31 F. 513 -

KNOWER V. HAINES.

513

d the tax due from B. L. Richards, after making the proper deduction, he will be entitled to an injunction restraining tbecollection of any further sum. As to C. H. Huntington, it is clear that he is not taxable in _,ny amount upon the stock owned by him, and is therefore entitled to restrain the collection of any tax thereon for the year 18'86. So far as the other shareholders are concerned, it is not shown that they have debts .properly deductible from the assessments made upon their shal'es, and as to them the bill is dismissed. The costs will be equally divided.

KNOWER '!1. HAINES.

and another, Assignee, etc.

(Oirouig Oourl, D. Vermont. July 15,1887.) ,

t.

t.

8.

JUDICIAL

The courts of the Unitl'ld States take judicial notice of the public statutes of the several'states;
' .

COUBTS-STATE STATUTES.

, .,

CORPORATION-SToCKHOLDERS' LIABILITY-How ENFORCED.

No liability of the officers or stockholders of a corporation for its debts exists at common law, but only by statute; and when such p,rovision is made it can be enforced only as therein provided. ' , Under the laws o.f Massachusetts, the officers of a corporation are made jointly and severally liable for the debts thereof, when they exceed the capItal, "to the extent of such excess existing at the time of the commeucement of the suit against the corporation upon the judgment in which the' suit in equity to enforce such liability is brought." Herd, that this liability, befQre suit brought to fix it, is not a debt,nor any fixed obligation to pay, but only that from which, by the prescribed course, an obligation to pay may be raised.

SAME----'OFFICERS'LIABILITY-NATURE OIl"

4.

The defendant, largely indebted at the time, and an officer of a corporation, indorsed, without consideration, the obligations of the corporation given for a pre-existing debt thereof, and subsequentlY" to take up those obligations, gave without consideration a mortgage coverIng all his property. In a suit agaInst defendant and his in insolvency to foreclose thIS mortgage, held that, the mortgagee acqUIring no rights as a bonaflrk holder for value without notice, such mortgage was void as to creditors. II. INSOLVENev-I'RE.FERENCE-REV. LAWS VT. § 1860. ' The laws of Vermont provide that if a person being insolvent, or in contemplation of insolvency, within four months of insolvency makes a conveY'ance to a creditor, having reasonable cause to believe him insolvent, orm contemplation of insolvency, and that such conveyance is made in fraud of the laws relating- to insolvency, the same shall be void. Held, also, that this mortgage was void under the act, being given within the time prohibited; delendant knowing his insolvency, and the orator having reasonable cause to suspect the same, and the preference the mortgage, if operative, would work. 6. CONSTITUTIONAL LAw-IM.rAIRING OBLIGATION OF CONTRACTS. This law regulates conveyances, which any state lI1p,y do as to any prop· erty within its jurisdiction. notwithstanding the provision of the constitution against impairing the obligations of a contract.

FIUUDULENT CONVEYANCES-MoRTGAGE-CONSIDERATION.

'1.

l'RESUMPTIONS-KNOWLEDGE OF FACTS.

A mortge,gee of property located in another state, having reasonable cause lawapplica· to know the fact of such conveyance, is presumed to know ble to them. '

v.31F.no.9-33

514

FEDERAL REPORTER.

,: In ,Eq'Jiity. The facts appear in the opinion. ' Wilder'L. Burnap and Alfred J. Taylor, Jor orator; . James K; Batchelder and Henry A. Harman, for defendant Carney.
I

J; This suit isbroughUo foreclose a mortgage of $50,000 on teal estate, mill, and machinery situated in Bennington, dated Feb1886. The d:efense:is made by the assignee.in insolvency proceedings had under the laws of the state within four months after, upon the ground that the mortgage is void as against the assignee under those laws. The Huguenot Woolen Company, a corporation organized in January, 1884, under the laws of Massachusetts. of which Haines was president, and of the stock of which he owned 65 per cent., appears to have owed the firm of Knower, Haines & Cooley, whose assets belonged the ,tenth day of November, 188{>, the sum of wholly to the orator, $85,198.73. 'The capital sttickbfthis corporatfonwas $50,000, and by the laws of Massachusetts the officers of the corporation were made jointly and severally liable for its debts, iIi cettmn cases specified, and not otherwise. Pub. St. Mass. c. 106, § 60.. The only on(;lof the cases applicaple to this GaBe, as shown by the" evidence, is the third.' 'In that case, they are made so liaole when. the debts exceed the capital, "to the extent'of such excess existing at the time of the the suit agllinst the corporation upon the. judgment in which the suit in"eqtiityto enforce such liability as thereinafter provided. These laws of Massachusetts were not put in evi., dehce;but his the duty'oftPis court to tak(l judicial notice of them. v. U. S. 747,7 'Sup. Ct. Rep. 757. No' such suit in equit}toenforee any judgment in a suit, or any such appearseve'r to have beei1brought. ' No liability of officers or stockof,/Io corpOl;ation exists at common law, but only by statutes of the sovereignty creating it. ,When so created, it exists only as created, ,'enforced'. by statntes ,when they make P!Ovl8,lOnJor that. purpose..' PolkLrd v. 20 Wall. 520; FOU1·th Nat. Bank v. Fmnaklyn, supra. Such liability, under a statute like this, beforesui't brought to fix it,i'Snbt a debt, nor any fi:x:edobligation to paYi but is onlY'that frqPlwhich., by the prescribed course; ,an to pay may be raised. Ripley v. Sampson, 10 Pick.. 371; Bangs v. LinCOln, 10 Gra1,600. .This is different from cases where the law raises the liapility fio-m of W(l' officers or stockholders, and leaves it to be enforced'lbythe appropriate remedy. WindhamProv. Irt8t. v. Sprague, 43 VL 502, . . . ·'. Upon these principles, Haines not liable, and could not be'made so, forany of this debtofthat company, except for the excess of itabove $50:;000; and only forso much oUhat as might exist. at the against the corporation, to be followed by a bill in' equity against him .. On that day he indorsed 31 notes of that company. made payable to'his order, to the orator, for $77,500 of this debt, andd*ew'three.checks in favor of the orator, of $2,500 each, for $7,500 more of it. There was' no other consideration for these checks or these
'WlIEELER,

KNOWER ". HAINES.

515

acquired no' rights as' a bona fide holder '1vithout 'One of the checks was paid. ThiS'hiortgage 'wasgiven' to take up the t,w<;>Teinaining'checks, and as many of the notes, all' of which' remained unpaid, as it \"ould cover, and for noother consideration. Haines owedatthis time,about $106,000 of just debts, ::tndthe mortgitge cOTeredsubstantially all of his property within the reach of hiscroo.it()rs' fodhe satisfaction of his aebts{ which, Upon the does not appear to have beefi in fact wotth' much, if 'any more, thatithe amountofthe mortgage. .The undertaking' which Haines entered into by indorsing then'otes,and drawi?g the: checks; WIiS without legal 'consideration; for no newiadvancement made upon it, and th'eliability of W66IenCom'pany, andi i of the officers ofth3.t c()Inpany, rem11'ined afte1lwarq,slhesalle as before., The mortgage 'was therefore really given' to secure 'a deDt due from the Company to the orator, and not any debt due from Haines to the orator. Such a conveyance of substantially all his property, for such a purpose, was void as to his creditors.without reference to the statutes invalidating preferences. Church v. C/w,pin, 35 Vt. 223. .The assignee represents the creditors, and has all their rights of defense against the mortgage. Haines could probably have settled his ,liability to a suit in equity for the excess of this debt above the capital of the Huguenot Company, about $35,000, without waiting fora suit against the, ,com- l pany, and then agal.m;;t him, or given his note, or indorsed the company's note, for the amount, and a valid debt, against him have thereby been created. But this was not done. Nothing was done but what, taken altogether, amounted to an attempt to his property for a debt due from the company, and not due But if this debt, or the excess of it above the capital of the Huguenot Company', was to be treated asa debt of Haines'whichhemightlawfully well as any other, the laws of Vermont provide that if a person, being -insolvent or in contemplation of insolvency, within four monthe'of insolvency makes such conveyance to a creditor, having reasonable cause to believtl him insolvent, or in conteQ1plation of insolvency, and that such conveyance is made in fraud of the laws relalling to insolvency, the same shall be void. Rev. Laws Vt. § 1860. With this added to his other debts, or without, there is no £'lir question but that Haines was actually insolvent at the time of making this nor but that he was so far insolvent that he knew the mortgage, if operative, would work a preference to the orator. And the proof Sh9WS that the orator was so familiar with Haines and his property. and the sources from which it came, and with his liabilities, and his aptitude' for creating them, that he had good grounds, amounting to reasonabW cause, to more than suspect, and to believe, that hewas insolvent, and that the mortgage; if operative, would Withdraw his property from the reach of his other creditors,and prevent its equal distribution, under any law, among them. The p:roof shows that he did not know oithe insolvency laws of VernlOnt, or that there were any, and that he resided in New York, away from their operation; but, as he was situated' with

516

FEDERAL REPORTER.

to this property, in undertaking to cover it with this mortgage, of these laws, as well as of the facts he had reasonable cause. t(} that bri,ng the conveyance which he took within their opera,tion. Being charged with knowledge of the,facts, he is to be presumed to know thE' laws applicable to them. , The point is made in the that this law of Vermont is con· trary,t9 tbat provision of the constitution of the United States which prohibits any state from making any law impairing the obligation of contracts. This law does not,however, impair the obligation ;of any cOntract. It regulates conveYllnces, which it does not seem to be doubtfulthatany may do, as tp any property within its jurisdiction, notwithstapding clause the constitution of the United States. be a decree that this mortgage is void as to the defendant Carney, as assignee of Haines, aJ;ld that the bill be dismissed as to him, with costs.

BROWN

1.

'V.

AMERICAN FINANCE Co. and others.

(Oircuit Oowrt, 8. D. New York. May 11,1887.)
CoNTnAcr-LEX LOCI.

The law of the place,;wbere the contract is made, not that of the place of performance of the contract, is the law which determines whether the con· tract is void for illegality.

8.

2. SAME-CONFLICT OF LAWS. lfthe contract is sanctioned by the law of the state in which it is made, and is not immoral, the courts of another state will treat it as lawful, although the laws of that state prohibit such a :lontract.
SAME-USURIOUS CONTRACT-PLACE OF MAKING.

A contract was made in the state of Rhode Island, and promissory notes were given thereunder and negotiated in thEj same state. The notes purported to be made at New York, were payable there, and New York was the place for substantial performance of the contract. The maker of the notes subsequently alleged usury in the transaction" and filed a bill on this ground for a surrender and cancellation of the contract and notes. Held, that the same being:valid and free from usury in Rhode Island, where they were made, the comDlainant waS not entitled to the relief prayed for.

,

In

Burton N. Harrison, for complainant. Robert I;udlow Fowler, for defendants.

W ALJ.ACE, J. The relief(sought by the bill is, among other things, (1) the cancellation of a contract of the date of April 14, 1884, entered Finance into hetween the complainant and the defendant the Company, or that the agreement be reformed; (2) that an agreement of the date ,of September 24, 1884, between the complainant, party of the first part, the defendant .the American Finance Company, party of the second part, and the defendants MaI;lon and Jillson, parties of the third usurious ,and void, and surrendered up for canpart, be adjudged to cellation; (3) that certain notes, executed by the complainant pursuant