intestate, and that they inherited, in right of their mother, as heirs of the testator, their share of the intestate property. The living children of the testator claimed under the residuary clause of the will. The court held that the words "the balance" in the residuary clause should be so limited "as to reach nothing more than the particular fund with which they stood in immediate connection, namely, the bank and canal stock, and the lands and town property, the use of which had been given to the wife of the testator"; and that fund, "after being charged with all the debts, legacies, and donations," yielded "the only 'balance' to be distributed" to the residuary legatees.

The residuary clause in the will in question here does not purport to dispose of the general residuum of the testator's property, but is, in terms, limited to the disposition of "the balance" of a particular fund derived from certain specified sources; and that "balance" is only what is left after taking from the fund the amount of the charitable bequests, though, from the happening of an unexpected event, they became void. The requirement that the amount of those bequests shall be taken from the fund in order to arrive at the balance that shall pass under this clause to the persons named, clearly evinces an intention of the testator that no part of that amount shall go to them. What disposition the testator would have made of the amount if he had anticipated the charitable legacies might have failed is left to mere conjecture, and the presumption that he did not intend to die intestate as to any property to which his attention was directed does not authorize the court to dispose of it as may be supposed the testator would have done. "In the construction of wills, conjecture is not permitted to supply what the testator has failed to indicate; for, as the law has provided a definite successor, in the absence of disposition, it would be unjust to allow the right of this ascertained object to be superseded by the claim of any one not pointed out by the testator with equal distinctness." 1 Jarm. Wills, *326.

If it be a presumption that the testator knew of the provision of the statute already quoted which avoids bequests and devises of the character therein mentioned on the happening of the specified event, it may be inferred that he intended the amount of such bequests in his will to go to his heir, if they became ineffectual, with as much certainty, at least, as that he intended it should pass under the gift of the balance of the designated fund, after deducting the amount therefrom. The statute evidently was enacted for the special protection of the children or adopted child of the testator, and their representatives, in the cases provided for, though, as held in Patton v. Patton, 39 Ohio St. 596, it inures also to the benefit of the collateral heir when the lineal heir survives the testator and then dies. We think

the fund in question should be awarded to the plaintiff in error. Judgment reversed, and judgment for plaintiff in error.

(62 Ohio St. 446)

WICK NAT. BANK v. UNION NAT. BANK et al.

(Supreme Court of Ohio. April 24, 1900.) CORPORATIONS-STOCKHOLDERS' LIABILITY — TRANSFER OF STOCK-TRANSFEREE INSOLVENT LIABILITY OF ASSIGNOR - ASSESSMENTS ON SOLVENT STOCKHOLDERS-RIGHTS OF CREDITORS.

1. Where the holder of stock in a corporation has transferred his stock in good faith to one who, at the time of subjecting the stockholders' liability to the payment of the debts of the corporation, is insolvent, the liability of such assignor of stock may, subject to the rule established in Harpold v. Stobart, 21 N. E. 637, 46 Ohio St. 397, be subjected to the payment of debts which accrued while he held the stock, in case a suficient fund is not raised by assessment upon solvent stockholders to satisfy all creditors.

2. In such case the fund arising from assessments on solvent persons who are stockholders at the time of the decree should be applied pro rata upon all the debts of the corporation, and funds arising from assessments on persons who had been stockholders, but had assigned their stock in good faith before the insolvency of the corporation, should be applied to the residue, if any, owing to those who were creditors at the time such stock was assigned.

(Syllabus by the Court.)

Error to the circuit court, Cuyahoga county. Action between the Wick National Bank and the Union National Bank and others. From the judgment the Wick National Bank brings error. Affirmed.

Williamson, Cushing & Clarke, C. D. Hine, Webster & Cook, Garfield, Garfield & Howe, and J. J. Sullivan, for plaintiff in error.

Where a solvent stockholder transfers his shares to one who is solvent at the time of the subjecting of the stockholders' liability to the payment of the debts, the fund derived from such transferring solvent holder of stock should go into a common fund, to be distributed pro rata among all the creditors of the corporation. Umsted v. Buskirk, 17 Ohio St. 114. Const. art. 13, § 3, provides that in all cases each stockholder shall be liable over and above the stock owned by him, and any amount paid thereon, to a further sum at least equal in amount to such stock; and the statutory provision is that the stockholders shall be liable, in addition to their stock, in an amount equal to the stock by them subscribed or otherwise acquired, to the creditors of the corporation. The liability thus created is expressly "to the creditors of the corporation." This liability is to secure "payment of the debts and liabilities of the corporation." Brown v. Hitchcock, 36 Ohio St. 667, lays down a rule for creating a fund for "the creditors of the corporation," but does not provide for its distribution. Harpold v. Stobart, 46 Ohio St. 400, 21 N. E. 637, determines the method of calculating

the amount of the liability of the stockholder, and relates solely to the creation of a fund, and not to its distribution. Peter V. Manufacturing Co., 56 Ohio St. 181, 46 N. E. 894, only determines that, if a person sells or gives away stock in order to avoid liability for future indebtedness, such transfer is valid, and he is not liable for subsequently contracted debts. In the dissenting opinion in Brown v. Hitchcock, 36 Ohio St. 667, the court states that there is no disagreement between the members of the court in the proposition that the aggregate security for the dues of a corporation is the aggregate stock of the corporation, and all amounts unpaid thereon, with a further sum equal to the total amount of the stock; nor is there any disagreement that the security thus provided must be distributed pro rata among all the creditors. "This right against the stockholders is intended for the equal benefit of all creditors." Harpold v. Stobart, 46 Ohio St. 397, 21 N. E. 637. To the same effect is Umsted v. Buskirk, 17 Ohio St. 114.

Heisley & Selzer and Squire, Sanders & Dempsey, for defendants in error.

The fund was earned by the creditors to whom it is distributed, and the complaining creditors could have no claim against the stockholders in question, and, not having any claim, could not have raised any fund by assessing the stock owned and transferred prior to the time from debts accrued. The question referred to in the dissenting opinion in Brown v. Hitchcock, 36 Ohio St. 667, was not before the court at the time, and the language used must be understood as limited to the case then before the court. In Umsted v. Buskirk, 17 Ohio St. 113, the position taken by defendants in error was that it was not the intent of the legislature to make stockholders in railroad companies individually liable, but that they were subject to be assessed pro rata by the corporation to the extent of their statutory liability, and the question of distribution of the fund was not considered. A suit to subject the statutory liability is a proceeding in equity, and a court can render such decree as equity requires. Wright v. McCormack, 17 Ohio St. 86.

SPEAR, J. The case here in error arises out of a controversy in a suit brought by the creditors of the Champion Spring-Bed Company, a corporation, against stockholders, to enforce stockholders' liability under the statute. Certain of the existing debts of the corporation were created prior to the transfer of the stock of certain stockholders who sold and transferred their stock to insolvent purchasers, but the bulk of the existing indebtedness accrued afterwards, and the controversy below was as to the division of the amount arising from assessments upon those former stockholders. The trial court held that the fund so arising should be applied 57 N.E.-21

*

in payment of the indebtedness existing at the time of the transfer, and that no part thereof should be applied to the debts of the company contracted subsequent to that date. The circuit court affirmed that judgment, and error is brought in the interest of the later creditors. So that the question presented by the record is: Where a solvent stockholder transfers his shares to one who, at the time of subjecting the stockholders' liability to the payment of debts, is insolvent, shall the fund derived from the assessment upon such transferring stockholders be applied solely to the payment of debts of the corporation existing at the time of such transfer, or shall it be applied pro rata to all debts, regardless of when they were contracted? Our constitutional provision is: "Dues from corporations shall be secured by such individual liability of the stockholders, and other means, as may be prescribed by law." Const. art. 13, § 3. And the statute is: "All stockholders * shall be deemed and held liable to an amount equal to their stock subscribed, in addition to said stock, for the purpose of securing the creditors of such company." Rev. St. § 3258. It is to be noted that no method or basis of distribution is prescribed, and whether distribution is to be pro rata among creditors or otherwise is left to judicial determination. It is conceded by plaintiffs in error that no decision of this court covers the proposition. But it is insisted that expressions in cases involving the enforcement of statutory liability, notably Umsted v. Buskirk, 17 Ohio St. 114, Brown v. Hitchcock, 36 Ohio St. 667, and Harpold v. Stobart, 46 Ohio St. 397, 21 N. E. 637, favor the claim of the plaintiffs in error. That claim is, in substance, that, as stated in Umsted v. Buskirk, supra, "the right arising out of this [the stockholders'] liability is intended for the common and equal benefit of all the creditors," aud from this it follows that the liability of the stockholders is to secure payment of the debts and liabilities of the corporation; not some of them, but all of them; not such as may be contracted at some given period, but, without restriction, all of them. On the other hand, counsel for defendants in error insist that the creditors who were such at the time the transfer of stock was made are to receive the same pro rata share as other creditors out of the general fund derived from the assessment of all solvent stock outstanding at the time of the insolvency of the corporation, and, in addition, to receive the extra amounts by reason of assessments on stock outstanding while they alone were creditors, to be applied towards the payment of such parts of their claims as remain unpaid by reason of the insufficiency of the fund raised by the general assessment. It is not proposed here to discuss these several contentions at length, but to simply state the conclusions to which the court has arrived. For arguments pro and con reference is had to the able briefs of counsel, which precede, and to the authorities

which are there cited. It is true that the precise question has not been heretofore considered by this court; at least not in any reported case. It is further true, as we think, that excerpts from Umsted v. Buskirk and Harpold v. Stobart, supra, to be found in the brief of plaintiffs in error, do not materially aid their contention, for, by all rules of construction, they must be held to apply to the precise question in hand, which was not this question, no matter of distribution being then before the court. An attentive consideration of those cases will show that when it is stated that the right against stockholders arising out of their statutory liability is intended for the common and equal benefit of all creditors, the context indicates that reference is had to such creditors as are in a position to demand an enforcement of the right, and to them only. As to the expressions quoted from the opinion of McIlvaine, J., in Brown v. Hitchcock, it should be remembered that they are dicta of a dissenting judge, and while, apparently, they seem to have been shared by the others, yet the proposition stated was not argued by the counsel, and not involved in the case before them for adjudication. What conclusion would have been reached after full argument, and under the responsibility of deciding a live question, we have no means of determining. It having been settled by previous decisions that where holders of stock are, at the time action is brought to enforce stockholders' liability, insolvent, the liability of assignors of such stock may be subjected to payment of debts existing at the time of the transfer, we have as a new question a proper rule of distribution of the fund made by assessment upon such former holders of stock; and it is not free from difficulty. Two considerations, however, lead us to the conclusion that the better reason supports the contention of defendants in error, and that the judgments below should be affirmed:

First. Those who were creditors at and prior to the transfer are in law presumed to have trusted to the responsibility of the then stockholders, as well as to the property of the corporation, and the obligation of the stockholder to the creditor is in the nature of a contract, and although not in form an express personal contract, yet is of equally binding force. It springs out of, and is coexistent with, the contract between the corporation and the creditor. Brown v. Hitchcock, supra; Corning v. McCullough, 1 N. Y. 47; Hawthorne v. Calef, 2 Wall. 10, 17 L. Ed. 776; Norris v. Wrenschall, 34 Md. 492; Hager v. Cleveland, 36 Md. 476. There arises, therefore, a manifest equity in favor of such creditors.

Second. Such transferrors of stock have incurred no statutory liability to the later creditors, and owe no contractual duty to them. Nor are they in any way liable to them because of once having been the owners of stock. These later creditors can have no

standing to demand distribution to them of a fund which arose, not from any contract with them, or with any one for their benefit, nor by reason of any liability accruing in their favor, but from a contract wholly with others, and for the benefit of others, and resting upon a liability created wholly in favor of others. Hence the fund which accrues from assessments upon such assignors of stock can in no sense belong to the subsequent creditors, and they are, therefore, not deprived of any right by the application of such fund to the satisfaction of the debts owing to the earlier creditors.

We are of opinion that the proper rule is that as to the fund arising from assessments upon all who were stockholders at the time of the decree enforcing stockholders' liability all the creditors should share pro rata, but as to funds arising from assessments upon persons who had been stockholders, but had assigned their stock in good faith before the insolvency of the corporation, such funds should be applied to the residue, if any, owing to creditors who were such at the time of the assignment of the stock; the liability of such transferrors of stock being subject to the limitations stated in Harpold v. Stobart. Judgment affirmed.

(176 Mass. 38)

SMITH et al. v. BUTLER et al. (Supreme Judicial Court of Massachusetts. Suffolk. May 16, 1900.)

ACTIONS AT LAW-CONSOLIDATION-NEW PARTIES- DEFENDANT - STATUTE OF LIMITATIONS SHIP'S HUSBAND INTEREST - EVIDENCE OF CUSTOM DISREGARDING EVIDENCE-BILL OF EXCEPTION.

1. Where plaintiffs, through a misapprehension, brought three separate actions at law to enforce a cause of action which could only be enforced by one bill in equity, the court has power to allow the actions to be amended, and consolidated into one bill in equity, on a showing that a new action begun might be barred by the statute of limitations.

2. Where plaintiffs, before limitations had expired, brought three actions at law, which, on a showing that a new action begun might be barred by limitations, were consolidated into one bill in equity after limitations had expired, plaintiffs' claim is not barred except as to those defendants who were first made parties in the bill in equity.

3. In an action to recover a deficit resulting from voyages of a bark, evidence is admissible of a custom of the port of Boston for ship's husbands to make advances for disbursing vessels managed by them, and credit interest on all sums received by them from the date of the receipt, and debit interest on all sums paid out by them from the date of payment, where there is an implied agreement between plaintiffs and defendants that plaintiffs should so charge and allow interest, as it is competent for parties to agree to pay interest on a running account, which agreement may be proved by evidence of the custom known to the parties.

4. In an action to recover a deficit resulting from voyages of a bark, in determining whether or not a custom exists at the port of Boston for ship's husbands to make advances for disbursing vessels managed by them, and credit interest on all sums received by them from the date of the receipt, and debit interest on all

sums paid out by them from date of payment, where one of the defendants testified that he knew of no such custom, and such defendant had owned in a large number of vessels sailing from such port, the master was warranted in disbelieving his testimony.

5. In an action to recover a deficit resulting from voyages of a bark, where interest is charged by the ship's husband on all sums of money received from date of receipt, and interest debited on all sums paid out from date of payment, when the amount received by plaintiffs in each year and credited and duly applied to the account with the owners of vessels exceeds the interest charge for that year, such charge, being the balance of interest charged on the items of each side of the account for the year in question, was paid, and the charge for each year following was on a new principal, less than the original principal, not made up in any part of interest, and was not objectionable in that interest was charged on interest. in contravention of Pub. St. c. 77, § 3, providing that no greater rate of interest than 6 per cent. should be charged unless the agreement to pay such greater rate is in writing.

6. In an action to recover a deficit resulting from voyages of a bark, an exception to the ruling of a master admitting evidence of a custom for ship's husbands in the port of Boston to insure freights to cover advances made by them, and to charge to the owners the premiums of such insurance, is not before the court when there is nothing in the record to show that plaintiffs charged interest in such manner.

Report from superior court, Suffolk county; Henry N. Sheldon, Judge.

Sylvanus Smith and another brought three separate actions at law against Benjamin F. Butler, Joseph L. and R. H. McLauthlin, and Morton Bradford to recover a deficit resulting from the voyages of a bark. On motion the superior court allowed plaintiffs to amend by changing the actions at law into a suit in equity on a showing that a new action begun might be barred by the statute of limitations. From the action of the superior court overruling defendants' demurrer, they appeal. There was a reference to a master by the superior court, who found for plaintiffs, and defendants except to his report. Modified and affirmed.

E. P. Carver and A. C. Burnham, for plaintiffs. William H. Baker, for defendants.

LORING, J. 1. The first question presented in this case is that raised by the appeal of the defendants Butler, R. H. and J. L. McLauthlin, and Bradford, who were the defendants in the three actions at law, from the order of the superior court allowing the three actions at law to be consolidated and amended into one bill in equity, in which all the part owners of the bark (23 in addition to themselves, making 26 in all) were joined as parties defendant. A motion was made by the plaintiff in each of the three actions at law, stating that the action in which the motion was filed and the other actions at law had been begun under a misapprehension, and that, in consequence of the lapse of time, a new proceeding might be barred by the statute of limitations, and praying that the action at law in question might be amended by chan ging it into a suit in equity, in which all of

said co-owners should be joined, and annexing thereto the bill in equity to be filed if the motion was allowed. The superior court made an entry in each action at law, allowing the "motion to amend by changing into suit in equity and consolidation with" the other two actions at law. There is no question of the power of the superior court to allow an action at law to be amended into a bill in equity, and we have no more doubt of its power when, through a misapprehension, plaintiffs have brought three separate actions at law to enforce a cause of action which can only be enforced by one bill in equity to consolidate the actions and amend the consolidated action into a bill in equity.

2. The second question is the question whether the plaintiffs' claim is barred by the statute of limitations. The cause of action sued on was not barred when the three actions at law were originally brought, but it was barred when the motion to consolidate those actions and to convert them into a bill in equity was made. We are of opinion that the plaintiffs' claim against the defendants in the three original actions at law is not barred, but that their claim against those defendants who were first made parties to the litigation by the filing of the bill in equity is barred. So far as the defendants in the three original actions are concerned, the cause of action enforced by the decree entered in the bill in equity is the cause of action sued on in the separate actions at law. In each action at law the plaintiffs sought a judgment against the defendant in that action for his share of the deficit resulting from the voyages of the bark in question. In the bill in equity, a decree has been entered against each defendant separately, directing him to pay to the plaintiff a specified sum which the court found to be that defendant's share of the deficit in question. The only purpose of the amendment was to cure a mistake made by the plaintiffs' counsel as to the proper remedy for enforcing the causes of action which were the subject of the three actions at law, and the reason given by the plaintiffs for their motion to be allowed to amend in place of beginning a new action was that a new action "might be barred by the statute of limitations." It has been the settled practice in this commonwealth for a period of over 50 years to allow amendments under such circumstances, in place of putting a plaintiff to a new suit, and to allow those amendments on the ground that, if a new suit were brought, it would be barred by the statute. We cannot doubt that this was effectual, and that the defendant could not plead the statute to the action so amended. Davenport v. Holland, 2 Cush. 1, 15; Sanger v. City of Newton, 134 Mass. 308310: Loring v. Salisbury Mills, 125 Mass. 138, 142. But the suit in equity, as against the defendants, who were brought in by amendment, was begun for the first time when the amendment was made, and they were for the first time made parties defendant. The stat

ute of limitations is a bar to the claim against them. Miller v. McIntyre, 6 Pet. 61, 8 L. Ed. 320; Woodward v. Ware, 37 Me. 563; Brown v. Goolsby, 34 Mies. 437. The case does not come within the principle of Burgie v. Parks, 11 Lea, 84, in which it was held that in a suit to enforce a claim against the estate of a testator of whose will there were two executors, one of whom only was sued, the statute of limitations could not be set up by the other executor when he was joined as a party defendant by an amendment after the statutory time had run. In that case the amendment cured a description of the person who represented the estate, which was liable for the cause of action originally sued on. Here no claim was made against the new defendants in the three actions originally brought at law, and the amendment introduced a new cause of action against a new defendant. Nor does this case come within Woodward v. Ware, 37 Me. 503, 564, cited by the plaintiffs. In that case it was intimated that, if a surety is sued before the statute has run, and the principal is made a party defendant by amendment after the expiration of the statutory time, it may be that he could not plead the statute of limitations. The principle on which the intimation rests is that the surety, if the surety is forced to pay under those circumstances, would have a remedy over against the principal, though the remedy of the creditor against the principal was barred. But here the plaintiffs seek to charge each defendant with his separate share of the loss resulting from the foreign voyages of the bark in question, and the payment by the defendants in the three original actions at law of their shares of that loss gives them no remedy over against the defendants who have been subsequently brought in by the amendment, or against anybody else.

3. The third question is that raised by the exception to the admission by the master of evidence of a "custom of the port of Boston for ship's husbands to make advances for disbursing vessels managed by them, and credit interest on all sums received by them from the date of the receipt, and debit interest on all sums paid out by them from the date of payment," and to the interest being computed in that way in this case. But the master found "that there was an implied agreement between the plaintiffs and the defendants that the plaintiffs should so charge and allow interest." It is competent for parties to agree to pay interest on items in a running account, and such an agreement may be proved by evidence that there was a custom to that effect, and that that custom was known to the parties. Fisher v. Sargent, 10 Cush. 251. In this case there was evidence that there was such a custom, and that that custom was known to the parties. The defendants R. H. and J. L. McLauthlin claimed that the right to charge them interest stands differently from the right to charge interest against the other

defendants, because one of them testified "that he did not know such custom"; but the master may have disbelieved this testimony. The master found, on competent evidence, that there was such a custom, and that "McLauthlin had owned in a large number of vessels sailing from the port of Boston." This, coupled with the further testimony of McLauthlin "that there was no such custom," was sufficient to warrant the master in disbelieving the testimony in question. The defendants make the further objection that a new principal was carried forward each year to the debit side of the account, and that interest was charged on such principal at the rate of 6 per cent. per annum, and thereby interest has been charged on interest, and more than 6 per cent. interest has been charged, in contravention of Pub. St. c. 77, § 3; there being in this case no agreement in writing. But it is found by the master "that in each year the amount received by the plaintiffs, and credited and duly applied in their account with the owners of said vessel, exceeded the amount of interest charges for that year." If that is the case, the interest charge, being the balance of interest charged on the items on each side of the account for the year in question, was in fact paid, and interest was in fact charged each year on a new principal which was less than the original principal, and which was not made up in any part of interest; for it was a principal ascertained by deducting from the old principal the balance of the credits for that year left after deducting from them the interest balance charged by the ship's husband.

4. The next question is the exception to the ruling of the master admitting evidence of a custom of ship's husbands in the port of Boston to insure freights to cover advances made by them, and to charge to the owners the premiums of such insurance, "it not appearing that plaintiffs were charging insurance in said manner." Inasmuch as there is nothing on the record which warrants the suggestion contained in this exception that it did not appear that the plaintiffs were charging insurance in said manner, this exception is not before the court. O'Brien v. Keefe (Mass.) 56 N. E. 588. Further, it does appear that that suggestion is not correct. The master found that the plaintiffs "insured freights to cover all sums thus advanced by them," and again, "that, as ship's husbands, they had a right, in accordance with said custom, to charge the defendants the premiums of such insurance paid by them."

5. The other questions raised by the ap peals and exceptions were waived at the argument. The decrees against the defendants William Waters, Jr., Alfred Cox, executor of the estate of Mark Googins, Susan Wadsworth, administratrix of the estate of Peleg Wadsworth, and Josephus Dawes, were erroneous, and the bill as against those defendants should be dismissed. The de