Case ID: abbn-cas_9/html/0289-01.html
Source: Caselaw Access Project
Author: {"author": "Van Vorst, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

ANDERSON v. HADDON.
    
      N. Y. Supreme Court ; First Department,
    
    
      April, 1881.
    Liability of Stockholders in Foreign Corporations.—Ascertaining Amount of Liability by Foreign Court.—Effect of Foreign Decree on those not having Notice.—Power of Foreign Liquida- • tors to Sue.
    Under a foreign act of incorporation, which provided that individual liability of the incorporators should be determined by liquidators to be appointed by the company in case of winding up, and enforced by a specified foreign tribunal, an action will lie in the courts of this State by such liquidators, upon the order or decree of the foreign tribunal, as upon a judgment.
    The fact that the amount of the liability can only be ascertained by a particular foreign court, is no objection to an action here to enforce such liability after its amount has been so ascertained.
    When a foreign act of incorporation provides a special method of determining the liabil'tv of its stockholders, they, by becoming such, assent to the provision, and are personally bound by the decree made pursuant thereto, although they have become non-residents, and have had no nonce and no opportunity to be heard; and1 ' the liability -may be personally enforced against them in another country.
    Liquidators of a foreign corporation appointed pursuant to the act incorporating it, and whose attitude is sanctioned by a formal resolution of the stockholders, have power to sue a stockholder individually liable, in a foreign jurisdiction, as their authority is not solely derived from the foreign court.
    . Demurrer to answer.
    . •" William ' Anderson, George A. Jamieson, John Cameron and James -E. Haldane, as liquidators of the City of' Glasgow Bank, sued John Haddon, to compel him to contribute as a stockholder toward the liabilities of the bank.
    The following facts appeared from the complaint : The act of parliament incorporating the bank provided that its stockholders should be individually liable, and that the amount of their liability should be settled by liquidators who should certify their conclusion to the court of session in Scotland, which should enter a decree, &c.
    • The liquidators were appointed by the stockholders of the bank pursuant to a provision in the act of incorporation, authorizing it and providing for the voluntary winding-up of the company. The proceedings were, as were required, conducted under the, supervision of the court of session.
    
      The defendant in his answer interposed five defenses ; the first was a general denial; the second alleged that the liability ivas only enforceable in the court of session of Scotland, and that the remedy provided in that court was exclusive of all others, and that therefore the court in which this action was brought had no jurisdiction of the subject matter. The third defense stated that the defendant was a resident of New York, and that the plaintiffs were appointed by a foreign tribunal and' engaged in administering a foreign bankrupt law. The fourth defense was that the foreign decree was made wholly without notice to defendant. The fifth defense, which also was pleaded as a counter-claim, was that plaintiffs had in their hands more than sufficient assets to satisfy the liabilities of the bank.
    The plaintiff demurred to all the defenses except the first.
    
    
      Thomas G. Shearman (Shearman & Sterling), for plaintiffs and demurrer.
    The averments of the answer are conclusions of law, and therefore nullities (Mc-Kyring v. Bull, 16 N. Y. 297; Buffalo v. Holloway, 7 Id. 493; Merritt y. Millard, 5 Bosw. 645; People v. McCumber, 15 How. Pr. 186 ; affirmed 18 N. Y. 315; Caryl v. Williams, 7 Lans. 416). Plaintiffs have power to sue here (Petersen v. Chemical Bank, 32 N. Y. 21, 43 ; Hoyt v. Thompson, 5 Id. 320 ; S. C. again, 19 Id. 207, 226; Runk v. St. John, 29 Barb. 585 ; Barclay v. Quicksilver Mining Co., 6 Lans. 25 ; N. J. Lombard Bank v. Thorp, 6 Cow. 46 ; Bidlack v. Mason, 11 C. E. Green, 230 ; Dayton v. Borst, 7 Bosw. 115). A valid agreement that a certain court should be deemed to have jurisdiction, without service of process, is sufficient to give the court such jurisdiction, if it is authorized by the law to take it upon the strength of such an agreement. The defense of want of notice is bad, because it does not negative every possible method under which the foreign court might have acquired jurisdiction (Cassidy v. Leitch, 2 Abb. New Cas. 315; Cowan v. Braidwood, 1 M. & G. 882; Reynolds v. Fenton, 3 C. B. 187 ; Maubourquet v. Wyse, Irish Rep. 1 C. L. 471). The defense does not show that defendant was not a citizen of Scotland and that the Scotch law requires'further notice than was given (Douglas v. Forrest, 4 Bing. 686; Hay v. Fisher, 2 M. & W. 722; Becquet v. McCarthy, 2 B. & Adol. 951). The defendant, having voluntarily become a member of a Scotch corporation, is bound by the Scotch law governing that corporation, and is personally bound by any decree made under that law and by it declared" to be personally binding upon shareholders (Copin v. Adamson, L. R. 9 Ex. 345 ; affirmed, L. R. 1 .Ex. Div. 17; Vallee v. Dumergue, 4 Exch. 290 ; Bank of Australasia v. Harding, 9 C.B. 661; Bank of Australasia v. Nias, 16 Q.B. 717). Equality is equity ; and the defendant cannot resist the call upon him, by showing that other shareholders, no more bound to contribute than himself, have paid in enough to satisfy all debts. The liquidators have absolute power to compel payment of each stockholder’s whole liability, without regard to the actual needs of the insolvent bank (Kennedy v. Gibson, 8 Wall. 498 ; Casey v. Galli, 94 U. S. 673 ; National Bank v. Case, 99 Id. 628).
    
      Edward Patterson, for defendant.
    The liability did not exist at common law (Gray v. Coffin, 63 Mass. 199 ; Erickson v. Nesmith, 86 Id. 235 ; Patterson v. Baker, 50 Barb. 432; Woodruff v. Chittenden, 4 Bos. 417); and defendant is therefore only liable in the manner prescribed by the statute and in the particular tribunal specified by it (Lowrey v. Inman, 2 Sweeny, 128 ; affirmed, 46 N. Y. 119 ; Jessup v. Carnegie, 80 N. Y. 441; Smith v. Lockwood, 13 Barb. 209 ; Thurston v. Prentice, 1 Mann. [Mich.] 193 ; Bassett v. Carleton, 32 Me. 553 ; Benwick v. Morris, 7 Hill, 575; Andover Turnpike Co. v. Gould, 6 Mass. 40 ; Franklin Glass Co. v. White, 14 Id. 286; Millar v. Taylor, 4 Burr. 2322 ; Dudley v. Mayhew, 3 N. Y. 15). The allegation that the foreign statute is a bankrupt law is one of fact and is admitted by the demurrer. Foreign laws are facts to be alleged and proved as such (Monroe v. Douglas, 5 N. Y. 447). Foreign bankruptcy trustees cannot sue a resident of this State in the courts of this State (Mosselman v. Caen, 1 Hun, 647). The foreign decree cannot have the force of a final j udgment, as defendant had no notice and no opportunity to be heard (Starbuck v. Murray, 5 Wend. 148; Rockwell v. Nearing, 35 N. Y. 314; Borden v. Fitch, 15 Johns. 121 ; Shepard v. Wright, 59 How. Pr. 512). The statute should be strictly construed (Souter v. Sea Witch, 1 Cal. 162; Smith v. Moffatt, 1 Barb. 65; Millered v. Lake Ontario, &c. R. R. Co., 9 How. Pr. 238 ; Ayers v. Knox, 7 Mass. 306). The counter-claim was a proper one (Code Civ. Pro. §§ 501, 506, subd. 4).
    
      
       The allegations of the complaint were as follows:
      I. That the City of Glasgow Bank is, ancl at all the times hereinafter mentioned was, a. corporation created, organized and registered under and by virtue of a statute of the kingdom of Great Britain and Ireland, entitled “An act for the incorporation, regulation and winding up of trading companies and other associations,” enacted by the Queen and Parliament of the said kingdom on the 7th day of August, 1862, and which provides that the said statute might be cited for all purposes as “ The Companies Act of 1862,” which act was further. amended by an act entitled-“An act to amend the Companies Act of 1862," passed by the said Queen and Parliament on the 20th day of August, 1867, which act provided that it might be cited for all purposes as “The Companies Act, 1867;” and that the principal place of business of the said bank was in Glasgow, Scotland.
      II. That the act under which the said bank was incorporated provided a method of incorporation with unlimited liability of stockholders for the debts of the corporation, which method was adopted in the incorporation of the said bank; and it was, in pursuance of the said act, duly incorporated and registered on November 29, 1862, in such manner as to provide that every stockholder should be under an unlimited liability for all the debts and obligations of the said bank.
      III. That ever since February 8, 1869, the defendant has been an owner and holder of stock in the said corporation to the amount of one thousand pounds sterling, par value.
      IV. That by section 129 of the said “Companies Act, 1862,” it was enacted that a company registered under that act may be wound up voluntarily, whenever the company has passed an extraordinary resolution to the effect that it has been proved to their satisfaction that the company cannot, by reason of its liabilities, continue its business, and that it is advisable to wind up the same; and it was farther enacted by sections 51 and 129 of said act, that any resolution shall be deemed extraordinary which is passed by a majority of not less than throe-fourths of such members of the company for the time being entitled, according to the regulations of the company, to vote, as may be present in person or by proxy, at any general meeting of which notice, specifying the intention to propose such resolution has been given.
      V. That by section 133 of the said act, it was provided, among other things, that upon the voluntary winding up of a company^ liquidators shall be appointed for the purpose of winding up the affairs of the company and distributing the property; that the company in general meeting shall appoint such person or persons as it thinks fit to be liquidator; that, when several liquidators are appointed, every power given to them by the said act may be exercised by such one or more of them as may be determined at the time of their appointment, or in default of such determination, by any number not less than two; that the liquidators so appointed may exercise the powers given by the said act to the court, of settling the list of contributories of the company, and any list so settled shall be prima facie evidence of the liability of the persons named therein to be contributories, and that the liquidators may at any time call on all or any of the contributories, to the extent of their liability, to pay all or any sums they deem necessary to satisfy the debts and liabilities of the company, and the costs, charges and expenses of winding it up, and for the adjustment of the rights of contributories amongst themselves, and may, in making a call, take into consideration the probability that some of the contributories, upon whom the same is made, may partly or wholly fail to pay their respective portions of the same,
      VI. That an extraordinary general meeting of the members of the said corporation was called, by notice duly given in the manner prescribed by the regulations of the said corporation, such notice specifying the intention to propose the resolutions hereinafter set forth, and was held in the City Hall in Glasgow, on October 22, 1878.; and that at the said meeting the following extraordinary resolutions were passed by a majority of more than three-fourths of such members of the said corporation for the time being entitled, according to the regulations of the said corporation, to vote, as were present in person - or by proxy (the regulations of said corporation allowing of proxies), to wit: “Resolved (1) That it has been proved to the satisfaction of this meeting that the City of Glasgow Bank cannot, by reason of its liabilities, continue its business, and that it is advisable to wind up the same. (2) That the City of Glasgow Bank be wound up voluntarily. ■
      VTL That at the same meeting it was unanimously resolved, by all the members of the said corporation then present, that the meeting proceed to appoint liquidators for the purpose of winding up the affairs of and distributing the property of the company, and that each of them so appointed might separately exercise every power which by the Companies Act 18G2, and acts amending and extending the same, is conferred on liquidators; and the said corporation, in the same general meeting, by the unanimous vote of all members of the said corporation present in person or by proxy, appointed the plaintiffs liquidators thereof, with the powers and under the conditions aforesaid.
      VIII. That said corporation was registered in Scotland, on November 29, 1362, in pursuance of the said statute; and that, by sections 81 and 117 of the said act of 18G2, it was provided that when a resolution has been passed by a company registered in Scotland to wind up voluntarily, the court of session may make an order directing that the voluntary winding up should continue, but subject to sucli supervision of the court, and with such liberty for creditors, contributories or others to apply to the court, and generally upon such terms and subject to such conditions, as the court thinks just.
      IX. That by an order of the court of session of Scotland, duly made on November 27, 1878, it was directed and ordained that the voluntary winding up of the said corporation, resolved on by the members thereof as aforesaid, be continued, but subject to the supervision of the court of session.
      X. That by section 146 of the said Companies Acts, it is provided that, where a company is in course of being wound up voluntarily, and proceedings are taken for the purpose of having the same wound up by the court, the court may, if it thinks fit, notwithstanding that it makes an order directing the company to be wound up by the court, provide in such order, or in any other order, for the adoption of all or any of the proceedings taken in the course of the voluntary winding up.
      XI. That on November 7, 1878, the plaintiffs, as liquidators aforesaid, settled the list of contributories to the liquidation of the said bank, in accordance with the provisions of the said Companies Act, 1862, and settled, among other things, the name of the defendant John Haddon upon the said list of contributories, as owner of stock to the amount of £1,000 sterling, and a contributor accordingly.
      XII. That by an order of the court of session in Scotland, duly made on December 21, 1878, the court approved of the proceedings in the voluntary winding up before the said supervision order pronounced on November 27, 1878.
      XIII. That by section 75 of the said Companies Act, 1862, it is provided that the liability of any person to contribute to the assets of a company under that act, in the event of the same being wound up, shall be deemed to create a debt accruing due from such person at the time when his liability commenced, but payable at the time or respective times when calls are made, as mentioned in said act, for enforcing such liability.
      XIV. That on November 13, 1878, the plaintiffs, as liquidators aforesaid, made their first call of £500 sterling for every £100 sterling of stock, upon all the contributories aforesaid, payable in two equal installments, on December 23, 1878, and February 24, 1879, respectively, and on Aprils, 1879, the plaintiSs, as such liquidators, made a second call on the said contributories of £2,250 sterling for every £100 of stock, payable on April 22, 1879.
      XV. That by section 121 of the said Companies Act, 1862, it is provided that where an order, interlocutor or decree has been made in Scotland for winding up a company by the court, it shall be competent to the said court of session in Scotland during session, and to the lord ordinary on the bills during vacation, on production by the liquidators of a list, certified by them, of' the names of the contributories liable in payment of any calls which they may wish to enforce, and of the amount due by each contributory respectively, and of the date when the same became due, to pronounce forthwith a decree against such contributories for payment of the sums so certified to be due by each of them respectively, with interest from the said date till payment, at the rate of five pounds per centum per annum, in the same way and to the same effect as if they'had severally consented to registration for execution, on a charge of six days, of a legal obligation to pay such calls and interest; and such decree may be extracted immediately, and no suspension thereof shall be competent, except on caution or consignation, unless with special leave of the court or lord ordinary. •
      
      XVI. That on or about the fourth day of September, 1879, the said court of session, in Scotland, being then in vacation, the said liquidators produced to the said Lord Ordinary on the bills, a list certified by them of the names of contributories liable in payment of calls as aforesaid, which they wished to enforce, and of the amount due by each contributory respectively, and of the date when the same became due: which list contained the name of the defendant, John Haddon, as one of the contributories liable as aforesaid, stating the amount due from him as £22,500 sterling due on the twenty-second day of April, 1879, and thereupon the said lord ordinary forthwith duly pronounced, gave and made a decree against the defendant for payment to the plaintiffs of the said sum of £22,500 sterling, with interest thereon at tire rate of five per centum per annum from April 22, Í879, and decreed that execution should issue against the said defendant accordingly.
      XVII. That payment of the said moneys has been duly demanded by the plaintiffs from the defendant; but no part thereof has been paid except the sum of £568 9s. Id.', leaving a balance remaining unpaid of £31,931 11 d.
      
      XVIII. That the value of the said sum of £31,931 lid., at all the times hereinbefore mentioned, and at the present time, as well as at the commencement of this action, is and was §106,584.88 in gold coin of the United States.
      Wherefore the nlaintiffs demand judgment against the defendant for the sum of §100,584.88, witn interest at five per centum per annum, from the 33d day of April, 1879.
      Sheabman & Steeling,
      Plaintiffs’ Attorneys.
    
    
      
      That demurrer to answer raises the question of the sufficiency of the complaint, see Gleason v. Youmans, 9 Abb. N. C. 107.
    
   Van Vorst, J.

The complaint distinctly sets forth that the proper court in'Scotland has issued its process, awarded its decree and adjudged that the defendant pay the amount demanded by the complaint, and further shows that this was done on September 4, 1879.

That the court of session in Scotland had jurisdiction to do this, the answer impliedly admits. In fact, the answer avers that it had exclusive jurisdiction to make a decree binding upon the defendant which cannot be enforced elsewhere than in Scotland Because the defendant has left Scotland and taken up his residence in this country, of itself affords no valid reason why he may not be prosecuted here upon the judgment if this court has jurisdiction of the subject matter. But on the other hand, because the defendant has placed himself beyond the power of the court of session of Scotland to act upon him personally, through his change of residence, a reason exists why he should be sued here if there be no valid objection to the jurisdiction of this court over the subject matter. It is urged by the learned counsel for the defendant that where a right is created and a liability to respond exists “ solely by ■ force of some statute, then the remedy for the enforcement of such right given by statute, if any, is exclusive of all others, and that only can be adopted and prosecuted by the claimant.” And, further, “that where the right claimed is the creature solely of a special statute, it will not be enforced in courts or tribunals beyond or outside of the boundaries of the State by force of whose legislation the right is created or the liability incurred.” In support of this proposition several cases are cited, among which are Lowrey v. Inman (2 Sweeny, 128 ; S. C., 46 N. Y. 129); Dudley v. Mayhew, (3 Comst. 15).

In the case we are now considering, by the terms of the statute under which the City of Glasgow Bank was incorporated, there was imposed upon the stockholders unlimited liability for the debts of the corporation. It was a distinctive feature in Lowrey v. Inman (supra) that there was no personal liability resting' upon stockholders ; and that whatever liability they had incurred by becoming stockholders, was to be enforced only against property upon a judgment to be recovered against the corporation, and that the remedy could not be enforced elsewhere than in the State of Georgia.

It was conceded that if the act of incorporation imposed a personal liability it could be enforced elsewhere.

It is quite true that the particular manner of ascertaining the amount to be contributed by each stockholder can only be effectuated through the court of session of Scotland. But when the liquidators had ascertained and reported the same to the court, it might make a judgment or decree against the stockholders or contributors for its payment, which judgment could be enforced by execution.

That the decree of the court of session possesses all the attributes of a judgment, I have no doubt. And a judgment is a debt of record.” In one view it is a new debt, and in another it is the highest expression and evidence of a previous existing obligation or duty (Lewis v. Armstrong, 8 Abb. New Cas. 386, 389, and cases there cited). And as a judgment it may be the foundation of a suit in the courts of other States.

It appears to me that this conclusion is adverse to the defendant’s contention that this court has no jurisdiction of the subject matter of the action. In this ccnnection.it is proper to notice the defense, in which it is claimed that the decree of the court of session of Scotland has no extra-territorial force from the non-service of process upon the defendant, and the absence of of opportunity to be heard.

A kindred objection was considered in a case lately before me in this court, and to which I am referred by the learned counsel for the defendant (Shepard v. Wright, 59 How. Pr. 512).

Upon authority, it was there decided that in order that the court should have jurisdiction to render a judgment which would impose personal liability, to be recognized beyond the State in which the action origin- “ ated, it was necessary that the defendant be served with the process of the court, or voluntarily appear in the action.

It does not appear that the defendant was served with any process in the proceeding in the court of session of Scotland, or that he personally appeared therein. But the defendant, having voluntarily become a member of a foreign corpozutiozz, is bound by the law which created and governs the corporation. The act of incorporation provides a znethod for determinizzg and enforcing the liability of stockholders therein, in a special manner; and by becoming a stockholder, he assented to the proceedings to be taken in pursuance of its provisions for fixing such liability.

Under such conditions the defendant is personally bound by any decree made under that law, which, by it, is declared to be personally binding upon shareholders (Copin v. Adamson, L. R. 9 Ex. 345 ; S. C., 10 Eng. R. 492 ; affirmed, L. R. 1 Exch. Div. 17).

The defendant has voluntarily subjected himself to. the law under which the corporation was organized. The objection that the plaintiffs, as liquidators, taking their appointment in a foreign- country, and under a foreign law, have no status to maintain this action here,

I do not regard as well taken.

The foreign law, in substance, gives the liquidators power to collect the assets and enforce the calls, that would enable them to prosecute the decree which fixed the amount to be paid by each stockholder. Unless they could do this their appointment as liquidators would be fruitless.

I do not think that any analogy drawn from the . power and rights of foreign assignees in bankruptcy, or foreign executors, is in point. The liquidators receive their power and authority not from a foreign court, but from the appointment of the stockholders of the bank, who, at a general meeting and by formal resolution, placed them in the attitude they now occupy with regard to the assets of the bank and the closing up of its affairs.

To this method of appointment and this exercise of power the defendant must also be regarded as having agreed when he became a stockholder. v

■ I have no idea that tho defendant can resist this action, which seeks to enforce a call made upon him to contribute his proportion of the deficiency, for the reason that the plaintiffs have sufficient assets arising from contributions made by other stockholders. He must pay his proper proportion, and, if there be a surplus after the debts are fully paid, he will be entitled to his proportion thereof.

I regard the grounds of demurrer as well taken, and there should be judgment for the plaintiff on the demurrer, with liberty to the defendant to amend on payment of costs.