Case ID: abb-pr-ns_16/html/0081-01.html
Source: Caselaw Access Project
Author: {"author": "Miller, P. J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

BONNELL against WHEELER.
    
      Supreme Court, Third Department, Third District, General Term;
    
    
      March, 1874.
    Joinder oe Actions. — Manufacturing, &c. Cob poraxions.—Individual Liability of Stockholders and Officers,—Pleading.— Assignment of Cause of Action.
    In an action to charge the officers of a manufacturing, &c. company, individually, for a debt of the corporation, a cause of action for not making the report within the twenty days prescribed bylaw, may be joined with a cause of action for making a false report, though both refer to the same year.
    Such causes of action 11 arise out of the same transaction, or transactions connected with the same subject.” The subject of action is the plaintiff’s demand against the corporation, and the transactions connected with it, are defendant’s unlawful acts.
    
    But if it appear that the false report was not signed by all the defendants who are charged with omission to make report, there is a misjoinder of actions, by reason that the causes do not affect all the defendants.
    A cause of action against the officers of a corporation, to charge them individually with its debt, is assignable.
    
    Samuel Bonnell, Jr. and Eli W. Blake respectively brought two several actions in this court, against Geo. M. Wheeler, Chester Griswold, Jacob Hoysradt and others, as the surviving trustees of the Iron Mountains Company of Lake Champlain, formed in August, 1869, under the act of the legislature of New York, entitled, “ An act to authorize the formation of corporations for manufacturing, mining, mechanical or chemical purposes,” passed February 17, 1848, and the acts amendatory of the same. The plaintiff Bonnell claimed the sum of five thousand five hundred and eleven dollars sixty-six cents, by virtue of an assignment to him. by the Birmingham Iron Foundry, of a demand for work and labor done, and materials furnished by it for the Iron Mountains Company. The plaintiff Blake claimed the sum of one thousand two hundred and forty-seven dollars forty cents as originally due him in his own right from the Iron Mountains Company.
    The first counts of the complaints respectively ^alleged the organization of the said Iron Mountains Company as aforesaid ; that the defendants, and said John A. Griswold (since deceased), were duly appointed and acted as the trustees of said company for the first year; that during that period they omitted, to make, publish, or file a report within twenty days from January 1, 1870, pursuant to the provisions of section 12 of the above-mentioned act, by means of which alleged omission the defendants became liable to pay the plaintiffs’ claims, respectively stated in said counts.
    The second counts, after referring to the allegations of the incorporation of said company, in the first counts, respectively set forth a copy of the charter, or certificate of incorporation thereof, and state that the said defendants and the said John A. Griswold, while acting as such trustee as aforesaid, did on January 13, 1870, make and file in the office of the clerk of the county of Essex, a certificate or report, a copy of which is annexed to and made a part of the complaints, and which it is averred the said defendants and the said John A. Griswold, in said month of January, 1870, published in the Elizabethtown Post, a newspaper published in said county of Essex, the said certificate or report being, as said plaintiffs respectively allege, false in a material representation, and known by the said defendants, and the said John A. Griswold, so to be, namely, in stating that the capital stock of said company had been paid in full, when, as the plaintiffs respectively aver, such was not the fact; and that, therefore, by force of section 13 of said act, the said defendants also became liable to the plaintiff, to the amount of their respective claims.
    The third counts, after referring to the incorporation of said company, and that the defendants and said John A. Griswold, were the trustees thereof, as aforesaid, respectively set forth, that prior to the organization of the said company, the said defendants and the said John A. Griswold entered into an alleged fraudulent scheme, combination and conspiracy, to form said corporation as it was formed, and to fraudulently cause to be transferred thereto certain lands owned by a corporation styled the “ Kingdom Iron Ore Company," in which company it is alleged the defendants and. said John A. Gris-wold were interested as stockholders and officers, and to have the stock of the new company issued to an amount largely in excess of the value of said lands, and to have the whole of said stock paid to, or for the benefit of said Kingdom Iron Ore Company, in part payment for said lands. The third counts then proceeded with general allegations of acts and doings on the part of "said defendants and said Griswold, in furtherance of said alleged scheme and conspiracy, closing by alleging that the said alleged omission set forth in the first counts, and the alleged making of said alleged false report set forth in said second counts, are and were part and parcel of said alleged scheme or conspiracy, by means of which alleged doings it is claimed the defendants became liable to pay the claims of the plaintiffs respectively.
    The said plaintiffs also each brought another action, on the same demands respectively, against Chester Griswold, John W. Griswold and Elizabeth H. Gris-wold, as executors of John A. Griswold, deceased, but in his lifetime a trustee of the said corporation. The complaints in these actions contained substantially the same allegations as those of the first two counts of the two former actions above described, respectively, • but omitted those of the third counts.
    The defendants demurred to all the complaints upon the grounds stated in the opinion below, and now appeal to the general term from Mr. Justice Bookes’k orders overruling the demurrers.
    
      W. O. Holbrook, for the1 defendants, appellants.
    
      A. Pond, for the plaintiffs, respondents.
    
      
       Compare Sanborn v. Lefferts, p. 42 of this vol. ; Hall v. Sigel, 13 Abb. Pr. N. S., 178.
    
    
      
       Compare Hall v. Sigel, 13 Abb. Pr. N. S., 178.
    
   By the Court.

Miller, P. J.

In the first two actions, I think that the first and second causes of action were properly united. Each of them was for a liability somewhat in the nature of a statute penalty, and virtually an action on contract for the recovery of money (McCoun v. N. Y. & H. R. R. R. Co., 7 Lans., 75; overruled, however, as to form of summons, in 50 N. Y., 176). They were therefore, properly joined under section 167, sub. 2 of the Code.

The fact that one of the causes of action is for not making a report within the twenty days as required by section 12 {Laws of 1848, ch. 40), and the second for making a false report, does not, I think, alter the case. Each one of the counts contains a separate and an independent cause of action, and either of them may be upheld, if the evidence upon a trial warrants it.

They are not necessarily inconsistent with each other or contradictory. Even if a report be filed, which is false within section 15 of the act cited, it by no means follows that there has been a compliance with section 12. A report which is false, can scarcely be said to be a report which is required by section 12, and I am inclined to think that where such is the case, an action may be upheld under section 12, if for any reason the proof upon a trial would not warrant a judgment under section 15.

Nor, in my opinion, is there any question but that each of these causes of action may arise out of “the same transaction or transactions connected with the same subject of action,” within section 167, subdivision 1. The subject of the action of the plaintiff, is the debt, and the transactions connected with.it are the unlawful acts of the defendants. These acts arise out of transactions whicli relate to', and form a part of the subject of the action.

If, in accordance with the opinion of Adams v. Bissell (28 Barb.) 386), we disregard the last clause of sub.division 1 of section 167, which I am. not prepared to do, I am nevertheless satisfied that each of the causes of action arises out of the same transaction, and may be maintained. If these views are correct, the first ground of demurrer can not be upheld.

It is insisted that there is a misjoinder of the first and second causes in the first two actions, because they do not affect all the defendants, viz. : Hoysradt, Corning and Burleigh, who were not signers of the alleged false report set forth in the second cause of action. And that there is a misjoinder of the third cause of action therein with the first and second, for the same reason. These grounds are stated also in the second and sixth grounds of demurrer of the defendants Wheeler and Griswold respectively, and in the separate demurrer of the defendant Hoysradt.

The Code, section 167, provides that the causes of action united “ must affect all the parties to the action,” and the objection of a misjoinder may be taken advantage of by demurrer (Warth v. Radde, 18 Abb. Pr., 396; S. C., 28 How. Pr., 230; Smith v. Geortner, 40 Id., 185 ; Hess v. Buffalo & N. F. R. R. Co., 29 Barb., 391; Palmer v. Davis, 28 N. Y., 246).

It is claimed by the plaintiffs that the complaints allege that all the defendants did sign the report and the demurrers admit the allegation to be true.

The second count in the two cases avers, that the company was duly organized and incorporated as stated in the first count; that the defendant and Griswold were duly named as trustees, and while such trustees, and acting as such, having accepted as such, the “defendants and said John A. Griswold on January 13, 1870, made and filed in the Essex county clerk’s office,” .... “a certificate or report, a copy whereof is hereunto annexed marked B.” It also alleges that “said certificate and report was the only report made, filed and published ; that said report was false,” &c. stating wherein.

It then proceeds to state “ that said defendants ■and the said John A. Griswold signed said certificate, ■knowing it to be false as hereinbefore stated,” •&c. The certificate annexed does not contain 'the names of the three defendants hereinbefore mentioned. The allegation that they did sign, refers to “said certificate,” meaning the one annexed, which negatives the allegation that such was the fact.

If this last allegation can be considered as in conflict with what had previously been averred, then the reading of the report or certificate annexed must, I think, determine how the fact is.

And although verbally a contradiction, yet as it refers directly to the report, the allegation must be ■ considered as confirmed and restricted to what appears upon the face of the certificate, a copy of which is :annexed, that is; that Griswold and others did sign it, but that the other three defendants did not. It appears then that the report and certificate set forth was not signed by either of them, whence they could not be held responsible for its being false. It is no .answer to say that the complaints only purport to have annexed to them copies of the report and not of the signatures, for it would lack the essential qualities ■of a report unless it is signed. Besides the names attached constitute a part of the report; are first mentioned at its commencement as being trustees; and the report purports to have been sworn to by each one of -the signers before a notary. It is plain, therefore, that there is a misjoinder of actions as to the first and second causes of action, and also of the third, which is based on the first and second, and in this respect the ■demurrers are well taken.

The defendant’s counsel further insists, that the complaint in the Bonnell case does not state facts sufficient to constitute a cause of action, because it shows upon its face that Bonnell was not an original creditor, but-derives his claim only by assignment or transfer from the ‘1 Birmingham Iron Foundry.” In other-words that the claim was not assignable by the trustees-of the “ Birmingham Iron Foundry,” so as to transfer to Bonnell any cause of action against the defendants-which arises under sections 12 and 15 of the manufacturing act, by virtue of which a recovery is claimed (Laws of 1848, ch. 40, p. 54, 57.)

The provisions referred to provide for a liability of trustees or officers of a company for all debts existing or contracted without limiting or restricting such liability to the creditor alone, and extend the remedy, I think, for the collection of the debt, against the trustees or officers who neglect their duty and fail to-comply with the law.

They do not change the nature of the debt for which the company was originally, and continues to be, liable, nor invest it with a character which prevents an assignment of the same, which carries with it all the incidental remedies given by statute.

The act embraces “All the debts of the company,” which, I think, means debts due not only to the original creditor, but to such person as may be entitled to the same by virtue of a lawful assignment.

Regarding the action as brought upon the contract, and the remedy under the statute as merely incidental, I am inclined to think that it stands precisely in the same position as any other action of a similar character, which has been lawfully transferred to another-party. But even if this position may be doubted, the plaintiffs’ cause of action may be considered as embraced within the rule laid down,in some of the reported cases, to the effect that a cause of action against a vendee of" land for fraudulent representations as to an incumbrance, or an action for fraudulent representations in. obtaining money or property, survives to and against the personal representatives, and an assignee may sue thereon (Haight v. Hoyt, 19 N. Y., 564; Byxbie v. Wood, 94 N. Y. 607 ; Graves v. Spier, 58 Barb., 349, 385 ; Johnston v. Bennett, 5 Abb. Pr. N. S., 331).

Although the first and second causes of action set forth in the plaintiff Bonnell’s complaint, do not perhaps directly show an injury arising from the defendants wrongful acts, or which tends to affect, impair or diminish the estate of the “ Birmingham Iron Foundry,” or of the plaintiff) yet it is quite apparent that the unlawful acts of the defendants may have such an effect.

The law declares that such an injury may have accrued from the facts stated, and it is a fair and legitimate inference, I think, that the failure of the defendants to comply with the provisions of the statutes cited, may have occasioned, and did cause such injury, and seriously affected and impaired the property and estate of the plaintiff, or his assignor.

It is also a presumption of law that the debt was contracted, in the first instance, and an assignment of the same made, with a full knowledge of the remedies-under the statute, and with entire reliance upon the same.

In my opinion, the case now presented, bears no analogy to an action brought to recover damages for personal injuries, which is not assignable,'for the reason that no one has a property in the personal sufferings of another, and, therefore, the acts complained of can not injuriously affect, impair, or diminish his estate.

The cause of action here clearly goes beyond the person. It is a debt incurred for work and labor performed, and materials furnished, which if not paid, diminishes the property of the creditor or of his assignee.

If the (muses of action are regarded as brought for-mere penalties, then some of the later cases hold, that the right of action is assignable, and not a mere personal. privilege (Meech v. Stoner, 19 N. Y., 26; McDougall a. Walling, 48 Barb., 464).

As the statute does not forbid the assignment of a claim like that for which the plaintiff seeks to recover, but appears to favor the right to assign, and as such right is not in conflict with any principle of law, and is upheld by the reported cases, my conclusion is that the grounds of demurrer last considered are not well taken except as to the defendant Hoysradt, who, as we have already seen, was not a signer of the certificate, and, therefore, can not be made liable under the second cause •of action.

There was no misjoinder of the third cause of action with the first and second causes of action, so far as the substance of the same is concerned, and I see no difficulty in regard to them. The question presented in regard to this branch of the case was passed upon in Arthur v. Griswold (55 N. Y., 400), and it is there held that, although the causes of action are different, they are to be deemed properly united, and they relate to the same general transaction (See opinion of Church, Oh. J.).

In the third and fourth actions the complaints against the executors, are of the same general character as in the first and second actions, except that the cause •of action alleging a conspiracy, being the third cause of action in these two cases, is omitted.

The observations already made cover all the ob jections taken, and as none exist which are fatal to a recovery, the demurrer must be overruled as to these.

In the first and second actions the order appealed from must be reversed, with ten dollars costs, and the defendants are entitled to judgment on the demurrer, with leave to the plaintiff in each to amend, upon payment of costs, within twenty days of service of a •copy of the order herein.

In the third and fourth actions, the order must be affirmed, with ten dollars costs. Judgment must be ordered for the plaintiffs, upon the demurrer, with leave to the defendants to answer within twenty days after service of a copy of the order herein, and upon payment .of costs. 
      
       Present, Miller, P. J., and Boaiidiialt, J.