Nonantum Worsted Co. v. Holliston Mills , 149 Mass. 359 ( 1889 )

W. Allen, J.

The defendant made an assignment to a trustee for the benefit of its creditors, by indenture to which the plaintiff became a party. The question is, whether the debts owed to creditors who were parties to the indenture were discharged by it. It seems plain that they were not.

The purpose of the debtor in making the assignment was not to procure a discharge. The recital is that the “ Holliston Mills is at present unable to pay its debts at maturity thereof, and b is desirous to convey all its property for the benefit of its creditors, without preference or priority, one over the other or others.” The assignment is of all its property, and it is to be distributed, ratably to the creditors, with such priorities as are provided by the insolvent law of this Commonwealth. It is agreed that attachments made by creditors shall be dissolved on their becoming parties to the indenture, and that no creditor party shall make any attachment or levy any execution on the property; but no other agreement by creditors not to sue is expressed, and we cannot see that any is implied.

As the debtor is a corporation, and as its property cannot be touched, in a suit by such a creditor, nor the management and distribution of the property be affected by such a suit, it is difficult to see how an agreement not to sue can be implied. There is an obvious reason why it should not be. A suit and judgment against the corporation are necessary, in order to enforce the statutory liability of its officers and stockholders for its debts. The question is not whether the creditor will be presumed to have given up his right to sue a penniless corporation, but whether he has given up his remedy against a surety for the debt. That this was not the intention of the parties is not only to be presumed, but is expressed in terms which alone would be sufficient to preserve the right to sue the corporation. They agree that no holder of any debt of the corporation upon which any other person is absolutely or contingently liable shall, by executing the indenture, release or discharge such other person, or in any manner impair his liability, but shall reserve all rights and remedies against him, and “ the same may be as fully enforced as if these presents had not been executed.”

The indenture, in its meaning and effect, bears a close resemblance to an assignment by a corporation under the insolvent laws of this Commonwealth, which are several times referred to in it. It assigns all the property of the corporation to be distributed among its creditors; it dissolves attachments on- the property, and protects it from being taken on attachment or execution ; it does not discharge the debtor or release the debt; it preserves the remedy against officers and stockholders of the corporation, and what is part of that, the right to obtain a judgment against the corporation. See Coburn v. Boston Papier Maché Manuf. Co. 10 Gray, 243; Johnson v. Somerville Dyeing & Bleaching Co. 15 Gray, 216.

Judgment for the plaintiff.