Court Opinion

ID: 3601546
Source: CourtListenerOpinion
Date Created: 2016-07-05 23:47:52.855186+00
Date Added: 2024-06-11T13:57:00.483254
License: Public Domain

I do not yield to the contention of the defendant, that no report need be filed until after the company has commenced business in fact. The report is to be filed each year, within twenty days from the first day of January. This means each year after the organization. If it is not filed within that time, because the company has not then had an actual business transaction, may it have that transaction on the twenty-second day of the year, and go on the whole year after, without giving the protecting information to the public which the statute provides for? The act looks to a filing of the report annually after the organization, so that throughout the year, commencing the actual operations when the company may in the year, those about to deal with it may have the information called for by the statute. The information is not by the intent of the act deemed of use *Page 209 
to those who have become creditors of the company, so much as to those about to; and as actual business may begin on any day in the year, so on any day in the year, after the prescribed number of days have passed, should those of whom it asks credit have access to an authentic report of its condition. (Garrison v.Howe, 17 N.Y., 458-465.) Moreover there is testimony in the case of business transactions before the 1st day of January, 1871, the year of the failure to file a report.
The other positions taken by the appellant are to be disposed of according to the view which is taken of his relation to the company and its creditors, growing out of his official position in the company, and the neglect to file a report. If a trustee who, by the neglect of the company to file a report, has become liable for the debts of the company then existing, is to be treated as a surety for the company, and as having a surety's right of reclamation upon his principal for the amount paid by him, and other rights and privileges of a surety, it may be that the points made by the appellant have plausibility in them. But if the liability to pay the existing debts, which by reason of the neglect falls upon the trustee, is to be treated as if a penalty or forfeiture, laid upon him as a wrong-doer, for his punishment, and if he has no such right of reclamation against the company, no relation of surety to it, no right of contribution from his cotrustees save a statutory one, those points have no soundness.
It may be doubted whether it is technically correct, to call the liability imposed by this statute a penalty. Penal statutes are those which impose a forfeiture on such as transgress the provisions of them; but where the statute only gives a remedy to the party aggrieved it shall not be considered as a penal statute. (Wynne v. Middleton, 1 Wilson, 125; Woodgate v.Knatchbull, 2 T.R., 148-154; Bellasis v. Burbriche, 1 Ld. Ray., 170-172; Ward v. Snell, 1 Hy. Blk., 10.) But though it may not be technically proper to call this liability a penalty, it is in the nature of a penalty. (Thomas v. Weed, 14 J.R., 255; Brown v. Genung, 1 Wend., 115, which were decisions upon a statute in some respects similar.) And *Page 210 
in applying the provisions of the statute of limitations, to causes of action against a stockholder in a company, formed under a statute like this general manufacturing incorporation act, a distinction has been taken between a cause of action not created by the act, and one which is created and the remedy given by the act. (Corning v. McCullough, supra.) The former falls into the class of actions arising upon contract. The latter into those arising upon a forfeiture to a party aggrieved, and the liability is spoken of as being in the nature of a penalty. And so inMerchants' Bank v. Bliss (35 N.Y., 412), it is said: "It is clear that the liability of the trustees is not imposed as an indemnity."
The language of the cases is, that this act is a highly penal one, extremely rigorous in its provision. (Miller v. White,50 N.Y., 137); and it is said that the statute imposes a penalty upon the trustees for the omission of a prescribed duty, by compelling them to pay the debt of another. To be sure, the stockholder, in his liability for the debts of the company, has been likened to a surety or a guarantor. (Moss v. McCullough,
5 Hill, 131, and some of the cases there cited.) But that liability arises not from the neglect of the stockholder, and is not imposed as a punishment as for a wrong done. It is more in the nature of a contract implied from his becoming a stockholder, and he is liable in an original and primary sense, like a partner or member of an unincorporated association. (Corning v.McCullough, 1 N.Y., 47.) But a trustee made liable by the neglect to file a report, is compelled to pay the debt of the company not upon a liability in any manner arising out of contract, or as strictly collateral to the contract or obligation of another, but as a punishment, a forfeiture for a wrong done.Bolen v. Crosby (49 N.Y., 183), though it speaks of the claim against the trustees as being collateral and incidental to the debt against the company, does not conflict with this view. For it is not the debt which they are compelled to pay, but a penalty, not in any manner arising from their contract, the extent of which is measured by the amount of the debt against the *Page 211 
company. (Merch. Bk. of New Haven v. Bliss,
35 N.Y., 412-414.) In the case last cited it is distinctly held, all the judges concurring, that the twelfth section of the manufacturing corporation act imposes a penalty, or a liability in that nature, to a right of action on which the three years' statute of limitation applies. And thus it is, that the legislature felt called upon in 1871 (Laws of 1871, chap. 657, p. 1435, § 3), to enact that a trustee severally mulcted in the penalty, could call upon his cotrustees for a ratable contribution. There is no right of contribution among wrong-doers for moneys paid by reason of torts committed (Miller v. Fenton, 11 Paige, 18); and though the rule that there is no contribution among wrong-doers does not apply where one is a tortfeasor only by inference of law, and is confined to cases where one knows, or is presumed to know, that he is doing an unlawful act (Pearson v. Skelton, 1 M.  W., 504), (which exception might in some cases aid a trustee in fact innocent of, or protesting against the neglect to file the report [see Miller v. White, supra, foot of page 139]); yet this action of the legislature shows that the liability of the trustee has been treated by the law-making power as one imposed as a penalty for a wrongful act or neglect. It had, indeed, prior to the passage of the act, been held in the Supreme Court that there was no right of contribution among trustees in such cases. (Andrews v. Murray, 33 Barb., 354.) I find no provision of statute enabling a trustee, cast in judgment for his default in not filing a report, to make reclamation upon the company, or to seek indemnity from it; nor, if the neglect to file the report is charged upon the trustee as a wrong, and his liability for existing debts imposed upon him as a punishment therefor, in the nature of a penalty and a forfeiture, do I perceive the principle upon which he can have repayment or indemnity. Hence, as the defendant loses no right thereby, he is not discharged by the act of the plaintiff in taking the notes of the company for the amount of his debt, and then renewing the notes. In Deming v.Puleston (55 N.Y., 655; affirming judgment appealed from, *Page 212 
on the opinion in the court below, 35 N.Y.S.C. [3 Jones  Sp.], 309), it was held that the debt of the company did not merge in its notes taken therefor, and that an attempt to collect them from the company by action did not discharge the trustees. The case cited, meets and answers the position of the appellant, that the remedy against the trustees is inconsistent with that against the company, and that if the last be chosen the first is gone. A judgment recovered in any form of action is still but a security for the original cause of action until it be made productive in satisfaction to the party, and therefore until then it cannot operate to change any other collateral concurrent remedy which the party may have. (Drake v. Mitchell, 3 East, 251.) Nor, upon the application of the same principles, is it perceived how an extension to the company of time of payment, by renewing the notes, relieved the appellant from his liability. It was not an extinction of the debt; though by the taking of the notes the time for the payment by the company was extended, and it might not then be sued, the debt remained, and was before and after that act an existing debt. (55 N.Y., supra.)
The point made by the appellant, that at all events he is not liable in this action for the amount of the three renewal notes which had not accrued due at the commencement of this action is new. That state of facts has not before been presented, as far as I am aware.
The language of the twelfth section is, that if any company shall fail to make the required report, the trustees of it shall be jointly and severally liable for all the debts of the company then existing, and for all that shall be contracted before such report shall be made. It is the fact, that the report had not been made before this debt was contracted, and that this debt was one existing while the appellant was, as a trustee, in default for not making a report. The trustees thus in default are within the words of the statute whenever the debt exists, and surely it exists as something owing, though not yet by its terms payable, as soon as it is contracted. In 35 New York (supra), it is said: "Nor indeed is it necessary *Page 213 
that the creditor should have sustained any injury or damage by reason of a violation" of that section. (See page 416, 417.) "It is sufficient that the party prosecuting should be a creditor when the violation of the law takes place." (Id.) But the exact point now considered was not involved in that case, and it is not well to rely on that language alone as controlling. It is not necessary to determine now, whether one dealing with a manufacturing company could sell it the raw material from which to make its marketable goods, at such time of credit, as was needed and asked for by it to make them and bring them into market, and could the next day after the sale bring suit for the debt against trustees who had become liable to pay it as a debt existing, while they were neglecting to file a report. It may have been the intention of the legislature to make the trustees liable for the debt as soon as it existed, but not subject to action therefor until it had become payable as well as owing. That, however, is not precisely this case. At the time when these notes were taken, in renewal of others which had then becomepayable, there did exist not only a liability of the trustees,but a right of action thereon had accrued to the plaintiff,against them. I have stated above, that the taking of the new notes was not a merger of the original debt against the company, and that they did not represent a new debt contracted after the filing of a report in January, 1872. It was merely an extension of the time for the payment of that debt, but it was one which did not release the trustees, either from liability to pay, or from liability to immediate action. And here it seems to me is the fallacy, (I say it with respect), in the prevailing opinion. As soon as the original notes became due and payable, the trustees were liable. They were at once thereupon subject to action; so were the company. These two rights of action in the plaintiff were not dependent. They were concurrent and independent. The plaintiff could assert either, or both. The assertion of one did not preclude the assertion of the other. Suspending the assertion of one, did not preclude the assertion of the other. Waiving one, did not. Postponing one by *Page 214 
agreement, did not. The plaintiff, when he took the renewal notes for notes then due payable and actionable, had two remedies, not inconsistent; either of which he might pursue at the same time. Nothing but satisfaction of his debt, by the pursuit of one, would take from him his right to follow the other. Was the liability of the trustees strictly collateral to that of the company, it would not be otherwise. A creditor holding matured collateral securities for his principal debt, may receive or enforce payment of the collateral, though the principal debt be not payable. And the case is stronger where the concurrent liability does not arise out of contract, and is not rigidly a collateral obligation. The spring of all the consequences to the trustees is the wrong they have done, and all their relations are to be affected, and all their rights determined by that fact. Having no right of reclamation or indemnity from the company which can be affected by the action of the creditor, they are not, after right of action to enforce their liability has once accrued, to be relieved therefrom, nor is the right of action to be suspended, by any dealings of the creditor with the company short of a satisfaction of his debt. Boughton v. Otis
(21 N Y, 261), favors this view. There a debt was contracted at divers times between January 18, 1856, and January 1, 1857. Certain persons were trustees from the last date until March of the same year. Then there was a new election, and the board of trustees was somewhat changed in its components. On the 8th April, 1857, the notes of the company were given for the prior existing indebtedness. It was held that the new trustees were not liable for the debt, but that the old ones were; and that thegiving of the notes did not change the result. (Id., 265.) It was said that the liability of the members of the first board of trustees had already accrued when the last one came in; and thatthe liability when it had once attached, and upon whomsoever attached, remains fixed and unalterable. (Id., 263.)
The judgment should be affirmed with costs.
All concur with ALLEN, J.; except FOLGER, J., dissenting.
Judgment in accordance with opinion of ALLEN, J. *Page 215