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104 Mass. 577

Bacon v. Pomeroy

Massachusetts Supreme Judicial Court

Decided September 15, 1870

Massachusetts Supreme Judicial Court · decided 1870-09-15

<p>In order to procure credit for a manufacturing corporation, its stockholders signed and gave to a bank a writing, in which, after reciting that the stock had “ all been recently purchased, and is now owned, by the subscribers, who desire and intend to continue the corporate organization, hut not for the purpose of exempting themselves from their individual liability for the debts of the company,” they declared that, “ as to creditors of the corporation, we do and shall hold ourselves liable, jointly and severally, as copartners, and such liability shall continue as to each one so long as he shall continue a stockholder in said concern, but shall not apply to liability contracted after transfer of his stock.” The bank then made two loans to the corporation, which it failed to repay, whereupon one of the signers repaid them, and sued for contribution the executors of the will of another signer, no transfer of whose stock had ever been made, and who died after the time of the first and before the time of the second loan. The will directed the executors to pay the testator’s just debts, and empowered them to continue his estate in trade so long as they should deem for its interest in prosecuting and completing business undertakings which at the time of his death he was engaged in as copartner or on his sole account, and apply any part thereof “ for the performance of any engagement, and the payment of any debts, notes and obligations, wh&eh have been made or incurred by me or by any copartnership of which am a member.” The plaintiff made his payment to the bank more than two years after the executors gave bond, and brought the suit against the executors within a year after making the payment. Held, (1.) that the testator ceased by death to be a stockholder within the meaning of the writing, and was not chargeable thereon for the loan made afterwards; (2.) that, as to the loan made before the death, even assuming that the plaintiff’s payment of it created a right of action which first accrued upon such payment, the special statute of limitations of actions against executors and administrators, Gen. Sts. o. 97, § 5, was a bar to the suit, from which he was not excepted under §§ 8-11, if he had omitted to present the claim to the judge of probate under § 8; and (3.) that the mere delay of the executors to dispose of and transfer the testator’s shares weald not warrant an inference of any election by them, in their discretion under the will, to continue the estate in trade or make any part thereof liable for debts or obligations contracted by any copartnership either before or after the death.</p>

Relies on Nathaniel Burwell v. Daniel Cawood · Sykes v. Meacham · Marcy v. Clark

Good law ✅— No negative treatment on recordhow we know

Decided 1870-09-15

How this case has been cited

Cited by 17 later decisions (1 by the Supreme Court) — most recently June 1924

1 district · 14 state decisions

70187018801890190019101920decided

Later decisions citing this case, by decade. The current decade is in progress, and our corpus holds fewer opinions from the most recent years, so the latest bars are undercounted — not a real decline.

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Gray, J.

¶1The agreement signed by the plaintiff and Pollock and their associates, upon which this bill is founded, recites that they have purchased and own all the stock in a manufacturing corporation established under the laws of the Commonwealth, that they desire and intend to continue the corporate organization, and have no purpose of exempting themselves from their individual liability for the debts of the company; and declares that they shall hold themselves liable jointly and severally as copartners to its creditors, and that such liability shall continue as to each so long as he shall continue a stockholder.

¶2At the date of this agreement, the St. of 1862, c. 218, subjecting the estate of a deceased person in the hands of his executor or administrator, to some extent, to his liability as stockholder for the debts of a manufacturing corporation, had not taken effect; but the liability of the stockholders in such a corporation for its debts was regulated by the Gen. Sts. cc. 60, 61. It has been said that such statutes “ in fact only continue the principle of copartnership in operation.” Parker, C. J., in Marcy v. Clark, 17 Mass. 330, 334. But a partner is not ordinarily liable for debts contracted by his copartners after his death, unless there is an express stipulation to that effect in the partnership articles. Marlett v. Jackman, 3 Allen, 287. Tyrrell v. Washburn, 6 Allen, 466. And the statute liability of a stockholder for the debts of a manufacturing corporation is limiteu to debts contracted while he is a stockholder, and, as has been *583repeatedly held, in the absence of express provision for its continuance, terminates with his death. Child v. Coffin, 17 Mass. 64. Ripley v. Sampson, 10 Pick. 371. Dane v. Dane Manufacturing Co. 14 Gray, 488.

¶3In the light of these roles of law, the affirmative part of the agreement in question cannot, upon any fair construction, be held to make either of the subscribers liable for debts contracted after he has ceased by death to be a stockholder in the company. And no such extension of liability can be inferred from the negative clause, providing that he shall not be liable for debts contracted after a transfer of his stock shall have been made and recorded as therein prescribed. Taking the whole agreement together, this clause evidently contemplates only transfers made by himself in his lifetime.

¶4This agreement, therefore, does not of itself charge the estate of Pollock with debts contracted by the company after his death. The question whether his executors can be held in this suit by reason of debts contracted in his lifetime requires further consideration.

¶5By the special statute of limitations of actions against executors and administrators, no executor or administrator, after having given due notice of his appointment, shall be held to answer to the suit of any creditor of the deceased, unless it is commenced within two years from the time of his giving bond, except in the cases afterwards specified, namely, of new assets afterwards received, failure of an action by defect in form or service, rights of action accruing after the end of the two years and before the estate is settled, or where justice and equity require it and the creditor is not chargeable with culpable neglect. Gen. Sts. c. 97, §§ 5-11. St. 1861, c. 174, § 2. Wells v. Child, 12 Allen, 333. Sykes v. Meacham, 103 Mass. 285. Even a representation of the estate as insolvent, and the appointment of commissioners to receive and examine the claims of creditors, do not suspend the operation of the statute against claims not presented to the commissioners within the period of limitation, except in cases of contingent claims or of farther assets. Aiken v. Morse, ante, 277.

¶6*584The ground upon which the plaintiff relies to take his claim arising from his payment of the debt contracted by the Pittsfield Woollen Company in the lifetime of Pollock, out of the special statute of limitations is, that his right of action thereon did not accrue within two years after the giving of the administration bond, within the meaning of the Gen. Sts. c. 97, §§ 8-11.

¶7The Gen. Sts. c. 97, § 8, provide that “,a creditor of the deceased, whose right of action does not accrue within two years after the giving of the administration bond,” may present his claim to the probate court at any time before the estate is fully administered, and obtain an order that the executor or administrator retain in his hands a sum sufficient to satisfy the same, or that, instead thereof, a bond for payment of the demand may be taken, if offered by any other persons interested in the estate. By § 9, the decision of the probate court shall not be conclusive in favor of the claimant, and his claim shall not be paid, “ unless it is found to be due in an action commenced by the claimant within one year after the. same becomes payable.” By § 10, “ the action shall be brought against the executor or administrator, if he has been required to retain assets therefor; otherwise, upon the bond given by the persons interested in the estate.” And § 11 prescribes the form of the pleadings in an action on such bond.

¶8The executors of Pollock deny that the payment by the plaintiff of the sums due from him under their agreement created a right of action which first accrued at the time of such payment, within the meaning of these statutes. The question thus raised would require consideration, if the case turned upon it. See Gen. Sts. c. 99, §§ 5-7; c. 101, §§ 31, 32; Cummings v. Thompson, 7 Met. 132, 134; French v. Hayward, 16 Gray, 512; Wood v. Leland, 22 Pick. 503, and 1 Met. 387; Hayward v. Hapgood, 4 Gray, 437; Fairfield v. Fairfield, 15 Gray, 596. But it is not necessary, in order to dispose of this bill, to determine whether the plaintiff’s right of action accrued after the end of two years from the giving of the administration bond. If it did not, it was clearly barred by the special statute of limitations. If it did, it is not brought within the exception to that statute *585on which the plaintiff relies, because no application has been made to the judge of probate, as required by the Gen. Sts. c. 97, § 8; and, if such an application should be made, a bond might be offered and taken from persons interested in the estate, in which case, by § 10, no suit could be brought against the executor or administrator, but only against the persons giving that bond. Holden v. Fletcher, 6 Cush. 235. Lovell v. Nelson, 11 Allen, 101.

¶9The plaintiff further relies upon the provisions of Pollock’s will, to charge his estate with these claims. • But we are of opinion that neither the provisions of the will, nor any acts which have been done by the executors in pursuance thereof, are sufficient to have that effect.

¶10The preliminary direction to pay all the testator’s just debts adds nothing to the duty imposed upon all executors by law; and no executor has power to waive the special statute of limitations, even if he wishes to do so. Wells v. Child, 12 Allen, 333. Lamson v. Schutt, 4 Allen, 359, 360.

¶11A testator may doubtless subject his estate to liability for debts contracted after his death by a partnership of which he has been a member. But such liability can be created only by clear provisions of the will, or unambiguous acts of the executors or trustees under an authority thereby conferred upon them. Ex parte Garland, 10 Ves. 110. Burwell v. Mandeville, 2 How. 560. Stanwood v. Owen, 14 Gray, 195. It is not pretended that these executors, in the exercise of the discretion vested in them by the testator, have done any affirmative act, manifesting an intention to continue the estate in trade, or to make any part thereof liable for any debts or obligations made or contracted by any copartnership, either before or after his death. Their mere delay in selling the shares in the Pittsfield Woollen Company, in which, for the reasons already stated, he had ceased by his death to be a stockholder within the meaning of the agreement sued on, will not warrant the inference of such an election.

¶12As neither the terms of the agreement signed by Pollock, nor the provisions of his will and the conduct of his executors, sustain this bill to enforce the payment, out of his estate, of the *586plaintiff’s claim, whether arising out of debts contracted during his lifetime, or out of rights accrued since his decease, it is un necessary to decide whether the demurrer for the nonjoinder of the Pittsfield Woollen Company is well taken.

¶13 Demurrer sustained.

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