Connecticut River Savings-Bank v. Fiske

I. The defendants claim that the bill is multifarious, as it joins other creditors than the bank. This objection, if it were valid, might be obviated by an amendment such as the plaintiffs have offered to make; but the bill is not open to the charge of multifariousness. By our statutes, remedies of the character here sought must be prosecuted by bill in chancery. Gen. St., c. 186, s. 1. "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 equally among the shareholders." Hadley v. Russell,40 N.H. 109; Erickson v. Nesmith, 46 N.H. 371; Rice v. Hosiery Co.,56 N.H. 114, 128; 1 Dan. Ch. 240: Sto. Eq. Pl., ss. 173, 180.

II. The sufficiency of the demand for payment of the note in question is controverted by the defendants. It is claimed that it should have been made personally, and not by letter, and that it should have been a demand on the company to pay the note, or to expose personal property for attachment. But what is the object of a demand in a case like the present one, and why should it be made personally and not by letter? As indicated by the statute, its object is to afford the officers and stockholders an opportunity to pay the debt, or expose personal property of the company so that it may be attached, and thus to protect the stockholders from a suit against them. Therefore it is said, in Haynes v. Brown, 36 N.H. 545, that the demand should be personal, in order "that the person called upon may at once discharge himself" by paying the debt or surrendering property. But in the same case, Judge Bell says, "If the defendant or others had made no objection to the manner of the demand, and had distinctly refused to pay, it would be a waiver of any objection on this account." See, also, Phelps v. Gilchrist, 28 N.H. 266, 277. In this case the demand was sufficient, because all the practical purposes of its requisition were accomplished, and because the company, by its treasurer, made no objection to the manner in which it was made, but expressly refused to pay the note, or to point out personal property on which an attachment could be made. These facts were sufficient to show a waiver on the part of the company of a more formal demand, and the master has found that the demand was sufficient. Haynes v. Brown, 36 N.H. 545, 564; Abbott v. Strafford, 51 N.H. 148, 155; Norris v. Morrill, 40 N.H. 395; Phelps v. Gilchrist, 28 N.H. 266, 278; Gordon v. Norris, 29 N.H. 198, 201; Rogers v. Weir, 34 N.Y. 463; Heard v. Lodge, 20 Pick. 53; Delano v. Goodwin,48 N.H. 203.

III. The master having found the fact that this suit is prosecuted for the benefit of the plaintiffs alone, and that they are not indemnified by any other party or parties, as was claimed by the defendants, the doctrine of ultra vires is no defence in this case. By Gen. Sts., c. 135, s. 4, the corporation was forbidden to contract debts exceeding one half of its capital stock then actually paid in and unimpaired, and of its its other property and assets; but in Ossipee Manufacturing Co. v. Canney,54 N.H. 295, 322, it is expressly held that debts contracted and liabilities incurred in excess of that amount are binding upon the corporation. In this case the plaintiffs cannot be presumed to have known that the company was, exceeding its powers in contracting the debt represented by the note in suit. That was a fact peculiarly within the knowledge of the officers of the company, which the plaintiffs could not ascertain except by a long, complicated, and probably difficult computation. The statutory prohibition of the contraction of debt did not authorize the company to keep without repayment the money it was forbidden to hire. Brice Ultra Vires 717. No ground is shown on which the plaintiffs' knowledge of the excessive indebtedness would be material. The defendant corporation hiring the plaintiffs' money is liable to repay it, whether the hiring was authorized or not. The note is a valid debt of the corporation that gave the note for the money it hired. It is therefore immaterial whether the creation of this debt was ultra vires of the company or not.

It is also immaterial whether the debt was contracted by a vote of the company or by its officers, or whether the officers were authorized to contract it. If contracted by the company, it is valid, without reference to the question whether, having received the benefit of it, the company is estopped to deny its validity; and if contracted by its officers without authority in the premises, their act has been ratified by the company by receiving and enjoying the benefit of the money thus borrowed. Ossipee Manufacturing Co. v. Canney, 54 N.H. 295, 324; Rich v. Errol, 51 N.H. 350; West v. Errol, 58 N.H. 233; Railroad v. Railroad,59 N.H. 385.

IV. It is insisted that the plaintiffs having commenced a suit against the company, they are not entitled to the relief sought by this bill until they have exhausted their legal remedy. But the defendants' liability is created by a statute which contains no such limitation or condition. "The officers and stockholders of corporations, except banks, whose object is a dividend of profits, shall be individually liable for the debts and contracts of the corporation in the cases and to the extent specified in this chapter, and not otherwise." Gen. Sts., c. 135, s. 1. "The only remedy to enforce the payment of a debt of a corporation against the individual stockholders thereof shall be by bill in chancery." Gen. Sts., c. 136, s. 1. Upon demand of payment of any debt of a corporation, it is made the duty of the officers and stockholders to discharge it, or to expose unincumbered personal property that it may be attached; and if such property be thus exposed, no suit shall be maintained against the stockholders. Gen. Sts., c. 136, s. 3. The requirements of the statute preliminary to the commencement of this suit have all been complied with. The debt has not been paid, and unincumbered personal property has not been exposed upon demand.

"Every stockholder, except stockholders in banks, shall be liable for all debts and contracts of the corporation until the whole amount of the capital fixed and limited by such corporation shall have been paid in, and a certificate thereof, under oath, signed by the treasurer and a majority of the directors, has been filed and recorded by the clerk of the city or town where such corporation has its principal place of business," etc. Gen. Sts., c. 135, s. 8. As the conditions upon which the defendants' liability for "all the debts and contracts of the corporation" terminates have never happened, their liability under the statute would seem to be complete. Hicks v. Burns, 38 N.H. 141, 146. And aside from the statute, upon what equitable ground can it be claimed that this court should compel these creditors to resort to their suit-at-law against the company, and exhaust that remedy, before asserting their claim by this bill in equity? "Why should a court of equity interfere to stop the election of the creditor as to any of the remedies which he possesses in virtue of or under his contract?" What is there in this case to take it out of "the settled doctrine, that the debtor himself has no right to insist that the creditor should pretermit any of his remedies, or elect between them?" 1 Story Eq., s. 640. The cases to which we are referred relate to bills in equity brought to assist the enforcement of judgments at law, holding that the creditor must show that he has proceeded at law to the extent necessary to give him a complete title. See Brinkerhoff v. Brown, 4 Johns. Ch. 671; Dauchy v. Brown, 24 Vt. 197; Cambridge Water-Works v. Somerville Dyeing, c., Co., 4 Allen 239. And we have not been able to find a case where, under a statute like ours, the creditor has been compelled to resort to an attachment, or to the application of any particular fund or security before availing himself of the right of action prescribed by the statute.

These suggestions also dispose of the defendants' claim that the plaintiffs should first exhaust their remedy against Dunsmore and Willard, who, having no right, it is claimed, to create the relation of principal and surety between themselves and the company, are directly liable to the plaintiffs as principals. Without considering how this might be in a suit between these men and the company, we do not perceive any reason why these plaintiffs, who have acted without any fraudulent or sinister purpose from the beginning, should be compelled to seek their remedy first against the sureties on this note.

The plaintiffs are entitled to a decree.

Case discharged.

STANLEY and CLARK, JJ., did not sit: the others concurred.