Court Opinion

ID: 5552151
Source: CourtListenerOpinion
Date Created: 2022-01-11 00:34:06.546771+00
Date Added: 2024-06-11T08:35:10.959652
License: Public Domain

Starnes, J.
concurring.
The main question in these cases, in my opinion, admits of •a very simple solution. The difficulty which has -arisen, as I 'think, grows out of an error in applying the Common Law .rule, that “ upon the dissolution of a corporation, its real estate reverts to the gi'antor; its personal estate goes to the Crown, (in ■this country to the State) and its debts are extinguished,” to •the case made against these plaintiffs in error. That rule does not affect or control these cases, for very plain reasons.
The debt here is sued for as the debt of individuals, and not as the debt of a corporation; and it was the debt of these persons, before the dissolution of that corporation. It is true, that the -Commercial Bank of Macon was liable for all the bills emitted by it, as well those which were issued in excess, as others; but from the time that excess happened under the administration-of these directors, it became their debt also, by virtue of a provision in the 8th of the fundamental rules and regulations of the charter issued to said bank. That provision is as follows: u The total amount of the debts which the said corporation shall *332at any time owe, whether by bond, bill, note, or other contract, shall not exceed three times the amount of their stock paid in, over and above the amount of moneys actually deposited in their banks for safe-keeping; in case of excess the directors under whoso administration it shall happen, shall be liable for the same, in their individual, natural and private capacities, and an action of debt may, in such case, be brought against them or any of them, their, or any of their heirs, executors or administrators, in any Court of Record in the United States, having competent jurisdiction,” &c. The charter further, as if for the sake of explicitness, and to make plain the character of the liability of the corporation, and the directors in case of such excess, provides that “ this shall not be construed to exempt the said corporation, or the lands, tenements, goods and chattels of the same, from being also liable for, and chargeable with the same excess,” &c.
Thus, this regulation of the charter makes that excess, which would otherwise have been the debt of the bank only, the debt of the directors also; and does this in such terms as clearly creates a several, if not a joint and several liability of this corporation and of these directors. And the latter were so made liable, “in their individual, natural and private ■ capacities” eo instanti, that the excess happened under their administration.
If the debt, as due by the corporation, has been extinguished, it has not been by payment; and what show of reason is there in the proposition, that because the charter of this bank has been forfeited, and its debts are in this way extinguished, although this excess has never been paid, yet that no recovery can be had for and on account of it, against these defendants, who were severally and independently liable to pay it ? True, the debt may no longer exist against the corporation, because of its dissolution, nor against the members of that -corporation qua corporators, nor because of their having been corporators, but this affords not even a technical reason, if it have not been paid, why it should not exist against other persons who, by contract, or quasi contract, have undertaken, equally with the corporation, and severally, to pay the debt.
*333I suggest this illustration : We will suppose that the Mer■ehant’s Bank of Macon, in this State, for a valuable consideration, draws its check on the Bank of the Republic in New York, in favor of A, citizen of Macon. In due course of trade B ■agrees to receive this check from A if he will make himself responsible therefor. Whereupon, A transfers it to B, and indorses thereon an agreement to pay the same, as a joint and several maker, waiving all notice, &c. B goes on to New York, presents the check, and is informed that there are no funds in hand to pay it. He returns to seek payment from the drawer, but in the meantime, the charter of the Merchant’s Bank has expired, and its debts are extinguished. Will anyone venture to hold that the several liability of A, to pay the check, is also extinguished because of such dissolution ? If not, it should not be insisted that the liability of the directors, in the cases at bar, was extinguished by the dissolution of the corporation.
In this view of the subject, all difficulty is obviated (if difficulty there be) growing out of the argument, that a charter is to, be regarded as a contract between the stockholders of a corporation and the State; and that when a contract falls, all rights springing out of it must go with it. The right to hold these directors responsible, cannot be said to depend, alone, on the contract between the State and the corporators, but springs oixt of the statutory liability of these defendants, which, if not ex contractu, is quasi ex contractu, and was incurred by each director, when this excess happened; he, by accepting the office of director, having agreed to become subject unto the obligations and liabilities which the charter created; one of which was, that he should be held responsible for such excess of issues, as might happen during his administration. Bullard vs. Bell, (1 Mason, 292, 293.)
This appears to me a reasonable and just view of the subject, without reference to the rationale of the Common Law rule to which I have • referred. An examination of the reasons for that rule, however, will strongly sustain the positions I have assumed.
*334The radical principle on which that rule rests is, simply, that what is due to a corporation, or artificial body, is not due to the natural persons composing it; and when anything is due from such a body, it is not owing by the natural persons constituting it. The same rule prevailed at the Civil Law, and was expressed by the words, si quid universitati debetur, singulis non debetur; nee quod debet universitas, singuli debent.” (Ff. 3, 4, 7. Domat Civ. L. Book 2. Tit. 3 Sec. 3. 3 Par. 1452. Angel & A. on Corp. chap. 22, §7.)
Of course it follows, that when a corporation is dissolved, not having heirs or legal representatives, nor the legal possibility of such, if the power creating it has made no other provision, its debts are no longer due by any one, or to any one; that is to say, there remains no person 'in being, natural or artificial, responsible for them, or who may collect them, and they must necessarily become extinct. This is all that”Sir William Blaclcstone means to say, in the passage so often cited at the hearing of this.case, when he says, “that the debts of a corporation, either to or from it, are totally extinguished by its dissolution; so that the members thereof cannot recover or be charged with them in their natural capacities,” as is proven by the fact, that he declares this Common Law.rule to be “ agreeable to that maxim of the Civil Law” which I have quoted above. (1 Black Com. 445.) And this is what is meant by the repetition of the doctrine in the other books and cases which were cited by the Counsel for the plaintiffs in error. I will refer to a few of the more prominent of these cases. They •must be taken as examples of what is held in the others; for to comment on all would consume too much time and attention.
Let us look, first, to the case of Fox vs. Horah, (3 Ired. Eq. R. 358) a leading case on this subject, and one concerning which, in the argument, it was said “ it could not be distinguished from that at bar, it might be over-ruled.” There Judge Gf-aston said, “ when the creditor corporation died, and there was no successor, no representative, the relation of debtor and creditor ceased, and the debt became necessarily extinct.”
*335Another case, the most recent decision which was brought to the attention of this Court (Coulter Richards, Exrs. vs. Robertson, Trustee, 2 Miss. Cush. 278) and which was relied upon by one of the Counsel for the plaintiffs in error, as exceedingly appropriate to his case, very explicitly and forcibly supports this view of the subject. Ch. J. Smith, in that case says, “It may now be regarded as the settled doctrine, that on the dissolution of a banking corporation, the debts due to and from it are extinguished; not by an implied condition in the contract, but from necessity, because there is no person in whose favor, or against whom, they can be enforced.” Again, he says. “ A debtor and a creditor are essential to the very existence of a debt. There can be neither debt nor obligation without there be in actual being, or in expectancy, with the legal possibility of an actual existence, a person by whom the debt ma.y be paid, or the duty performed, as well as a person who may receive the payment of the debt or accept the performance of' the obligation. Wherever, therefore, the payor or the payee,, the debtor or the creditor, or the person by whom the duty is; to be performed, or who is to accept the thing which is to be done, ceases to exist without a representative, or the legal possibility of a representative, the debt or obligation ceases to exist, and the obligation of payment or performance is forever at an end.” Nothing can be more correct than this, and nothing more in harmony with, and in support of the views which I have just presented.
It may be true, as was remarked by one of the Counsel for the plaintiffs in error, that we cannot always find the accurate reasons for a great Common Law principle, and that such a principle will sometimes survive the reasons in which it had its origin. But I think I have showm, that is to say, I think Sir William Rlaelcstone and others to whom reference was made in the argument as authority, have shown — and I think Judge Cfaston and Ch. J. Smith, whom I have just cited, (and whose opinions will not be disputed, unless the Counsel take issue with each other) have shown, that the principle in question is one which has not survived the reasons on which it is based. *336Indeed, it is, in my opinion, one of those plain principles,-which carries the reasons on which it rests, in its own inherent nature.
The same ^counsel Ayas of the opinion, that the case of The Mayor &c., of Colchester vs. The Executor of Seaber (3 Burr. 1866) was opposed to the idea, that upon its dissolution the debts of a corporation are extinguished, because there is no one to sue and be sued. Lord Kenyon said of this case in Rex vs. Clarke, (2 East, 75) that it did not pass Avithout doubt, and Mr. J. Lawrence observed, that it was questioned in Rex vs. Passmore, (3 T. R. 199) but I am not sure that what was there decided should have been questioned, and am disposed to allow the full benefit of it to the plaintiffs in error. The Counsel is mistaken, however, in its purport. In that case, there had been a judgment of ouster against the Mayor and Aldermen of the Borough of Colchester in the year 1740, and the borough remained without officers, and Ayithout asserting its corporate rights until the year 1763, when another grant of chartered rights was made to it by the crown, and officers chosen under it. Before the old officers had been removed, a bond had been made payable to the Mayor and Commonalty by the defendant’s testator, and action was brought upon it by the new magistrates. Out of this state of things arose the question, whether or not the old corporation had been dissolved by the ouster of its officers, and whether or not the corporation suing was a new and distinct corporation. If the former corporation were dissolved, its debts were extinguished — if only dormant, and it was revived by the neAv grant, its debts Avere not gone. Lord Mansfield, on this subject, held the following language: “ I am clear, upon principles of law, that the old corporation was not absolutely dissolved and annihilated, though they had lost their magistrates; and by virtue of the new charter they are so revived as to be entitled to the credits and liable to the debts of the old corporation.” And Mr. J. Wilmot says, “ Wherever a corporation accepts a new charter, it remains, to every purpose, as it did before, though the name be altered,” &c.
*337It is thus made plain, that the case was put upon the ground that the corporation was never dissolved; there had always been an artificial person, in esse, to whom the debt was due. That person could not sue, it seems, for want of officers; but it maintained, according to the views of the Court, an artificial corporate being; its rights and debts remained the same; it retained the legal possibility of being represented by its officers (analogous in its situation, in this respect, to the estate of a deceased person, upon which there has been no representation) and when it was represented by officers, it could assert its rights. And the effect of what the Court rules is, further, that if this corporation had been dissolved, it would then have parted, not only with all existence, but the legal possibility of ever being in a situation to enforce its rights, or to be held liable on account of its obligations. Instead, therefore, of being opposed to the view I have taken of the reasons on wdiich rests the Common Law rule under consideration, it directly supports it.
■ It was also insisted for the plaintiffs in error, that in the case of The Pres. & Selectm. of Port Gibson vs. Moore, (13 Sm. and Mar. 157) it was decided that though the members of the corporation had been individually liable for the debt with the corporation, yet they were released upon the dissolution of that corporation, because' the debt was thereby extinguished. The case does not support this remark. Action was there brought on the debt, as one due from the Pres. & Selectm. of Port Gibson. I take it, therefore, that it was a debt due by the corporation; or at all events, only through the corporation. The P. & S. who contracted the debt, belonged to the old corporation which had been dissolved ; and suit was brought against the new. The point made was, that the now charter was a revival of the old, and therefore the new corporation was liable. The Court “held that this last Act did not, revive the old corporation, but was a new creation — a new Act of incorporation, and did not revive former liabilities of the old corporation extinguished,” &c. No point was made in relation *338to the liability of individuals for the debt, and nothing in relation thereto was decided.
I could easily show, that none of the cases which have been cited controvert the views I have presented, and that some of' them strongly support them; but a further examination of cases-would occupy too much time and space. I therefore leave them with the observation, that not a single case which I have ever seen, directly or indirectly disturbs the conclusion, that the reasons for the Common Law rule we have been considering, are such as have been presented; and not one in which this rule was recognized and applied, was a case in which, by the terms of the charter or otherwise, the natural person against whom suit was brought, had been made equally and severally liable with the corporation for the debt.
If then, such be the reasons for this rule, the reasons and the rule fail to apply to these cases, when it is shown that this charter contains a provision, by virtue of which and by reason of their having accepted office subject to it, these directors became liable individually and severally, together with the bant, for the payment of any excess of issues beyond what the charter authorized, which might happen during their administration; for then, notwithstanding the dissolution of the corporation, there did remain a person who was liable for the debt, and against whom action could be brought for it.
There being no difference of opinion between the members of the Court as to the other point made in these cases, the judgment of the Court thereon is delivered by my brother Lump-kin.