Westinghouse Electric & Manufacturing Co. v. Reed , 194 Mass. 590 ( 1907 )

Sheldon, J.

It was provided by R. L. c. 112, § 19,' in force when this bill was brought, that “ the directors of a street railway company shall be jointly and severally liable, to the extent of its capital stock, for all its debts and contracts until the whole amount of its capital stock as originally fixed by its agreement of association, or if a chartered company, by its directors, shall have been paid in, and a certificate stating the amount thereof so fixed and paid in shall have been signed and sworn to by its president, treasurer, clerk and a majority of its directors, and filed in the office of the secretary of the Commonwealth.” These provisions are now contained in St. 1906, c. 463, Part III. § 29. The bill is brought under that statute to enforce the liability of the directors of the Lowell and Boston Street Railway Company, for debts alleged to have been incurred by that company.

It seems manifest to us that the remedy to enforce this liability must be in equity and not at law. The liability of the defendants is not for all the debts and contracts of the company, but only for those debts and contracts to the extent of its capital stock. The liability, being to this limited extent for all the debts and contracts of the company, is not to be enforced for the benefit of the creditor who may first seek to avail himself thereof, which might result in excluding other creditors by exhausting the fund, but must be made available for the benefit of all the creditors. Harris v. First Parish in Dorchester, 23 Pick. 112. Crease v. Babcock, 10 Met. 525. Bell v. Spaulding, 3 Allen, 485. For the reasons stated in those opinions, it is only in equity that the rights of all parties can be protected and an adequate remedy given. See to the same effect Knowlton v. Ackley, 8 Cush. 93, 97; Kinsley v. Rice, 10 Gray, 325; Merchants’ Bank v. Stevenson, 10 Gray, 232; Merchants’ Bank v. Stevenson, 5 Allen, 398, 400; Commonwealth v. Cochituate Bank, 3 Allen, 42, 44; Pope v. Leonard, 115 Mass. 286, 290.

The corporation is not a necessary party to the bill. This statute creates a different liability from that imposed by R. L. c. 110, §§ 58 et seq. By § 62 of that statute the corporation is made a necessary party to a bill brought to enforce that liability. It is only for this reason that the corporation must be joined as a defendant. Barre National Bank v. Hingham Manuf. Co. 127 Mass. 563, 567, 568. As was pointed out in that case, the right to proceed against the directors never belonged to the corporation and was no part of its assets. So in Clarke v. Warwick Cycle Manuf. Co. 174 Mass. 434, 437; Hancock National Bank v. Ellis, 166 Mass. 414,, 419; Chamberlin v. Huguenot Manuf. Co. 118 Mass. 532; New Lamp Chimney Co. v. Ansonia Brass & Copper Co. 91 U. S. 656, 666. The provisions of St. 1903, c. 437, § 36, do not apply to this case for the same reasons, and for the further reason that by § 1 of that act street railway companies are excluded from its provisions. Nor need the creditors exhaust their remedy against the corporation by taking out execution or otherwise, because the statute under which this bill is brought requires no such action.

The statute provides that the liability of the directors shall continue until the whole amount of the capital stock shall have been paid in and a certificate thereof shall have been signed and sworn to by the president, treasurer, clerk and a majority of the directors, and filed in the office of the secretary of the Commonwealth. R. L. c. 112, § 19. St. 1906, c. 463, Part III. § 29. The bill avers that the whole amount of the capital stock “ was never actually paid in in cash,” and “ that no valid certificate has been filed by the directors of said street railway company to the effect that said capital stock has been paid in as required ” by the statute. The defendant contends that this is not an averment that no certificate has been filed, and that the validity

of the certificate is not to be inquired into in this proceeding, but that the statutory liability of the defendants ends as soon as a certificate shall have been filed, whether its statements are true or untrue. Stedman v. Eveleth, 6 Met. 114, 120, 121. The liability considered in that case rested upon the stockholders until the capital stock should have been paid in and the officers of the corporation should have filed a certificate thereof; and it was held that the liability of the stockholders for subsequent debts of the corporation ceased upon the filing of the certificate. But the reasoning of the court in that case is inapplicable to the facts in the case at bar. Here the liability is upon the directors; and it is upon them, acting by a majority of that body, as well as upon other officers, that the duty of signing, swearing to and filing the required certificate rests. It would be strange if by their mere false statement under oath, whether made wilfully or carelessly, they could terminate the liability imposed upon them, especially as it ordinarily would be in their own power to prevent the incurring of the debts and the making of the contracts which create that liability. Nor is it material whether the directors did or did not act in good faith in making the certificate. It concerned a matter as to which they had full means of knowledge. We cannot restrict their liability further than is done by the statute. 35.

The formal objection that the bill avers that the capital stock has not been paid in “ in cash,” and that no valid certificate has been filed “ by the directors,” whereas the requirement of the statute is that it be filed by the president, treasurer, clerk and a majority of the directors, has not been argued and need not be considered. Nor has it been argued that the bill should have averred that any certificate of capital stock had been issued, or that the proper defendants are not those who were the directors when the debt due to the plaintiff was incurred. See Holyoke Bank v. Burnham, 11 Cush. 183; Johnson v. Somerville Dyeing & Bleaching Co. 15 Gray, 216.

Demurrer overruled,.