Johnson v. Johnson Bros.

• Decision Date: 14 July 1911
• Citation: 80 A. 741,108 Me. 272
• Parties: JOHNSON v. JOHNSON BROS.
• Court: Maine Supreme Court

80 A. 741

108 Me. 272

JOHNSON

v. JOHNSON BROS.

Supreme Judicial Court of Maine.

July 14, 1911.

Report from Supreme Judicial Court, Sagadahoc County.

Bill by George W. Johnson against Johnson Brothers. On report. Decree directed.

See, also, 80 Atl. 750.

Argued before EMERY, C. J., and WHITE-HOUSE, SAVAGE, SPEAR, KING, and BIRD, JJ.

Prank L. Staples, for receivers. Arthur J. Dunton, for First, Marine, and Lincoln Nat. Banks.

Stearns & Stearns, for Bacon-Robinson Co. Charles P. Barnes, Asst. Atty. Gen., for the State.

KING, J. This is a proceeding in equity against the defendant, an insolvent corporation, to wind up its affairs and distribute its assets amongst its creditors. Receivers of the corporation were appointed, who, acting by order of the court to take proof of claims against the corporation, made report of their doings in which they specified all claims presented, showing a total indebtedness claimed of $94,111.89, of which they recommended that the following should be disallowed:

State of Maine

$ 10 00

Marine National Bank (one-half)

850 00

Marine National Bank (one-half)

1,500 00

Marine National Bank (one-half)

10,000 00

Lincoln National Bank

1,200 00

Lincoln National Bank

1,750 00

Lincoln National Bank

700 00

Lincoln National Bank

850 00

Lincoln National Bank

900 00

First National Bank

450 00

First National Bank

2,800 00

First National Bank

850 00

First National Bank

800 00

First National Bank

450 00

Bacon & Robinson Co.

300 00

Bacon & Robinson Co.

400 00

Mrs. Henry C. Tarbox

2,950 00

Edward W. Hyde total

9,451 57

The report of the receivers as to all claims presented (except those recommended by them to be disallowed as above) has been accepted, and Mrs. Henry C. Tarbox and Edward W. Hyde do not now contest the disallowance of their claims. As to all the other claims above enumerated the case is reported to this court upon statements of facts agreed to by the receivers and the various creditors presenting said claims, the law court to render such decision respecting each claim as the law and the evidence require. The report of the receivers (acting as masters under direction of the court) is made a part of the ease.

In determining whether or not the claims here involved should be disallowed, it is to be borne in mind at the outset that the affairs of the corporation are now in the hands of the receivers as officers of the court, and that the controversy is not one between the corporation and these claimants, but one between them and the other creditors of the corporation.

Claim of the State of Maine.

This claim is for a franchise tax of $10 assessed against the corporation under the provisions of chapter 8, R. S. §§ 18-22. Section 19 provides that the state assessors shall, on or before the 1st day of July, annually, assess a franchise tax upon the authorized capital stock of the corporation, and the tax shall become due and payable on the 1st day of September thereafter. Every corporation subject to a franchise tax is required to make a return to the Secretary of State, on or before the 1st day of June, annually, of the amount of its authorized capital stock, as the basis of the assessment of the franchise tax. Chapter 47, R. S. § 26. Such tax "shall be a debt due from such corporation to the state," which shall also be "a preferred debt in case of insolvency under the laws of this state, or in any process of liquidation in its courts." Section 20, c. 8, supra.

This so-called tax is not levied on property, but is imposed on the corporation in the nature of an annual license fee for the right to continue to exercise the privileges conferred upon it by the state. It is plain that under the provisions of our statute a franchise tax is assessable against a corporation only as of the first day of July annually, and covers the period of the succeeding year. And the franchise tax in question was assessed against the defendant corporation as of July 1, 1910, and for the year beginning on that date. But the defendant corporation had passed into the hands of receivers by order of court made in April, 1910, under proceedings for its dissolution. the defendant thereafter had no right to exercise for itself any of the privileges conferred upon it by the state. Its franchise—its right to do business for itself—had ceased, and the state had taken possession of its assets for distribution among its then existing creditors. No claim can share in those assets unless it was an outstanding debt against the corporation at the date of the decree of sequestration. The tax in question was not such a debt. It did not exist at that time, and, under the statute which authorized it, could not have existed prior to July 1, 1910. Moreover, at the time this tax was assessed there was no basis for its assessment, because the corporation then had no franchise or privilege to do business, without which, manifestly, no franchise tax could be imposed. Jones v. Winthrop Savings Bank, 66 Me. 242. Our conclusion, therefore, is that the state has no valid claim against the defendant corporation for this tax.

The several claims herein above specified as presented by the three banks arise upon negotiable promissory notes, and it is contended in support of the recommendation that they be disallowed (1) that the name of the defendant corporation was put upon the notes without authority of the corporation; (2) that it was done for the accommodation of another corporation or person, an act entirely outside of the scope of the powers conferred upon the corporation, and, therefore, ultra vires and void; and (3) that the banks took the notes, either having actual knowledge that the defendant was an accommodation party thereto, or charged with notice of that fact. Each of these contentions is sharply controverted.

In deciding the questions thus presented in respect to these notes, it becomes necessary to consider the business relations of the parties thereto, and the manner and circumstances in which the notes were issued.

The notes in question are made payable to the respective banks. the name of Johnson Bros, appears on the back of all but two, and another name, in most instances that of the Monson Consolidated Slate Company appearing on the face of the notes as maker. Johnson Bros, was originally a partnership consisting of three members, George W. Johnson, Edward P. Johnson, and Ernest A. Johnson. This firm carried on a hardware and ship chandlery business in Bath. January 12, 1895, George W. Johnson became treasurer of the Monson Consolidated Slate Company, a Maine corporation operating a slate quarry at Monson, Me. Subsequently Ernest A. Johnson also became a stockholder in the Monson Company, but Edward F. Johnson, the other partner, was never a stockholder therein. The partnership name was signed by George W. Johnson, who was the financial manager of the firm, with the tacit consent of all the members, "on his personal notes and notes in connection with the business of Johnson Bros, and the Monson Company." Some of the notes in question, as will be hereafter noted, are renewals, or include renewals, in whole or in part, of notes to which the name of Johnson Bros, was signed while the partnership continued. After this practice of signing notes in the partnership name for the Monson Company and for George W. Johnson had continued for a time the three partners, on May 22, 1890, formed a corporation under the general law of Maine to take over and carry on the partnership business, keeping the same name, and they have been its only stockholders and officers since its incorporation. The purposes of the corporation, as expressed in its Articles of Association, were the "carrying on the business of ship chandlery, hardware, including anchors, chains, and all outfittings of vessels, painters' supplies and farming utensils, the acquiring, owning and managing ship property, and the purchasing, owning, and selling real estate." The corporation took over the assets and assumed the liabilities of the partnership. After the incorporation of Johnson Bros, the same practice of signing notes for the Monson Company and for George W. Johnson was continued, the corporation taking the place of the partnership on renewals of notes previously discounted at the banks, and various additional notes, made in the same manner, were discounted at the banks. The corporate name of Johnson Bros, was put upon the notes, before they were negotiated by George W. Johnson, its treasurer, but there is no evidence by any formal vote of the directors or stockholders authorizing or ratifying it. It is agreed, however, that Edward P. and Ernest A. Johnson, the other directors and stockholders, had general knowledge that the treasurer, to whom the financial management of the corporation was wholly left, had been signing notes in the corporate name "for the benefit of the Monson Company with greater or less frequency since August 13, 1895." It is also agreed that, "since its incorporation Johnson Bros, had, at times, paid with its checks various bills of the Monson Company for supplies and merchandise sold direct to that company; had occasionally bought large orders of merchandise for it; had sold to it in the regular course of business frequent bills of goods; had occasionally paid interest on that company's notes at the various banks, and had transferred from its own account at the different banks from time to time various sums of money, as loans, to the Monson Company, charging all these items up against that company.

It had also occasionally, and as late as April 4, 1910, deposited to its own account checks drawn to the order of the Monson Company, giving that company credit for the same on its (Johnson Bros.) books. At the time of the appointment of the receivers there was due Johnson Bros, on this account, including interest, $84,239.79, in addition to which notes had been given by the Monson Company to Johnson Bros, to the amount of $5,850, which still...