South Milwaukee Co. v. Murphy

58 L.R.A. 82, 88 N.W. 583, 112 Wis. 614, 1902 Wisc. LEXIS 6

• Court: Wisconsin Supreme Court
• Decided: January 7, 1902
• Status: Published

Opinion

Marshall, J.

The first proposition submitted for consideration by appellants’ counsel is based on the assumption that the purpose of the pleader was to state a cause of action at law. That assumption is doubtless in accordance with the fact. The only relief demanded or demandable on the facts alleged is a recovery of money, hence the issues of fact, when formed, will be triable by a jury as a matter of right; and that makes the action one at law. Sec. 2843, Stats. 1898.

But it is contended that the action is under sec. 3274, Stats. 1898, and that it authorizes only an equitable action. We'are unable to see anything in the complaint indicating that respondent’s counsel purposed stating a cause of action under that section. It authorizes an action against heirs or devisees who shall have, as such, become possessed of real estate, and provides that the action must be brought against all such heirs or all such devisees as a class. No judgment can be rendered unless the entire class is before the court. Sec. 3275. The complaint must contain a description of the real estate received by each defendant, and a statement of the value thereof. Sec. 3276. Each defendant can be held liable only for such proportion of the plaintiff’s claim as the value of the real estate received by him bears to that received by all the members of the class and not exceeding the value of what he received; and in case he shall not have sold such realty the judgment against him can be enforced against that particular property only. Whether such an action is one in equity need not be here decided; for, manifestly, the complaint does not state facts sufficient to satisfy such statutes.

Respondent’s counsel say that its right to recover, if it has any, is under sec. 3269, Stats. 1898. Assuming that the claim is not barred by some statute of limitation, and was not and is not recoverable, as sjiown by the complaint, by proceedings in the county court or from personal representatives of the deceased, we are unable to see why the complaint does not meet all the calls of such section and those regulating the procedure thereunder. It provides:

“Actions against the next of kin or legatees of any deceased person to recover the value of any assets that may have been paid to them by any executor or administrator may be brought against all of the next of kin jointly or one or more of them, or against all of the legatees jointly or one or more of them.”

The defendants are next of kin of the deceased, and his legatees as well, and they received assets of his estate from! his executor exceeding in value the plaintiffs claim. Sec. 3270 provides:

“If such action be brought against the next of kin the plaintiff must show that he has been or will be unable, with due diligence, to collect his debt or some part thereof by proceeding in the proper county court or from the personal representatives of the deceased.”

As the defendants are sued as legatees, that provision is not material. However, if plaintiff’s claim, without fault on its part, was not in a condition to be enforced in the county court during the progress of the administration of the estate, the complaint would satisfy the quoted requisites of sec. 3210, if the action was against the defendants as next of kin. Sec. 3272 provides that if the action be against legatees there shall be no recover}? unless it be shown that no assets were delivered by the executor or administrator to the next of kin of the deceased, or, if any such were so delivered, that the value thereof has been recovered by other creditors, or is not sufficient to satisfy the plaintiff’s demand, in which case the recovery shall be limited to the deficiency. Here, as indicated, the legatees received all the assets, so such section would be satisfied if they were not next of kin. Secs. 3270 and 3272 provide that the defendants, in proportion and to the extent of the assets received by them respectively, shall be liable for so much of the plaintiff’s claim as all the members of their class might have been held liable for, each having a right of action against other members of such class for contribution when necessary to ratably distribute the entire burden, and that the judgment shall express the amount adjudged against each defendant for damages and costs, the same to be docketed and enforced against the defendants severally in like manner as if there were several judgments, that is, by separate executions and against the property of the judgment debtors as in ordinary cases.

It will be seen that such statutes contemplate an action for money only, one in which issues of fact, if formed, are triable by a jury as a matter of right, or, in other words, an action at law. The authorized action is not in rem. No lien is obtainable upon the specific property received by the defendants from the deceased. It is not to' enforce a trust, for the defendants are not required to account for the property 'received by them in specie or for the proceeds thereof. It is to enforce a liability different from any existing at common law, a legal liability created by statute to pay the plaintiff’s claim to the extent specified therein. The statute, acting upon the conditions and to the extent mentioned, creates a devolution of liability from the estate of the deceased to his next of kin and legatees without changing the nature of the claim. By the act of the next of kin or legatees, in taking assets from the administrator or executor, they do not become trustees thereof for the benefit of persons who may be unable to collect their claims against the deceased by proceedings in the county court or from the personal representatives of the deceased, under the provisions of ch. 165, Stats. 1898; but they impliedly assume and agree to pay such claims to the 'extent of their statutory liability. Sec. 3269 creates a legal liability and none other, enforceable in an action at law and in no other way.

But counsel contend that the claim is barred by the statutes of nonclaim, so called; that the claim in.question was not contingent, hence should have been presented to the probate court for allowance. All claims not proper to be allowed, but which may be exhibited to the county court and may ripen into absolute liabilities, are contingent, and a failure to present them while the contingent character exists does not affect the right of action under sec. 3269, Stats. 1898. Ernst v. Nau, 63 Wis. 134; Mann v. Everts, 64 Wis. 372. Many authorities are cited to our attention on the subject of what is a contingent claim. Expressions are gathered from them and referred to as showing that a liability upon a subscription for capital stock in a corporation is a debt, and that a debt in prcesenti is not a contingent claim; that when we speak of a contingent claim in the language of the statute, the element of contingency refers to the existence of the debt, not to whether there is an absolute liability to pay it. For instance, in Greene v. Dyer, 32 Me. 460, this expression is used, speaking of contingent claims: “ That class of claims embraces those only, concerning which it is uncertain or contingent whether they will ever become debts.” Evidently the court meant, ever become absolute debts. The case, rightly understood, is in harmony with Austin v. Saveland's Estate, 77 Wis. 108, and other cases cited by appellant’s counsel, decided in this court, and cases decided elsewhere, to the effect that, if a liability exists but it is uncertain whether it will ever be absolute in the sense of being enforceable, it is contingent within the meaning of the statute. The terms “ debt,” “ absolute debt,” “ liability,” and “ absolute liability,” are used in the authorities in a way to confuse and lead to wrong deductions if one does not keep in mind that the essential element of a contingent claim is uncertainty as to whether it will ever be enforceable. True, so long as a debt is absolute it is not contingent, but it is not absolute if its enforceability is dependent upon a contingency that may never happen. True, a subscription liability for capital stock in a corporation is a debt, as said in 1 Cook, Stock, § 105, and in Hatch v. Dana, 101 U. S. 205, cited to our attention, and in all authorities that treat of the subject, but not an absolute debt. It is a debt payable in the future, as said by this court in Germania I. M. Co. v. King, 94 Wis. 439, but payable only in the future upon a contingency, the happening of an event, to wit, a call regularly made pursuant to the by-laws of the corporation and notice given pursuant thereto; hence a contingent claim. The call does not fix the liability in the sense of creating the obligation to pay for the stock. That is created by the subscription contract; but the contract is not to pay for the stock at all events; it is to pay upon a contingency, upon condition of a call being made according to the contract. The call makes what was before contingent absolute. It fixes the time of payment only as a step in satisfying the contingency necessary to make the liability absolute, to make what was before uncertain whether it would ever occur, certain, satisfying the rule announced in Austin v. Saveland's Estate, 77 Wis. 108, which was but a statement of elementary law. Probably the rule cannot be found more tersely stated than by Justice Bradley in Riggin v. Magwire, 15 Wall. 549, in speaking of what constituted a contingent claim under the bankrupt act of 1841. This language was used:

“ The better opinion is, that so long as it remains wholly uncertain whether a contract or engagement will ever give rise to an actual duty or liability, and there is no means of removing the uncertainty by calculation, such contract or engagement is- not provable.”

It would seem from the foregoing, there being no controversy but that an absolute liability does not exist to pay upon a subscription for stock in a corporation, except upon a call regularly made and notice thereof regularly given to the subscriber pursuant to the by-laws of the corporation, that citations of authority, classing such claims as contingent, are not necessary. The general rule, that where absolute certainty does not exist there is the uncertainty necessary to the contingency mentioned in the statute, would seem sufficient. However, counsel for appellants were able to present one case where the precise question at issue, in circumstances similar to those present here, was decided. Lake Phalen L. & I. Co. v. Lindeke, 66 Minn. 209. They also cite Dent v. Matteson, 70 Minn. 519, where the same question was decided under different circumstances, it being there held, in accordance with a familiar rule, that the insolvency of the corporation created an absolute necessity to call in balances due on subscriptions 'to capital stock, removing the element of contingency the same as a call under ordinary circumstances. We may say in passing that both actions were under a statute precisely the same as our sec. 3269, and were commenced and prosecuted as actions at law. The cases are numerous where the same question 'has been decided under other circumstances. We cite the following: Glenn v. Howard, 65 Md. 40; South Staffordshire R. Co. v. Burnside, 5 Exch. 129; General Discount Co. v. Stokes, 17 C. B. (N. S.), 765; In re General Estates Co. 4 Ch. App. 274; Martin's P. A. Co. v. Morton, L. R. 3 Q. B. 306; Black, Bankruptcy, 221. The following quotations from the decisions will amply show the position of the courts on the subject under discussion. In South Staffordshire R. Co. v. Burnside, Parke, B., speaking for the court, said:

“ The contract on which the shareholder’s obligation is founded is not to pay a certain, fixed sum upon a future contingency, but such sum or sums as maybe required from himself and all the other shareholders from time to time, not exceeding a .certain sum, and regulated by the wants of the company. At the time of the bankruptcy it was uncertain what the sum would be which the defendant would be called on to pay, and no certain debt was then contracted.”

In Glenn v. Howard, this language was used:

“As against the company and those claiming to hold under it, the stockholder has a right to stand upon the terms of his contract, and that contract created no obligation upon him to pay, except upon a general call legally made upon all the stockholders; and in the absence of such cail no one could foretell, or have the means of ascertaining, what amount, or when, the stockholder would be required to pay on his stock, or whether he would ever be required to pay at all.”

The conclusion of the court was that, at the time the discharge in bankruptcy took effect, the liability of the defendant for the unpaid subscriptions for stock was a contingent claim, hence not provable under the bankrupt act, and that therefore the enforcement of future calls upon subscription liability was not barred by the discharge in bankruptcy. The test adopted as to what constitutes a contingent claim, was the rule laid down in Riggin v. Magwire, 15 Wall. 549.

It is considered that, upon reason and authority, the claim in question was contingent till after the administration of the estate of Shea was completed. There was no way whereby, in advance of a call regularly made, the liability upon the subscription contract could have been valued and extinguished by payment, or of determining whether any payment whatever would ever be required, hence it was not a claim that could have been allowed by the probate court, and was not affected by the bar of the statute as to allowable claims. Sec. 3844, Stats. 1898.

It is further contended that the complaint failed to allege a valid call for a payment upon the subscription contract in that, instead of setting forth the particulars in regard to the existence of the by-laws and compliance therewith, such particulars were pleaded according to their legal effect, thus: “A call was duly made pursuant to resolutions,” etc., “and in pursuance of the by-laws of said company theretofore duly made and adopted.” “The by-laws of said plaintiff duly provided the manner in which each subscriber, and his representatives and successors in interest, should be notified ©f said calls, and due notice,” etc., “pursuant to said by-laws, was given to each of the defendants,” etc., and “ due demand made for the payment thereof.” To support the proposition that such allegations were insufficient, authorities are cited to the effect that where a liability arises under a by-law, the by-law must be specially pleaded; that is, where the liability, not a mere condition precedent to the enforcement of the liability, depends upon a by-law, it must be pleaded. Manifestly such authorities have no application to the liability in question. The foundation of the liability was the subscription contract. The existence of by-laws and the making of the call and giving notice pursuant thereto were mere conditions precedent to a complete cause of action upon such contract, and therefore the facts in that regard were pleadable according to their legal effect by express provision of statute. Sec. 2674, Stats. 1898. Moreover, independent thereof, under the liberal rules of pleading prescribed by the Code, facts which are inferable with reasonable certainty when stated according to their legal effect, if so alleged, do not render the pleading bad upon a challenge for insufficiency, though it may be open to a motion to make more definite and certain. That has often been decided by this court. Cutler v. Ainsworth, 21 Wis. 381; Frankfort Bank v. Countryman, 11 Wis. 398. That rule was recently applied to a situation very much like the one before us. Miles v. Mut. R. F. L. Asso. 108 Wis. 421. The authorities in the state of Mew York, from which our system of pleading was adopted, are to the same effect. Gay v. Paine, 5 ; Keteltas v. Myers, 19 N. Y. 231; Platt v. Stout, 14 Abb. Pr. 178; People ex rel. Crane v. Ryder, 12 N. Y. 433; People ex rel. Hawes v. Walker, 23 Barb. 304. In the latter case it was said that the allegation that a meeting was duly convened implies that it was regularly convened, and, if necessary to its regularity, that it was an adjourned meeting. In Platt v. Stout it was held that, impliedly, a person’s title to office is sufficiently pleaded on demurrer, by an allegation that on a day specified, in pursuance to the laws of the state, such person was duly appointed to fill the office, and duly made and executed his official bond with sureties, and took the oath of office required by law.

It is further suggested that the complaint is bad because it does not affirmatively show that the original subscription liability has not been extinguished by a transfer of the stock and an acceptance of the transferee in place of the original subscriber. It is considered that we ought not to dignify that proposition by any extensive discussion of it. The original liability could not have been extinguished except by consent of the corporation, and if there has been such an extinguishment it is a matter of defense to be raised by answer like a plea of judgment, or any other matter showing that the original liability created by the subscription contract no longer exists.

The further point is made that the complaint does not show that the by-laws contained any provision for giving notice of calls to the heirs of deceased stockholders. The conclusive answer to that seems to be that the complaint states that the by-laws provide the manner of giving notice to successors in interest of a stockholder, and that the entire beneficial interest in the stock in question, either m specie or the proceeds thereof, went to the defendants, and that due notice of the calls in question was given to them. The term,£t successors in interest ” does not necessarily mean successors in ownership of the stock. It is broad enough and was doubtless intended to coyer successors to the benefits of such ownership. The complaint amply shows that the stock, either m specie or otherwise, swelled the assets of the deceased, to which the defendants succeeded as legatees.

The foregoing covers all the grounds upon which the complaint is challenged. None of them appears to be tenable.

By the Court..— The order appealed from is affirmed.