Case ID: ny_143/html/0511-01.html
Source: Caselaw Access Project
Author: {"author": "Finch, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Frank M. Hunting, Respondent, v. Ferdinand S. M. Blun, Appellant.
    In an action under the General Manufacturing Act (§ 18, chap. 40, Laws of 1848) to enforce the liability imposed by the act upon a stockholder of an insolvent corporation, to excuse the non-performance of the condition precedent to such liability, i. e., the recovery of a judgment against the corporation and the return of an execution issued thereon unsatisfied, plaintiff produced a record of a judgment in an action in the Supreme Court, brought by a judgment creditor of the corporation to sequestrate its property and for the appointment of a receiver. The complaint in that action alleged the recovery of a judgment against the corporation in the Auburn City Court, and the issue and return of an execution thereon unsatisfied. The judgment granted the relief sought, and forbade creditors from suing the company. The corporation was not located in said city. Defendant claimed that the judgment was void for want of jurisdiction, and so the injunction was a nullity and might have been disregarded. Held, that, conceding the invalidity of the judgment, plaintiff was not bound to disregard it, and that the nonperformance of the condition was excused; but, held, that the complaint in the former action presented a case over which the court had jurisdiction; that the question as'to the validity of the City Court judgment was one of law for it to decide, and, although it erred in adjudging it to be valid, this was a judicial error, and the judgment of sequestration could not be attacked collaterally, but the mistake, if made, was available only on appeal or some direct review of the decision.
    Reported below, 69 Hun, 562.
    (Argued October 22, 1894;
    decided November 27, 1894.)
    Appeal from, order of the General Term of the Supreme Court in the fifth judicial department, entered upon an order made June 23, 1893, which denied a motion by defendant for a new trial and directed judgment in favor of plaintiff upon the verdict directed by the court.
    The nature of the action and the facts, so far as material, are stated in the opinion.
    
      B. T. Wright for appellant.
    The court erred in denying defendant’s motion for a non-suit. (Laws of 1848, chap. 40, § 24; Dean v. Mace, 19 Hun, 391; Farnsworth v. Wood, 91 N. Y. 308; Crippin v. Hudson, 13 id. 161; R. M. N. Bank, 
      v. Bliss, 89 id. 338; Code Civ. Pro. § 1784; Slee v. Bloom, 5 Johns. Ch. 366; Decker, v. Gardner, 124 N. Y. 334; Gilman v. G. P. S. Co., 61 Barb. 1; Galway v. U. S. S. S. R. Co., 36 id. 256; Ervin v. 0. R. R. N. Co., 62 How. Pr. 490, 491; People v. A. & S. R. R. Co., 55 Barb. 344; Waterbury v. M. U. E. Co., 50 Barb. 157.) The Bheubottom & Teall Manufacturing Company was not a resident of the city of Auburn when the City Court action was commenced. Nor does the fact that its president was within the city of Auburn when the summons was served upon him, aid the plaintiff any. (Hubbard, v. N. P. Ins. Co., 11 How. Pr. 149, 151; Conroe v. N. P. Ins. Co., 10 id. 403, 404; O. S. Factory v. Dalloway, 21 N. Y. 449, 455 ; W. T. Co. v. Scheu, 19 id. 408; U. S. Co. v. City of Buffalo, 82 id. 351, 355, 356 ; Phillips v. B. L. Co., 21 Atl. Rep. 640; Carpenter v. W. A. B. Co., 32 Fed. Rep. 434, 435 ; Reifsnider v. A. I. P. Co., 45 id. 433; Eliot v. Piersol, 1 Pet. 328; Turner v. Roby, 3 N. Y. 193.) If plaintiff is permitted to introduce a judgment in evidence, as an excuse for not performing a duty required by statute, it is just to allow defendant to invalidate the excuse by showing the judgment to be void, and a general denial is sufficient to permit this. (O’Brien v. McCann, 58 N. Y. 373; Milbank v. Jones, 141 id. 340 ; Greenfield v. M. M. L. Ins. Co., 47 id. 430 ; Wheeler v. Billings, 38 id. 263-265.) A mere inspection of the judgment entered in the City Court of the city of Auburn, in the case of N. Bank v. R. & T. M. Co., which is the alleged basis of the sequestration action, shows that that court had no jurisdiction of the Bheubottom & Teall Manufacturing Company, for it shows on its face that that company was a duly organized corporation located and doing business at the village of Weedsport, N. Y. (Gilbert v. York, 111 N. Y. 544; Fries v. Ford, 6 id. 176.) The judgment of sequestration and the orders therein contained restraining creditors are void, and do not constitute an excuse for the plaintiff in this action for not performing the-statutory condition precedent of obtaining a judgment against the corporation before bringing his action against a stockholder. (Yates v. Lansing, 9 Johns. 407; Turner v. Roby, 3 N.Y. 193,194,195 ; Cleveland v. Rogers, 6 Wend. 438,439; People v. Koeber, 7 Hill, 39-41; Sackett v. Andross, 5 id. 327-330; Dakin v. Hudson, 6 Cow. 221; Cornell v. Barnes, 7 Hill, 35; Barnes v. Harris, 3 Barb. 603; Bridge v. Ford, 4 Mass. 641; Wiley v. Stickland, 8 Ind. 453; 2 Black on Judg. § 966; McCracken v. Flanagan, 127 N. Y. 493; Foote v. Stevens, 17 Wend. 483 ; Colwell v. G. N. Bank, 119 N. Y. 408.) Where the existence of a condition or status of the defendant is necessary to confer jurisdiction, as in this case, the recital of fact in the record showing such condition or status is only prima facie evidence of those facts, and they may be contradicted when the record is offered in evidence or relied upon for any purpose. (People ex rel. v. Warden, 100 N. Y. 20; Dobson v. Pearce, 12 id. 156 ; Harrington v. People, 6 Barb. 607; Craig v. Town of Andes, 93 N. Y. 405; Adams v. S. & W. R. R. Co., 10 id. 328; Kerr v. Kerr, 41 id. 272.) It was error to receive in evidence an order made on the 7th day of April, 1891, upon the petition of the receiver, in which it was alleged he asked permission to pay the employees’ accounts as preferred claims, and that the application was denied. (Laws of 1885, chap. 376.) Plaintiff should not succeed in this action for the reason that he has not exhausted his remedy against the corporation. (Brown v. A. B. C. F. Co., 52 Hun 151; Code Civ. Pro. § 1784; A. B. Co. v. Sylvester, 68 Hun, 401; Laws of 1885, chap. 376.)
    
      E. C. Aiken for respondent.
    A cause of action against a corporation or a stockholder in favor of a laborer is assignable. ( Wakefield v. Fargo, 90 N. Y. 123; Kincaid v. Dwinnelle, 59 id. 548; Pilcher v. Brayton, 17 Hun, 429 ; Code, §§ 1909, 1910; Bolen v. Crosby, 49 N. Y. 183; Allen v. Clark, 21 N. Y. Supp. 338.) Where a condition precedent to the maintenance of an action has become impossible, such condition precedent is no longer in force. (Kincaid v. Dwinnelle, 59 N. Y. 548; Shellington v. Howland, 53 id. 371; Hardman v. Sage, 124 id. 32.) The court properly excluded evidence tending to impeach the sequestration judgment. (Roderigas v. E. R. S. Inst., 63 N. Y. 460; Code Civ. Pro. § 405.)
   Finch, J.

The plaintiff as assignee of certain employees of an insolvent corporation sued the defendant, a stockholder, for the amount of their unpaid wages. It was necessary for the plaintiff to prove the condition precedent attached by the law to his right of action that judgment upon the demand had been rendered against the corporation, and execution thereon had been returned unsatisfied. He proved such a judgment, obtained in the Auburn City Court, but the corporation was located out of the city, and the judgment was held to be a nullity for want of jurisdiction in the local court. The plaintiff then sought to excuse the non-performance of the essential condition by showing that it became impossible' within the period prescribed. He produced the record of an action in the Supreme Court brought by a creditor of the corporation to sequestrate its property and for the appointment of a receiver. Judgment was rendered granting that relief and forbidding creditors from suing the company or interfering with its assets. This injunction made performance of the condition precedent practically impossible. Such fact excused the omission. (Hardman, v. Sage, 124 N. Y. 32.) But the defendant now attacks that judgment as also void for want of jurisdiction, and insists that plaintiff was at liberty to sue, and could have disregarded the injunction as a nullity and without being guilty of contempt of court. Even if that were true, I do not think he was bound to take the risk. In judging of his omission to act, and measuring the quality of his excuse, it does not seem to me that we should require him to go behind the explicit order of the court and determine at his peril whether he could safely defy it. The fact of its existence may reasonably justify a conclusion that a practical impossibility stood in the way of a suit by plaintiff against the corporation. But, however that may be, I think the judgment of sequestration and the injunction which accompanied it were not shown to be void by any evidence which the defendant offered. The plaintiff in that case by his complaint fairly alleged all that was needed to authorize the judgment of the court. It avers the recovery of a judgment against the corporation in the Auburn City Court, the docket of .that judgment in the Cayuga county clerk’s office, the issue of an execution and the return of the same unsatisfied. Those allegations presented a case over which the jurisdiction of the court was unquestionable. They were sufficient to invoke and require a judicial determination whether they were true or not and whether sequestration should follow. It may be that the court erred in regarding the City Court judgment as valid. That was a question of law for the court to decide, and its error, if it made one, was a judicial error to be corrected by an appeal. We held substantially that in Whittlesey v. Frantz (74 N. Y. 457). That was a case like the one before us in every respect except as to the defect which made the creditor’s judgment void and null.

The difficulty there was that by reason of a misnomer the corporation had not been sued at all, and there was no judgment against it. Our first answer to the objection went upon the concession that the error might make the judgment invalid, but we held that the judgment of sequestration could not be "collaterally attacked for error in the proofs on which it rested. So in this case the evidence may have been insufficient and the court in error, either because no defect was alleged or pointed out, or because the court thought that the presence of the president of the corporation in Auburn, where a part of the corporate property was situated, answered the requirement of the statute as to the defendants that “ they are within the city of Auburn.” (Laws of 1887, chap. 633, § 2.) However erroneous the decision might have been, the court had jurisdiction of the subject-matter presented for its consideration, and its mistake, if made, was only available on an appeal or some direct review of the decision. We think the case cited is decisive of this appeal.

The judgment should be affirmed, with costs.

All concur.

■Judgment affirmed.