Hathorn v. Calef , 53 Me. 471 ( 1866 )

Danforth, J.

This case has been before the Supreme Court of the United States, where it was decided that the qualified obligation resting upon the stockholders of the K. & P. R. R. Co., by force of law, to pay the debts of the corporation, is not only a contract as between the stockholder and creditor, but is also an element in the contract between the creditor and the corporation. Hence the Act of April 9th, 1856, was declared unconstitutional so far as it affected such contracts, made before its passage. Therefore the former judgment rendered by this Court was reversed. The action now comes before us upon a-report, and it is contended, that, aside from the statute referred to, this action cannot be maintained, because it is unauthorized in form, and the preliminary proceedings of the plaintiff have not been such as the statute requires. The remedy provided by the statute is an " action of the case,” the present action is assumpsit.

The only question is, whether an "action of the case” embraces that of assumpsit.

Chitty, in his Treatise on Pleading, p. 95, says, — "at common law also, though no-form could be found in the register adapted to the nature of the plaintiff’s case, yet he was at liberty to bring a special action on his own case.” And adds, that the statute of Westminster was passed more effectually to carry out this provision of the common law. This is the origin of the " action on the case” and its distinguishing characteristic would seem to be, that all the facts upon which the plaintiff relies are to be stated in his declaration. This will apply to assumpsit as well .as tort. On page 99 of the same work, referring to assumpsit, the author says, " though founded upon contract this action may be termed an action upon the case.” Again, on page 132, he says, — an action on the case, "in its most comprehensive signification, includes assumpsit, as well as an action in form ex delicto. He also adds, — " But, at the present time, when an action on the case is mentioned, it is usually understood to mean an action in form ex delicto.” The use of the term usually plainly indicating that it is not always, or necessarily so. So Bacon says, — " Both indebitatus assumpsit and special assumpsit come under the denomination of actions on the case.” (Bacon’s Abr., Assumpsit.) Stephen, in his work on pleading, pages 18 and 19, attributes the origin of the action to the same source as Chitty, and says, — " It comprises many different species of which the most common is assump-sit and trover.” From these authorities, which are believed to be sound, the action on the case includes assumpsit as well as tort, and, when this remedy is provided by statute, we know that all the facts must be set out in the declaration, but whether in the form of assumpsit, or tort, must be decided from the nature of those facts. It may bo true that, when an action on the case is mentioned, we usually understand one of tort, for usually violations of statute provisions are tort. Tt is but seldom that the statute, as in the case at bar, provides a remedy for a cause of action originating in, and founded upon, a contract. But whore it does provide such a remedy, its infrequency furnishes no ground of inference that we should violate all the ordinary rules of pleading, when the statute does not require it.

The claim sought to be enforced in the present action is founded upon a contract. There is no element of tort, or active wrong in it. It is simply a failure to fulfil an obligtion, such as the law would imply a promise to fulfil, and, as the statute provides an "action on the case” simply, we see no reason why that may not be in assumpsit, and we find that in similar cases, as in Fowler v. Robinson, 31 Maine, 189, assumpsit has been maintained. But, were it otherwise, the facts, relied upon by the plaintiff, are all stated in his declaration, and, by striking out the last sentence only it would be an action on the case, and not assumpsit. This sentence neither helps nor hinders a right understanding of the " person and case.” It is clear then, that, by our statute, an amendment would not only be allowable, but the Court would be required to grant it, if asked for.

The next question involved in this case is whether the plaintiff has taken the necessary steps in order to enable him to recover. Upon this point, it is contended that the Act of February 16, 1836, which was passed before the charter of the K. & P. R. R. Co., or possibly c. 46, §§ 18, 19, and 20, which was passed before the acceptance of the charter, must control and settle the rights of the parties to this suit. These two Acts are very similar in their provisions, and perhaps it is not very material which governs. Conceding for the present the above proposition, we think the plaintiff has made good his claim under either statute.

No question is made as to the ownership of stock by defendants’ testator, or the recovery of the judgments against the corporation, as alleged in the plaintiff’s writ, or that the action was commenced within the time allowed.

But it is claimed that no sufficient return has been made upon the executions by the officer, and that the required demand and notice have not been made and given. Also that there is no sufficient allegation in plaintiff’s writ of a want of attachable corporate property. We do, however, find in the writ an allegation that the executions were returned unsatisfied for want of attachable corporate property. Considering that the statute contemplates that this fact is to be proved by the return of the officer, we do not perceive why it is not a sufficient statement of the fact, although accompanied with the proof. It certainly cannot weaken the statement, and it seems to be a pretty distinct setting forth that the corporation had no such property. If this fact is to be proved by testimony other than that obtained from the return of the officer, we find sufficient prima facie evidence of it in the statement in the report that the corporation became embarrassed with debt in 1852, and have been insolvent ever since. But, as already indicated, the statute contemplates that this fact shall be proved by the officer’s return, and makes it the duty of the officer holding the execution, preliminary to the right of the plaintiff to maintain his action, to appropriate such attachable corporate property as he can find towards its satisfaction, and certify the deficiency. (Act of 1836, c. 200, § 4.) Has the officer made a sufficient return, such as the statute requires? By the R. S. of 1841, (c. 46, § 18,) he is "first to ascertain, and then certify that he cannot find corporate property.” He has returned that he cannot find corporate property. This is all that is required in this respect. He has also certified that he made diligent search and this search was made before his return. This would seem to be a sufficient compliance with the provision that he must " first ascertain.” This is certainly a very proper, as well as the usual way by which an officer ascertains whether a debtor has property. The statute points out no other way, and no reason is perceived why any other means should have been adopted, and when he says he made diligent search and after that could find no property, it is tantamount to his saying, he first ascertained. It is not easy to perceive how else ho could perform this duty so as to be able to make his return under the sanction of an official oath, nor do we perceive that the statute requires, in this respect, the certificate of any officer beside one in the county where the corporation has its place of business, unless possibly one in the county where the stockholder resides. In this case there are returns of officers in each county, nor does it make any difference that the road of the corporation extends through more than one county. The return of one officer was deemed sufficient in Chaffin v. Cummins, 37 Maine, 76, though that was the case of a corporation whoso road extended into two counties.

Nor does the statute require an officer to go out of his precinct. When a duty is required of an officer, as such, it can only be done within his precinct, for the moment he steps out he is no longer an officer. Hence, when he makes a return of his doings, it will be understood that what he did was in his own county, unless the contrary appears, and the words " within my precinct” add nothing whatever to the return.

The notice must be forty-eight hours before commencing the suit, and must convey to the stockholder information of the creditor’s intention to take his property, and the amount of the debt or deficiency. The proof is, that when he was notified the execution with the officer’s return thereon was shown to him. It is difficult to see how he could have better evidence of the amount of the debt, or deficiency, or how the officer could have complied with the provisions of the statute more literally.

The demand to disclose 'corporate property was made at the same time the notice was given, and appears to have been in entire conformity with the statute. The law does not prescribe which shall be first in order of time, the demand or notice; nor does it seem to be material. Both must be before the suit. The one forty-eight hours, and, if any inference is to be drawn from the language of the statute, it would be that the demand, as in this case, should be at the same time the notice is given. The only object of the forty-eight hours delay is that the stockholder may have time to find and disclose corporate property, which he would have no occasion to do until the demand was made. Complaint, however, is made that the officer did not retain the execution during the forty-eight hours, and that the creditor did not remain conveniently near, so that during the forty-eight hours neither were in a condition to receive such property as the stockholder might be prepared to disclose. The statute in terms does not require this ; still it is undoubtedly requisite that the conduct of the creditor should not be such as unreasonably to interfere with the stockholders’ right under the statute to protect himself by disclosing corporate property within the time allowed.

It does appear that, when the demand was made, both the creditor and the officer, with the execution, were present ready to receive such property as might be disclosed. But the stockholder then declined to disclose any, and, so far as appears, gave no intimation that he would do so at any future time, or if he did, where the property would be situated. It would not be unreasonable under this state of facts that the creditor should return to his home, which, for ought that.appears, is as near to any property which would be likely to be disclosed, as that of the stockholder.

Besides, the officer remained, and the stockholder had the legal right to show him the property, and thereby relieve himself. This right could not be affected by the fact that the officer did not retain the execution. This is a matter which concerns the creditor alone. If the alleged debtor had shown the officer the property, this would have relieved him, and if the creditor by himself, or officer, was not in a situation to avail himself of that property, the loss would have been his own. But no complaint of this kind was made in the specifications, therefore there is no foundation on which it can rest now. The creditor having in the first place complied with the provisions of the law, if the defendants’ testator suffered from his subsequent conduct, it would be for them to show it, and to authorize them to do so it must appear in the specifications.

The return of the officer and all the proceedings of the plaintiff seem to be in accordance with those in like cases which have been sustained by the decisions of this Court. Cole v. Butler, 43 Maine, 401; Grose v. Hilt, 36 Maine, 22; Came v. Brigham, 39 Maine, 35; Stanley v. Stanley, 26 Maine, 191.

It is further suggested that, if the liability of the defendants’ testator rests upon the general statutes of the State, then the plaintiff cannot prevail, because his remedy, in that case, would bo scire facias, and that only. It therefore becomes necessary that we should examine the-several Acts of the Legislature in reference to this subject, that we may ascertain their application to, and influence upon, the rights of these parties. The first Act was that of February 16th, 1836, (c. 200.) Subsequently to this the charter of the K. & P. R. R. Co. was granted and made subject to the liabilities and duties provided in the former Act, and it is said that by this reference the former Act was made a part of the charter, and the Legislature could not, and have not attempted, to repeal or modify it since.

The Act of February 16, 1836, is general, and applies to all’corporations thereafter created by the Legislature, providing for matters, which the Legislature has, with perhaps a very few exceptions, provided for ever since by public and general Acts. Under these circumstances, if the words of reference in the charter of the K. & P. R. R. Co. are material at all, we shall find it difficult to establish the proposition that the Legislature intended to change that Act, from a public to a private one, even so far as this corporation is concerned.

But the words are not material. Without them, the Act applied to and controlled the duties and liabilities of the members of that corporation, as much as with- them. . By its terms it applied to each and every corporation created thereafter. It therefore applied to this one and controlled the duties of its members as fully as language could make it, though no reference had been made to it in the charter, and it would have been just as competent for the Legislature to have changed or modified it in the one case as in the other. Has, then, the Legislature the power so to modify or change existing laws, as to affect the liability of stockholders for the debts of the corporation? These liabilities are usually provided for by public laws, which is of itself an evidence that the Legislature were to control these matters at will, and those becoming members of corporations could or ought so to understand it. Besides,, this is a matter which relatés to the liabilities of the members, and in no way affects the rights or privileges of the corporation. It is not an infringement of the charter, unless there is in the charter an express prohibition of such an interference. Such a right the Legislature of this State has constantly exercised, and we find numerous statutes where the liabilities of members of existing corporations have been both increased and diminished. These Jaws have been sustained by judicial decision.

In Stanley v. Stanley, 26 Maine, 196, Whitman, C. J., speaking of an Act which had imposed an additional burden upon the owners of stock in an existing corporation, says, — " If the corporation were not satisfied with their individual liabilities, so créated, they had it in their power to cease incurring them. We are satisfied, therefore, that it was competent for the Legislature to make such a provision.”

This authority is also recognized in Milliken v. Waterhouse, 49 Maine, 527, and expressly decided in the case at bar, and in Coffin v. Rich, 45 Maine, 507, and in this respect the authority of these cases have not been shaken, but rather confirmed by the decision of the U. S. Court, from the fact, that in that decision such an authority was not denied, except so far as the exercise of it impaired the obligation of existing contracts. The same rule prevails in Massachusetts.

In Gray v. Coffin & als., 9 Cush., 200, where the point was distinctly raised, and the right of the Legislature sustained, Shaw, C. J., says, — "This Act was general in its nature, extending to the members of all corporations, providing to wliat extent they should be liable to the claims of creditors, and all persons dealing with and becoming creditors of any corporation. It was future and prospective in its operation, regulating the rights of debtor and creditor, as they should afterwards arise, expressly securing any right acquired by any person against a holder of stock in any corporation by force of existing laws. It had no tendency to impair, or in any way to alfeot, or modify any power, privileges, or immunity, pertaining to the franchise of any corporation, and therefore, seems to be within the just limits of legislative power.”

The same principle is recognized in Peck v. Phillips, 8 Allen, 36, also in Angelí & Ames on Corporations, § 612, 8th ed. and note. It would seem too late to deny this power to the Legislature, provided, in the exercise of it, due regard is had to existing contracts, and the laws are made prospective in their operation.

Has the Legislature in this case exercised this power, or has the Act of Feb. 16, 1836, been repealed so far as it applied to the K. & P. R. R. Co. ? It is conceded that it was repealed as a public Act, and this would be sufficient, if not incorporated into the charter of thé K. & P. R. R. Co., and thereby become a private Act so far as that corporation is concerned. But, if it were so, the Legislature intended still to repeal it. It is said that a private Act is not repealed except it is specially referred to. This may be true, and yet, how can we avoid the conclusion, that this Act, as applicable to the charter of this corporation, is so far referred to as to repeal it. It is not only repealed in terms, but, at the same time, another Act, similar in its provisions, was passed referring to this corporation as well as all others. It includes all corporations created by the Legislature after February 16, 1836. And this being one of those corporations is just as much referred to as though designated by name. The Act of February 16, 1836, then, no longer applies to this corporation, or, if it does, we have two statutes applying to it, not entirely consistent in their provisions. A proposition entirely untenable.

But, it is said, these subsequent laws do not apply to this corporation, because all corporations are exempted where other provisions are made in the charter. The precise words of exception, as found in the R. S. of 1841, c. 46, § 18, are " unless otherwise specified in their charter.” Now the Legislature could not have meant to exclude those corporations where provision was made for those liabilities, for we find, in the Act of April 9, 1856, and in the E. S. of 1857, the additional words, " or bj any general law of the State.”

Inasmuch, then, as by the law provision is made for the liability of the members of all, or nearly all corporations, if the meaning claimed is the correct one, all corporations would be exempt and the law would be of no effect. Taking the most natural meaning of the language used, and it would exclude from the operation of the law those corporations, and only those, where, by the charter or general law it had been provided that the stockholders should not be liable, or only liable upon certain contingencies. That is, all stockholders shall be liable in case of a deficiency of attachable corporate property, unless they are protected from such liability by existing provisions of law. Hence, we find, in a few instances, corporators thus protected by their charters, and in some others, as in manufacturing corporations, by a general law.

Thus the phrase in question can have its legitimate meaning, and have force in the law, and yet not exempt the K. & P. E. E. Co. On the other hand, if it does exempt this company, it renders null the law itself. It follows that the Act of February 16, 1836, was repealed by the E. S. of 1841, in its application to this corporation, as well as others. And the Act of 1841, in its turn, was modified by the Act of 1855, c. 169. This latter Act was in force when the debt sought to be recovered in this action accrued. So far as this case is concerned, it violates no contract, for that is of a date subsequent to the Act.

It is worthy of note that the liability of the stockholders under all these Acts is substantially the same. The Act of February 16, 1836, was in one respect more onerous to the stockholder, as that makes him liable for all debts contracted prior to the transfer of his stock, while all the subsequent Acts limit it to those contracted during his ownership of stock. In all of them his liability is to the amount of his stock, and only in case of a deficiency of corporate property. The other provisions relate only to the manner of proceeding on the part of the creditor in order to enforce that liability. It may then fairly be inferred that, as the prior Act was repealed only upon the passag’e of another, the Legislature- intended to continue the stockholder’s liability unchanged,'but in some respects to modify the remedy.

The obligation of the stockholder to the creditor accrued the moment the debt was contracted by the corporation. So far as the contract is concerned, the rights of both parties attached when it was made, and no change in those rights could be made after that date. But the remedy may be subsequently changed, even though by that change additional burdens may be imposed upon the one party or the other. If the debtor fails to perform his obligation, he cannot complain if a more effectual remedy is provided to enforce that obligation, than existed at the time of the contract. The contract, then, is to be construed according to the laws in force when it is made, the method of enforcing it according to the laws in force when the remedy is sought. Angelí & Ames on Corporations, 8th ed., note on page 598, and authorities there cited.

Before this suit was commenced, the law of 1855, providing a remedy by scire facias, was repealed, and an action on the case substituted. If, however, that Act was not repealed, then both remedies were open to the creditor, and he could take his choice.

The R. S. of 1857, (c. 46, § 25,) in force when this action was commenced, is more onerous to the plaintiff than that of 1855, which was in force when the contract was made. It is conceded that the proceedings of the plaintiff were in accordance with the provisions of the R. S. of 1857.

It follows that, in any view which we are able to take of this case, the plaintiff is entitled to recover to the amount of the stock owned by the-defendants’ testator, without interest.

Judgment for plaintiff for $2500.-

Appleton, C. J., Walton, Dickerson and Barrows, JJ., concurred.