Atwood v. Rhode-Island Agricultural Bank , 1 R.I. 376 ( 1850 )

If the stockholders are liable in this proceeding, it must be by the third section of the charter. At common law the stockholders in a corporation are not liable individually for the corporate debts. The capital stock is the fund to which alone the creditors must resort, unless in cases of fraud. The following is the language of the section relied on by the plaintiffs: "The stockholders of said bank shall be personally and individually liable for all losses, deficiencies and failures of the capital stock of said bank." The construction put on this section by the defendants is, that it was intended to confer upon the corporation the power to keep the capital stock good, in order to carry on the business of the bank.

We do not think this a reasonable construction of the section. The stockholders are by this construction made liable personally and individually to themselves. If the clause had been intended merely to keep the stock good by assessments upon the stockholders, we think the phraseology would have been different. We think the words "liable personally and individually," mean a liability for the benefit of creditors. These words, "personally and individually," are used in contradistinction to corporate liability. Without the words the corporation was liable to creditors, and we think the intent of the section was to superadd the personal and individual liability of the stockholders to the corporate liability.

This construction is confirmed by the stockholders themselves, in the petition preferred by them to the General Assembly at their October session, 1845. At the time of this petition all the bills had been redeemed. The General Assembly acted upon the statements in the petition; and thus both parties to the contract, the stockholders on the one hand, and the General Assembly on the other, affirm the construction which the court have put upon the charter.

In addition to this, the bills of the bank in circulation had the following inscription on them: "Stockholders' private property holden." Upon the faith of this liability of the private property of the stockholders, the bank has obtained credit, and the stockholders ought not now to be permitted to repudiate it.

The defendants' counsel have referred to the case of Bakerand others v. Atlas Bank and others, 9 Met. 182. The language of the Massachusetts statute is, "If any loss or deficiency of the capital stock in any bank shall arise from the official mismanagement of the directors, the stockholders at the time of such mismanagement, shall in their individual capacity be liable to pay the same." The court say, "the language of this section is certainly not very clear and explicit, but considering it in connection with the 31st section, and other sections of the 36th chapter, its meaning, we think, may be ascertained with reasonable certainty." The main ground of the decision upon this section, admitted to be doubtful, was, that the 31st section creates a liability of the stockholders to pay all the outstanding bills, although they should exceed in amount the whole capital stock. The court says, "To suppose that a double remedy was intended to co-exist, if not an absurdity, is a reproach upon the good sense and discernment of the legislature, and of the wise men who drew up these sections." The third section in the defendants' charter is the only remedy for bill-holders as well as other creditors.

But the defendants contend, if any liability existed, the claims of the plaintiffs are barred by the statute of limitations.

The words of our statute are, "all actions of debt founded on any contract without a specialty." Digest of 1844, sec. 1, p. 221. This is the language of the New Hampshire statute, on which the case of Bullard v. Bell was decided. The language is similar to the statute of James. In Bigelow v. The Cambridgeand Concord Turnpike Corporation, 7 Mass. 202, it was held that where a statute gives a right to recover damages, reduced pursuant to the provisions of such statute to a sum certain, an action of debt lies if no other remedy be given by the statute. InBullard v. Bell, 1 Mason, 243, all the cases are collected and examined. The court there held that debt is the proper remedy, where the debt or duty is imposed by common law or statute, and lies not in unliquidated damages, but is capable of being reduced to a sum certain. And this rule is fully sustained by English and American authority. In Van Horn and others v.Whitlock and others, 3 Paige, 409, it was held by Chancellor Walworth, that upon a liability created by statute, the plaintiff may bring debt or assumpsit at his election, if no form of action is prescribed by the statute creating such liability, and that a suit in equity founded on such liability would not be barred till the expiration of the largest time limited for bringing either of these actions at law.

We think this a sound rule.

The question then recurs — if this liability could have been enforced by an action at law, and debt had been brought, would the statute of limitations have been a bar?

The statute bars all action of debt founded on any contract not a specialty. Now a statute obligation to pay money is a specialty, and we think the obligation of the stockholders to pay the deficiency is a specialty.

The next question is, whether the obligation of the stockholders is an obligation to pay unliquidated damages, or to pay a sum which can be reduced to a certainty?

We think each stockholder is bound to pay his proportion of the deficiency. The amount of this deficiency is the excess of the debts over the assets of the bank. This can be, and indeed already is, ascertained with certainty. Then since the amount of this deficiency is to be paid by the stockholders, each according to the amount of his stock, there is no difficulty in ascertaining with certainty the amount which each stockholder is to pay.

The language of the Massachusetts statute is different from ours, and from the New Hampshire statute, and from the statute of James. The Massachusetts statute bars "all actions of debt founded on any contract or liability not under seal." Now a liability created by statute is a specialty, but is not a liability under seal. The Rhode Island and New Hampshire statutes bar only actions of debt, founded on any contract without a specialty, and do not bar a liability created by statute. The decision in the case of Baker and others v. Atlas Bank andothers, upon the Massachusetts statute, was founded upon this difference between the Massachusetts and New Hampshire statutes.

The next question is, whether the case is one for the equitable jurisdiction of this court?

We think a Court of Equity is the only tribunal in which to vest redress in cases like this. The necessary contribution which is involved in the case, renders it not only a proper subject of equitable jurisdiction, but exclusively so. (1 Hopkins, 305.)

The last ground of defence remains to be considered, and that is, that the bill does not allege a request by the creditors to the receiver to sue the stockholders, and a refusal by him to sue.

The bill might have been more full and explicit in this particular. It alleges that the receiver neglected and refused to sue. Now a refusal implies a request, and in that the bill is well enough in this particular. But the answer of the receiver denies any request, and the plaintiffs have put in no proof upon this point. But the answer of the receiver does state that he hath never commenced any suit in law or equity against the stockholders in behalf of the creditors for the adjudication of claims, because he hath not deemed it his duty so to do. The receiver in his conduct in this particular, would of course be governed by his sense of duty, and no request by a creditor would have any influence upon him to do what he considered was not his duty. A request by a creditor would be a useless ceremony, as much as if he had told the creditors what he has stated in his answer. The rule on which this objection is founded ought not to be technically administered, and when, as in this case, a long term has elapsed without suit, and it is apparent that the receiver would not sue if request had been made, we feel ourselves justified in entertaining the present suit. In fact, upon strict common law principles, a refusal, without demand, supercedes the necessity of demand.

Decree. That the said defendants, owners of stock in said Rhode Island Agricultural Bank, at the time of the failure thereof, are liable to make up the losses, deficiencies and failures of the capital stock of said bank, so far as is necessary for the payment of the debts due from said bank, which may be presented to the Master under this decree, and that said deficiency is to be made up by the stockholders in proportion to the amount of stock held by each at its par value. And a reference was ordered to a Master to ascertain the amounts to be severally contributed by the stockholders, and to report the same, together with other matters specified in the decree relative to their interest in the capital stock in said bank. And the stockholders were to be at liberty to plead any special matter in discharge or bar of their liability as aforesaid, before said Master, (provided said special matters in defence be filed within ten days after the time first appointed for the hearing,) and the said Master to report the same with his opinion thereon, to the court. And it was further ordered that said Master ascertain and determine the amount of counsel fees and other costs, charges and expenses which the plaintiffs have paid or become liable for in the prosecution of their claims against said stockholders; and that he divide and apportion the same among all the creditors of said bank, who may on or before the first day of June next become parties to this suit, and apply for the benefit of this decree in proportion to their respective claims, and that he require the payment of said proportionate sum from each to the solicitors of the plaintiffs, before they are admitted to be creditors entitled to the relief granted by this decree.