Case Name: HIRSHFELD v. KURSHEEDT et al.
Court: New York Supreme Court, General Term
Jurisdiction: New York
Decision Date: 1894-11-16
Citations: 30 N.Y.S. 1023
Docket Number: 
Parties: HIRSHFELD v. KURSHEEDT et al.
Judges: 
Reporter: West's New York Supplement
Volume: 30
Pages: 1023–1027

Head Matter:
HIRSHFELD v. KURSHEEDT et al.
(Supreme Court, General Term, First Department.
November 16, 1894.)
Banks and Banking—Liability of Stockholders.
Laws 1892, c. 688, § 55 (Stock Corporation Law), providing that no action shall be brought against a stockholder for any debt of the company until certain requirements have been complied with, must be construed in connection with Laws 1892, c. 689, § 52 (Banking Law), which makes stockholders of banks liable for corporate debts; and a complaint against a stockholder for a debt of the bank, in a case where the requirements of section 55 have not been complied with, must allege facts showing that such compliance was impossible.
Appeal from special term, New York county.
Action by Jacob Hirshfeld, suing in his own behalf, etc., against Frederick A. Kursheedt and others, directors of the Madison Square Bank. From an interlocutory judgment sustaining a demurrer to the complaint, plaintiff appeals. Affirmed.
Argued before VAN BRUNT, P. J., and O’BRIEN and PARKER,. JJ.
Louis Marshall, for appellant.
Joseph Fettretch, for respondents.

Opinion:
O'BRIEN, J.
The material allegations of the complaint are as*follows: (1) That such bank is a domestic corporation, organized and doing business under the laws of this state relative to banks-(2) That an action was commenced in this court on the 10th day of August, 1893, by the people of the state of New York against the-Madison Square Bank for its dissolution on the ground of insolvency, etc. (3) That on November 24, 1893, a final judgment was-entered in the office of the clerk of New York county dissolving such corporation, forfeiting its franchises, and providing for the distribution of its assets among its creditors, forever restraining it from, exercising its corporate franchises, etc., and restraining its several, creditors from instituting any action against it. (4) That defendants O'Brien and Cannon, in and by said judgment, were duly appointed permanent receivers of such bank, and have qualified. (5)-That the capital stock of the bank is $500,000, and that it was, at the time of the commencement of this action and the rendition of the decree of dissolution, held and owned by the defendants in the amounts stated. (6) That, prior to the commencement of said action (people's), the plaintiff herein had duly deposited with said bank . moneys belonging to him to the amount of $5,334.41, for which said bank was on that day indebted to him; that a portion of this amount has been paid; and that there is now due plaintiff $4,024.56, with interest from August 10, 1893. (7) That said bank is also indebted to divers other creditors to an amount exceeding $1,000,000; that the assets of said bank which have come into receivers' hands are inadequate to pay in full said bank's liabilities; and that, after the application of said assets to the payment of such liabilities, there will remain a deficiency upon the aggregate claims of such creditors exceeding the sum of $500,000.
The defendants Kursheedt demur upon the ground that the complaint does not state facts sufficient to constitute a cause of action, and from the decision and judgment thereon, sustaining the demurrer, this appeal is taken.
The statute under which the action is brought is section 52 [c. 689] of the "Banking Law" of 1892, and is 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."
The stock corporation law of 1892 [c. 688], § 55, reads as follows:
"No action shall be brought against a stockholder for any debt of the corporation until judgment therefor has been recovered against .the corporation and an execution thereon has been returned unsatisfied in whole or in part, and the amount due on such execution shall be the amount recoverable, with costs, against the stockholder. No stockholder shall be personally liable for any debt of the corporation not payable within two-years from the time it is contracted, nor unless an action for its collection Shall be brought against a corporation within two years after the debt becomes due, and no action shall be brought against a stockholder after he shall have ceased to be a stockholder for any debt of the corporation unless brought within two years from the time when he shall have cease® to be a stockholder."
It will be noticed that the banking law (section 52) expressly refers to the stock corporation law, and the latter, in its classification as to what is to be considered as a stock corporation within the meaning of that law, in addition to a transportation and a business corporation, also includes a moneyed corporation, which latter, again, is defined by section 3 of the law as one "formed under or subject to the banking or insurance law." It is clear, therefore, that the provisions of the stock corporation law embrace a banking corporation, and are applicable thereto; and, where a- liability is created against the stockholders by the banking law, the provisions of the stock corporation law limiting such liability must be considered. Our conclusion upon this branch of the case is that the learned! judge below was correct in holding that section 55 of the stock corporation law was to be construed in connection with section 52: of the banking act. It must be remembered that the latter is a special law applicable to banks, and creating a liability with respect to the stockholders thereof, while the stock corporation law is a general law, applicable, not only to banks, but to other classes of corporations in most respects dissimilar to a bank. In construing a general law applicable to different and dissimilar corporations, it is proper that such a construction should not be given to it a® would render it unreasonable or meaningless. There is therefore much force in the contention that, if all the provisions of section 55 of the stock corporation law are to be literally consolidated with | section 52 of the banking law, it would be impracticable to pursue a stockholder of a banking corporation, and the liability created in favor of creditors would be taken away. Because such liability, so far as the stockholders of a bank are concerned, never would arise until the insolvency of the bank, which, when it occurs, is followed by the placing of a temporary receiver in possession of the property, whose position is usually fortified by an injunction restraining any action on the part of creditors; and, by express provision of law (Code, § 1806), such a restraining order is part of the judgment of dissolution, which it is provided shall have the same effect "as if each creditor upon whom it is served was named therein and was a party to the action in which it was granted." There are cases which are seeming authority for the proposition that, where the • performance of conditions precedent is rendered impossible by the act of the law, then such performance is excused and dispensed with. Shellington v. Howland, 53 N. Y. 371, 375; Kincaid v. Dwindle, 59 N. Y. 548; Flash v. Connecticut, 109 U. S. 371, 3 Sup. Ct. 263; Hardman v. Sage, 124 N. Y. 25, 31, 26 N. E. 354; Bank v. Wetmore, 124 N. Y. 241, 26 N. E. 548. Whether allegations showing that the plaintiff could not obtain, or was prevented from obtaining, a judgment, and issuing an execution against the bank, would be sufficient, is a question that we are not called upon now to decide, and which is reserved until it is directly presented; it being sufficient, so far as this appeal is concerned, to point out that this complaint nowhere alleges facts showing that the defendants or others have rendered the requirements of the statute impossible of performance. This, we agree, must appear, for, where a liability is to be predicated upon the compliance by the plaintiff with certain conditions, the complaint must allege either such compliance or such facts as would .show that compliance was impossible.
There is a statement that, by the final judgment, creditors were restrained from instituting any action against the bank; but, as -this final judgment was not entered until some months subsequent -to the commencement of the people's suit, there was a period during which, so far as it now appears, an action could have been instituted. If, therefore, from the commencement of the people's suit, the corporation had been enjoined from the exercise of its corporate powers, and the temporary receivers of its property had been appointed at the same time, and creditors enjoined from proceeding against it, these facts should appear, or some reason should be given for plaintiff's failure to proceed and comply with the conditions entitling him to maintain Ms action. In addition to this objection, we think that where no judgment is alleged it should at least be shown that there is an indebtedness which, upon presentation to the corporation or its receivers, has been allowed; and the facts in connection with such indebtedness should be made to appear in such a way that the court can determine whether or not it was contracted •subsequent to the passage of the act of 1892. The statements that the bank was indebted to the plaintiff, and that plaintiff had duly deposited, are conclusions. These may be true, and still plaintiff have no action. As against a stockholder, allegations of the time when the debt was contracted and when it became due are important, for a stockholder is not liable "for any debt of the corporation not payable within two years from the time it is contracted, or unless an action for its collection shall be brought against the corporation within two years after the debt becomes due." And, again, to hold a stockholder, the plaintiff should state, not only that he made a deposit of money during the time that the person whom he seeks to hold liable was a stockholder, but that he made such deposit without any condition or limitation, and in such form as to entitle him to demand Ms money at any time; because, for aught that appears, the deposit may have been a special one, payable on demand, or in years, or for some special purpose, or conditionally, and thus be an obligation of the corporation for which the stockholder might not be liable. Whether the debt was one contracted before or after the present law of 1892 is important, because a stockholder's liability prior thereto was fixed by article-8, § 7, of the constitution, which confined the liability to stockholders of banks- issuing notes or paper credits to circulate as money. By the act of 1892 the liability was enlarged, so that it is no longer necessary to •show that the bank was engaged in issuing bank notes; but this .should appear if recovery is sought for a debt contracted prior to 1892.
Apart, therefore, from the main question, which has been reserved, we think the other objections to the complaint, some of which we have pointed out, were sufficient to justify the conclusion reached by the learned judge at special term in sustaining the demurrer, and that the judgment appealed from should be sustained, with •costs, but with leave, upon payment thereof, to amend. All concur.
Laws 1892, c. 687.