Rice v. Merrimack Hosiery Co.

FROM GRAFTON CIRCUIT COURT. I. One of the causes of demurrer assigned is, that the bill is uncertain, informal, and insufficient; and the bill is clearly open to this objection. It is an elementary rule, that the bill should state the right, title, or claim of the plaintiff with accuracy and clearness; and should in like manner state the injury or grievance of which he complains, and the relief which he asks of the court. The other material facts ought to be plainly yet succinctly alleged, and with all necessary and convenient certainty as to the essential circumstances of time, place, manner, and other incidents. Story's Eq. Pl., sec. 241. Whatever is essential to the rights of the plaintiff; and is necessarily within his knowledge, ought to be alleged positively. It is not a sufficient averment of a fact to state that a plaintiff "is so informed" — Lord Uxbridge v. Staveland, 1 Ves. 56 — or to say that a defendant alleges and the plaintiff believes a statement to be true — Egremont v. Cowell, 5 Beav. 620; nor is an allegation that the defendant sets up certain pretences, followed by a charge that the contrary of such pretences is the truth a sufficient allegation or averment of the facts which make up the counter statement. 1 Daniell's Ch. Pl. Prac. 412. If every fact necessary to entitle the plaintiff to the relief prayed for is not distinctly and expressly averred in the stating part of the bill, the defect cannot be supplied by inference, or reference to averments in other parts. Wright v. Dame, 22 Pick. 55.

The bill charges that the defendants, with one Beal, since deceased, organized an association or joint stock company July 2, 1868, under the name of the Merrimack Hosiery Company, as the plaintiff is informed and believes, and perhaps with sundry other persons to the plaintiff unknown, under the laws of the state of Ohio, with a capital stock claimed by them to be $50,000, for the purpose of manufacturing goods at Bristol in this county, and having its principal place of office in Cincinnati, Ohio; that the defendants owned, or claimed to own, stock in said company; that by the laws of Ohio, as the plaintiff is informed and believes, stockholders are liable for all debts due from the company to its laborers; that the plaintiff has no knowledge, except from reports, whether the defendants are a corporation or not; if a corporation, whether they ever had any capital stock, and if any, whether it was paid in, or how it was owned; and if a corporation, whether the defendants have done such acts as by the laws of Ohio would relieve them, as stockholders, from personal liability to the plaintiff; or whether they were mere partners in business, jointly and severally liable for all debts contracted by them. As to all and singular of said facts, queries, and claims, the plaintiff prays that the defendants may be compelled to prove the same by competent evidence, if they claim the benefit thereof.

These allegations are so general and uncertain as to draw with them the consequences and mischiefs of uncertainty in pleadings. The defects, we think, are fatal to the objects of the bill. There is no distinct allegation that the defendants are a corporation. The statement is made merely upon the plaintiff's information and belief; so also is the charge that the stockholders are liable under the laws of Ohio for the debts due from the company to its laborers. Besides, the allegation that the plaintiff has no knowledge, except from reports, whether the defendants are a corporation, or whether they had any capital stock, or whether it was paid in and who owned it, or whether the defendants were partners, is altogether too vague and uncertain. What allegations does this demurrer admit? or, if this bill should be taken pro confesso, what would it confess? Clearly, that the plaintiff has been informed and believes as he charges, and not that what he has been informed and believes to be true is true. The plaintiff is bound to state in his bill a case upon which, if admitted in the answer or proved at the hearing, the court can make a decree. 1 Daniell's Ch. Pl. Prac. 412. In Story's Eq. Pl., sec. 255, it is laid down, — "That every fact essential to the plaintiff's title to maintain the bill and obtain the relief must be stated in the bill, otherwise the defect will be fatal. For no facts are properly in issue unless charged in the bill, and, of course, no proofs can be generally offered of facts not in the bill; nor can relief be granted for matters not charged, although they may be apparent from other parts of the pleadings and evidence, for the court pronounces its decree secundum allegata et probata. The reason is, that the defendant may be apprised by the bill what the suggestions and allegations are against which he is to prepare his defence," and because the court cannot render judgment except upon what appears on the record.

One or two examples from those found in Story, derived from adjudged cases, will illustrate these principles. A bill was brought to perpetuate a right of common and of way. The charge in the bill was, that the tenants, owners, and occupiers of certain lands of a manor, in right thereof or otherwise, from time whereof the memory of man is not to the contrary, had, and of right ought to have, a common of pasture, c., in a certain waste,c. The bill was held bad on demurrer; for the manner in which the right of common was claimed was not set forth with any certainty: it was not set forth as common appendant or appurtenant, but as that "or otherwise," which was no specification at all, and left any sort of right open to proof. Cresset v. Mitton, 1 Ves. Jr. 449; S.C., Bro. Ch. R. 481.

So where a bill sought a discovery and delivery up of title deeds to the plaintiff, and alleged that, at the time of the marriage of his father and mother, his mother was seized and possessed or entitled to divers freehold, copyhold, and leasehold estates, as one of the co-heiresses of her father, or under his marriage settlement, or his will, or codicil, or by some such or other means; and that, upon the marriage of the plaintiff's father and mother, or before, or at some time after the said marriage, some settlement or settlements was or were executed, whereby all or some parts of the said estates were conveyed, upon certain trusts and purposes, in such a manner as that estates for life were given to his father and mother, or one of them, or at least an estate for life to his father, with a provision, by way of jointure or otherwise, for his mother, who died in the lifetime of his father, — remainder to the first son of his father and mother, or to their first and other sons severally and successively, or in some manner; so that the plaintiff, upon the death of his father and mother, became seized or entitled to all or most of the estates, c., either in fee or absolutely, or as tenant for life, or in tail in possession, or in some other manner, as would appear by the deeds, c., in the defendant's possession. Upon demurrer, the bill was held bad for vagueness and uncertainty; and that the defendant could not plead to it, but must discover all deeds relating to their estates. Ryves v. Ryves, 3 Ves. 343. That case, in the looseness of its statements and in the uncertainty of the facts essential for the plaintiff to know in order to make out his case, seems to finds its parallel in the one now before us. In short, the rule, as laid down, is as follows: "It is absolutely necessary that such a convenient degree of certainty should be adopted as may serve to give the defendant full information of the case which he is called upon to answer." 1 Daniell's Ch. Pl. and Prac. 421; Creset v. Mitton, supra; Wormuld v. DeLisle, 3 Beav. 18.

But, if we should assume that the defendants were duly organized into a corporation under the laws of Ohio, and if we should assume that the statutes of Ohio, if they had been recited in the bill, would show what the plaintiff has alleged, — that each stockholder is liable for any debt due by the corporation to any laborer employed by it in carrying on its manufacturing business, — there would still remain insuperable difficulties in maintaining this suit. The laws of a foreign state do not operate beyond its territorial limits ex proprio vigore, but only ex comitate. The courts of a state, where the laws of a foreign state are sought to be enforced, will use a sound discretion as to the extent and mode of that comity: they will not permit their tribunals to be used for the purpose of affording remedies which are denied to parties in the jurisdiction of the state that enacted the law, and which tend to operate with hardship on their own citizens and subjects. Erickson v. Nesmith, 15 Gray 221. The liability which the plaintiff seeks to enforce is a mere creature of the statute, having none of the elements of a contract, whether express or implied: it is a naked, statutory liability, entirely unknown to the common law, for the indebtedness of the corporation however it may accrue, whether from the breach of a contract or the commission of a tort. The stockholder is not liable upon the contract in the one case, nor for the tort in the other, but, under the statute, for the debt against the corporation which may grow out of either. Hicks v. Burns, 38 N.H. 141. In order to arrive at a just conclusion in this case, it is important to know by what proceedings this liability is enforced in Ohio. By the statutes of New Hampshire, proceedings to enforce the liability of stockholders, under our laws, must be by bill in chancery. A creditor, seeking to enforce it, must join in the suit all the parties in interest who can be affected by the decree: the suit must be prosecuted for the benefit of all the creditors, and not for a portion of them. All the stockholders who can be reached by the process must be made defendants. The corporation itself must also be joined; — and thus, by avoiding a multiplicity of suits, the whole liability of the corporation is apportioned among the solvent stockholders, who can be reached by the process of the court, and by the decree each stockholder is compelled to pay his proportionate share of the debts: and thus, in one suit, the affairs of the corporation are practically wound up, and its burdens distributed equitably among the share-owners. Hadley v. Russell,40 N.H. 109; Erickson v. Nesmith, 46 N.H. 371.

In Erickson v. Nesmith, 15 Gray 221 — which was a suit at law brought to enforce the personal liability of a stockholder, residing in Massachusetts, of a corporation established in New Hampshire, for a debt of the corporation — the supreme court of that state, in the exercise of a sound discretion, refused to permit such suit to be maintained, upon the ground that the plaintiffs were seeking to enforce the liability against a citizen of Massachusetts, by a remedy denied to them in the courts of the state whose statutes created such liability; and because, if the suit could be maintained, it would operate with greater hardship on the citizens of Massachusetts than the remedy provided by the statute itself, and which alone they could pursue in New Hampshire.

The same creditors subsequently brought a suit in equity against Nesmith and others, stockholders of the same corporation, residing in Massachusetts — reported 4 Allen 233 — said suit being brought in behalf of all the creditors, to enforce their claims against the stockholders, under the provisions of the statutes of this state making the stockholders individually liable for the debts of the corporation. It was held that the bill could not be maintained. In the opinion of the court, DEWEY, J., remarked as follows: "If this be so, we perceive at once strong reasons why such a bill should be brought in the state which created the corporation, and where the same is located by the express terms of its charter, and where its place of business is. The effect of maintaining such a bill is to draw before the court all the creditors of the corporation, all the stockholders, and, necessarily, as we should suppose, the principal debtor, — the corporation itself. The fact of the residence of a single stockholder in Massachusetts, who might be liable in a New Hampshire corporation in common with a hundred stockholders residing there, would, upon that hypothesis, transfer to our jurisdiction all such stockholders and all the creditors, and authorize us to hear and adjust all conflicting questions as to the indebtedness of the corporation, who were stockholders, and what were the equities between them.

"Great practical difficulties meet us at once. There are strong reasons for holding that, in case of an existing corporation, the debt sought to be recovered of a stockholder should be first established by a judgment of court. If this be doubtful, it is, at least, necessary that, before such debt be established by the proceedings in the bill in equity, the corporation should have been made a party to the bill. Bogardus v. Rosendale Manuf. Co., 3 Seld. 151. But we have no jurisdiction that will reach such corporation out of this commonwealth, and having no assets here; and the same is true of the stockholders residing in New Hampshire. A bill in equity in Massachusetts is, therefore, not the remedy intended to be prescribed by the statute of New Hampshire creating and regulating the liability of stockholders in a manufacturing corporation in New Hampshire."

In the suit between the same parties in this state, reported in46 N.H. 371, SARGENT, J., in commenting upon the above decision of the court in Massachusetts, said, — "The result of the suit in Massachusetts was what might have been expected. The plaintiffs, in going to another state to try to enforce upon its inhabitants the special provisions of the laws of New Hampshire, would be very likely to find their mistake, — that the stockholders in Massachusetts did not belong to any corporation in that state to which the Massachusetts laws, to which alone they were amendable had any application."

The defendant corporation was organized under the statutes of Ohio; it has its principal place of business there; the most of its stockholders probably reside there; if it has any assets, they will probably be found in that state; none of the stockholders are residents of this state; the corporation has no assets here; it has been adjudged a bankrupt; only one of its stockholders has any property within this state; and there is no recital in the bill by which we can be informed by what remedial process the individual liability of stockholders is enforced in that state. Under such circumstances I do not think comity requires us, in the exercise of a judicial discretion, to give effect to the foreign statutes here. Being without information as to the remedy afforded in Ohio, it might happen that we should afford a remedy here which is denied to persons in that jurisdiction, and which would not be allowed to persons seeking to enforce a similar right under our own laws. It is hardly necessary to add, that if the defendants are not a corporation, but are a partnership, the plaintiff has a plain and adequate remedy at law.

The defendants' counsel has argued at great length, and with signal ability, that the liability created by the statutes of Ohio, being entirely unknown to the common law, no action either at law or in equity can be maintained in this state on account of or to enforce that liability. But in the view we have taken of this case we have not found it necessary to consider that question except incidentally. Several other questions raised by the demurrer we have also had no occasion to consider.

CUSHING, C. J., and LADD, J., concurred.

Demurrer sustained.