Case Name: Gale v. Troy & B. R. Co., (three cases.)
Court: New York Supreme Court, General Term
Jurisdiction: New York
Decision Date: 1889-02-07
Citations: 4 N.Y.S. 295
Docket Number: 
Parties: Gale v. Troy & B. R. Co., (three cases.)
Judges: 
Reporter: West's New York Supplement
Volume: 4
Pages: 295–296

Head Matter:
Gale v. Troy & B. R. Co., (three cases.)
(Supreme Court, General Term, Third Department.
February 7, 1889.)
1. Railroad Companies—Consolidation—Action against Constituent Companies.
The railroad consolidation act (Laws N. Y. 1869, c. 917,) § 5, provides that pending actions against either of the consolidating companies shall not abate, but may be conducted to final judgment in the name of the existing corporation, and that the rights of all creditors shall be preserved unimpaired, and the respective corporations shall be deemed to continue in existence to preserve the same. Held, that an action brought after consolidation against one of the consolidating companies on its bonds previously executed, is maintainable.
2. Same—Title to Property—New Company.
It is no defense that defendant has no property, but that the property it formerly had vested in the new company.
Appeals from circuit court, Rensselaer county.
Three actions by John B. Gale against the Troy & Boston Railroad Company. One of them was commenced in November, 1887, and the others in January, 1888. Defendant appeals.
Argued before Learned, P. J., and Landon and Ingalls, JJ.
R. A. Parmenter and John H. Peak, for appellant. Alelen & King, (John JB. Gale, of counsel,) for respondent.
Affirming 2 N. Y. Supp. 354.

Opinion:
Learned, P. J.
Two of these are actions on unpaid bonds, past due, of the defendant. The third is an action on unpaid interest of such a bond. The bonds are secured by a mortgage to trustees. The defense is that subsequently to the execution of the bonds and mortgage, and in June, 1887, a consolidation agreement was executed between the defendant and the Fitch-burgh Railroad Company, under chapter 917, Laws 1869, (the general consolidation act,) by which the two companies were consolidated under the name of the Fitch burgh Railroad Company. The defendant claims that the effect of that consolidation is such that thereafter no action at law can be maintained against it for debts existing at the time of the consolidation. The ground is that thereafter all the property of both corporations vested in the new; that it would be unjust that creditors of the old companies should maintain actions by which nothing could be collected. Section 5 of the act provides that pending actions against either of the consolidating companies shall not abate by the consolidation, but maybe conducted to final judgment in the name of the existing corporation. It provides also that by order of the court the new corporation may be substituted. Hence it is evident that, without such order, an action pending at consolidation, of the nature of those in question, could proceed to final judgment against this defendant. Thus it is manifest that the statute did not take away the right of action against the consolidating companies. If it had done so, the pending actions would have abated. If a pending action is not to abate, it is reasonable to say that a similar right of action is not destroyed. Again, the fifth section says that "the rights of all creditors of either of said corporations shall be preserved unimpaired, and the respective corporations shall be deemed to continue in existence to preserve the same." This language seems to be unequivocal. The right of a creditor is not preserved unimpaired when it is taken away. Before the consolidation, this plaintiff had the right to sue and recover at law against this defendant. The defendant now says that such right was taken away by the consolidation. That seems to us directly contrary to the statute. The defendant urges that because it has no property it cannot be sued on its debts. It is a new doctrine that when a debtor has assigned all his property for the benefit of creditors, and has nothing, he has escaped all legal liability on his debts. If a man were sued on a bond, it would be an ingenious attorney who would set up as a defense in the answer that the defendant had no property, and therefore should not be harassed by a useless action. A majority of this general term have just decided that no action on these bonds lies against the consolidated corporation. If the defendant is correct, then no action at law lies against any one in.these cases; in which event the rights of creditors would be very decidedly impaired. Whether the legislature can destroy, or authorize debtors to destroy, the right of action of creditors to recover debts, we need not decide; for it seems to us that they have made no attempt to do this. Judgment affirmed, with costs, in each ease. All concur.
See Janes v. Fitchburg R. Co., 3 N. Y. Supp. 165.