Phillips v. Blatchford

• Decision Date: 05 September 1884
• Citation: 137 Mass. 510
• Parties: William H. Phillips v. John S. Blatchford, executor
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

137 Mass. 510

William H. Phillips v. John S. Blatchford, executor

Supreme Court of Massachusetts

September 5, 1884

Suffolk.Bill in equity, filed November 9, 1881, against the surviving executor of the will of Marshall S. Scudder, for contribution.The bill, as amended, alleged the following facts:

On or about June 1, 1874, certain persons entered into a copartnership styled the Ryder Reciprocal Grate Association under a declaration of trust, by the terms of which no member, as such, was to have any control over the business of the association, which was to be entirely under the control of a board of managers, of whom the trustee was to be a member, and the other members were to be elected by the shareholders.The stock was to be divided into fifteen hundred shares, and each holder of a share was entitled to a certificate, which might be transferred by an assignment in writing.The following provision was made in case of the death of a member: "The decease of a member of the association shall not work a dissolution of it, nor shall it entitle his legal representatives to an account, or to take any action in the courts or otherwise, against the association or the trustee, for such; but they shall simply succeed to the right of the deceased to the certificate and the shares it represents, subject to this declaration of trust.'

The defendant's testator became the owner of one hundred and twenty-five shares in the association, on or about June 1 1874, and was such owner at the time of his death, on August 28, 1875.On October 11, 1875, the defendant and John P Putnam, since deceased, were appointed executors of his will.

The association in the prosecution of its business became indebted to the Taunton Iron Works Company.This indebtedness was incurred partly before and partly after the death of Scudder.On June 18, 1878, the Taunton Iron Works Company brought an action against the plaintiff and other members of the association, to recover the debt.On November 12, 1880, the plaintiff and Sylvanus N. Staples each paid one half of the amount of said claim, which amounted in the whole to the sum of $ 6934.78.The association also became indebted in the sum of $ 1625.27 to the firm of Staples and Phillips, which firm was composed of the plaintiff and Sylvanus N. Staples, and on February 28, 1879, said indebtedness was paid by the plaintiff by the account being charged to profit and loss on the books of the firm.

The number of shares in the association held by solvent persons in Massachusetts was one hundred and eighty-nine; and on November 12, 1880, the plaintiff presented a petition to the ProbateCourt, setting forth the payment by the plaintiff of the claim of the Taunton Iron Works Company, and the liability of Scudder to the plaintiff growing out of such payment; and the Probate Court, on December 20, 1880, ordered the executors of the will of said Scudder to retain in their hands the sum of $ 4000 until the rendering of final judgment in any suit at law or in equity commenced within one year after payment of the claim.

The prayer of the bill was that the defendant be ordered to pay 125/189 of the claims paid by the plaintiff, and for further relief.

The answer admitted the allegations of fact contained in the bill; alleged that the bill did not set forth any ground for relief in equity; and that the causes of action accrued within two years from the date of the defendant's giving bond as executor, or, if such causes of action accrued after two years, that they accrued more than one year before the commencement of the suit.

The case was heard by Field, J., upon the bill and answer, and reserved for the consideration of the full court.

G. E. Williams & L. L. Scaife, for the plaintiff.

J. C. Gray(W. C. Loring with him,) for the defendant.

Holmes, J. Devens & Colburn, JJ., absent.

OPINION

Holmes, J.

It is too late to contend that partnerships with transferable shares are illegal in this Commonwealth.They have been recognized as lawful by the court, from Alvord v. Smith, 5 Pick. 232, to Gleason v. McKay, 134 Mass. 419.Even if the question were a new one, we should come to the same result.The grounds upon which they were formerly said to be illegal in England, apart from statute, have been abandoned in modern times.Walburn v. Ingilby, 1 Myl. & K. 61, 76.Garrard v. Hardey, 5 Man. & G. 471.Harrison v. Heathorn, 6 Man. & G. 81, 140.In re Mexican & South American Co.27 Beav. 474, 481;4 DeG. & J. 320. 1 Lind. Part. (3d ed.) 200-202.

It is suggested by the defendant, that such associations are intended to avoid having a paid-up capital, which would be necessary if a corporation were formed, and to escape taxation.These new reasons peculiar to this State derive no support from the English decisions invoked, and do not impress us.If a partnership incurs debts, the members are personally liable, and there is no need of a paid-up capital.And an association does not become illegal simply because another very like it is taxed.We perceive no wrong to the public, and as to the shareholders, if they choose to purchase stock in a partnership with unlimited personal liability, it is their own lookout.Courts will not assume to understand the interests of contracting parties better than they do themselves.

We attach equally little weight to the argument that the Bubble Act(St.6 Geo. I. c. 18) was made applicable to America, in 1741, by the St. of 14 Geo. II. c. 37, by which, among other things, all offenders against these acts were subjected to the penalties of a proemunire, and brokers dealing in the shares therein referred to were made incapable of acting as brokers for the future.

The Constitution continued in force, until altered or repealed, the laws which had been adopted, used, and approved in the Province, Colony, or State, and usually practised on in the courts of law, (Mass. Const. c. 6, art. 6,) and it may be true that "some few English statutes, passed since the emigration, were adopted by our courts."Commonwealth v. Knowlton, 2 Mass. 529, 534.But the fact that, as far back as the records of our judicial decisions extend, this act has not been practised on in the courts, but has been ignored by them, is strong evidence that the act was not among those that were kept in force after the Revolution.Alvord v. Smith, ubisupra.Tappan v. Bailey, 4 Met. 529, 535.Tyrrell v. Washburn, 6 Allen 466, 475.Hoadley v. County Commissioners, 105 Mass. 519, 526.Bodwell v. Eastman, 106 Mass. 525.Taft v. Ward, 106 Mass. 518;111 Mass. 518.Gott v. Dinsmore, 111 Mass. 45.Boston & Albany Railroad v. Pearson, 128 Mass. 445.Gleason v. McKay, ubisupra.Frost v. Walker, 60 Me. 468, 471.In view of the practice and opinion disclosed in these cases, it is not necessary to give more than a word to the absurdity of attempting to enforce the act as a whole, or to the fact that the whole course of our legislation shows the same ignorance of its existence as the decisions, and that the St. of 1878, c. 275, clearly assumes such associations to be lawful.It is also unnecessary to consider whether the cases of O'Hanlon v. Myers, 10 Rich. 128, and Hill v. Smith, Morris (Iowa) 70, go farther than we should feel disposed to with regard to obsolete statutes, or whether this association appears to fall within the prohibitions of the act.

It is admitted that the partnership was formed under a declaration of trust, by which it was provided, among other things, as follows: "The decease of a member of the association...