Brown v. Union Insurance

The judgment of the court, was pronounced by Rost, J. The late firm of Hermogene Brown Co., obtained, before its 1 bankruptcy, a judgment against Ihe Union Insurance Company, upon a prorais- ij sory note, subscribed by that institution to A. St. Clair, under whose endorse. X ment-the firmjield it. After Ihe bankruptcy of said firm, the assignee caused ■ [181] this judgment, together with accounts, notes, and bills receivable belonging to it, to be sold at public auction, and Alfred Boisblanc, became the purchaser. He caused an execution to issue, and the sheriff finding no property of the defendants’ to seize, Boisblanc presented a petition, under the provisions of the act of 1839, stating that he had reason to believe that Outkbert Bullitt of this city was indebted to the defendants, and praying that the said Bullitt be ordered to answer on oath the following interrogatories. 1st. Are you not a subscriber to, or stockholder in, the Union Insurance Company ? If so, for how many shares 1 Is it not for one hundred shares that you are a stockholder ? 2d-Have you ever paid said stock in full ? 3d. Have you ever paid more than $5 on each share of said stock ? If yea, how much more, and when ? The garnishee having been ordered to answer, filed an exception, alleging that the defendants, formerly a body corporate, have not, since the year 1839, transacted any business or had any office, directors or officers; that they have long since forfeited their corporate functions, and among them that of appearing as a party in courts of justice; that said functions have been resumed by the State, and the corporation has to all intents ceased to exist; that the judgment of the plaintiffs was obtained upon a note of hand, drawn by the president and countersigned by the secretary of the company; that said company was organised and empowered to act only as an insurance company, and not to give notes or monied obligations; and that the stockholders of said company are not bound, nor can they be garnisheed, for such obligations. That no execution could issue against .the defendants who were' no longer in being, and that the attachment made in his hands, as well as the execution, are illegal and void. The garnishee reserving the benefit of these exceptions answered the interrogatories in substance, as follows: In 1836, I subscribed for a number of shares in the Union Insurance Company. That number is shown by other evidence to be one hundred. I did not pay the stock in full; according to my recollection, only the cash payment of $5 per share was paid. He farther alleged that, notwithstanding his subscription, he was not a debtor to the company, and could not be held as garnishee, because he had long since abandoned his stock and ceased to be a stockholder; and because farther, any action of the company against him was barred by the prescription of ten years. The charter shows the shares to have been of $50 each; and upon the rule taken against the garnishee, and the traverse filed by Boisblanc, the court below considering that the said garnishee was indebted to the defendants in a larger amount than that claimed from him, gave judgment against him for the amount of the judgment, interests and costs. The garnishee appealed. In the argument before this court exceptions have been taken, for the first time, to the form of the proceedings. The garnishee went to trial in the court below without urging them, and as he can suffer no injury by reason thereof, we must consider them as having been waived. The first ground of -defence is that, before the proceedings against the garnishee were had, the insurance company was dissolved, and the defendants jn the suit no longer in being. The charter, granted in 1836, gives the corporation a duration of thirty-five years. It has not been avoided by the legislature ; and we take it to be the settled rule that, although the neglect of corporations to reappoint their officers may, in certain cases, suspend their existence, they cannot be thus extinguished to the injury of .creditors. Angelí and Ames [182] on Corporations, new edition, p. 735, 736, oh. 27, sec. 3. Ibid p. 599. The case of Slee v. Broom, cited by the counsel for the appellant in opposition to this principle, was exceptional, and, as Chancellor Kent observes, a decision for the sake of the remedy and in favor of the creditors. The charter of the company in that case provided that creditors should have a direct action against the shareholders, .after the dissolution of the corporation only. The action was brought by a creditor, alleging the dissolution, against a shareholder; and it was very properly determined that, as the shareholders had done every thing in their power to dissolve the company and to consider it as dissolved, the court, for the sake of giving the remedy to the creditor, would also consider it in that light. 19 Johnson R. 475. A corporation never can dissolve itself so as to defeat any of the just rights of its creditors. In this case, the officers once appointed are required by the charter to continue in office until others are elected, and, if they should die, absent themselves, resign, or refuse to act, and it was made to appear that the shareholders neglected to appoint others to the injury of the creditors, we would, on a proper case being made out, feel ourselves authorized to order the appointment of a manager in the interim, for the purpose of winding up and putting an end to the concern. This appointment would in no wise differ from, that of receiver, which our courts frequently make to settle the affairs of insolvent banks and partnerships. In the case of Carlan v. Drury, 1 Ves. and B. 154, involving the question of the neglect of the managers of the association of the Bankside Brewery to act, the Lord Chancellor said: “This court is not to be required on every occasion to take the management of every play-house and brew-house in the kingdom. But if the case justified the interference of the court, it may appoint a manager in the interim, for the purpose of winding up and putting an end to the concern. If a case of delinquency was clearly made out, I do not hesitate to declare the court would act. But there must be a positive necessity for the interference, arising from the refusal or neglect of the committee to act.” Under the equity powers vested in our courts and the imperative command of the law that, in cases not provided for, the judge shall proceed and decide according to equity, they might adopt a similar course, if it became necessary to prevent a failure of justice. The next ground is that, the Insurance Company could not recover from the garnishee the sum alleged to be due by him for stock, and that the attaching creditor can only exercise against him the rights of the company. The charter divides the subscription into two distinct portions. The first is composed of the $5 paid at the time of subscribing, and of §25 more which were to be paid on each share by instalments fixed by the charter, and all falling due within the year 1836. The other portion is composed of the other $20, for the payment of which no period is fixed, the directors being authorized to call it in at such time and in such proportions as they might see fit. The $25 to be paid at fixed periods were due to Ihe'corporation, and formed part of the assets out of which its liabilities were to be satisfied. To the extent of that debt, the garnishment must be sustained, unless it is barred by lapse of time, as alleged by the garnishee. More than ten years had elapsed from the maturity of the last instalment beforo the institution of these proceedings against him. Art. 3508 of the Civil Code provides that, all personal actions except those enumerated in the title of prescription, are prescribed by’Ten years, if the creditor be present, and by [183] twenty years if he be absent. The french text is: lí Tonics les actions personnelles généralement quelconques.” The disposition is as universal as language can make it. - The directors of the company had their choice either to consider the stock as forfeited on the non-payment of the instalments at the periods fixed by the charter, or to sue for those instalments. They neglected to act in the matter. Supposing this neglect to have originated in fraudulent motives on their part and that of the shareholders, the creditors of the company were not remediless; they might have caused the company to be administered, and the calls necessary to pay them to be made and enforced. The prescription which operates a release from debt does not require that the debtor thould produce any title, or that he should be in good faith. The neglect of the creditor alone operates the prescription. . When he is pregent, and his silence has continued ten years, the law presumes payment; that presumption is juris et de jure; and the statement of the garnishee in this case that, according to his recollection, only the cash payment of §5 per share was made, will not avail against it. Civil Code, arts. 3494, 3496. Good faith not being required for this class of prescriptions, the relation which existed between the garnishee and the defendants can be no obstacle to it. It was formerly maintained by Dunod and other civilians, that when there is in a contract reciprocal and synaliagamatic conventions, as long as the contract is executed by one of the parties, the other cannot refuse to execute it on his part, under the pretext of prescription, even if those conventions should only be accidental. This was called the rule of correlatives. An attempt was made to have it inserted in the Napoleon Code, but it failed; and the rule forms no part of the law of prescription, either in France or with us. We must hold, therefore, that the relations of parties, under a contract or a charter, do not affect the general law on this subject. Troplong, Prescription, voí. 2, no. 534. For the §20 remaining on each share, the company had no action against the garnishee without a formal call, made-upon all the shareholdes equally, and then only for the share due by him. His liability to third persons for this portion of the subscription, cannot be enforced by the process of garnishment. They must resort to a direct action. Purton v. New Orleans and Carrollton Rail Road Company, ante p. 19. As no term was fixed for the payment of it, it is manifest that no prescription has accrued. It has also been alleged as a ground of defence, that the company was not authorized to issue promissory notes. This plea; as made, would not avail the garnishee even in a direct action. The company is authorized by the charter to make all contracts, to establish by-laws, to insure, and to settle, adjust and pay all losses, according to their own rules and regulations. Its charter contains no inhibition to deal on credit; and if the garnishee meant to insist that the note was given for purposes unsanctioned by it and prejudicial to the shareholders, those facts ought-to have been alleged and shown; and he should further have alleged and proved that Iiermogene Broion Sf Co. were apprized of them when they took the note, or that it was received by them after maturity. Hill v. Manchester and Salford Water Works Company. 2 B. and Ad. 544. For the reasons assigned, it is ordered that the judgment in this case be reversed. It is further ordered that the attachment made in the hands of Culh~ bert Bullitt be dissolved, and that there be judgment in'his favor, with costs in both courts. It is further ordered that the rights of the seizing creditor in a direct action be reserved.