Sayles v. Bates

• Decision Date: 10 July 1886
• Citation: 15 R.I. 342,5 A. 497
• Parties: SAYLES and others v. BATES and others.
• Court: Rhode Island Supreme Court

5 A. 497

15 R.I. 342

SAYLES and others

v. BATES and others.

Supreme Court of Rhode Island.

July 10, 1886.

Bill in equity for contribution. On demurrers and pleas to the bill.

Arnold Green and Arthur D. Payne, for complainants.

Claudius B. Farnsworth, James Tillinghast, Rollin Mathewson, Horatio Rogers, B. B. Hammond, Charles Bradley, Henry B. Whitman, and Charles H. Payne, for respondents.

DURFEE, C. J. The case is this: The American File Company of Pawtucket was incorporated by the general assembly at its May session, A. D. 1863, and immediately organized and began to manufacture files. The stock was owned in Rhode Island and Maryland in about equal parts, and the board of directors consisted equally of Rhode Islanders and Marylanders. Money to carry on the business was raised on the notes of the company indorsed by the stockholders. The business was carried on at a loss, and in 1870 the company was deeply in debt. It was decided to bond the debt; the stockholders contributing in proportion to their stock for its payment, and receiving the bonds of the company severally in the amount contributed. Accordingly bonds to the amount of $190,000 were issued, and the company notes indorsed by the stockholders taken up with the proceeds. Afterwards a number of the bonds came into the possession of Robert Garrett & Sons, of Baltimore, who sued the company thereon in this court, and recovered judgment in the sum of $184,488.27; the certificate, required by Rev. St. R. I. cap. 128, § 1,¹ and Pub. St. R. I. cap. 155, § 1, to relieve the stockholders from individual liabilities, never having been filed. The Garretts threatened to levy execution upon the private property of some of the Rhode Island stockholders; and, it being determined after litigation that they were entitled to do so,² the complainants satisfied the judgment. They bring this suit for contribution; every person who ever was, at any time, a stockholder in the company, or his personal representative in case of his death, being made a party to the bill. The right to contribution is not disputed; the question being who of the defendants, if any number less than all, are liable to it.

Our statute imposing the liability was first enacted in 1847. It was copied, with some immaterial verbal changes, from the Massachusetts statute of 1829. See Rev. St. Mass. cap. 38, sections 16, 30, 32. The supreme judicial court of Massachusetts, construing the Massachusetts statute, have decided that the liability extends to all persons who web stockholders when the debt sought to be enforced was contracted, and also to all persons who are stockholders when the liability is sought to be enforced, though they may have become such since the debt was contracted; but does not extend to persons who had become stockholders after the debt was contracted, and had ceased to be such before the debt became payable and action was brought. Holyoke Bank v. Burnham, 11 Cush. 183; Curtis v. Harlow, 12 Mete. 3. See, also, Milldam Foundery v. Hovey, 21 Pick. 417; Johnson v. Somerville Dyeing & Bleaching Co., 15 Gray, 216. These decisions are entitled to great weight, not only because of the ability of the court, but also because our statute was borrowed from the Massachusetts statute, and should be construed in the same way unless there is some strong reason for construing it differently. We do not find any such reason, and adopt the Massachusetts construction.

We think that under the statute (Pub. St. R. I. cap. 155, § 23)³ the liability to contribution is co-extensive with the liability for the debt. The section authorizes suit for contribution "against any one or more of the stockholders who were originally liable" with the stockholders suing for the payment of the corporate debt. We understand the words "stockholders originally liable" to include all stockholders who were liable for the debt before it was paid by the stockholder suing for contributions, and therefore that all persons who were stockholders when the debt was contracted, and all who were stockholders when proceedings were begun to enforce the liability, are proper contributories.

When two persons are subject to the same liability,—namely, the stockholder when the debt was contracted, and the stockholder when the liability is sought to be enforced,—the question may arise how, as between the two, the liability shall be discharged. This question has not been argued, and is left undetermined.

A question put in the case at bar is, when was the debt contracted? We think the debt must be held to have been contracted when the bonds on which the Garretts recovered judgment were issued; and, if the bonds were issued at different times, then that it was contracted at different times as and when the bonds were issued. We do not think there can be any doubt on this point; for, according to the statement, the promissory notes were taken up with the proceeds of the bonds, and ceased to exist as obligations of the...