Priest v. Essex Hat Manufacturing Co.

Wells, J.

The Essex Hat Manufacturing Company was or ganized as a corporation under the provisions of the Gen. Sts. c. 61 ; and the defendants, Cushing, Burrill, Bayley, Wills. Cook *381 and Blood were elected as its officers. The certificate, required by § 8 of that chapter, signed and sworn to by all said officers except Wills, was filed in the office of the Secretary of the Commonwealth. The association thereupon engaged in business in its corporate name; contracted debts, made the notes, and suffered the judgments set forth in the bill. Other certificates were made declaring the corporate character of the organization, some of which were signed and sworn to by the defendants, Wills and Cutter.

These facts establish sufficiently, and we think conclusively against these defendants, the corporate character of their association. The evidence, offered to control it, tended to show the former existence of some written agreement of association, which had been lost or destroyed; and the defendants relied upon paroi proof of its contents to show that it was so defective in form that no corporate existence could be founded upon it; relying upon certain suggestions as to the essential nature and significance of the articles of association as the first step in the formation of such corporations, contained in Utley v. Union Tool Co. 11 Gray, 139 , Newcomb v. Reed, 12 Allen, 362 , and Hawes v. Anglo-Saxon Petroleum Co. 101 Mass. 385 . But we are of opinion that this case is governed rather by Dooley v. Cheshire Class Co. 15 Gray, 494 , and Merrick v. Reynolds Engine & Governor Co. 101 Mass. 381 ; and that the defendants are concluded by their affidavits and acts and by the judgment, from disproving the regularity and sufficiency of their original articles of association.

The neglect to comply with the requisitions of the St. of 1862, c. 210, is admitted.

But there appears to be an irregularity in the proceedings by which the plaintiffs seek to enforce against the defendants this liability for the debts of the corporation. The liability exists only as imposed by the statutes, which also prescribe the mode in which alone it may be fixed and enforced. The process must be followed strictly. There must be, in the first place, a judgment against the corporation; in the second, a demand on the execution ; thirdly, a neglect for thirty days after demand made on execution to pay the amount due, or to exhibit to the officer real or personal estate of the corporation, subject to be taken on execution, sufficient to satisfy the same; and fourthly, in conse *382 quence thereof, a return of the execution unsatisfied. St. of 1862, c. 218, § 3. All these conditions must concur. A return of the execution unsatisfied on the same day with the demand made thereon, for the reason that payment was then refused and no property could be found, does not make the directors liable to be proceeded against under the statute. Section 4 provides that “ after the execution shall be so returned, the judgment creditor, or any other creditor, may file a bill in equity, in behalf of himself and all other creditors.” This shows conclusively that the return of the execution contemplated by the statute is its return unsatisfied after the neglect of the corporation for the period of thirty days ; which alone warrants a return upon which the creditors can proceed against directors or stockholders. One alternative allowed to the corporation is, at any time within the thirty days, to exhibit to the officer property that he may take upon the execution. This implies that the execution is to remain in his hands for that purpose; and before the directors or stockholders can be proceeded against, his return must show default in this respect.

In the present case, the return, having been made on the same day with the first demand, not only fails to show that the execution remained unsatisfied at the end of the thirty days thereafter, but shows affirmatively that the opportunity was not kept open for thirty days for the corporation to exhibit property that might be taken upon it. We think this is a tetep in the process which must be taken by formal proceedings; and cannot be supplied by proof that the corporation neglected to pay the debt, made no attempt to exhibit property, and had none to exhibit. The omission cannot be regarded as immaterial because it does not affect the equity of the case. The liability does not rest upon equity, but is of strict statute imposition. The remedy is given in equity for the sake of the greater convenience and advantage it affords for adjustment of the various interests of the several parties who.may join or be joined as plaintiffs or defendants.

There not having been a strict compliance with all the requirements of the statute, the bill cannot be maintained, and is Dismissed with wsts.