Case Name: IRVING NAT. BANK v. MOYNIHAN et al.
Court: New York Supreme Court, Appellate Division
Jurisdiction: New York
Decision Date: 1903-06-05
Citations: 82 N.Y.S. 705
Docket Number: 
Parties: IRVING NAT. BANK v. MOYNIHAN et al.
Judges: 
Reporter: West's New York Supplement
Volume: 82
Pages: 705–707

Head Matter:
IRVING NAT. BANK v. MOYNIHAN et al.
(Supreme Court, Appellate Division, First Department.
June 5, 1903.)
1. Corporations—Debts in Excess op Paid-Up Capital Stock not Secured by Mortgage—Liability op Directors—Statutory Provisions—Suppiciency op Evidence.
The Stock Corporation Law, § 24 (Laws 1890, p. 1070, c. 564, as amended by Laws 1892, p. 1830, c. 688), provides that if a stock corporation, except a moneyed corporation, create any debt whereby its total indebtedness not secured by mortgage exceeds its paid-up capital stock, the directors creating such debt shall be personally liable therefor to the creditors of the corporation. Held that, where plaintiff sought to hold defendants, as directors of a corporation, liable under the statute for debts of the corporation, but failed to prove that the indebtedness in excess of the paid-up capital stock was not secured by mortgage, its complaint was properly dismissed.
Appeal from Special Term, New York County.
Action by the Irving National Bank against Daniel C. Moynihan, impleaded with others. Judgment for defendants, and plaintiff appeals.
Affirmed.
Argued before HATCH, McLAUGHLIN, PATTERSON, O’BRIEN, and LAUGHLIN, JJ.
William S. Bennet, for appellant.
Henry H. Man, for respondents.

Opinion:
McLAUGHLIN, J.
In March, 1895, the W. B. Webb Company was incorporated under the statutes of this state with a capital stock of $2,500, and it continued to do business until January, 1897, when it was, by a judgment of this court, dissolved, and a receiver appointed. Subsequently the plaintiff, on behalf of itself and all other creditors similarly situated, brought this action to recover from two of the di rectors of the corporation—the respondent Moynihan and otie William B.Webb—certain indebtedness of the corporation upon the ground that the same was created in violation of section 24 of the stock corporation law (chapter 564, p. 1070, Laws 1890, as amended by chapter 688, p. 1830, Laws 1892), which makes directors of a corporation consenting to the creation of an indebtedness not secured by mortgage, in excess of its paid-up capital stock, personally liable. The complaint, among other things, alleged the incorporation of the W. B. Webb Company, the election of Moynihan and Webb as directors, and, while acting in that capacity, the creation, with their consent, of debts of the corporation unsecured by mortgage to the amount of about $9,000, the dissolution of the corporation, the appointment of a receiver, etc. . In the answer interposed by Moynihan not only the material allegations of the complaint were denied, but there was a specific denial that he, as a director of the corporation, created, or consented to the creation of, any indebtedness not secured by mortgage in excess of its paid-up capital stock, or any indebtedness whatever which has not been paid. Upon the trial it .appeared that the plaintiff had a claim against the corporation for $600 by reason of its having discounted for the corporation a note for that amount, and which remained unpaid; that the defendant Moynihan, so far as appeared, did not consent to the creation of this indebtedness, other than that he took one Hart and irankel to the office of the plaintiff, introduced them to one of its officers, and thereupon,, at their request, the note was discounted. It also appeared that there were other claims against the corporation, including claims held by Moynihan himself, largely in excess of $2,500; but, if his claims were deducted, then the aggregate amount of such other claims was less than $2,500. At the conclusion of the trial the learned justice sitting at Special Term dismissed the .complaint, and from the judgment entered upon a decision to this effect the plaintiff has appealed.
We are of the opinion that the complaint was properly dismissed. The only right to maintain the action at all is that given by statute, and, before the plaintiff could succeed, it was bound to bring itself squarely within its provisions. Appreciating this, it alleged that the indebtedness of the corporation, not secured by mortgage, exceeded the amount of its paid-up capital stock, and that the same was created with the consent of the directors, Moynihan and Webb. This allegation was denied by Moynihan, and, before the plaintiff could recover in the action,-it was bound to establish by competent proof that this allegation of its complaint was true, and this it did not do. There was absolutely no evidence offered at the trial, so far as the record before us shows, to prove that the indebtedness in excess of the paid-up capital stock was not secured by mortgage. This was a material fact to be established, and without which plaintiff could not recover. The statute so provides. The words are:
"No stock corporation, except a monied corporation, shall create any debt, it thereby its total indebtedness not secured by mortgage shall exceed the amount of its paid up capital stock, and the directors creating or consenting to the creation of any such debt shall be personally liable therefor to the creditors of the corporation."
It is the creation of a debt, not secured by mortgage, in excess of the paid-up capital stock, which makes the directors liable, but not a debt which is secured by mortgage. Therefore at the conclusion of the trial there was a failure on the part of the plaintiff to establish a material fact, upon which depended its right to recover. The trial court so held, and he could not have done otherwise. This conclusion makes it unnecessary to pass upon the other question raised.
The judgment is right, and must be affirmed, with costs. All concur.