., while the other omits the words “as collateral security.” A record of these certificates appears in the transfer book and in the stock ledger of the corporation. On July 16, 1894, by a decree entered in a suit in the circuit court of the United States for the district of Kansas, William S. Hinman, of Boston, Mass., and Waldo H. Howard, of Kansas City, Kan., were appointed receivers of the loan and trust company, for the purpose of winding up the affairs of the corporation. The order appointing the receivers did not purport to dissolve the corporation. The corporation had been established to exist for 50 years from February 2, 1887, and had a capital stock of $100,000, divided into 1,000 shares, of $100 each. There was evidence that a great many of the stockholders resided outside of the state of Kansas.

The plaintiff in the present suit put in evidence the General Statutes of Kansas of 1889, paragraphs 1192, 1193, 1199, 1205, 1206, 4080, 4081, 4083–4085, 4087, 4167–4170. Paragraphs 1192, 1205, and 1206 are printed in the margin. ¹[172 Mass. 43]These statutes, so far as material, had been in existence for some time before the defendant became the owner of the certificates of stock, and before the organization of the loan and trust company. The plaintiff also put in evidence the official reports of the following decisions of the courts of Kansas: Howell v. Manglesdorf, 33 Kan. 194, 5 Pac. 759;Wells v. Robb, 43 Kan. 201, 23 Pac. 148;Abbey v. Dry–Goods Co., 44 Kan. 415, 24 Pac. 426;Abbey v. Long, 44 Kan. 688, 24 Pac. 1111;Plumb v. Bank, 48 Kan. 484, 29 Pac. 699;Hoyt v. Bunker, 50 Kan. 574, 32 Pac. 126;Howell v. Bank, 52 Kan. 133, 34 Pac. 395;Van Demark v. Barons, Id. 779, 35 Pac. 798;Achenbach v. Coal Co., 2 Kan.App. 357, 42 Pac. 734;Pump Co. v. Davies, Id. 611, 42 Pac. 590;Buist v. Bank, 4 Kan.App. 700, 46 Pac. 718. The defendant, subject to the exception of the plaintiff, put in evidence the General Statutes of the State of Kansas of 1889, article 12 of the constitution, par. 211, and paragraphs 1200 and 1204 of the statutes, which are printed in the margin,¹ and also the official report of the decision of the supreme court of Kansas in Hentig v. James, 22 Kan. 326.

[172 Mass. 44]The courts of Kansas, from the nature of the question, can never directly decide that the liability of a...