Case ID: nys_21/html/0657-01.html
Source: Caselaw Access Project
Author: {"author": "MACOMBER, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

KOONS et al. v. MARTIN.
    (Supreme Court, General Term, Fifth Department.
    January 18, 1893.)
    Corporations—Liability op Stockholders inter Se. Where stockholders of a limited liability corporation, organized under Laws 1875, c. 611, pay off a judgment against the corporation and take an assignment thereof, their rights to recover against another stockholder can be asserted only through an equitable action for contribution, and an action at law in the county court to recover from such other stockholder on his capital stock cannot be maintained.
    Appeal from Monroe county court.
    Action by Jacob Koons and others against Andrew N. Martin. From •a judgment for plaintiff entered on the decision of the county judge sitting without a jury, defendant appeals. Reversed.
    
      Argued before DWIGHT, P. J., and MACOMBER and LEWIS JJ.,
    John J. Snell, for appellant.
    M. H. McMath, for respondents.
   MACOMBER, J.

On the 3d day of May, 1890, a judgment was recovered against the Webster Preserving Company, Limited, a corporation organized under the laws of the state of New York, and succeeding, by name, the Curtice Preserving Company, Limited, upon two promissory notes, bearing date the 1st day of September, 1888, one of them in the sum of $1,000, and the other in the sum of $500. Executions against the corporation having been returned unsatisfied, this action was begun against the defendant on the 9th day of April, 1891, charging him with liability to the extent of $500, being the amount of the shares of the capital stock of the corporation held by him,—being five shares, at' the par value of $100 each. The learned trial judge has found that the defendant was such stockholder, in the amount named, from the 16th day of November, 1886, to the 11th day of April, 1889, and that he was a stockholder of such corporation within two years before the beginning of this action. . The facts disclosed by the evidence clearly sustain this conclusion. The plaintiffs are assignees, by an instrument in writing, of the judgment so recovered by Fred D. Bancroft. • It appears, however, that they were, at all of the times covered by the dealings of Bancroft with the corporation, down to the beginning of this action, themselves stockholders of that corporation, and during a portion of the time officers thereof. The question is, therefore, whether they can maintain this action in the county court.

It is property assumed on both sides that the county court has not jurisdiction of an action for contribution from stockholders, under chapter 611 of the Laws of 1875, in pursuance of which this corporation was organized. For the purpose of such contribution by all of the stockholders to one or more who have compulsorily paid debts that the whole number should have paid, the stockholders must be deemed, substantially, to be copartners. Corning v. McCullough, 1 N. Y. 47; Clark v. Myers, 11 Hun, 608. The plaintiffs, therefore, were jointly indebted with the other stockholders of the concern for the whole amount of the judgment obtained by Bancroft. It matters not, for the purpose of fixing their rights,- whether they were compelled by process of law to pay the Bancroft judgment, or whether they- voluntarily paid the same. So long as they appear to be stockholders of the corporation, their rights to recover against a costockholder can be worked out only through an equitable action for contribution. But this action is purely one at law. It is to recover absolutely of the defendant, as a stockholder, the whole amount of the face of his stock, at par. Each one of the plaintiffs is liable for contribution in proportion to the stock held by him for this very claim now made by them against this defendant. The defendant had the-right to take the position at the trial, which he did, that the county court had not jurisdiction of this action, because he could not bring into the case other stockholders, equally liable with himself, and compel contribution among all of them, including the plaintiffs. Any other view would' lead to the anomalous conclusion of permitting a recovery at law in this action of the whole sum of $500, with liability on the part of the plaintiffs to this defendant to pay back the same, or a portion thereof, in a suit for contribution. For this reason, the complaint should, we think, have been dismissed at the trial.

Judgment of the county court of Monroe county, appealed from, reversed, and new trial granted, with costs to abide the event. All concur.'