Moies v. Sprague, Administrator

9 R.I. 541

• Court: Supreme Court of Rhode Island
• Decided: October 6, 1870
• Status: Published

Opinions

This action is brought against the defendant, as administrator of the estate of the late Byron Sprague, deceased, to charge the estate by reason of certain alleged statutory liabilities incurred by the decedent as a stockholder, a director, and the president, of the Union Horse Shoe Company, upon four promissory notes of the company, or upon said notes, alleging that they have been reduced to a judgment against the company.

The first and fourth counts of the declaration declare upon the liability of the decedent as a stockholder, — the first in respect of the four notes, and the fourth in respect of said notes, alleging they have been reduced to a judgment, with other allegations. There is an obstacle, which is, in our opinion, insuperable to the plaintiff's recovery upon those counts, for the reason that, where the liability is that of a stockholder, the nineteenth and twentieth sections of chapter 128 of the Revised Statutes provide certain remedies, neither of which is by an action on the case against him personally; and the rule is, that where a statute creates a right or liability and prescribes a remedy, the remedy prescribed is the only remedy. 1 Chitty's Pl. 112. Smith v. Drew,5 Mass. 514; The Vestry of the Parish of St. Pancras v.Batterbury, 2 Com. B. (N.S.) 477, and cases cited in note on page 487. This view — that the remedies given by the statute are the exclusive remedies — is in accordance with the opinion expressed in the case of Knowlton v. Ackley, 8 Cush. 93, by the Supreme Judicial Court of Massachusetts, in regard to the individual liability of a stock holder in a manufacturing corporation, under the statute of that state, (Rev. Sts. of Mass. c. 38, §§ 30, 31,) which, in respect to the remedies on such a liability, is the same as our own, — ours doubtless having been copied therefrom. And see Erickson v. Nesmith, 15 Gray, 221. But see Ex parte Von Riper, 20 Wend. 614.

Whether the liability of a stockholder, especially if he die before judgment recovered against the corporation, (Handrahan v. Cheshire Iron Works, 4 Allen, 396,) survives in any manner at law against his estate, we need not determine. See Dane v.Dane Manufacturing Co. 14 Gray, 488; Child v. Coffin,17 Mass. 64; Kelton v. Phillips, 3 Met. 61; for, if it survive, we think it would not survive so as to give an action against his administrator which would not lie against himself. See Outter v. Middlesex Factory, 14 Pick. 483; Andrews v. Callender, 13 Pick. 490; Ripley v. Sampson, 10 Pick. 371.

We may further remark, that one of the four notes mentioned in the declaration was not made until after the death of Byron Sprague. As to that note, we do not see how it can be claimed that he ever incurred any, even an incipient, liability, either as a stockholder or as an officer of the company.

The second count declares upon the four notes, as a claim against the estate by reason of a liability incurred by the decedent as a director of the Union Horse Shoe Company, under section 13 of chap. 128; and the third count declares upon the four notes, as a claim against the estate by reason of liability incurred by him as president of the company, under sections 2 and 3 of chapter 128. It is not denied but that each of these counts states a case upon which the decedent, if he were still alive, would have been liable, either in an action on the case brought against him personally, as provided by section 18 of chapter 128, or by a suit in equity under the twentieth section. But he is dead, and the question is, whether the notes, or any of them, are a claim against his estate, upon which his administrator can be sued in in this action.

After the death of Byron Sprague, his estate was represented insolvent, and commissioners appointed thereon, to whom the plaintiff in due time presented the notes, as a just claim and debt against the estate, and, the same having been rejected by the commissioners in their report, he has proceeded under the statute to bring this action against the administrator.

The counsel for the defendant contends, that the plaintiff has no claim or debt against the estate, within the meaning of the statute regulating the settlement of insolvent estates of deceased persons, by reason of any of the liabilities incurred by the decedent, as alleged in the plaintiff's declaration.

The statute regulating the settlement of insolvent estates of deceased persons, (Rev. St. ch. 158,) uniformly speaks of the persons entitled under its provisions against the estate as "creditors," and of the right by virtue of which they shall be so entitled, as a "claim" or "debt." The first section provides (subject to certain preferences) that "when the estate of any person deceased shall be insolvent, or insufficient to pay all the just debts which the deceased owed, the same shall be distributed to and amongst all the creditors in proportion to the sums to them respectively owing, so far as the said estate shall extend." The statute further provides for having the estate represented insolvent, and for commissioners to examine the claims against the estate, and to make their report and present a list of the claims by them allowed. The eighth section provides that "notwithstanding the report of the commissioners, any creditor whose claim is wholly or in part rejected may have the same determined at common law, in case he shall give notice thereof in writing in the office of the clerk of probate within forty days, and bring and prosecute his action within sixty days, after such report shall be received."

We do not find it necessary, for the purposes of this case, to decide whether every liability of a decedent which gives an action or cause of action that survives, either by statute or at common law, constitutes a claim which is provable before the commissioners upon his estate, the same being represented insolvent. But supposing that it does, we think that at least we cannot go beyond that, and hold that a liability which does not give an action or cause of action that survives, will constitute such a claim; for by the eighth section, above quoted, any creditor whose claim is wholly or in part rejected may have the same determined at common law, in case he shall give notice, etc., and bring and prosecute his action within sixty days.

Do the liabilities, upon which the second and third counts of the plaintiffs declaration are based, give actions or causes of action that survive? If they do, it is because the actions or causes of action which they give survive at common law, for they are not within the statutory provision for the survivorship of certain causes of action and actions in addition to those which survive at common law. (Rev. Sts. c. 176, § 10.)

According to the leading case of Hambly v. Trott, Cowp. 372, which has been uniformly recognized as authority in subsequent cases; Cravath v. Plympton, 13 Mass. 454;McEvers v. Pitken, 1 Root, 216; Martin v. Bradley, 1 Caines, 124; Franklin v. Low Swartwout, 1 Johns. 396; ThePeople v. Gibbs, 9 Wend. 28; personal actions of tort do not survive at common law, though if the estate of the guilty party have derived a gain or benefit from the tort, it may be competent for the other party to waive the delictum and proceed against his representative for the value of such gain or benefit, by an action however in form ex contractu; for the common law respects the form, and will not, even in such cases, allow an action ex delicto to be maintained. And in The People v.Gibbs, supra, it was held an action of assumpsit, being the remedy given by the statute, would not lie against the executors of a sheriff for the fault of his deputy in returning process — the cause of the action being a tort.

In this case there is no contract between the plaintiff and the decedent expressly alleged or proved; nor is it shown that the estate of the decedent has been increased by any thing done or omitted to be done, whereby the liabilities alleged in the second and third counts were incurred, which would warrant the presuming of any contract, — each of these counts being framed simply with a view to show a case of statutory liability; and therefore, under the rule laid down in Hambly v. Trott, the plaintiff cannot recover by reason of these liabilities, or either of them, unless the statute gives them, or one of them, the effect of a contract on the part of the decedent to assume the debts of the corporation, to the extent of its liability, as his own individual debts.

The statute does not expressly declare, nor does it in our opinion contain language which necessarily imports, that this shall be the effect of the liabilities, or of either of them, when incurred; and, such being the case, we do not think we ought to construe them, or either of them, as equivalent to such a contract. The liabilities accrue in consequence of a neglect and a violation of duty, or, in other words, of a tort, which signifies not merely misfeasance, but also nonfeasance, where there is duty to be done. The action brought is that which is given by the statute, to wit, an action on the case, which, conforming to the statute, alleges no promise on the part of the decedent, — as indeed, it properly could not, without the authority of the statute, there being in the view of the law no privity of contract between a creditor of the corporation and its officers, in the absence of special agreement. We are therefore, brought to the conclusion that the liability alleged, either in the second or the third count, does not give a cause of action which survives the person affected by the liability, or which constitutes at law a valid claim against his estate. We refer to the following cases as cases which, though not precisely in point as precedents, throw light upon the subject; Kelton v.Phillips, 3 Met. 61; Knowlton v. Ackley, 8 Cush. 93; Gray v. Coffin, 6 Cush. 192; Sanford v. Haskell. 50 Maine, 86;Erickson others, v. Nesmith others, 4 Allen, 233.

In Massachusetts, in the case of Bangs v. Lincoln, 10 Gray, 600, it was held that the liabilities of officers of a manufacturing corporation for the corporate debts, under the Mass. Rev. Sts. ch. 88, §§ 19, 20, were not provable against their estates in insolvency, "because the liability thereby created is not a debt, but a right of action in behalf of a creditor, for neglect or omission to perform certain official duties."

There are cases from Ohio and New York in which similar liabilities have been considered as penal, and not in the nature of contracts. Thus, in Lawler et als. v. Burt, 7 Ohio State, 340, in an action brought to charge certain stockholders and directors of a corporation upon an individual liability imposed by statute, to pay the amount of certain notes issued by the corporation so made as to circulate as money, it was held that the liability was not in the nature of a contract but of a penalty, an action on which would be barred in four years. And see also Sturgess v. Barton, 8 Ohio State, 215.

In Andrews v. Murray, 33 Barb. 354, under an act making the trustees of an incorporated company jointly and severally liable for its debts, in case of neglect to make and file the report mentioned in the act, it was held that one trustee who had paid for the company a large sum of money at their request, could not by reason of this liability recover of co-trustees a proportionate amount thereof, upon the ground that where the liability arises ex delicto, there is no contribution among the wrongdoers. And in the case of The Shaler Hall Quarry Co. v.Bliss, 34 Barb. 309, the court, speaking of the same liability, say: "The liability of the trustees, by that section, is of the nature of a penalty or punishment for the omission of duty." And see Abbott's Dig. Law of Corp. p. 392, §§ 150, 151, citingMerchants' Bank of New Haven v. Bliss, 1 Rob. 391; Bird v.Hayden, 1 Rob. 383.

In Halsey v. McLean, 12 Allen, 438, the Supreme Court of Massachusetts refused to enforce a liability, incurred under the New York acts, because of the "qualified and penal character" of the provision creating the liability according to the construction given to it by the New York Court of Appeals, citingGarrison v. Howe, 17 N.Y. 468; Boughton v. Otis, 21 N.Y. 261; Chambers v. Lewis, 28 N.Y. 454.

These decisions support the view which we have taken of the nature of the liabilities incurred by the decedent, as president and director of the Union Horse Shoe Company.

Whether the plaintiff still has any remedy in equity, or whether he has any remedy under chapter 128, section 23, of the Revised Statutes, are questions which do not in our view arise in this case, and as to which we express no opinion. We think the plaintiff is not entitled, upon the case which he makes by his declaration, to recover, and we therefore give the defendant judgment for his costs.

Judgment for the defendant.

After the rendition of the foregoing opinion, the plaintiff moved for a rehearing, and also filed a bill in equity against the defendant.

This bill claimed that the amount of the promissory notes therein described; made by the Union Horse Shoe Company, a manufacturing corporation incorporated at the May session, 1864, of the General Assembly, and included within and subject to the provisions of chapter 128 of the Revised Statutes, and of the acts in amendment of and in addition thereto, and of which company the said Byron Sprague was a member, stockholder and director from its organization in 1864, until his decease in July, 1866, was a claim or debt against the estate of the decedent, and should be added to the claims and debts theretofore allowed by the commissioners appointed, upon representation that said estate was insolvent, to examine the claims against the said estate.

The bill alleged that Byron Sprague in his lifetime became liable for the debts aforesaid due from said corporation to the complainant, as a member of said corporation under the provisions of sections 1 and 2 of chapter 128 of the Revised Statutes, as a stockholder under the provisions of sections 11 and 12 of said chapter 128 and chapter 266 of the Statutes of said state, and as a director under the provisions of section 13 of said chapter 128; and also that the estate and funds in the hands of the respondent, who as administrator of the estate of Byron Sprague, and since his decease had held the shares in said corporation which were owned by the said Byron Sprague in his life time and voted upon and represented the same as a stockholder of said corporation at the meetings thereof held since the death of said Byron Sprague, were liable for the payment of the debts aforesaid under the provisions of section 23 of said chapter 128.

The bill also averred that the moneys advanced by the complainant to said corporation upon the notes aforesaid were applied to the payment of the debts of said corporation, for the payment of which the said Byron Sprague then in full life was personally and individually liable, that the complainant recovered judgment at the October term, 1867, of this court upon said notes against the said corporation, that the respondent was duly appointed administrator of the estate of said Byron Sprague, that said estate had been represented insolvent, that commissioners had been appointed to receive and examine claims against said estate, to whom the complainant's said claim was within the time limited therefor presented, and who in their report wholly rejected the same. The bill further averred that after payment in full of said claims allowed, the respondent would have in his hands, of the estate of Byron Sprague, sufficient to pay the claim aforesaid of the respondent.

The bill prayed that the respondent might be decreed to pay to the complainant the amount due and owing to him as aforesaid, or that his said claim might be decreed to be valid against the said estate and might be added to the debts allowed and reported by said commissioners, to be paid in the regular course of the administration of said estate, and for general relief.

The answer admitted all the allegations and averments of the bill, excepting as to the allegations that the capital stock had not been paid in according to section 1 of chapter 128, as to the extent of the excess of the debts over the capital stock paid in under section 13 of said chapter 128 and as to any surplus after the payment of the claims which had been allowed.

And it was agreed between the parties that if the complainants claim in the judgment of the court depended upon any liability under the 13th section of said chapter 128, the amount of such excess should be thereafter ascertained, and if the complainant's claim depended upon the fact of a surplus after the payment of the claims allowed, that the bill should be retained until it was ascertained whether there was any such surplus or not. Under this agreement, the cause came on for hearing upon the bill and answer.

The action at law also stood for re-hearing with the bill, and the question was, whether or not the complainant's said claim was a valid claim, either in whole or in part, at law or in equity, against the estate of the said Byron Sprague.