CASES

ARGUED AND DETERMINED

IN THE

SUPREME JUDICIAL COURT.

FOR THE

COUNTY OF WORCESTER, OCTOBER TERM, 1821, A1

Members of a manufacturing corporation are liable, by force of the statute of 1808, c. 65, in certain cases, for the debts of the corporation; and a fraudulent transfer of their shares, with a view to avoid such liability, leaves them still liable.

REPLEVIN for sundry goods and chattels mentioned in the writ. The defendant pleaded that the goods, at the time of the taking, &c., were the property of one Joseph Marcy, the plaintiff's brother, and traversed the averment in the writ, that they were the property of the plaintiff. On this traverse, issue was joined, to maintain which, on his part, the plaintiff produced a bill of parcels of the said goods and chattels, from the said Joseph to him, and proved that they were delivered to him before the taking, &c.

The defendant produced evidence to show that the said sale was

MARCY VS. CLARK.

fraudulent, and made with the intent to defraud the creditors of the said Joseph. All which evidence was left to the jury for their consideration; and they returned a verdict for the defendant.

The trial was before Wilde, J., April term, 1820; and the only question reserved for the consideration of the Court was, whether the defendant was, by law, entitled to *ques- [* 331 331] tion the validity of the sale on the ground before mentioned, as to which the following facts were proved or admitted.

The defendant, being a deputy sheriff, on the 3d of November, 1818, seized the goods in question as the property of the said Joseph Marcy, by virtue of two executions against a manufacturing company, of which he was or had been a member. The defendant, on the 1st day of October previous, having the said executions in his possession made a demand of the said Joseph, then a member and treasurer of the said manufacturing company, to exhibit property of the company for the satisfaction of those executions. No such property was exhibited by him, or found by the defendant; and before the executions were levied on the property of the said Joseph, he made a bill of sale of his share in the stock of the company to one Samuel C. Edwards; the validity of which bill of sale was questioned, by the defendant, on the ground that the same was fraudulent, and made without consideration; that Edwards was a man destitute of property; and that the bill of sale was made in order to defeat the creditors in recovering their just demands against the company

On this point there was much evidence, all which was left to the jury, with directions to find for the defendant, if they should be of opinion that the said sale of the goods and chattels to the plaintiff was fraudulent against the creditors of the said Joseph, and that he made sale of his share with the fraudulent intent of preventing the creditors of the company from recovering their just demands against them, and to avoid the levy of said executions on his property for the satisfaction of the same.

If this direction was wrong, the verdict was to be set aside, and the defendant defaulted; otherwise, judgment was to be rendered on the verdict.

Lincoln, for the plaintiff. The execution under which the defend ant would justify the taking of the plaintiff's goods, was issued upon a judgment recovered not against him, [ * 332 ] but against a certain manufacturing corporation; nor did it contain any direction to the officer to take the person or property of any individual. individual. We contend that, to give the officer the power to seize the persons or property of individuals, the precept should explicitly confer such power. It ought not to be left to the discretion of the officer to make a person a judgment debtor,

MARY US. CLARK.

who is not even named, nor in any way described, or even referred to, in the judgment or execution.

But, certainly none but such as are corporators at the time of the demand made, and so appear by the books of the corporation, should be liable to be treated as such by the officer. It is not for him to adjudge on the validity or sufficiency of a transfer, made according to the forms of law, and recorded. If he is not to be governed by the actual condition at the time of his making the demand, it is impossible to fix any limitation.

It is respectfully insisted that the law, under which the defendant claims to justify the taking of the goods in this case, militates with the constitution of the commonwealth. By the twelfth article of the declaration of rights, "no subject shall be deprived of his property, but by the judgment of his peers or the law of the land." But this statute authorizes an executive officer to take the property of citizens, without any judgment having been rendered against them. The officer is to decide whether a person is a corporator or not, and, in effect, whether he is liable, in his property and his body, to satisfy an execution issued upon a judgment to which he was not a party, and of which he had no notice. It should seem necessary, within the spirit of the constitution, that there should be means by which he should have a right to a judicial investigation and decision of the question whether he is liable as a corporator or not. The same objections apply to the provisions of this statute, when compared with the fifteenth article of the declaration of rights.

[* 333 ]

Hastings, and T. Bigelow, for the defendant.

*PARKER, C. J., delivered the opinion of the Court The sale of the goods from Joseph Marcy to his brother, the plaintiff, having been found by the jury to be fraudulent against creditors (1), the only question, reserved for the consideration of the Court, was, whether the defendant had a right, by law, to question the validity of the sale, which, notwithstanding its fraudulent intent, was good between the vendor and vendee.

The defendant, having taken the goods upon an execution in favor of a creditor of an incorporated manufacturing company, and having proceeded under the statute of 1808, c. 65, "defining the general powers and duties of manufacturing corporations," so as to authorize him to take the goods or person of any member of the company, has certainly a right, in behalf of the creditors, for whom he was acting officially, to a restoration of the property;

(1) [How could the sale, unless by a strange confusion of ideas, be called fraudulent as to creditors, when the levy was not made on the shares, and the sale, as between the vendor and vendee, was admitted to be valid ?—ED.]

MARCY US. CLARK.

provided Joseph Marcy was a member of the company when the defendant seized the goods.

The defendant had the same authority and right over the goods of Joseph Marcy, as he would have had if the execution had been against him nominally. The statute makes every member of a manufacturing corporation, against which judgment has been rendered, virtually a judgment debtor; and, by force of the statute, the execution is against every such member, although not named in the precept. The officer, therefore, who has seized the goods belonging to a member, or found in his possession, must, of necessity, have a right to defend his possession, or to recover it, if it should be lost.

The sixth section of the statute before referred to provides for the liability of the estate, and of the person of any member of a manufacturing corporation, which shall not, in fourteen days after demand, satisfy any execution which shall issue against it. Here a question arose, at what time the individual should be a member, to make him incur the liability; and it was determined that the execution might be levied upon him, who was a member at the time of the *levy. Indeed, no other construction [* 334 ] could be given to the statute; for none but a member

was made liable, and one who had sold his share in the corporate property certainly did not continue a member.

The question arising in this case is, whether Joseph Marcy was a member of the company at the time the goods were taken. Before the execution was levied, he had made a bill of sale of his share to one Edwards, without adequate consideration, and for the express purpose, as found by the jury, of avoiding his liability to the execution as a member of the corporation. It was contended that he had a right thus to shift the burden from himself, and to give away his shares, if he chose. It is true every man may dispose of his own property as he pleases; but always subject to the equitable principle, that he is not to injure another by his gift. Sic utere tuo ut alienum non lædas is a maxim of eternal justice, as well as law (2).

The legislature have thought fit, and we think wisely, to subject the property of all members of these corporations to a liability for the debts of the company. By this, in fact, they only continue the principle of copartnership in operation; and, considering the multitude of corporations, which the increasing spirit of manufacturing gives rise to, regard to the interest of the community seems to require that the individuals whose property, thus put into a common mass, enables them to obtain credit universally, should not shelter

(2) [This, at least, is an odd application of the maxim, and the sound sense of it is not quite apparent.-ED.]

MARCY VS. CLARK.

themselves from a responsibility to which they would be liable as members of a private association. Since this statute was enacted, all who deal with such companies, look for their security to the individual members, rather than to the joint stock; and to suffer those members to avoid their responsibility by parting with their stock, would be to deprive the creditor of a vested right, and of the means of satisfying his debt. For such a measure would not be resorted to, but in case of the actual or expected insolvency of the company. We cannot doubt, then, that a transfer of an interest [* 335 ] in * the stock of such corporations, not bonâ fide, but for the purpose of defeating the creditors of the company, is fraudulent and void. Otherwise the wholesome provision of the statute for the security of creditors would be unavailing at the very time, and in the very circumstances, in which it was intended to operate.

Under the statute we have been considering, those who are liable must be members when the execution is levied. But the legislature have thought that a further security was necessary; for there may be bona fide sales, by which the shares may be transferred from those who are able to those who are unable to pay debts existing at the time of the transfer; and it was reasonably thought that it was to the credit of those who were members when the debt was incurred, that the creditor trusted. It was, therefore, provided by the statute of 1817, c. 183, that the bodies and estates of those who were members at the time any debt accrued, as well as of those who were members when the execution issued, should be liable (3). So that even a bonâ fide transfer of shares will not relieve the member from any debt which accrued while he was a member of the corporation.

These statutes have been objected to, as infringing some of the principles of our constitution, particularly the twelfth and fifteenth articles of the declaration of rights; the first of which is intended to secure the liberty and property of the subject, and the second to establish the right of trial by jury. It is said that these statutes authorize a man's estate or body to be taken on execution, without any judgment against him, and without any hearing in the action upon which the judgment was rendered.

If it were so, undoubtedly the statutes would be void. But all who are members of the corporation are virtually defendants in the

(3) [This act was passed February 24, 1818, and related to corporations only which should thereafter be created. If it had any bearing in the present case, it tended to show that such persons were not before liable, and therefore that the defendant was not liable.-ED.]