Cunningham v. Pell

The Chancellor.

Independent of the objection of the want of proper parties, this bill cannot be sustained as a bill to obtain satisfaction of the judgment obtained against the corporation, and the seven directors thereof, in the state of New-Jersey. It is evident, from the bill itself, that the requirements of the statute were not complied with, so as to entitle the complainant to a judgment against the individual property of the directors of the bánk. The statute authorizes process to be issued against the president and directors, for the amount contained in the affidavit, upon which judgment may be rendered and execution issued against the corporation and its estate, and against the real and personal estate of the president and directors in their individual capacity. But in this case it appears that, instead of taking out process against the president and the directors of the bank, individually, and upon that process proceeding to judgment against them and the corporation which they represented, the process was sued out against the corporation only ; and upon that the judgment has been rendered against the individual directors, who may not have had any notice of the suit. The legislature never could have intended that a judgment should be rendered against the directors of *the bank personally, upon the service of process upon the president or cashier of the corporation, and without giving the directors an opportunity to defend themselves by showing- that they were not such directors at the time of the commencement of the suit, or when the .demand of payment was made and refused; but there would bé no Impropriety in rendering a judgment against a corporation, upon process served upon its president and' all its directors ; who are the proper agents of such corporation, to defend its rights. In this case it is very evident that the true construction of the eleventh section of the act of incorporation is, that, to make the president and directors individually liable, the process must be sued out against them individually, and duly served; and that it is- not sufficient to sue out process against the corporation only, as was done here.

That the individual directors were not served with the process upon which this judgment was obtained, is perfectly evident from the facts stated in the bill. It is there alleged that Doughty and Stevens were elected directors without their knowledge or consent, and that they never acted as such. And yet a personal judgment is rendered against them, as well as the other directors, upon process issued against the corporation, two or three years after one of them was-dead. Upon this process the court had no jurisdiction, either as to the persons or the property of the individual directors.; and the judgment, so far as concerns them individually, is absolutely void. Even if the construction of this statute was that the court might enter a judgment against the properly of the president and directors individually, upon process issued against the corporation only, it would be a proceeding in rem, merely; and the court having- no jurisdiction over the persons of the individual directors, by such a proceeding, the judgment would not create a debt upon which a suit could be sustained against the directors, in the courts of this state. (See Bates v. Delavan, 5 Paige’s Rep. 299.)

Sufficient, however, appears upon this bill to entitle the complainant to relief, if it was not defective in form, and if the proper parties were before the court. In Robinson v. Smith, (3 Paige’s Rep. 223,) this court decided that the directors of a corporation were liable to the parties injured by a fraudulent breach of trust. And the same point was decided the same way by the supreme court of Louisiana about the same time. (Percy v. Millaudon, 3 Louis. Rep. 568.) In this case it is charged that the funds- of the bank have been fraudulently abstracted, to a large amount, by the two Pells, so that nothing is left for the payment of the creditors of the institution ; and that the complainant is a creditor, and has recovered a judgment, which is probably binding upon the corporation. Even if he is a creditor at large, he is entitled to protection against the consequences of these fraudulent acts,, by which the creditors have been deprived of the means of collecting their debts, in the usual way, against the corporation itself. In the case of The Protection Insurance Company v. Dummer and others, decided in this court in April, 1834, but which is not reported, it was held not necessary to make all the fraudulent directors parties, to a bill filed for the purpose of obtaining satisfaction for a fraudulent breach of trust; that this was an exception to the general rule that in a proceeding against trustees all. must be made- parties. (See also Walker v. Simons, 3 Swans. Rep. 75 ; 4 Russ. Rep. 274, note; and Wilson v. Moore, 1 Myln. & Keen’s Rep. 127.) It was not necessary, therefore, to make Spencer and Lyon parties to this suit, except for the purpose of obtaining relief against them on the ground of their personal liability for the debts of the company, under the eleventh section of the act of incorporation. If the complainant seeks to charge any of the directors on that ground, all the other directors who are liable to the same extent, should be made parties, so that a proper decree for contribution may be made. In that case, also, the corporation, if in existence, and not entirely destitute of property, should also be a party, so that its funds may be fairly applied to the payment of the complainants’ demand.

The objection for multifariousness is not well taken. If the allegations in the bill are true, the personal representatives of Alfred S. Pell, and the trustees under the marriage settlement, are proper parties; the first, that they may account for the monies and property of the institution, which was fraudulently abstracted by their testator, and the last that they may be compelled to restore the funds and property belonging to the bank, which may have come into their hands as trustees under the settlement.

But it is a fatal objection to all the relief claimed by this bill, that the corporation is not made a party. This question was decided in the case of Robinson v. Smith, before.referred to. Although that suit was brought by the stockholders, and this by a creditor of the corporation, the principle is the same, in both cases. If this creditor could compel the defendants to account to him for the funds of the bank which have been abstracted by the Pells, the corporation, if in existence, might hereafter compel the defendants to account a second time to it. Although the corporation is located in another state, if it does not appear voluntarily it may be proceeded against as an absent defendant.

It does not appear by the bill in this case that there are any other creditors but the complainant; but if there are others, which is probably the case, they should be made parties; or the bill should be filed by the complainant in behalf of himself and all others standing in the same situation, to enable them to come in under the decree; and to relieve the defendants from the necessity of accounting again to other creditors.

The demurrers are allowed'; but with liberty to the complainant to amend his bill, upon the payment of costs, if he shall be so advised.