If a statute enacts that when a corporation has unlawfully made
a division of its property, or has property which cannot be
attached, or is not by law attachable, any judgment creditor may
file a bill in equity for the purpose of procuring a decree that
the property shall be paid to him in satisfaction of his judgment,
the right of action thus conferred, being an equitable right, does
not accrue until the issue of execution on the judgment and its
return unsatisfied.
If a statute confers upon a judgment creditor of a corporation
an equitable remedy on the issue of an execution on the judgment
and its return unsatisfied, and in a revision of the statutes the
same equitable remedy is given, but without mention of the issue
and return of execution, it is not to be presumed that the
legislature intended by the omission to abrogate or modify an
established rule of equity; that when it is attempted by equitable
process to reach equitable interests fraudulently conveyed, the
bill should set forth a judgment, issue of execution thereon, and
its return unsatisfied.
By chapter 46 of the Revised Statutes of Maine of 1857,
reenacted in the Revised Statutes of 1871, it is, among other
things, provided that
"When the charter of a corporation expires or is terminated, a
creditor or stockholder may apply to the Supreme Judicial Court,
which may appoint one or more trustees to take charge of its estate
and effects, with power to collect its debts and to prosecute and
defend suits at law. The court has jurisdiction in equity of all
proceedings therein, and may make such orders and decrees, and
issue such injunctions as are necessary,"
§ 19; also that
"The debts of the corporation are to be paid in full by such
trustees when the funds are sufficient; when not, ratably to those
creditors, who prove their debts as the law provides, or as the
court directs. Any balance remaining is to be distributed among the
stockholders, or their legal representatives, in proportion to
their interests,"
§ 20; further, that
"When such a corporation has unlawfully made a division of any
of its property, or has property
Page 111 U. S. 111
which cannot be attached, or is not by law attachable, any
judgment creditor may file a bill in equity in the Supreme Judicial
Court, setting forth the facts, and the names of such persons as
are alleged to have possession of any such property or choses in
action, either before or after division. Service is to be made on
the persons so named, as in other suits in equity. They are, in
answer thereto, to disclose on oath all facts within their
knowledge relating to such property in their hands, or received by
a division among stockholders. When any one of them has the custody
of the records of the corporation, he is to produce them and make
extracts therefrom, and annex to his answer, as the court
directs."
§ 34. Still further, that
"The court is to determine, with or without a jury, whether the
allegations in the bill are sustained, and it may decree that any
such property shall be paid to such creditor in satisfaction of his
judgment, and cause such decree to be enforced as in other chancery
cases. Any question arising may, at the election of either party,
be submitted to the decision of a jury under the direction of the
court."
§ 35.
These statutory provisions being in force, Bowker, the appellee,
on the 7th day of June, 1866, brought his action against the
Piscataqua Fire and Marine Insurance Company in the Supreme
Judicial Court of Maine for the County of York to recover the sum
due him on a policy issued by that company, in the sum of $5,000,
upon his interest in a certain vessel. It was duly entered at the
September term, 1866, of that court. Before judgment was obtained,
the Legislature of Maine, by an Act approved February 28, 1867,
accepted the surrender of the charter of the company, declaring
therein that
"Its affairs shall be wound up in the manner provided in
sections nineteen and twenty of chapter forty-six of the Revised
Statutes, and the organization of the company shall continue for
the purposes provided for in said sections,
provided that
so much of said acts, or the act incorporating said company, or the
act amending the same, as confer any special remedies against
officers or stockholders of said corporation shall not be affected
hereby; nor shall this act relieve them from any personal
liabilities under any of said acts, or under any of the statutes of
this state, or prevent any creditor from pursuing any remedies
conferred
Page 111 U. S. 112
by chapter one hundred and thirteen of the Revised
Statutes."
§ 1. Also, that
"Actions pending against said company when trustees are
appointed as provided in said sections may be discontinued without
payment of costs, or continued, tried, and judgment rendered, as in
other cases. Actions may be also maintained upon claims disallowed
in whole or in part by the trustees. All judgments shall be
satisfied in the same manner as other claims against the company
are satisfied by the trustees."
§ 2.
In the action instituted by Bowker, judgment in his behalf was
entered April 4, 1868, and execution thereon was issued April 8,
1868. It was returned July 8, 1868, with an endorsement by the
officer that after diligent search he had been unable to find any
property of the corporation wherewith to satisfy it.
Before that judgment was rendered, the Supreme Judicial Circuit
Court for York County, in accordance with the provisions of the
Revised Statutes, appointed trustees to take charge of the estate
and affairs of the company, with power to collect its debts, and to
prosecute and defend suits at law.
The present suit was instituted April 11, 1874, by Bowker -- he
being a citizen of Massachusetts -- in the Circuit Court of the
United States for the District of Maine, to enforce the rights
given to him as a judgment creditor by the statutes of Maine. The
defendants were William Hill the testator of appellants, and the
trustees, to whom had been committed the custody of the property of
the insurance company. Hill was the treasurer and a stockholder of
the company. The bill proceeds upon the ground that the company,
prior to the surrender of its charter, had, in violation of the
statute, made a division of portions of its property. The bill
avers that it had, and that its corporators still have, property
which cannot be attached; that Hill at the commencement of the
suit, had possession of part of the property so unlawfully divided,
which could not be attached. The prayer of the bill is that the
complainant's judgment be satisfied from the property so divided,
transferred, and delivered to Hill or from its proceeds. The
trustees answered that there were no assets in their hands
Page 111 U. S. 113
with which to satisfy the judgment. Hill demurred upon the
ground that the bill made no case entitling complainant to the
discovery or relief asked. The demurrer was overruled, and Hill
answered. One of the defenses is that the complainant's cause of
action was barred by the statutes of limitations of Maine. Upon
final hearing, a decree was entered against Hill for the amount of
his judgment against the company. An appeal was taken from this
judgment.
MR. JUSTICE HARLAN delivered the opinion of the Court.
The only point seriously insisted upon in argument or which is
necessary to be considered is that this suit was barred by
limitation. The Revised Statutes of Maine in force when it was
brought provided that "all actions of assumpsit or upon the case,
founded on any contract or liability, express or implied," should
be commenced "within six years next after the cause of action
accrues, and not afterwards." Rev.Stat. Maine, 1857, c. 81, § 92.
The judgment against the company was entered more than six years
before the commencement of this suit. It is insisted that
appellee's cause of action accrued upon the entry of the judgment,
while it is contended in behalf of appellee that even if the
foregoing limitation has any application in a suit in equity,
brought in the circuit court of the United States by a citizen of
another state, his cause of action did not accrue until the return
of execution against the company, which occurred within six years
prior to this suit.
The counsel for appellee also insist that this suit can be
maintained upon the general equitable principles recognized in the
cases which hold that the capital stock of a corporation is a trust
fund which may be followed by creditors into the hands of those who
have notice of the trust; and, consequently that the right of a
circuit court of the United States to give relief according to the
received principles of equity cannot be controlled by any
limitation prescribed by the state in actions of
Page 111 U. S. 114
assumpsit or upon the case, founded on contract or liability,
express or implied. Without entering upon a discussion of that
question, and assuming, for the purposes of this case only, that
the circuit court, in analogy to the limitation prescribed by the
local statute, could properly have denied the relief asked, where
the suit was not brought within six years after the cause of action
accrued, we are of opinion that the decree was right and should be
affirmed.
The proposition that Bowker's cause of action accrued upon the
entry of his judgment against the company rests upon a very
technical interpretation of the statute, which, in terms, gives a
judgment creditor the right to file his bill in equity against any
corporation which has unlawfully made a division of its property,
or has property which cannot be attached, or is not, by law,
attachable. As this right is given to a judgment creditor, his
cause of action, it is claimed, accrues the moment he becomes such
-- that is, when he obtains a judgment. But such, we think, was not
the intention of the legislature. The provisions upon this subject
in the Revised Statutes of 1871 are brought forward from the
Revision of 1857. In respect of these matters, there is no
difference, even of phraseology, in the two revisions. In reference
to the Revision of 1857, it was expressly decided, in
Hughes v.
Farrar, 45 Me. 72, that the principal design was to revise,
collate, and arrange the public laws, and, in revising, to condense
as far as practicable; that a mere change of phraseology should not
be deemed a change of law unless there was an evident intention
upon the part of the legislature to make such change. The special
remedies given by the Revised Statutes of 1857, and which were not
affected or withdrawn by the Act of February 28, 1867, were not
then for the first time provided. Going back to the laws of 1848,
we find that, by an act approved August 10, 1848, it was made
unlawful for corporations, other than those for literary and
benevolent purposes, banking, and such as, by the common law, were
termed
quasi-corporations, to make any division of their
corporate funds or property, so as to reduce their stock below par
value, except to close up the concerns of the corporation after all
its debts are paid. And by the same
Page 111 U. S. 115
act it was provided that in all such cases of unlawful division
of corporate property,
"and in all cases where such corporation has corporate property
of any kind which is undivided, and which cannot be come at readily
to be attached, or which is not attachable, any judgment creditor
or creditors of such corporation, or his or their attorney, may
make complaint thereof to the Supreme Judicial Court, therein
setting forth in substance his or their judgment, and alleging the
same to be unsatisfied by reason of inability to find corporate
property wherewith to satisfy the same,"
&c.
The provisions of the act of 1848 are preserved, although much
condensed in words, in the later Revisions of the statutes. Clearly
the special remedy given to a creditor by the act of 1848 was given
upon the condition that his judgment was unsatisfied "by reason of
inability to find corporate property wherewith to satisfy the
same." This condition could only be met, within the settled
doctrines of the courts of Maine, by an issue of execution upon the
judgment. But because these words were omitted in subsequent
revisions, it is claimed that the legislature intended that the
creditor should have the privilege of filing his bill in the
Supreme Judicial Court, even though it was in his power, by
execution, to find corporate property wherewith to satisfy his
judgment. In this construction of the Revisions of 1857 and 1871 we
do not concur. Although they do not, in terms, as did the act of
1848, require the creditor to allege in his bill that his judgment
remained unsatisfied by reason of his inability to find corporate
property wherewith to satisfy it, we are not satisfied that their
purpose was to change the law, or to modify the grounds upon which
relief in equity could be obtained in the Supreme Judicial Court.
That court, as we infer from its decisions, would not have given
relief under the Revisions of 1857 and 1871, unless it appeared
that the creditor could not otherwise obtain satisfaction of his
judgment, for as early as in 1848, in
Webster v. Clark, 25
Me. 313, it was announced as a general rule that
"courts of equity are not tribunals for the collection of debts,
and yet they afford their aid to enable creditors to obtain
payment, when their legal remedies have proved to be inadequate. It
is only by the
Page 111 U. S. 116
exhibition of such facts as show that these have been exhausted
that their jurisdiction attaches. Hence it is that when an attempt
is made by a process in equity to reach equitable interests, choses
in action, or the avails of property fraudulently conveyed, the
bill should state that judgment has been obtained, and that
execution has been issued, and that it has been returned by an
officer without satisfaction."
See also Corey v. Greene, 51 Me. 114;
Griffin v.
Nitcher, 57 Me. 270;
Howe v. Whitney, 66 Me. 18. A
different construction of the Revisions of 1857 and 1871 can be
maintained only upon the theory that the legislature intended to
abrogate or modify the established rule of equity announced in
repeated decisions of the state court. We are not prepared to say
that such was its intention.
But it is suggested that the insurance company, by the surrender
of its charter under the Act of February 28, 1867, ceased to exist,
and that an execution upon a judgment obtained against it was
unauthorized by law, and void; consequently the appellee had a
right to institute his suit in equity immediately upon the
rendition of the judgment. This position is not, in our opinion,
well taken. That act expressly saved special remedies given by
former legislation and provided that suits pending at its passage
might be discontinued without payment of costs, or continued,
tried, and judgment rendered as in other cases, and that all
judgments should be satisfied in the same manner as other claims
against the company are satisfied by the trustees. When the act of
1867 gave a creditor in pending suits the privilege of proceeding
to judgment, and thereby establishing these demands, it gave him
the right, if it did not impose upon him the duty, of putting
himself in such a condition that he could, according to the
principles of equity, have invoked the aid of the court to remove
all obstacles in the way of obtaining satisfaction of his judgment.
It is true that the corporate property was in the possession and
charge of the trustees when the execution issued, and the effort to
levy it became, perhaps, a form; but, as was well said by the
circuit judge, it is by no means certain, in view of the strictness
with which statutory forms are often required to be followed, that
if this
Page 111 U. S. 117
form had been neglected, the defendant might not have
successfully contended that the complainant had neglected to meet
the requirements of the statute. Besides, the act of 1867 did not,
upon its face, show that the funds of the corporation would be
insufficient to meet its debts in full. When the execution issued,
the trustees might, for aught that the judgment creditor knew, have
caused it to be satisfied, and thereby dispensed with further
proceedings upon the complainant's part against those who were
supposed to have unlawfully received the property of the
corporation. It was proper therefore that a creditor, desiring to
resort to the special remedies reserved to him, should attempt by
execution to secure payment of his judgment against the corporation
before resorting to a court of equity.
For these reasons, we are of opinion that the complainant's
cause of action should not be deemed to have accrued until the
return of the execution; consequently his suit was not barred by
the limitation of six years.
The decree is affirmed.
