J. L. Mott Iron Works v. Arnold

• Decision Date: 20 June 1913
• Citation: 35 R.I. 456,87 A. 17
• Parties: J. L. MOTT IRON WORKS v. ARNOLD.
• Court: Rhode Island Supreme Court

87 A. 17

35 R.I. 456

J. L. MOTT IRON WORKS

v. ARNOLD.

Supreme Court of Rhode Island.

June 20, 1913.

Exceptions from Superior Court, Providence and Bristol Counties; Darius Baker, Judge.

Action by the J. L. Mott Iron Works against John A. Arnold. There was a verdict for defendant, and plaintiff brings exceptions. Overruled in part, and sustained in part, with directions to enter judgment for plaintiff.

Henry E. Tiepke, Henry M. Boss, Jr., and Louis W. Dunn, all of Providence, for plaintiff.

William A. Spicer, Jr., Frank H. Swan, and Edwards & Angell, all of Providence, for defendant.

PARKHURST, J. This is an action on the case, brought by the plaintiff, a creditor of the Pawtucket Steam & Gas Pipe Company, a Rhode Island corporation created by special act of the General Assembly, to enforce certain statutory liabilities alleged to have been incurred by the defendant as a director of said company, under the provisions of Pub. St. R. I. 1882, c. 155, later re-enacted as Gen. Laws R. I. 1896, c. 180.

The declaration contains three counts, but the second, since abandoned by the plaintiff, need not be considered. In the first count the plaintiff attempts to set forth a case within that portion of the statute imposing a penalty upon directors for failure to make and file a certificate stating the amount of capital stock added and paid in within ten days after the payment of the last installment of the increase thereof. To this count the defendant demurred, contending that the plaintiff had not stated a case within the terms of the statute. The third count seeks to impose upon the defendant a director's liability under the statute, on the ground that the total indebtedness of the company was allowed to exceed the amount of its capital stock actually paid in, while the defendant was one of its directors. To this count the defendant pleaded the general issue, and also filed a special plea stating that prior to the commencement of this suit the debts of the company had been reduced below the amount of the capital stock paid in, by the payment of certain dividends in bankruptcy. To this special plea the plaintiff demurred.

Both demurrers, that of the defendant to the first count and that of the plaintiff to the special plea to the third count, were decided on February 15, 1910, in favor of the defendant, and these rulings were duly excepted to. Subsequently, on October 20, 1910, the case was heard on its merits before a judge of the superior court and a jury, the defendant admitting for the purpose of the suit substantially all the allegations of the third count, including that of excess of Indebtedness over paid-in capital stock, and that as to the amount of the debt which it was sought to recover. This debt was admitted by the defendant and proved by the plaintiff to be $1,154.28, with interest thereon from June 13, 1907. The only defense claimed was that set up under the special plea to the third count. Upon motion of the defendant, the jury was directed to return a verdict of not guilty in favor of the defendant, and thereupon the plaintiff preferred its bill of exceptions, on which the case is now before this court.

The bill contains six exceptions, which will he more fully set forth hereinafter. The first two are to the rulings sustaining the defendant's demurrer to the first count of the declaration, and overruling the plaintiff's demurrer to the special plea to the third count. The other rulings excepted to relate to testimony excluded or admitted in accord with the rulings on the demurrers, and to the direction of a verdict for defendant.

The first exception was to the decision sustaining the demurrer to the first count. The provisions of the statute under which it is sought to charge the defendant with liability in the first count are as follows (Pub. Stat. 1882, c. 155, §§ 1, 2, 3; Gen. Laws 1896, c. 180, §§ 1, 2, 3):

"Section 1. The members of every incorporated manufacturing company shall be jointly and severally liable for all debts and contracts made and entered into by such company, except as hereinafter provided, until the whole amount of the capital stock fixed and limited by the charter of said company, or by vote of the company in pursuance of the charter or of law, shall have been paid in and a certificate thereof shall have been made and recorded in a book kept for that purpose, in the office of the town clerk of the town wherein the manufactory is established, and no longer, except as hereinafter provided.

"Sect. 2. The president and directors, with the treasurer and clerk of such company, within ten days after the payment of the last installment of the capital stock fixed and limited by the charter or by vote of the company, in pursuance of the charter or of law, shall make a certificate stating the amount of the capital so fixed and paid in, which certificate shall be signed and sworn to by the president, treasurer and clerk and by a majority of the directors, and they shall, within said ten days, lodge the same to be recorded in the book kept as aforesaid in the office of the town clerk of the town wherein the manufactory shall be established. In case of increase of the capital stock of said companies, like proceedings shall be had as to the amount added and paid in.

"Sect. 3. If any of said officers shall refuse or neglect to perform the duties required of them as aforesaid, they shall be jointly and severally liable for all debts of the company contracted after the expiration of said ten days and before such certificate shall be recorded as aforesaid."

That part of the first count based on this statute, with which the demurrer is concerned, reads: "And the plaintiff avers that the said company was duly incorporated on the 20th day of June, A. D. 1890, by the General Assembly of the State of Rhode Island, etc., and became subject to the provisions of chapters 152 and 155 of the Public Statutes of said state, the capital stock thereof not to exceed $100,000, to be fixed by a vote of the company from time to time, and thereupon the company was duly organized, and there-afterwards, on, to wit, the 1st day of September, A. D. 1891, by vote of the company, the capital stock was fixed at $50,000, and on, to wit, the 2d day of March, A. D. 1901, by vote of the said General Assembly the company was authorized to increase its capita) stock to an amount not exceeding in the aggregate $150,000, and to issue said increase, to wit, $50,000, as first preferred 7 per cent. stock. And said Company actually increased the capital stock thereof, and prior to the 1st day of December, A. D. 1905, issued capital stock in the sum of $10,727 as first preferred 7 per cent. stock in addition to the amount of capital stock theretofore issued and paid in, and the president and directors, with the treasurer and clerk of said company, did not, within ten days after the payment of the last installment of said increase of said capital stock as aforesaid, make a certificate stating the amount of the capital stock so added and paid in, signed and sworn to by the president, treasurer, and clerk, and by a majority of the directors, and did not within said ten days lodge the same to be recorded in the book kept for that purpose in the office of the city clerk of said Pawtucket, wherein the manufactory of said company is established."

The grounds assigned for demurrer to this count are:

"(1) It does not appear from said declaration that payment of the last installment of the increase of the capital stock of the Pawtucket Steam & Gas Pipe Company, as authorized by an act of the General Assembly entitled 'An act authorizing the Pawtucket Steam & Gas Pipe Company to increase its capital stock,' passed March 2, 1904, had been made:

"(2) It does not appear that the debt owing by the Pawtucket Steam & Gas Pipe Company was contracted at the expiration of ten days or thereafter, after the payment of the last installment of the increase of the capital stock of the Pawtucket Steam & Gas Pipe Company, as authorized by vote of the General Assembly on March 2, 1904.

"(3) It does not appear from the said declaration that the duty ever devolved upon the defendant to file the certificate provided for by chapter 180, § 2, of the General Laws of the state of Rhode Island."

At the hearing of the demurrer two questions were in issue: First, whether the first count is defective in not alleging payment of the entire increased capital. Second, whether, irrespective of the above question, the first count is defective in not alleging payment of any part of the increased capital, and generally in not stating a case within the statute.

This court is of opinion that the demurrer to the first count was properly sustained. This court states that the capital stock was originally fixed by vote of the corporation, September 1, 1891, at $50,000; but it does not state whether or not said stock to that amount was ever actually issued, or ever actually paid for, or whether or not any certificate of such payment was ever made. It further states authority from the General Assembly in 1904 for an increase of $50,000 in preferred stock; but it does not show that any definite increase under this last authority was ever fixed and limited by vote of the company. It simply states that the company actually increased its capital stock, and issued $10,727 first preferred stock. It does not state that this last issue of stock was ever paid for. The count is fatally defective in these particulars, and clearly fails to state a case of liability against a director under sections 2, 3, above quoted. There is nothing to show that the duty ever devolved upon the officers of the company to file any certificate as provided in the said sections. The statute plainly and clearly provides the same proceedings in case of an increase of stock as in case of original capital "fixed and limited." It must appear in both cases that the capital or the increase has been ...