The rulings of the Court of Appeals of New York, unanimously
made, that the warehouse company did not become indebted to the
plaintiff by reason of its endorsement of the notes which form the
basis of this action, as the company was an accommodation endorser,
of which fact the plaintiff was chargeable with notice, and that
the liability of Remsen as trustee of the company was not primary,
but secondary and dependent altogether upon a statute of that state
of a penal character, ought to be recognized in every court as at
least most persuasive, although the case in which the ruling was
made has not yet gone to final judgment.
Page 158 U. S. 338
This Court has held in
Chase v. Curtis, 113 U.
S. 452, that that statute of New York is penal in
character, and must be construed with strictness against those
sought to be subjected to its liabilities.
In the absence of any controlling decision, this Court is
unwilling to hold that a provision of a general statute imposing a
personal liability upon trustees or other officers of a corporation
is incorporated into a special charter by a clause therein
declaring that the corporation shall possess all the general powers
and privileges and be subject to all the liabilities conferred and
imposed upon corporations organized under such general act.
This case was tried by the court without a jury, and from the
findings the following facts appear: the German-American Mutual
Warehousing and Security Company (hereafter called the warehouse
company) was a corporation of the State of New York, incorporated
by c. 701, Laws N.Y. 1872, vol. 2, p. 1673. Section 9 of this
chapter provides that
"The corporation hereby created shall possess all the general
powers and privileges, and be subject to all the liabilities
conferred and imposed upon corporations organized under and in
pursuance of an act entitled 'An act to authorize the formation of
corporations for manufacturing, mining, mechanical, or chemical
purposes,' passed February seventeenth, eighteen hundred and
forty-eight, and the several acts extending and amending the
same."
It never made or published any of the reports required by
section 12 of the act of 1848, which directed every company within
the first twenty days of each year to make and publish in some
newspaper a report signed by the president and a majority of the
trustees, and verified by the oath of the president or secretary,
and showing the total capital stock, the proportion actually paid
in, and the amount of existing debts. Robert Squires was president,
and William Remsen, the defendants' testator, a director and
trustee of the company. Squires, Taylor & Co. were a firm doing
business in the City of New York. It was composed of Robert C.
Squires (a son of the president of the warehouse company), Charles
E. Taylor, and Burnett Forbes. In 1878, this firm made two
promissory notes, each to the order of themselves, which notes were
endorsed by themselves in blank, and after such endorsement were
also endorsed by the warehouse company, the endorsement being made
by the president of the company and without the knowledge of Remsen
or the other directors. These notes were discounted by the
plaintiff. They were not paid at maturity, and, notice having been
duly given, the plaintiff commenced an action in the Superior Court
of the City of New York against the warehouse company as endorser.
It recovered a judgment against the company which was affirmed by
the general term. 53 Jones & Spencer 367. The company appealed
to the Court of Appeals of the state, and on October 8, 1889, that
court reversed the judgment. 116 N.Y. 281. It held that the
warehouse company was not liable on the ground that it was an
accommodation endorser, and that the plaintiff was chargeable with
notice of the character of the endorsement, because the notes were
presented for discount by the makers, who received the avails
thereof.
Section 12 of the Act of 1848, c. 12, hereinbefore referred to,
provides that for failure to file the reports specified therein,
the trustees
"shall be jointly and severally liable for all the debts of the
company then existing, and for all that shall be contracted before
such report shall be made."
N.Y.Rev.Stats. 8th ed., vol. 3, p. 1957.
Page 158 U. S. 342
MR. JUSTICE BREWER, after stating the facts in the foregoing
language, delivered the opinion of the Court.
The highest court of the state, which incorporated the warehouse
company and in which it is situated, has ruled, in a direct action
against it, that it did not become indebted to the plaintiff by
reason of its endorsement. The liability of the defendants is not
primary, and that of a debtor, but secondary, and depends
altogether upon a statute of that state of a penal character which
declares that upon certain omissions of duty on the part of a
trustee, he shall become responsible for the debts of the company.
Can the federal courts ignore the decision of the Court of Appeals,
and, in face of its unanimous opinion that the warehouse company is
not indebted, compel the defendants to pay as a debt of the company
that which has been thus decided to be no debt? Or, to state the
proposition in another way: a statute of the state imposes a
liability on a trustee for the debts of the company of which he is
trustee. The highest court of the state says there is no debt, and
therefore no liability. Is it appropriate for this Court to hold
that there is a debt, and, by reason thereof, a liability? We are
asked to enforce a statute of a state penal in its character, so
far at least as the trustee is concerned, and therefore to be
strictly construed, in a case in which its highest court rules that
it ought not to be enforced. To the question as thus stated it
would seem that there should be but one answer, and that the
rulings of the highest court of a state as to liability under such
a statute ought to be recognized in every court as at least most
persuasive. That this statute is one of a penal character is
settled not merely by various decisions of the Court of Appeals of
New York, but also expressly by this Court in
Chase v.
Curtis, 113 U. S. 452,
though as since held not "a penal law in the international sense."
Huntington v. Attrill, 146 U. S. 657.
Page 158 U. S. 343
It is, however, insisted by the plaintiff that there has been no
final adjudication in the courts of New York in the action against
the warehouse company, the order made by the Court of Appeals being
simply to set aside the judgment and grant a new trial; that the
question of liability or nonliability of the warehouse company to
the plaintiff is therefore not
res judicata; that the
plaintiff has a right, if it has not already exercised it, of
discontinuing that case, in which event there will be no final
judgment either for or against it, and nothing to prevent its
commencing a new action either in the courts of New York state or
in the courts of any other state in which it can secure service of
process on the company;
Manhattan Life Ins. Co. v.
Broughton, 109 U. S. 121;
Gardner v. Michigan Central Railroad Co., 150 U.
S. 349; that even if a final judgment had been rendered
in the action against the warehouse company, it would not bar the
plaintiff or protect the trustee, for a judgment binds only parties
and privies, and the trustee was neither a party to that action nor
a privy thereto,
Miller v. White, 50 N.Y. 137; that the
question of the liability of the warehouse company to the plaintiff
being thus still an open one, and depending not upon any statute or
matter of local law, but upon principles of general commercial law,
this Court is free to determine it according to its own judgment,
and is not concluded by any opinion or ruling thereon by the state
court.
It is further insisted that the Court of Appeals erred in its
views of commercial law, and that, while the presentation for
discount by the maker of negotiable paper thus endorsed may suggest
that the discount is for his own benefit, and that the endorsement
is an accommodation endorsement, there is no conclusive presumption
of law to that effect; that if the party discounting the paper
makes no further inquiries, it is a mere matter of negligence, and
that, according to the rules laid down by this Court, negligence
alone neither vitiates the title of the holder nor relieves any of
the parties to the paper from the liability apparently assumed by
their signatures thereto. We deem it unnecessary to determine this
question. That the presentation for discount by the maker of paper
drawn to his own order,
Page 158 U. S. 344
and bearing the endorsement of another party, does create a
presumption that the endorsement is a matter of accommodation is
affirmed by the following, among other authorities:
Bloom v.
Helm, 53 Miss. 21;
Hendrie v. Berkowitz, 37 Cal. 113;
Stall v. Catskill Bank, 18 Wend. 466;
Overton v.
Hardin, 6 Coldwell 375;
Lemoine v. Bank of North
America, 3 Dillon 44;
Erwin v. Shaffer, 9 Ohio St.
43; 1 Daniel on Neg.Inst. § 365; 1 Edwards on Bills App. 105,
§ 104. . On the other hand, the plaintiff refers to these
authorities as tending to show that the presumption arising under
such circumstances is not a conclusive one.
Wait v.
Thayer, 118 Mass. 473;
Ex Parte Estabrook, 2 Lowell
547.
Section 12 of the act of 1848 is not in terms reenacted in the
charter of the warehouse company. It is, as we have seen, a
statutory provision of a penal character, and before any party can
be held bound by its provisions, it must satisfactorily appear that
the legislation of the state has rendered him subject thereto. The
contention is that section 9 of the charter of the warehouse
company in effect incorporates said section 12 into such charter,
but the provision of section 9 is that the corporation shall
possess all the general powers and privileges, and be subject to
all the liabilities, conferred and imposed upon corporations
organized under the act of 1848. It is the corporation which is
given the powers and privileges and made subject to the
liabilities. Does this carry with it an imposition of liability
upon the trustee or other officer of the corporation? The officer
is not the corporation; his liability is personal, and not that of
the corporation, nor can it be counted among the powers and
privileges of the corporation. How, then, can it be contended that
a provision in a charter that the corporation thus chartered shall
assume all the liabilities imposed by a general statute upon
corporations carries with it a further provision of such general
statute that the officers of corporations also assume, under
certain conditions, the liabilities of the corporation? Does one by
becoming an officer of a corporation assume all the liabilities
resting upon the corporation? Is not his liability of a distinct
and independent character, and dependent upon other principles? It
is said that this is a mere
Page 158 U. S. 345
question of statutory construction, which has been settled by
the Court of Appeals of New York in conformity with the views of
plaintiff, but we do not so understand the scope of those
decisions.
Wakefield v. Fargo, 90 N.Y. 213, is cited. In that
case, it appeared that the High Rock Congress Spring Company was
organized under an act of 1863, c. 63, which authorized three or
more persons to incorporate in the manner specified in the act of
1848 heretofore referred to. Section 2 provided that
"every corporation so formed shall be subject to all the
provisions, duties, and obligations contained in the
above-mentioned act, (the act of 1848), and shall be entitled to
all the benefits and privileges thereby conferred."
Section 18 of the act of 1848 made the stockholders "liable for
all debts that may be due and owing to their laborers, servants,
and apprentices for services performed for such corporation," and
it was held that that provision became incorporated into chapter 63
of the Laws of 1863, and that the defendants, as stockholders in
the spring company, were liable accordingly. The matter is not
discussed in the opinion, but the conclusion is stated as above. It
may be noticed, however, that the act of 1863, under which the
spring company was organized, was entitle
"'An act to extend the operation and effect of the Act passed
February 17, 1848, entitled 'An act to authorize the formation of
corporations for manufacturing, mining, mechanical, or chemical
purposes,"
and contained but two sections, the first authorizing the
organization of three or more persons into a corporation in the
manner specified, etc., and the second being as heretofore quoted.
And so it may well be that the Court of Appeals considered the act
of 1848 as passing bodily into the act of 1863, and that all the
"provisions" (in the language of section 2) of the former became
part of the latter act. Be that as it may, that decision comes
short of meeting the question here. Even if it were conceded that
it goes so far as to hold that "corporation," as used in that
statute, includes stockholders as component parts thereof, it does
not follow that it also includes the trustees, directors, or other
officers. But it does not go to
Page 158 U. S. 346
the extent claimed. The opinion expressly says that "a
stockholder is not liable for the general debts of the corporation
if the statute creating it has been complied with." The term
"corporation" does not include stockholders, and a statute imposing
a liability upon the corporation does not thereby impose the same
upon the stockholders. Indeed, section 9 of the charter of the
warehouse company makes special provision for the liabilities of
the stockholders of the company, which was obviously unnecessary if
by the clause quoted all the provisions of the general
incorporation act in respect to the liability of stockholders,
trustees, and other officers were transferred to and made a part of
the charter. We see nothing in the case of
Veeder v.
Mudgett, 95 N.Y. 295, to throw any light upon this question.
So far, then, as the decisions of the Court of Appeals go, they do
not affirm that so much of the act of 1848 as imposes a special
liability on trustees and directors was incorporated into the
charter of the warehouse company by force of section 9 or
otherwise, and, in the absence of any controlling decision, we are
unwilling to hold that a provision of a general statute imposing a
personal liability on trustees or other officers is incorporated
into a special charter by a clause therein declaring that the
corporation shall possess all the general powers and privileges,
and be subject to all the liabilities, conferred and imposed upon
corporations organized under such general act. Something more
specific and direct is necessary to burden an officer of the
corporation with a penalty for omission of duty.
We are of the opinion that the judgment of the circuit court was
right, and it is
Affirmed.
