LEGAL DOCUMENT

Case: Quidnick Company vs. Zechariah Chafee et als.
Citation: 13 R.I. 438
Court: Supreme Court of Rhode Island
Jurisdiction: Rhode Island
Decision Date: 1881-10-22
Docket Number: 
Pages: 438–442
Volume: 13
Reporter: Rhode Island Reports

Parties: Quidnick Company vs. Zechariah Chafee et als.

Quidnick Company vs. Zechariah Chafee et als.
A debt existing from S. to Q., S. gave to Q. his notes secured by a trust mortgage for an amount nearly equal to the debt, paying the small balance in cash.
It appearing that Q. accepted the notes and cash, and afterwards used part of the notes received to pay his own debts :
Held, that the original debt was cancelled. Potter, J., dissenting in the circumstances.
Quidnich Company v. Chafee, ante, p. 367, affirmed so far as relates to the contract considered in that case.
Bill in Equity to establish a lien and for an account.
The bill in this case set forth substantially the same state of facts as the bill in the last case, and claimed an indebtedness due to the complainant under the contract already given, ante, p. 369. The bill also charged that as the A. & W. Sprague Manufacturing Company had mot made the returns of its financial condition, required by the statutes of Rhode Island, its stockholders were under a statutory liability for all its debts; that its stockholders, the respondents, were holders of stock in the complainant corporation, and that the complainant had by charter a lien on the stock 'of any stockholder for the amount of such stockholder’s indebtedness. The bill prayed that this lien might be declared against the stocks of the respondents, that an account might be taken of the amount due, and that Chafee might meanwhile be enjoined from selling such stock.
October 22, 1881.

Stiness, J.
This bill charges that “ under and pursuant to ” the contract referred to in the preceding case, the A. & W. Sprague Manufacturing Company became and is indebted to the complainant; that Mary Sprague, Fanny Sprague, William Sprague, and Amasa Sprague, as stockholders in that corporation, are personally liable for such debt; that the Quidnick Company by its charter has a lien on the stock of its members for debts due from them to the company, and hence prays that a lien may be declared in its favor on the stock in the Quidnick Company claimed to belong to the persons named, and that the respondent, Chafee, may be enjoined from selling said stock under a pledge from them.
We have already decided that there is no debt due to the complainant from the A. & W. Sprague .Manufacturing Company “ under and pursuant to ” said contract, and therefore the Quidnick Company can have no lien on the stock on that account.
The answer admits that at the time the stock was pledged, and before the contract was made, there was a debt due to the complainant from the A. & W. Sprague Manufacturing Company of $216,410.88, which was subsequently settled and paid by the Quid-nick Company’s acceptance of $216,400 of the notes of the A. & W. Sprague Manufacturing Company, secured by the trust mortgage to Chafee, and $10.88 in cash. The complainant contends that this was taken only as “ additional security,” without extin guishing the original debt. We have no doubt, from the facts before us, that the mortgage notes were received and accepted as full payment of the debt then existing. The settlement in cash of the trifling balance of $10.88 indicates this, and a use of the portion of the notes by the Quidnick Company, to pay its own debts, is wholly inconsistent with its claim to hold them only as security. .
On neither ground, therefore, has the complainant a lien on the stock, and the bill must be dismissed.
Tiluing-HAST, J., concurred.
Ante, p. 369.
Quidnick Company v. Chafee, ante, pp. 367, 370.