President of the Middletown Bank v. Russ

ft is no objection to a bill in chancery against tho principal debtor, that there is remedy at law against a surety. Where a bill in chancery was brought against the individual members of a corporation, for the payment of a debt from the corporation, without setting forth, or counting on, the act of incorporation, by which alone the members were made individually liable ; it was held, that the bill could not be sustained. A bill for discovery, by the creditors of a corporation, against the individual members, made liable, by statute, for the debts of the corporation, in a case not otherwise exceptionable, may be sustained. Where the plaintiff in a bill brought for a discovery and relief, the discovery being sought as auxiliary to the relief, is not entitled to the relief, he cannot have the discovery. But a court of chancery having taken cognizance of a suit for the purpose of a discovery, will entertain it for the purpose of relief, in most cases of fraud, account, accident, and mistake.

THIS was a bill in chancery, brought originally to the superior court, for discovery and relief. The bill stated the following case. The Middletown Manufacturing Company was formed, and commenced business, by that name, in the year 1812. Soon afterwards, the company became indebted to the plaintiffs, on notes made by Arthur W. Magill, its agent, payable to Alexander Wolcott and other persons, or order, and by them indorsed, amounting to about 10,000 dollars. These notes were discounted at the Middle-town bank, at different times, during the year, for the accommodation of the company, and to enable it to purchase its stock, and carry on its business. The debt thus contracted has never been paid; but the notes were renewed from time to time, according to the rules and regulations of the bank, the old notes, when due, being cancelled, and new ones substituted, until the summer of 1816, when the company gave three notes, amounting to 8,900 dollars, signed by A. W. Ma-gill as agent, and indorsed by Alexander Wolcott, each payable eighty-eight days after its date; and on the 31st of January, 1817, another note was given, in the same manner, for 350 dollars, indorsed by Magill & Williams ; all which notes were discounted by the plaintiffs, for the benefit and accommodation of said company, at the request of its agent. When they respectively became due, notice thereof was immediately given to the company and the indorsers ; who neglected and refused, as they have ever since done, to pay the same. In September, 1817, the plaintiffs brought an action of assumpsit against the company, on each of those notes, and recovered judgment before the superior court, on the 5th of August 1818, for the several sums specified therein, with interest and costs, amounting to the sum of 10,599 dollars, 3J cents. Executions were shortly afterwards taken out, and put into the hands of an officer, who demanded payment thereof of said company, through Magill, its agent, and made search for the personal property of said company ; but he was unable to obtain payment, or find property, and therefore returned the executions unsatisfied ; the amount of which, with the officer’s fees and interest, is justly due to the plaintiffs from the members of said company, whose persons and property are by law liable for the payment thereof. The bill then stated, that when the debt was first contracted, in the year 1812, and at the respective dates of the several notes, John Russ of Hartford, George Blake of Boston, Thomas Barlow of the city of Washington, Lemuel Whitman of Farmington, Ithamar Atkins, Henry Wolcott, Esther Magill, Martha Williams, wife of Samuel Williams, Arthur W. Magill, Sarah Waldo and Elizabeth Magill of Middletown, were reported to be, and were in fact, and have ever since continued to be, members of said company. They were then charged with having fraudulently combined with persons to the plaintiffs unknown, to defeat the plaintiffs of their just rights ; and with having deceitfully and wickedly concealed and suppressed all ordinary evidence of the fact that they were members. And the plaintiffs averred, that they had not any legal evidence of such fact; nor had they knowledge or proof whether any other persons were members. The prayer of the bill as to disclosure, was, that the defendants be compelled to disclose, on oath, their knowledge as to the books And papers of said company, on which the names of the stockholders appear, or by which the persons who are, or have been, stockholders, may be ascertained, if any such books or papers remain in existence ; and that they be also decreed to disclose, on oath, what persons now compose the said company, and are members thereof, and who were members thereof, at the times when the said debts were respectively contracted, by said company, with the plaintiffs, and at the times when said notes were respectively given or renewed, and when said judgments were rendered. The prayer as to relief, was, that the defendants, or such of them as the court should consider bound in law and justice so to do, should be ordered and decreed to pay to the plaintiffs their said demands, in such proportions as the court should deem just and equitable. To this bill the defendants demurred; and the court reserved the case for the advice of all the Judges. contended, 1. That no foundation for relief was stated, because the act of incorporation, under which the Middletown Manufacturing- Company was formed, being in its nature a private act, was not set forth, either in form, or in substance ; and the defendants were under no obligation to the plaintiffs, except what arose from that act. The form of the act, with the circumstance of its being printed with the public acts, (a) does not alter its nature. Bul. N. P. 222, 3. Phill. Ev. 220., 2. That the plaintiffs have adequate remedy at law. In the first place, all that the plaintiffs seek, is payment of their debt against the company in money. If the defendants are individually liable to pay the debt, a court of law can do complete justice. Secondly, it appears from the bill, that the plaintiffs may resort to the indorsers, and recover the money from them. 3. That the plaintiffs are not entitled to a discovery., First, no foundation is laid for a discovery from any person ; no facts being stated from which it appears, that common law proof cannot be had. Secondly, the discovery sought is not from the proper sources. The contract was made with the company ; and the individual stockholders are not presumed to have any knowledge on the subject. They do not know who the members of the company are. The books of the company. and the clerk, should be resorted to, for this information. Din-eley v. Dineley, 2 Atk. 394. 4. That admitting the plaintiffs would be entitled to a discovery, on a bill properly framed for that purpose ; yet this bill being brought for a discovery and relief, and the discovery being sought as' auxiliary to the relief, if the plaintiffs are not entitled to the relief, they cannot have the discovery. Coop. Eq. Plead. 117. 188. 1 Madd. Chan. 175. Price v. James, 2 Bro. Ch. Ca. 319. Collis v. Swayne, 4 Bro. Ch. Ca. 480. Muckleston v. Brown, 6 Ves. jun. 63. Barker v. Dade, 6 Ves. jun. 686. Baker v. Mellish, 10 Ves. jun. 544. Gordon v. Simpkinson, 11 Ves. jun. 509. Sutton v. The Earl of Scarborough, 9 Ves. jun. 71. 75. as to the first point, remarked, That it did not appear from the bill, that the defendants were ever incorporated : it only appeared, that they were formed into a company, and commenced business, under the name of the Middletown Manufacturing Company. But if the defendants are a corporation, and their act of incorporation is a private act, the bill may be readily amended. They then contended, 2. That the remedy- at law, was, at best, doubtful, and subject to much delay and inconvenience. Suit after suit may be brought at law, and be defeated as often as brought, by a plea in abatement for the omission of some stockholder as a party defendant. But it is one of the peculiar advantages of a suit in chancery, that it al'ows additional parties to be made, and cited in, without interrupting its progress. This is, therefore, a proper case, for the relief prayed for. 3. That there was a sufficient foundation laid for the discovery. The plaintiffs clearly had an interest in the subject matter; the evidence sought was material, and, under the circumstances of the case, could not be supplied by common law proof; and the defendants, being individually liable, (a) were the proper persons to be resorted to. 4. That although the plaintiffs may have remedy at law, so that they could not come into chancery for relief only; yet where a court of chancery may hold jurisdiction for the purpose of discovery, it will go further, on the principle of preventing a multiplicity of suits, and grant relief. Jesus College v. Bloom, 3 Atk. 263. Swiffs Ev. 116. Russel v. Clarkes exrs., 7 Crunch 69. 89.