Case Name: Henry H. Persons and John R. Hazel, as Receivers of the Bank of Commerce in Buffalo, Respondents, v. William H. Gardner and Others, Defendants, Impleaded with William P. Reed, Appellant; Same, Respondents, v. Elijah R. Saxton, Appellant, Impleaded with William H. Gardner and Others; Same, Respondents, v. Granger A. Hollister, Appellant, Impleaded with William H. Gardner and Others; Same, Respondents, v. Charles C. Clarke and Sherman S. Rogers, as Executors, etc., of Christina Cameron Masten, Deceased, and Joseph Griffiths Masten, Appellants, Impleaded with William H. Gardner and Others; Same, Respondents, v. James E. Ford, as Executor, etc., of Mary F. Clark, Deceased, Appellant, Impleaded with William H. Gardner and Others
Court: New York Supreme Court, Appellate Division
Jurisdiction: New York
Decision Date: 1899-07
Citations: 42 A.D. 490
Docket Number: 
Parties: Henry H. Persons and John R. Hazel, as Receivers of the Bank of Commerce in Buffalo, Respondents, v. William H. Gardner and Others, Defendants, Impleaded with William P. Reed, Appellant. Same, Respondents, v. Elijah R. Saxton, Appellant, Impleaded with William H. Gardner and Others. Same, Respondents, v. Granger A. Hollister, Appellant, Impleaded with William H. Gardner and Others. Same, Respondents, v. Charles C. Clarke and Sherman S. Rogers, as Executors, etc., of Christina Cameron Masten, Deceased, and Joseph Griffiths Masten, Appellants, Impleaded with William H. Gardner and Others. Same, Respondents, v. James E. Ford, as Executor, etc., of Mary F. Clark, Deceased, Appellant, Impleaded with William H. Gardner and Others.
Judges: 
Reporter: Appellate Division Reports
Volume: 42
Pages: 490–506

Head Matter:
Henry H. Persons and John R. Hazel, as Receivers of the Bank of Commerce in Buffalo, Respondents, v. William H. Gardner and Others, Defendants, Impleaded with William P. Reed, Appellant. Same, Respondents, v. Elijah R. Saxton, Appellant, Impleaded with William H. Gardner and Others. Same, Respondents, v. Granger A. Hollister, Appellant, Impleaded with William H. Gardner and Others. Same, Respondents, v. Charles C. Clarke and Sherman S. Rogers, as Executors, etc., of Christina Cameron Masten, Deceased, and Joseph Griffiths Masten, Appellants, Impleaded with William H. Gardner and Others. Same, Respondents, v. James E. Ford, as Executor, etc., of Mary F. Clark, Deceased, Appellant, Impleaded with William H. Gardner and Others.
Insolvent bank — suit by a receiver against its stockholders to enforce their individual liability for its debts—the statute authorizing it, although retroactive, is constitutional— it relates to the remedy only.
Chapter 441 of the Laws of 1897, which amends section 52 of the Banking Law (Laws of 1892, chap. 689), enacting that the stockholders of a banking corporation shall be liable for its debts to the extent of the par value of their stock, in addition to the amount invested in such stock, by providing that if the corporation has been dissolved, and a permanent receiver “shall have been
; or shall be appointed,” an action to enforce the liability created by that section shall be brought only in the name of the receiver (unless he shall refuse to do so, in which event it may be maintained by a creditor), is applicable to a bank which had been dissolved and of which a permanent receiver had- been appointed prior to its enactment.
Since the amendment only relates to a remedy thereby given to creditors, a construction that it is retroactive does not render it unconstitutional, either as to the creditors of the bank or its stockholders.
The presumption arising from an allegation that the defendants were stockholders-of a corporation within two years, that they were stockholders at the time of the dissolution of the corporation, considered by Laughlin, J.
Appeal by the defendants, William P. Reed, in the first above-entitled action, Elijah R. Saxton, in the second above-entitled action, Granger A. Hollister, in the third above-entitled action, Charles C. Clarke and another, as executors, etc., of Christina Cameron Hasten, deceased, and Joseph Griffiths Hasten, in the fourth above-entitled action; and James E. Ford, as executor, etc., 'of Hary F. Clark, deceased, in the fifth above-entitled action, from interlocutory judgments of the Supreme Court in favor of the plaintiffs in each of the said actions, the first, second, third and fourth of which were entered in the office of the clerk of the county of Erie on the 25th day of Harch, 1899, and the fifth of which was entered in said clerk’s office on the 11th day of Hay, 1899, upon decisions of the court, rendered after trials at the Erie Special Term, overruling the separate demurrers of the above-named defendants to the plaintiffs* amended complaint.
The demurrers present two principal objections to the complaint, (1) that the plaintiffs have not capacity to sue, and (2) that the complaint does not contain facts sufficient to constitute a cause of action.
The amended complaint states that prior to the 3d of December, 1896, the Bank of Commerce in Buffalo was a banking corporation .organized under the laws of the State of New York, with a capital stock of $200,000 divided into 2,000 shares of the par value of $Í00 each share ; that the stock had been fully issued and fully paid -up-prior to December 3, 1896 ; that on the 3d of December, 1896, in an action theretofore brought in the Supreme Court, and upon the application of the Attorney-General, a judgment was rendered dissolving the corporation and the judgment roll filed in Erie county, and reference is made in the complaint to that judgment for a more full statement of its particulars. It is averred that the plaintiffs were, by the decree of dissolution of the corporation, appointed receivers of all the property, things in action and effects of the said bank, and that on the 4tli of December, 1896, the plaintiffs having given the requisite and approved bond, and fully qualified, entered upon the discharge of their duties, and that prior to the bringing of this action an order was made bythe'court, upon notice, “authorizing and directing these plaintiffs to begin and prosecute this action.”
It is alleged that at the time of the entry of the judgment dissolving the corporation, “ the contracts, debts and engagements of said bank amounted to the sum of fourteen hundred and fifty thousand dollars ($1,450,000) and upwards; that the same were payable within two years from the time they were contracted, and no part thereof became due and payable- more than two years prior to December 3,1896; that the property and assets of said corporation, the Bank of Commerce in Buffalo, are and will be-insufficient to pay the creditors thereof in full, and that after application of all the assets there will remain a considerable portion of said indebtedness unpaid and unsatisfied; that the stockholders of the Bank of Commerce in Buffalo' are individually responsible equally and ratably, and not one for another, for all contracts, debts and engagements of said corporation to the extent of the amount of their stock therein at par value • thereof, in addition to the amount invested in such shares, in pursuance of the provisions of the statutes in such case made and provided; that these plaintiffs are by law, and by the order of this court, invested with the right to enforce such liability for the ■benefit of such creditors, and to begin and maintain this action therefor ” against the present defendants, who were stockholders or the representatives of stockholders of the bank within two years prior to the beginning of the action.
Seward A. Simons and Maulisby .Kimball, for the appellant Reed.
Roland Grangle, for the appellant Saxton.
Rogers, LoeTce dh Milburn, for the appellant Hollister.
Edwcurd M. Mills, for the appellants Clarke and Rogers, as executors and trustees, and for Joseph Griffiths Hasten.
Eranlc, G. Ferguson, for the appellant Ford.
Norris Morey, for the respondents.

Opinion:
Hardin, P. J.:
Assuming that the judgment record, to which reference is made in the complaint, fully indicates that the Bank of. Commerce was. organized under the laws of the State of New York, and authorized to carry on the business of banking at the time of its dissolution, a liability existed against its stockholders " for all its debts and liabilities of every kind."
Article 8, section 7 of the State Constitution provides, viz.: " The stockholders of every corporation and joint-stock association for banking purposes shall be individually responsible to the amount of their respective share or shares of stock in any such corporation or association for all its debts and liabilities of every kind."
That section, with some difference in its language not necessary to be referred to in this case, was introduced into the Constitution of 1846.
When the constitutional provision was adopted, there was no remedy given in it for the enforcement of the liability of the stockholder, and the Legislature subsequently prescribed one. "The creditor was, therefore, necessarily left to the ordinary remedies afforded by the courts according to the laws and practice then existing." (Story v. Furman, 25 N. Y. 224.)
The Legislature, in chapter 226 of the Laws of 1849, provided for the enforcement of the liability of stockholders of banking corporations, and in that act prescribed a method to be pursued by the receiver for the enforcement of stockholders' liability.
In chapter 409 of the Laws of 1882, the Legislature provided for revising the statutes of the State relating to banks, and in section 125 of that act declared the liability of stockholders for debts contracted by the banks mentioned, and the enforcement thereof, as-provided in that section, " and in no other manner." (Laws of 1882, chap. 409, § 125.) In that act several provisions found in the act of 1849 were re-enacted. (See § 138-165.)
The Legislature in 1892 (by chap. 689) passed an act in relation to Banking corporations, and in section 52 provided as follows: "Except as prescribed in the Stock Corporation Law, the stockholders of every such corporation shall be individually responsible,, equally and ratably, and not one for another, for all contracts, debts and engagements of such corporation to the extent of the amount of their stock therein at the par value thereof, in addition to the amount invested in such shares."
That act repealed chapter 409 of the Laws of 1882, except sections 68, 69, 312 to 327, both inclusive.
By chapter 441 of the Laws of 1897, section 52 of the act of 1892 was amended so as to read as follows: " Except as prescribed in the Stock Corporation Law, the stockholders of every such corporation shall be individually responsible, equally and ratably, and not one for another, for all contracts, debts and engagements of such corpo ration, to the extent of the amount of their stock therein, at the par value thereof, in addition to the amount invested, in such shares. In case any such corporation shall have been or shall be dissolved by final order or judgment of a court having jurisdiction, and a permanent receiver or receivers of the said corporation shall have been or shall be appointed, all actions or proceedings to enforce the lia-' bility of stockholders under this" section shall be taken and prosecuted only in the name and in behalf of such receiver or receivers, unless such receiver or receivers shall refuse to take such action or proceeding upon proper request in that behalf made by any creditor, and in that event such action or proceeding may be taken by .any creditor of the corporation. The term stockholder,' when used in this chapter, shall apply not only to such persons as appear by the books of the corporation to be stockholders, but also to every owner of stock, legal or equitable, although the same .may be on such books in the name of another person, but not to a person who may hold the stock as collateral for security for the payment of a debt." Chapter 441 became a law May 17, 1897.
It is now contended in behalf óf the appellants that the amendment of 1897 does not apply to and prescribe the manner and method of the enforcement of the liability of the stockholders in the Bank of Commerce. It must be Iborne in mind that chapter 441 of the Laws of 1897 speaks from the day of its becoming a law, to wit, May 17, 1897, and the language used relates to a class of corporations to which the Bank of Commerce belonged, and relates to the •stockholders of that kind of a corporation, and then it, in terms, provides: " In case any such corporation shall have been or shall be •dissolved by final order or judgment of a court having jurisdiction, -and a permanent receiver or receivers of the said corporation shall '.have been or shall be appointed, all actions or proceedings to enforce the liability of stockholders under this section shall be taken and qarosecuted only in the name and in behalf of such receiver or receivers, unless such receiver or receivers shall refuse to- take such action or proceeding upon proper request- in that behalf made by -any creditor, and in that event such action or proceeding may be taken by any creditor of the corporation."
The Bank of Commerce had been dissolved by the judgment of court having jurisdiction, and- the plaintiffs had been appointed permanent receivers of that corporation on December 3, 1896, and the language, therefore, which was used in the statute, to wit, " shall have been or shall be appointed," appropriately relates to the plaintiffs as receivers. The statute further provides that such receiver shall have the right to bring " all actions or proceedings to enforce the liability of stockholders and it further provides that such actions or proceedings " shall be taken and prosecuted only in the name and in behalf of such receiver or receivers, unless such receiver or receivers shall refuse to take such action or proceeding upon proper request in that behalf made by any creditor, and in that event such action or proceeding may be taken by any creditor of the corporation." After the adoption of that section, as thus amended, an action was maintainable by the receivers at their election. The Legislature was careful to provide that, in case the receiver or receivers refuse to take such action, with the view to the enforcement of the liability of stockholders, upon proper request made by any creditor, an action might be taken by any creditor of the. corporation. The right of a creditor to proceed in an action to enforce a stockholder's liability is not taken away except upon condition that the receivers act. If the receivers, on request, refuse to act, then it is expressly provided that an action or proceeding may be taken by any creditor of the corporation.
Considering the state of the legislation to which reference has been made, it is quite obvious that the Legislature, by the act of 1897, intended to provide a method for enforcement of a stockholder's liability by receivers already appointed, or by receivers thereafter appointed in dissolution proceedings; and by way of greater precaution prescribed that, in the event a receiver sho.uld refuse to take such action upon proper request made by any creditor, in that event any creditor of the corporation might proceed to enforce the liability of stockholders.
It is to be borne in mind that it is a rule of statutory construction that a statute will be construed to be prospective, unless the intent of the Legislature to give it a retroactive effect is expressed in language clear and explicit so that no reasonable doubt exists in respect thereto. This rule has been laid down in numerous cases. In no sense does the provision destroy the rights of property or rights of action on the part of the creditors of a corporation. On the contrary, it tends to conserve their rights hy providing that actions may be brought by receivers ;' and, in-the event the receiver does not bring the action, the Legislature carefully provided that the creditor shall have such right. !
In Wood v. Oakley (11 Paige, 400) it was said, viz.: " It is a general rule, in the construction of statutes, that they are not to have a retroactive effect, so as to impair previously-acquired rights. Courts of justice apply new statutes only to Cases which subsequently arise, unless there is something in the nature of the new provisions adopted by the Legislature, or in the language of such statutes, which shows that they welre -intended to have a retrospective operation."
As we have already observed, thb construction which is suggested does not impair the rights of creditors. They are .carefully preserved by the power given to receivers to maintain actions against stockholders; and, in case the receivers refuse to act* the right of the creditor is preserved to act for himself, in the enforcement' of the liability of stockholders. I
The right of a creditor to maintain an action to enforce the liability created by Constitution or was considered by me in preparing by statute against a stockholder the opinion in Pfohl v. Simpson (50 How. Pr. 341; S. C. affd., 74 N. Y. 131). In that case it was maintained that an action in equity might be brought by a creditor in his own behalf, and in behalf of all others, against an insolvent corporation, and its stockholders, fhr an accounting to ascertain the debts and assets of the corporation, and to reach the claim against the stockholders arising from their personal liability under the charter. In the course of the opinion in that ease it was said : " The Constitution and the act of the Legislature having declared that the liability of the stockholders should, exist, and debts having been made by the corporation, the ' powiers incident to the jurisdiction of the court of chancery attached themselves to the new subject.' " (Citing Bangs v. Duckinfield, 18 N. Y. 596; Matter of Canal & Walker Streets, 12 id. 406.)
It was -further said in that case, viz.: " The statute must be j regarded as cumulative when it provides the same remedy which might have been attained under the general principles of equity, asserted under the general, jurisdiction of that court. In some respects the statute restricts the remedy, and in most instances it is the remedy that is affected, modified or controlled, instead of the right to a remedy, which as already shown, rests upon the principles of equity, antedating the statutes."
But it is argued that the statute, if held to be retroactive and to apply to a case like the one in hand, is unconstitutional, and it is asserted confidently by the learned counsel for the appellants that it deprives creditors of vested rights. We think otherwise. The statute only relates to a remedy. It is competent for a Legislature to give additional remedies to creditors and to prescribe that such remedies shall be pursued, and even be exclusive; that does not impair the rights of creditors. As was suggested in Story v. Furman (supra), in the absence of statutory power the creditor was left to pursue the ordinary remedies applicable to the nature of the right to be enforced.
It is said in Kent's Commentaries (Vol. 1, p. 420) that there is "a distinction in the nature of things between the obligation of a contract and the remedy to enforce that obligation, and the latter might be modified, as the wisdom of the Legislature should direct."
In Bronson v. Kinzie (1 How. [U. S.] 315), Chief Justice Taney said : " For, undoubtedly, a State may regulate at pleasure the modes of proceeding in its courts in relation to past contracts as well as future."
The doctrine of that case was referred to with approval in Story v. Furman (supra).
When the appellants became stockholders in the bank they assented to the provisions of law which authorized the Legislature to alter, amend or modify the act under which the corporation existed. (Matter of Oliver Lee & Co's Bank, 21 N. Y. 19; Schenectady & Saratoga Plank Road Co. v. Thatcher, 11 id. 114; Matter of Reciprocity Bank, 22 id. 9.)
In Crawford v. Branch Bank of Mobile (7 How. [U. S.] 279) it appeared that a note had been given to the cashier of a bank, and a law was passed in Alabama " authorizing suits to be brought on such notes in the name of the bank," and it was contended that the law impaired the obligation of the contract, especially as regards contracts made prior to the paasage. In dealing with that question the court observed : " The law is strictly remedial. It in no respect affects the obligation of the contract."
In Swan v. Mutual Reserve Fund Life Association (20 App. Div. 255) it appeared that the defendant was organized upon the co-operative or assessment plan in 1881, and in that year it issued a policy to the plaintiff which contained .certain agreements upon the part of the defendant that the plaintiff sought to have enforced in. the action. By chapter 400 of the Laws of 1890, the Legislature provided that no order, judgment or decree providing for an accounting, or enjoining, restraining or interfering with the prosecution of the business of any life or casualty insurance company, shall be made or granted otherwise than upon the application of the Attorney-General. The complaint in that action was demurred to on the ground of its insufficiency to state facts sufficient to constitute a cause of action, and, second, on account óf the want of legal capacity to sue, and when the case was in this court it was said (20 App. Div. 260): " It is the policy of the law' that neither individual membei's nor creditors at large of a corporation shall be permitted to bring actions which shall in any material sense interfere with the system of corporate management;'" and that any such suit " must be instituted and conducted in the mame of the People and by the public prosecutor, the Attorney-General of the State." It was further said in the opinion, viz.: " In response to the contention that the possible effect of such a construction of the statute would be to impair the obligation of a contract and thus violate the provision of section 10 of article 1 of the Constitution of the United States, it may be said that the whole scope and object of the statute is remedial only. That is, it furnishes a remedy and prescribes a method of procedure by which that remedy may be made applicable to every person situated as the plaintiff is. This much it was certainly within the province of the Legislature to do without violating any constitutional provision." (Citing Rexford v. Knight, 11 N. Y. 308; People v. Turner, 117 id. 227; New Orleans W. W. Co. v. L. S. R. Co., 125 U. S. 18.)
The limitation.jund-restriction of the act of 1890 were carried into tlie Insurance Law of 1892 (Chap. 690) by- section 56. The act of 1890 followed immediately upon the decision of the case of Uhlman v. N. Y. Life Ins. Co. (109 N. Y. 421), and In speaking of the act of 1890, Gray, J., in Swan v. Mutual Reserve Fund Life Association (155 N. Y. 20) says : " That the act was framed to prevent such an intolerable nuisance as an insurance company would be subjected to, if one or more of its policyholders might maintain such an action, is evident."
Later on in the opinion he says: " Nor is the act at all in violation of any constitutional right of the plaintiff, as impairing the obligation of a contract. It furnishes a remedy, as it was said in the opinion below, and prescribes a method of procedure by which that remedy may be applicable to every person situated as the plaintiff is."
The decision of the Court of Appeals was to the effect, viz.: " The plaintiff has not legal capacity to maintain this action and it must be brought, if at all, by the Attorney-General of the State of New York, pursuant to the requirements of chapter 690 of the Laws of 1892, which apply to this action and prohibit the plaintiff from maintaining it."
It is not for us to determine what were the motives of the Legislature, or the reasons which induced it to provide that actions against stockholders should be brought by receivers of corporations that had become insolvent. It is enough that we declare that the Legislature had the power, and that the act of 1897 is constitutional and valid.
In Hirshfeld v. Fitzgerald (157 N. Y. 166) it was held that see tion 52 of the Laws of 1892, chapter 689, " contemplates a representative action by a creditor on behalf of himself and such other creditors as may come in and share the expense; the plaintiff, in bringing such action, does not become a trustee for the other creditors so as to require him to carry, on the litigation for their interests in opposition to his own or after he has settled his claim."
Doubtless the Legislature of 1897, in the act of that year, provided for a representative action.by receivers without intending to deprive creditors of corporations of any of their just rights against stockholders thereof. In the course of the opinion delivered in the Hirshfeld case, it was said by Haight, J.: " It was evidently not intended by the.provisions of this statute that one creditor should be preferred and paid .to the detriment of other creditors, but that the stockholders should be responsible equally and ratably for all of the debts of the corporation to the extent of their capital stock' at par value. In other words, they were to contribute • equally and ratably'for the payment of the whole indebtedness. The object .of this statute was undoubtedly to furnish additional security to creditors, and is for the benefit of them all, and should be enforced by or on behalf of all." ' ;
The liability of the stockholders in this case when reached constitutes a fund to.which " all the creditors are entitled to resort after the-corporate property has been applied upon the debts." (Marshall v. Sherman, 148 N. Y. 22.) The doctrine of that case is approved in Hirshfeld v. Fitzgerald (supra), in which latter case it was; further said : " It is true that the capital stock of a corporation is a trust fund for the security of the creditors, and the amount recoverable from the stockholders under the-statute in addition to the capital stock may be treated as a like security, but, as we have shown, the creditor is not permitted to bring an action in his own behalf alone for a contribution by the stockholders, for in that way lie. would obtain a preference for himself. He must bring the action for himself and on behalf, not of all the creditors, but on behalf of those: who choose to come in and share the benefits and expenses of the litigation. His relation with the other creditors is one that the: law creates. He assumes to prosecute on their behalf only in so far-as his personal interests require."
It may; be supposed that .the; act of; 1891-obviates some uncertainties and mischiefs which arose in the ' case of Hirshfeld v. Fitzgerald (supra). Certain limitations and restrictions are declared in section 55 of the Stock Corporations Law (Laws of 1892, chap. 688, amending Laws of 1890, chap. 564), and in Hirshfeld v. Fitzgerald (supra) it was said that the bringing of an action by the Attorney-General to dissolve the association, and the procuring of an injunction restraining creditors from bringing actions, rendered compliance-: with this part of the statute impossible and, therefore, excusable.
The presence of the receivers as plaintiffs in-this case will enable-the court to ascertain and determine how much is required from the-stockholders after the application of the assets of the corporation, and how much each creditor is entitled, to receive in liquidation of' his indebtedness for which- the stockholders are declared liable.
Some minor questions have been presented by the several demur- rers in this case which are so satisfactorily considered in the - valuable opinion of LAtrGHnra, J., delivered at Special Term that we forbear further comment in respect to. them.
The foregoing views lead to the conclusion that the demurrers were properly overruled. (See Mahoney v. Bernhardt, 27 Misc. Rep. 339.)
All concurred.
Interlocutory judgments affirmed, with costs, with leave to the demurrants, severally, to withdraw their demurrers and answer upon payment of the costs of each demurrer, and the costs of this appeal to the respondents against each appellant who appeared in the argument.
The following is the opinion of Laughlik, J.:
Laughlim; J. :
On the 3d day of December, 1896, the Bank of Commerce, a domestic banking corporation, was duly dissolved by a final judgment of this court in an action brought by the Attorney-General in the name of the People. The same judgment appointed the plaintiffs permanent receivers. The assets of the bank are insufficient to pay its liabilities and this action is brought to enforce the statutory liability of the stockholders. The defendants Hollister and Saxton separately demur to the complaint on the grounds that plaintiffs have not a legal capacity to sue and that it does not state -facts sufficient to constitute a cause of action. The defendants Clarke and Rogers, as executors and trustees under the will of Christina Cameron Hasten, and Joseph Griffiths Hasten demur on the same grounds. The defendant Reed demurs on the last ground only.
It is sought by these demurrers to challenge the constitutionality of the retroactive provision of chapter 441 of the Laws of 1897 authorizing receivers to bring such suits, which amended section 52 of the Banking Law (Laws of 1892, chap. 689) and took effect on Hay twenty-seventh of that year.
The section, as thus amended, reads as follows:
"§ 52. Individual liability of stockholders.—Except as prescribed in the stock corporation law, the stockholders of every such corporation shall - be individually responsible, equally and ratably, and not one for another, for all contracts, debts and engagements of such corporation, to the extent of the amount of their stock therein, at the par value thereof, in addition to the amount invested in such shares. In case any such corporation shall have been or shall be dissolved by final order or judgment of a court having jurisdiction, and a permanent receiver or receivers of the said corporation shall have been or shall be appointed, all actions or proceedings to enforce the liability of stockholders under this section shall be taken and prosecuted only in the name and in behalf of such receiver or receivers, unless such receiver or-receivers shall refuse to take such action or proceeding upon proper request in that behalf made by any creditor, and in that event such action or proceeding may be taken by any creditor of' the corporation. The term ' stockholder ' when used in this chapter shall apply not only to such persons as appear by the books of the corporation to. be stockholders, but also to every owner o'f stock, legal or equitable, although the same-may be on such books in the name of another person, but not to a person who., may hold the stock as collateral for security for the payment of a debt." The amendment inserted the 2d sentence, the other provisions remaining-the same as they were originally enacted in 1892. From the time the corporation was dissolved down to the enactment of this amendment, the right of action, to enforce the liability of stockholders was vested in the creditors, and the receiver could not have maintained a suit. (Hirshfeld v. Fitzgerald. 157 N. Y. 166, 185.) Although it is not alleged in the complaint, the fact was conceded upon the-, argument that no creditor has instituted a suit to enforce the liability of the stockholders, and the constitutionality of: the amendment"is not questioned by the-creditors. It is alleged that notice was given of the application to the court for leave to bring this suit. Presumably that gives a notice to the Attorney- General who represents all creditors. All creditors have apparently and presumably tacitly acquiesced in the bringing of this suit by the receivers, and the Statute of Limitations would now be a bar to any action brought by them. The defendants contend that the cause of action having once vested in the creditors it was not competent for the Legislature by general law to provide for the enforcement of the liability by the receiver, It was claimed that this was an attempt to take the property of the creditors without due process of law, or that it impaired the obligation of existing contract rights. It will bé observed that the amendment does not purport to deprive the creditors of the ownership of their claims; it recognizes their rights to the fund to be collected by the receiver. It deprives the creditors of the right to sue and authorizes an officer of the court to represent them in enforcing the liability of the stockholders. It was not contended upon 'the argument that the liability of the stockholders has been enlarged by the amendment, but the suggestion is contained in one of the briefs submitted that" the receivers would be entitled to fees on the collections from stockholders, and in that manner the liability of the latter would be increased. That question is not necessarily presented now. It may arise on the accounting in determining the amount of the deficiency for which the stockholders will be liable. It can then he determined whether that is a question between the creditors and receivers only, and whether the Legislature intended to impose liability for such fees upon the stockholders; and if that intention be manifest the question would then arise whether to that extent the law would be Constitutional. It becomes necessary, therefore, to consider what were the respective rights of the creditors and stockholders prior to the enactment of the law of 1897. It was well settled that no creditor had an independent, individual cause of action against one or all of the stockholders. It was held to be the special province of a court of equity to enjoin actions at law, although this deprived the parties of a jury-trial, and to permit only one suit by one creditor for the benefit ot' himself and all other creditors against all the stockholders. The liability of the stockholders was not to individual creditors directly, but for contribution to a fund out of which all creditors would be paid alike. (Matter of Empire City Bank, 18 N. Y. 199; Sands v. Kimbark, 27 id. 147, 152; Hirshfeld v. Bopp, 145 id. 84; Hirshfeld v. Fitzgerald, supra; Pfohl v. Simpson, 50 How. Pr. 341, 343-349; Story v. Furman, 25 N. Y. 214, 224; Corning v. McCullough, 1 id. 47; Terry v. Little, 101 U. S. 216.)
From the time this liability of •stockholders of banks to its creditors, was first imposed, by section 7 of article 8 of the Constitution of 1846, down to the enactment of the Banking Law of 1892 (Chap. 689), the laws regulating the enforcement of such liabilit) (Chap. 226, Laws of 1849, and chap. 409, Laws of 1882) provided for the bringing of such actions by the receivers and did not authorize an action by the creditors. The provision authorizing receivers to enforce the liability was evidently omitted from the Banking Law of 1892 through an oversight. The Statutory Revision Commissioners who drafted the Banking Law had previously recommended to the Legislature a proposed receiver's law, which conferred such authority on receivers, but this was not enacted. (Hirshfeld v. Bopp, supra, p. 92; vol. 1, Report Comrs. Stat. Rev. 1890, pp. 1299, 1816, 1324.)
The Banking Law of 1892 did not in express terms provide that the creditors might maintain the action, nor does the present State Constitution. (§ 7, art. 8.) There being, however, no express provision authorizing receivers to sue, it was held, as has been seen, that -the claims of creditors for contribution by the stockholders were not assets which passed to the receivers, and that the suit should be brought by the creditor.
It has been decided in a case where a corporation was. insolvent, but was not so declared until ten days after the enactment of the law, that the Legislature might constitutionally pass a special act providing that the liability of stockholders to creditors, which attached under the Manufacturing Law of 1811 (Chap. 67), on dissolution of the corporation, should be enforced by trustees.. The constitutional questions here presented were strenuously'urged there against the power of the Legislature to transfer the right to maintain the action to trustees or receivers, and thereb)-" preclude the creditors from proceeding individually. The court reached the conclusion that the remedy of the creditors was not injuriously affected, and that if so affected, the degree of variation of remedy was not such .as to overstep the boundaries of constitutional limitation. (Herkimer County Bank v. Furman, 17 Barb. 116; Walker v. Crain, Id. 119, 124, 131; Story v. Furman, 25 N. Y. 214; Cuykendall v. Corning, 88 id. 129, 135.)
In the case of The People v. Tweed (5 Hun, 383) it was held that an act of the Legislature (Chap. 49, Laws of 1875) which authorized the People to maintain an action to recover moneys belonging to the city of New York, and unlawfully converted or appropriated, was constitutional. The question was there raised by the persons against whom the liability was sought to be enforced, as in this case. The city was made a party defendant, and it did not question the constitutionality of the law. The court decided the case upon both questions, holding that the city alone could question the constitutionality of the act, and that since the city acquiesced, the other defendants could not question the right of the Legislature to authorize the People to bring the action, and, also, that the act created a remedy for the benefit of the city, and did not deprive the city of its rights or property; that it was a modification of a legal, remedy which did not prejudice or extinguish any personal or property rights of the city, and that it was constitutional and valid.
In Commonwealth v. Cochituate Bank (3 Allen, 42) the Supreme Court of Massachusetts sustained the validity of a law enacted after the dissolution of a banking corporation, which transferred to the receivers the right to enforce the liability of the stockholders, which right, down to that time, was vested in the creditors. In that case the court says: "It will at once be perceived that no objection to a change of remedy can be successfully urged on account of its being more speedy and effectual. That objection might be urged as to all changes in the forms of proceeding, or the organization of the legal tribunals to act thereon. Every statute extending the equity powers of this court would be obnoxious to objections of this character. The objection, to be tenable, must go beyond this, and show that the statute increased the actual liabilities of the stockholders, and was something more than a change in the mode of enforcing a pre-existing liability.''
With the exception that the suit is brought in the names of the receivers, the remedy is according to the course of justice as always administered in this State. The statute of 1897 merely restores the appropriate remedy which existed prior 'to 1893. It was not seriously contended upon the argument that the language of the amendment of 1897 could be given full force and effect without declaring it retroactive. In some of the briefs submitted, however, it is contended that such •effect should be 'given to the law. I am of opinion that the legislative intent is clear that this act 'should apply to banks then in a state of liquidation. It is. sufficient here to hold that this legislation is constitutional and valid, at least as. against the stockholders.
The only allegation of the complaint with reference to the defendants being-stockholders, is that they were stockholders within two years before the commencement of this action, and it is contended that this allegation is insufficient. The fact is distinctly alleged that they were stockholders, and since they could, not become stockholders after the dissolution of the hank, it is to be inferred that, they were stockholders at the time of dissolution, or at some prior time, and within two years of the commencement of the action. There is no allegation that they transferred their stock, and i I think it may, for the purposes of the-demurrers, be presumed that they continued such stockholders down to the time-of dissolution. (Castner v. Duryea, 16 App. Div. 249.) The allegations of the-complaint on that subject are informal ;and indefinite, but, as was held in Marie v. Garrison (83 N. Y. 14, 23), " it is not sufficient that the facts are imperfectly or informally averred, or that the pleading lacks definiteness and precision, or that-the material facts are only argumentatively averred," to justify sustaining a. demurrer. All of the demurrers present the objection that it appears, on the face-of the complaint, that it fails to state facts sufficient to constitute a cause of action. That clearly presents all of the questions, and it was not necessary to-demur on the ground that the plaintiffs have not a legal capacity tó sue. (Ward v. Petrie, 157 N. Y. 301.)
The complaint shows that the assets áre insufficient to pay the debts for which the stockholders are liable. These facts authorize the commencement of the action, without waiting-until all of tile assets shall have been converted into-money, and the amount of the deficiency .thus definitely-ascertained. The Statute of Limitations would ordinarily run before that time unless the assets should he sacrificed by a forced sale, which might he prejudicial to both the stockholders and creditors. The court, after determining who are the stockholders against whom the liability may he enforced, will, in awarding final judgment, protect the stockholders against paying in moré than may appear to he reasonablynecessavy to meet the deficiency for which they'are liable, and then should there he a surplus, they will he entitled to its return pro rata. (Matter of the Reciprocity Bank, 17 How. Pr. 323; S. C., 22 N. Y. 9; Matter of Hollister Bank, 23 id. 508; Walton v. Coe, 110 id. 109; Hirshfeld v. Bopp, supra.)
The demurrers are overruled, with leave to the demurring defendants to answer within twenty days, on payment of the costs of-the demurrers.