Case ID: ad_115/html/0492-01.html
Source: Caselaw Access Project
Author: {"author": "Clarke, J.:", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Louis Bauer, Appellant, v. Euphemia A. Hawes, as Executrix, etc., of Granville P. Hawes, Deceased, Respondent, Impleaded with Henrietta M. Parker, as Executrix, etc., of John L. Macaulay, Deceased, and Others, Defendants.
    First Department,
    November 23, 1906.
    Judgment—when final judgment cannot be entered on reversed-interlocutory judgment against defendants who did not appeal therefrom — when severance of action not proper.
    When, in an action in equity brought by a creditor in behalf of himself and other creditors to enforce the statutory liability of directors of a corporation, an interlocutory judgment establishing the liability of directors has been reversed on an .appeal by some-of the directors and a new trial granted, which aew trial has never been had, the interlocutory judgment cannot be enforced even as against those directors who did not appeal therefrom, unless the action be severed.
    ■Moreover, when said interlocutory judgment was reversed because of the failure to bring in all the necessary parties defendant, the action cannot be severed, for the adjudication determines that all the defendants must be sued in one action.
    
      The right of ther plaintiff to enter a final judgment on such interlocutory judg ment against one director, who did not appeal therefrom, must be determined upon the facts as they existed at the time of the entry of the interlocutory judgment, and such final judgment cannot be justified on the ground that facts have since developed which make the reasons given by the court for reversing the interlocutory judgment of no force.
    
      It seems, that such director could appeal from a final judgment now entered against him, and on that appeal review the former interlocutory judgment, although he did not join in the original appeal from the interlocutory judgment.
    Appeal by the plaintiff, Louis Bauer, from an order of the Supreme Court, made at the Hew York Special' Term and entered m the office of the clerk of the county of Hew York on the 10.th day 'of July, 1906, denying the plaintiff’s motion for the settlement of a final judgment as against the defendant Euphemia A. Hawes, as executrix.
    
      H. V. Rutherford of counsel [James Dunne, attorney], for the appellant.
    
      Barclay E. V. McCarty, for the respondent.
   Clarke, J.:

This action was commenced on March 17, 1892, to enforce the statutory liability of Granville P. Hawes and other defendants as directors of the American Loan and Trust Company under the charter of that company. Section 11 of that charter (Laws of 1872, chap. 868, as amd. by Laws of 1874, chap. 486 ; Laws of 1880, chap. 489 ; Laws of 1882, chap. 391, and Laws of 1884, cliap. 260), provided among other things: “ Every director shall be personally liable for debts incurred by the corporation during his administration to an amount not exceeding five thousand dollars.” The action was brought by plaintiff as a creditor of the company, as well in his own behalf as in behalf of all other creditors of said company similarly situated who should come in and contribute to the expenses of the action.

After being duly served with the summons and complaint, Gran-ville P. Hawes died on December 29,1893, and the action was duly continued against Euphemia A. Hawes, as.his executrix. She duly answered. The action was tried in February, 1896, and the interlocutory judgment was entered on January 13,1899. This judgment provided that the defendants .therein specified, including Eupheinia A. Hawes, as executrix, should each pay to the chamberlain of the city of Hew York $5,000, or so much thereof as might be necessary .to pay the sum adjudged to be due to the plaintiff, and the sums which might thereafter be adjudged to be due upon the claims of the other creditors of the American L'oan and Trust Company, who should coiné in and make, themselves parties to the action, and prove and establish such claims under the judgment as debts. The judgment appointed a referee to take and report the proof of all such claims as might be proved against.said company, and to carry out the provision's of said interlocutory judgment, and provided that the final judgment to be entered in said action'be docketed as a several money judgment in favor of the chamberlain of the city of Hew York in his name of office against said defendants, and that, “upon the coming in of the referee’s report, after hearing the creditors as above provided, the plaintiff’s'attorney prepare a final judgment herein in accordance with the directions contained herein and' with said, report, and that said final judgment be settled by the court on notice to the attorneys for the defendants.”

From said interlocutory judgment certain of the defendants appealed to this court, where the judgment was reversed (Bauer v. Parker, 82 App. Div. 289) and a new trial ordered, the conclusion of this court being stated as - follows: “ Although the action was properly brought, the necessary parties were not before the court for a complete determination of all the questions involved, and for that reason the judgment was erroneous.”

The respondent, although ,she duly, filed her exceptions-to the interlo'cutory judgment,, did not appeal therefrom-. ■ Ho new trial, as directed by this court, has been had. After the entry of the interlocutory judgment the referee therein appointed proceeded to take the proofs of such creditors as filed their claims before him and filed his report on April 3, 1900.' Said report inter alia provided as follows:" “ And I do further report that it is necessary, under the •provisions of-said interlocutory judgment, to assess -against the séveral defendants thereby o.rdered and ad judged to make payments into court iñ. order to -pay the costs and claims of the plaintiff hereby adjudged to be paid, and to pay the claims of the other creditors who have proved and established their claims before me as such referee, the following sums of money, inclusive of interest from the 16th day of March, 1892, to the date of this report,” and among other defendants is thq respondent Euphemia A. Hawes,.$5,000 ; interest, $2,412.45 ; a total of $7,412.45, “and that said defendants severally pay into this court to the chamberlain of the city of Hew York the several sums of money set opposite their names respectively as aforesaid.” As pointed out supra, the interlocutory judgment, under which said referee was appointed and by virtue of the provisions of which he acted and filed his report, was reversed by this court after the filing of said report and in April, 1903. Plaintiff, proceeding upon the theory that inasmuch as Mrs. Hawes had not appealed from the interlocutory judgment, and that, therefore, so far as she was concerned it stood unreversed and in full force and effect, in June, 1906, presented to the learned justice who tried the cause a final judgment for settlement as against Mrs. Hawes "solely for the sum of $7,412.45. The said justice declined to settle said proposed final judgment, and from the order so made the plaintiff appeals.

This is an action in equity, the purpose of which is to procure from all of the directors the amount of their statutory liability or so much thereof as may be necessary to satisfy the claims of all the creditors. (Bauer v. Parker, 82 App. Div. 289.)

The action has not been severed as to this respondent, and indeed it would seem as if in such an action as the one at bar no severance could be had. This is certainly true as to the conditions which existed at the time of the entry of the interlocutory judgment, for one of the grounds for the reversal of that judgment by this court was, that as the plaintiff had released, for a money consideration, one of the directors who was a party to the action and had been served, and had discontinued the action against him, he had released from the action a necessary party for the complete determination of the questions involved, and that after the action had been discontinued as to said director it must be treated as if he had never been made a party defendant. The court said : “ It would seem to follow, therefore, that the act of-the plaintiff in discontinuing the action against one director created a defect of parties defendant, which, objection being properly taken, is fatal to the judgment.” So that this position is presented : An action in equity in which all the directors must be made parties defendant. An interlocutory decree. An appeal therefrom resulting in a judgment reversing said decree and directing a new trial. No new trial had. Plaintiff attempting to enter a final judgment against one of the directors^ all of whom are required to be parties to the suit, upon an interlocutory judgment which has been reversed, but from which judgment the director proceeded against did not appeal. But unless an action is severed there can be but one final judgment.

Section 1205 of the Code of Civil Procedure provides that: “ Where the action is against two or more defendants and a several judgment is proper, the court may, in its discretion, fender judgment or require the plaintiff to take judgment against one or more of the defendants and direct that the action be severed and proceed against the others as"the only defendants therein.” At the time of the entry of the interlocutory judgment a several judgment was not proper, and a; several judgment was not entered.. The final judgment following and being based upon the interlocutory judgment cannot, under the circumstances here disclosed, be now.entered as a several judgment.. Section 1220 provides that: Where an issue of law and an issue of fact arise, with respect to different causes of action, set forth in the complaint, and final judgment can be taken, with respect to one or more of the causes of action, without' prejudice to either party in maintaining the action, or a defence or counterclaim, with respect to the other causes of action, or in the recovery of final judgment upon the whole issue, the court may, in its discretion, and at any stage of the action, direct that the action be divided into two or. more actions, as the case requires.” This section does not apply since separate issues of" law and fact are not presented nor different causes of action.

The appellant contends that the reversal of the interlocutory judgment upon the appeal of certain other defendants did not affect the binding force of that judgment against the defendant Euphemia A. Hawes as to whom it remains in full force and effect, and in support of that contention cites Newburgh Savings Bank v. Town of Woodbury (64 App. Div. 305). In that case the plaintiff bank had advanced to the town of Woodbury, through the supervisor, $4,000, taking four of the bonds of the town which had been issued under the provisions of chapter 664 of the Laws of 1892," authorizing the reimbursement of drafted men within the town of Woodbury. The town, through its supervisor, paid the $4,000 received on such bonds to the county treasurer and simultaneously through its collector a farther sum of $1,346 received by taxation for the same purpose. These two sums, aggregating" $5,346, were deposited in the county treasurer’s “ general account ” and transferred to tlie'“ drafted men’s account.” The defendants Earl, Owens and Stokem presented vouchers for payment of the commutation moneys under the draft of 1863, and these were duly paid by the county treasurer under the impression that the defendants were entitled to the money under the laws of this State. Subsequently the Court of Appeals in Bush v. Board of Supervisors (159 N. Y. 212) held chapter 664 of the Laws of 1892 unconstitutional, and the plaintiff bank brought the action claiming the right to recover.the money advanced by it, whether in the hands of the . county treasurer or of the individual defendants who had received the said commutation money. The decree provided that the county treasurer repay the money he held, $1,782, and that the defendants Owens, Earl and Stokem each repay to plaintiff $767.25, and from the judgment entered the defendants Earl and Owens appealed. The county treasurer, who was. merely the custodian of the fund in his hands, claimed no interest in the money and asked that he be protected in making disposition of the same under the judgment, and there was no appeal from the decree or the judgment, in so far as it directed the repayment of the funds in his hands to the plaintiff.

It will be seen from the statement of facts that there was no community of interest as between the county treasurer, who still had in his hands moneys advanced by the bank, for the purpose of paying the commutation to drafted men, and the drafted men to whom previous sums had already been paid. The county treasurer asserted no claim to the money, and after the decision of the Court of Appeals no other drafted man would have any claim on him for a payment of any of the money in his hands, and, therefore,-the ease came directly under section 1205 of the Code of Civil Procedure, cited supra, and the court was entirely right in saying, under the circumstances disclosed, that the court “having directed judgment against the several defendapts in the amount found to be due from them that judgment must stand as to all parties who have not appealed.”

The citation from Freeman on Judgments (4th ed. § 481), found in the opinion in the last case cited and relied upon by the appellant here, is an authority against him, for it says: “ Where a judgment is against two or more persons, one only of whom appeals, its reversal, if the judgment was binding upon the defendants jointly or if all must co-operate in complying with the judgment, affects the parties who did not appeal to the same extent as those who did.” '

The very purpose of this equitable action is to determine in one suit the claims of all the creditors as against the statutory liabilities of all the directors, and the accounting ordered by the interlocutory judgment under which the rights and liabilities were to be arrived at. required the bringing in of the claims of all the creditors oh the one side-and the ascertainment of the liabilities of all the directors on the other side, and,, therefore, as “ all must co-operate in complying with the judgment ” the reversal “ affects the parties who did not appeal to the same extent as those who "did.”"

It seems to me clear-that the interlocutory .judgment cannot be availed of as against this defendant, and that in view of the decision on the former appeal there can be no severance in such an action.- „ The appellant further claims that the conditions disclosed by the accounting make it evident that the reason for the .decision of this court on the former appeal is of no force and effect, because it is now made to appear that the proved claims of. creditors so far exceed the sum of the liabilities of all-the directors, including those not made "parties, as "well as those still in the case, that the full amount of the statutory liability can be required to be paid by each of the directors sued.

■' - The answer to that claim is that whether or not the entry of the final judgment as proposedds proper liiust depend upon the facts as they existed at the time.of the entry of the interlocutory judgment. Upon those facts this court held that the interlocutory judgment was erroneous and must be reversed. There is nothing . which has occurred since that time which, upon the record, can be considered upon the question as to whether or not that reversal was proper, because, although prior to the reversal, the referee, appointed under the interlocutory judgment, had proceeded to take evidence and make his report, those proceedings must fall because solely based upon a judgment which has been reversed.

Even if a final judgment as proposed could now be entered, the respondent could appeal therefrom and upon said appeal review the interlocutory judgment under section 1316 of the Code of Civil Procedure which provides that the right to review an interlocutory judgment * * * as prescribed in this section is not affected by the expiration of the time within which a separate appeal therefrom' might have been taken.”

Upon said review the interlocutory judgment would have to stand or fall upon the same record as was presented to this court on the former appeal and would, therefore, have to be reversed as to the respondent, as it already has been as to the directors who took the former appeal, and being reversed as to her, of course the final judgment based thereon would also fall. But we do not place our decision upon this ground, but rather upon the ground^ that there has been no severance.

This court ordered a new trial upon its former reversal of the interlocutory judgment, and until such new trial shall have been had there can be no final judgment entered.

Therefore, the order appealed from should be affirmed, with ten dollars costs and disbursements to the respondent.

Ingraham, McLaughlin, Houghton and Scott, JJ., concurred.

Order affirmed, with ten dollars costs and disbursements. Order filed. 
      
       Section 11 has not been amended since it was enacted.— [Rep.