Gamwell v. Pomeroy , 121 Mass. 207 ( 1876 )

Lord, J.

The plaintiff relies upon an agreement between the parties named therein, made on May 3, 1862. The construction of that agreement most favorable to the plaintiff is, that the parties thereto, being the owners of the entire stock of the Pittsfield Woollen Company, with the assent of the said corporation, (expressed by a vote of the stockholders thereof upon the same,) agreed, so far as the public was concerned, to act as, and assume all the liabilities of, copartners, under the name of the Pittsfield Woollen Company; that although as between themselves, as matter of convenience, they intended to continue to act under their corporate organization, yet as to all the world except themselves they were to be, and to be known as, a copart nerskip, doing business under the corporate name as a name of the partnership, with all the liabilities attaching to that relation. Giving to this instrument such construction, then, so long as that relation existed, the parties to the agreement would be liable, not as guarantors, nor in any manner collaterally, but directly and immediately, to any creditor of the concern, as for their own debt. Whether, under such circumstances, those who traded with them would be bound by the special conditions and limitations of such agreement, it is unnecessary to inquire, because it appears that all parties to the negotiation for and loan of the §10,000, which is the subject of this action, had full knowledge of the agreement and its precise terms; and, in fact, both the borrower and the lender of the $10,000 were persons who had actually signed the agreement and were parties thereto. They, therefore, are to be deemed to have had full knowledge of all the terms of the agreement, and of all the limitations therein contained.

The first and most important limitation is, that the agreement is to be binding upon them severally only so long as each should “ continue a stockholder in said concern.” On December 9,1866, William Pollock, one of the signers of said agreement, ceased to be a stockholder within the meaning of the agreement; (Bacon v. Pomeroy, 104 Mass. 577 ; a decision upon the agreement under consideration;) and Pollock’s executors were not liable for any debt contracted subsequently to that date. From that date, the remaining four parties ceased to be the owners of the entire stock of the company; and at the time of the loan of $10,000 were not so the owners of the whole stock. They had no power, therefore, inter sese, and without the concurrence of the owners of the stock which had been Pollock’s, to make an agreement that the corporate name should be used by them, as a partnership name, by which all the stockholders of the company should be a partnership, with the liabilities of partners, instead of a corporation, with the limited and qualified liabilities of stockholders. From that time forward they were merely stockholders, and their action between themselves could not bind the corporation, except as such action was had at a stockholders’ meeting, and by vote. Their right to the use of the corporate name as the name of a private partnership, assuming such right to have originally existed, ceased from that time: and the promise made in the name of the corporation, while such corporation continued to exist and to do business, must be deemed to be the promise of the corporation. The four surviving parties who signed the agreement are neither in fact nor law the corporation; and the corporation was neither in fact nor law a partnership. Nor could it be made so even by vote of the stockholders. Trustees of Free Schools v. Flint, 13 Met. 539. All the parties to the loan of the $10,000 knew that a corporation in fact existed and was doing business; they all knew, also, of the existence of the agreement. Under these circumstances the borrower gave and the lender received the note of the corporation

The corporation, as such, immediately became liable upon the note as a corporation. The liability of the defendants, if any existed, was an independent and collateral liability. We see nothing in any of the cases cited by the learned counsel for the plaintiff which leads to a contrary result. Indeed, they all go upon the ground that the liability was collateral; and if they have any bearing upon the present case, it is rather to show that there is no collateral liability; but on this we are not called upon now to express, and do not express, an opinion. It is quite clear that the parties all understood the agreement to be collateral. It was executed long before the note. It is not incorporated into the note, nor in any manner referred to in said note. The note given was the note of the Pittsfield Woollen Company; it was treated as its note; payments of interest were made by the corporation ; the declaration in this action calls it the note of the corporation, avers that the loan was made to the corporation, and that the corporation had not paid it, nor any part of it, except the interest indorsed thereon, and that, by reason of these facts and of the agreement referred to, a cause of action has accrued ■ to the plaintiff. It is true that the declaration avers that the plaintiff is holder of the note, and acquired it by relying upon the obligation of the defendants. If this were important, the case discloses that he did not purchase the note bond fide, relying upon any such obligation. That, however, is not the question before us. We decide only that, if the agreement is obligatory, it is only as a collateral and independent agreement. It is an agreement in which he is not named and to which he was not a party - and, long before he became possessed of the note, the agreement had been given up to the parties making it by the custodian of it. The instrument is in no sense negotiable; and whatever rights or equities may exist between the parties, no action can be maintained by the present plaintiff, in his own name, at law. The recent decision in the case of Exchange Bank of St. Louis v. Rice, 107 Mass. 37, is decisive upon this point.

Exceptions sustained.