Dewey v. St. Albans Trust Co.

60 Vt. 1

• Court: Supreme Court of Vermont
• Decided: October 15, 1887
• Status: Published

Opinion

The opinion of the court was delivered by

Rowell, J.

Although the history of this case prior to the bringing of this petition fully appears in the report of it in 56 Vt. 476, yet it will be matter of convenience to restate it here as far as necessary to bring out the point now decided.

On August 17, 1883, the inspector of finance proceeded in chancery against the defendant company as an insolvent corporation, and obtained an injunction, restraining it from transacting any further business as a trust company, and from all custody of or interference with its books and property, except to keep and preserve the same, until further order. He at the same time obtained the appointment of a receiver, who was ordered to take possession of the property of the company at once, and to administer it according to law, subject to the further order and direction of the court.

The charter of the company provides that in case of its “dissolution * * * by act of law or otherwise,” the debts due from it, “incurred by deposits in favor of minors, insane persons, or married womens — such deposits having been made for married women in their own right — shall have a preference and be satisfied before any other debts due from said corporation are paid.”

The receiver took possession of the property and began to administer it, and on November 10, 1883, for the purpose of obtaining the direction of the court in respect of such administration, he preferred his petition in the case, setting forth that on October 4, 1883, the court ordered that all creditors of the company should present and prove their claims by December 1, 1883 ; that pursuant to said order a large number of creditors had proved their claims, and that he had reason to believe that the rest of them would prove theirs within the time limited; and further setting forth the provisions of the charter above recited, and that a considerable number of persons had proved claims for debts duo for deposits in favor of minors, insane persons, and married women in their own right, and insisted that said claims should be preferred and be satisfied before any other debts due from the company were paid; that he had realized a considerable amount of money from the assets of the company, and expected to realize more therefrom from time to time, and that it was for the interest of the creditors of the company that the funds realized and to be realized, should be paid and distributed to and among them according to their legal rights as soon as might be; that the creditors who claimed no preference insisted upon an equal and a rateable payment and distribution of the funds to and among all the creditors; and praying for an order, directing him in the premises, and prescribing in what order, proportion, and manner payment and distribution should be made with reference to the demands for which preference was claimed and with reference to the other debts of the company.

Notice of hearing on this petition on December 4, 1883, was given to all persons interested by publication of the petition and an order of notice, three weeks successively in the St. Albans Messenger and Advertiser, and by acceptance of service by the chairman of the depositors’ committee; and at the hearing the receiver and counsel appeared and represented the general creditors and counsel appeared and represented parties who claimed a preference, and a full hearing was had; whereupon it was ordered and decreed that all the depositors who had proved or should prove their claims as such, stood and should stand “on terms of perfect equality of right to share in the division and distribution of the funds or assets of said company, and that no depositor or class of depositors is entitled to any preference over others,” and the receiver was ordered to pay out and distribute the funds and assets accordingly. From this decree some of those claiming a preference appealed to this court, when the decree was affirmed and the cause remanded. Subsequently, and in December, 1884, Mr. Kent and his wife — who was a depositor in the company in her own right and had proved her claim pursuant to order — preferred this petition in the case on behalf of themselves and all others in like interest who might choose to come in and share the expense, for the purpose of obtaining a preference under the charter; and divers other persons' of like interest have come in, some of whom appealed . from the former decree,, and so were unquestionably parties to that adjudication.

The ground for claiming a preference before was and now is, .not that the corporation has been dissolved by a judicial forfeiture of its charter, but that its state of suspended animation is death within the meaning of the charter, sufficient for the right of preference to attach.

The present petition is defended, on two grounds; namely, that the former decree is conclusive, and that there is no dissolution within the meaning of the charter shown.

As to the first ground of defence :

It is claimed that the former adjudication cannot be availed of here, though set up in the answer, because the,record of it has not been put in evidence. But this was not necessary. That decree was made in this present case, the whole record of which was before the Court of Chancery, and this appeal has brought it all before this court. — R. L,., s. 773 ; and the court can properly look into it, to see what has been done in the case, without requiring proof in the ordinary way. Armstrong v. Colby, 47 Vt., 359. And besides, the petition expressly makes all prior proceedings in the cause a part of itself, but omits to set them out, to avoid prolixity.

It appears that some of the parties that have here intervened were real parties to the proceedings that resulted in the former decree, and so are bound by it to some extent, certainly; but it is said that these petitioners and the rest that have intervened are not bound by it at all, as none of them were real parties to it, and that it does not appear that they had notice of the pendency of the proceedings so they could appear, had they desired to.

The depositors bear to the company tire relation of creditors rather than of cesticis que trust. Pope v. Savings Bank, 56 Vt., 284. And although under our statute the receiver probably stands as -a representative of all the creditors — High on Receivers, s. 314; Talmage v. Pell, 7 N. Y.,328, 347 — yet, as here are conflicting interest between different classes .of creditors, and as a right of appeal is given to all persons in interest as in other cases — R. L., s. 3556 — there might be some incongruity in saying that the receiver was in court for all in a way to bind all; and more especially so, as the decretal order shows that the receiver and Messrs. Noble & Smith appeared and represented the general creditors, and that Mr. Edson and Mr. Tenney appeared and represented parties claiming to bo preferred creditors, from which it would seem that the receiver in point of fact represented the general creditors rather than those claiming a preference.

But the depositors are very numerous, there being more than 2400 of them, and more than 1100 'claim a preference. Many of them are undoubtedly dead, some having and some not having personal representatives, and many may have removed from the State or originally lived- out of .it, so that it would have been entirely impracticable if not impossible to' give personal notice to all, and the notice that was given was the only one that could well have been given. Under this notice there was an appearance before the chancellor on behalf of divers persons standing in the same interest as these petitioners and those who have intervened, and a full hearing was had, and an appeal was taken on behalf of eight married women and four minors, some of whom, as we .have seen, intervene here, and the case was argued for them in this court by the same counsel who now argue it for the petitioners; and it can justly be said that the rights of the whole class claiming a preference were then fairly represented and fully and honestly maintained and tried; therefore, on well recognized principles, that decree ought to be held binding upon the whole class.

Although the general rule in equity is, that all persons having an interest in the subject-matter in litigation should be before the court, to the end that complete justice may be done and future litigation prevented ; yet, there is of necessity an exception to this rule when a failure of justice would ensue from its enforcement. It is said that the want of parties does not affect the jurisdiction, but addresses itself to the policy of the court; that the rule was made by the court for the promotion of justice, and may be modified by it for the same purpose, and is always more or less a matter of discretion depending on convenience. Stimson v. Lewis, 36 Vt. 91. Cases in which the parties in interest are so numerous as to make it impracticable or greatly inconvenient and expensive to bring them all before the court, form an exception to tlie rule. And this exception applies to defendants as well as to plaintiffs. Take the case of a voluntary association of many persons. It is sufficient in a suit against them that such a number be made defendants as will fairly represent the interests of all standing in like character and responsibility. Story’s Eq. Pl. s. 116.

In the City of London v. Richmond, 2 Vern. 420, which was a bill against the assignee of a lease for the payment of rent and the performance of covenants, it was held that by dividing his interest into a great many shares the assignee had made it impracticable to have all the sharers before the court.

In Chancey v. May, Prec. Ch. (Finch’s Ed.) 592, one reason given for overruling the demurrer for want of parties was, “ that it would be impracticable to malee all the proprietors parties,.and there would be constant abatements by death and otherwise, and no coming at justice, if all were to be made parties.”

In Lloyd v. Loaring, 6 Ves. 779, Lord EldoN said he had seen in the manuscript notes “ strong passages as falling from Lord Hardwick, that when a great many individuals are interested, there are more cases than those — which are familiar— of creditors and legatees in which the court will let a few represent the whole.” He said that there was a very familiar case in which the court allowed a very few to represent the whole world.

In Adair v. The New River Company, 11 Ves. 429, he shows how one having a general right at law to demand service to his mill from the inhabitants of a large district, sues in equity: ‘ ‘ His demand is upon every individual not to grind corn for their own subsistence except at his mill. To bring actions against every person for subtracting that service is regarded as perfectly impracticable. Therefore a bill is filed to establish the right, and it is not necessary to bring in all the individuals; not because it - is inexpedient, but because it is impracticable. The court therefore requires so many that it can be justly said they will fairly and honestly try the legal right between themselves, all other inhabitants, and the plaintiff ; and when' the legal right is thus established, the remedy in equity is very simple — merely a bill, stating that the right has been established in such a proceeding, and upon that ground a court of equity will give the plaintiff relief against the defendants in the second suit, represented only by those in the first suit.” See also Meux v. Maltby, 2 Swanst. 277.

So the creditors of an insolvent debtor who execute the assignment, being numerous and some of them out of the commonwealth, need not be made parties to a bill that concerns the assets. Stevenson v. Austin, 3 Met. 474.

In a suit by the receiver of a trust and banking company to foreclose a mortgage, the court said it would be oppressive to require all the creditors and stockholders to be made parties. Mann v. Bruce, 5 N. J. Eq. 413.

The general rule in equity is that a nominal trustee cannot bring a suit in his own name alone, but must join the beneficiaries ; still, it is said that the court will in its discretion dispense with the rule in cases of great inconvenience or of unnecessary expense. Willink v. Canal & Banking Company, 4 N. J. Eq. 377.

Thus, in Van Vechten v. Terry, 2 Johns. Ch. 197, which was a bill for the sale of premises mortgaged to the plaintiff by the defendants who were trustees for two hundred and fifty copartners, the court said it would be intolerably oppressive and burdensome to compel the plaintiff to bring in all the beneficiaries, and the delay and expense incident to such a requirement, a reflection upon the justice of the court.

Slimson v. Lewis, 36 Vt. 91, was a bill to dissolve a partnership consisting of a great many members, and to close up its affairs and compel contribution; and it was held that all need not be made parties, though it was not said that absentees would be bound.

Here we have a current authority, adopting more or less a general principle of exception by which the rule in equity that all persons- interested in the subject-matter of the litigation must be made parties, yields when justice requires it, in the instance of either plaintiffs or defendants. A rigid enforcement of the rule would lead to perpetual embarrassment, and in many cases to an absolute denial of justice; and we think this case in respect of the binding quality of this decree comes necessarily within the exception.

But to what extent is the decree binding ? Certainly not to the extent of precluding all future inquiry into this matter, based upon things that have transpired since the institution of the former proceedings; for the doctrine of estoppel by judgment has no application to a case that is ambulatory in its nature and has ceased to be the same by progression. People v. Mercein, 3 Hill, 399.

Thus, a judgment for the defendant in an action of trespass qua. clau. is not conclusive upon the right of possession at a subsequent time, because intervening events may have restored the plaintiff to possession or terminated the possession or the right that the. defendant had at the former trial. Thayer v. Carew, 13 Allen, 82. And intervening events affecting the issue jmay be shown to prevent a former judgment from being conclusive even when the title has been tried in a writ of entry. Perkins v. Parker, 10 Allen, 22.

The case turned before on the ground that no dissolution was shown; and the only proper inquiry on this point now is, whether one is now shown, produced by that which did not then exist, but has since transpired ; and here we must be confined to the time between the institution of the two proceedings, which is a little more than a year.

This petition alleges that before and at the time of the appointment of the receiver, the company was not merely temporarily embarrassed and unable to meet its liabilities as they matured, but was hopelessly insolvent in fact; that since the appointment of the receiver, no meetings of the stockholders nor of the directors have been held.; that the directors have neglected to repair the capital stock by assessment, as required by the charter; that the president has absconded and is insolvent; that neither the officers nor the stockholders expect ever to resume the business of the company; that the funds and assets of the'company are all gone, and its insolvency so hopeless that the depositors must suffer loss by reason thereof,- and that legal remedies against it are unavailing; that it has become and is a mere nominal, inert body, incapable from its insolvency and lack- of funds of- hereafter carrying its franchise into effect; that on the appointment of the receiver it ceased to own any real or personal estate, and has acquired none since, and does not expect to acquire any; that since his appointment it has done no one act manifesting an intention to resume the exercise of any of its corporate functions ; and that the design and being of the corporation-has been fully and finally determined.

It will be noticed that some of these things are alleged to have existed before and at the time of the appointment of the receiver; some, from that time; and some, to now exist, without saying when they transpired, much less, that they transpired since the institution of the former proceedings unless as matter of inference and by way of continuation from an earlier period.

Nor does essential time appear from the report. Most of the things alleged are found to exist at the present time; but it does not appear when they transpired, except as to the depreciation of assets from former estimates, which is found to have been gradual and large during the last two years. But for aught that appears these things may all have antedated the former proceedings to some extent, though probably intensified since by the mutations of time.

It is claimed that this changed condition in the value of assets is of. itself alone sufficient to entitle the petitioners to be heard here on the merits. But mere insolvency, however hopeless, has never been held sufficient evidence of a surrender of corporate rights — and this is the theory on which the cases go ; — and besides, it does not appear that the company was not before insolvent in fact. That the assets have .since depreciated from former estimates does not show it.. In the former proceedings the real financial condition of the company did not appear; but, as we have seen, this petition alleges that it was hopelessly insolvent before then, and this is probably true. It is not sufficient to show a present state of things adequate to relief, allowing that such a state is shown, which we do not undertake to say, without avoiding the force of the former decree by showing that those things have since transpired; . otherwise we might override that decree, and grant relief for that which existed before but was not made to appear, which would be in effect a rehearing.

This makes it unnecessary to consider the other question involved, as to which we express no opinion.

Decree affirmed and case remanded.