Court Opinion

ID: 5211907
Source: CourtListenerOpinion
Date Created: 2022-01-06 16:14:37.770897+00
Date Added: 2024-06-11T08:27:22.896011
License: Public Domain

Clarke, J.
(dissenting):
I dissent. In Marstaller v. Mills (143 N. Y. 398) plaintiff brought an action against the defendants as the trustees of the creditors and stockholders of a domestic business corporation to recover for the loss of services of his son, who was injured in the employment of the company. Subsequently to the time when he received those injuries the corporation was dissolved in the course of proceedings for its Voluntary dissolution. The court, reading'together section 5 of chapter 691 of the Laws of 1892, the Business Corporations Law — * * The dissolution of any such corporation for any cause shall not take away or impair any remedy against it, its stockholders or officers, for any liabilities incurred previous to its dissolution ” — and section 30 of chapter 687 of the Laws of 1892; the General Corporation Law — “Upon the dissolution of any corporation, its directors, unless other persons shall be appointed by the Legislature, or by some court of competent jurisdiction, shall be the trustees of its creditors, stockholders or members, and shall have full power to settle its affairs, collect and pay outstanding debts, and divide among the persons entitled thereto the money and other property remaining after payment of debts and necessary expenses. Such trustees shall have authority to sue for and recover the debts and property of the corporation, by their name as such trustees, and shall jointly and severally be personally liable to its creditors, stockholders or members, to the extent of its property and effects that shall come into their hands”—said: “The term £ creditor ’ is broad enough, in view of the evident purpose of this act and of the other provision we have mentioned, to include those persons to whom the corporation was Under any enforceable obligation, as well as those *14to whom it was indebted. If the general investment of the directors with the power ‘to settle the affairs of the corporation ’ were" to be regarded as qualified and as limited, with respect to the payment of claims against, it, to those which' constituted' debts, in the strict legal sense of' the word, the Legislature Would be chargeable with a very grave inconsistency; It would have expressly retained all the remedies against a'corporation for any liabilities incurred previous -to its dissolution ; while limiting the power of its trastees, upon • a voluntary dissolution', to the consideration and payment of those liabilities only which arose upon contract,”" and affirmed a . judgment Overruling a demurrer to the complaint. In Shayne v. Evening Post Pub. Co. (168 N. Y. 70) the Court of Appeals sustained' an action for libel against the trustees of a defunct corporation committed during its existence.
But it is claimed that these cases no longer apply and that section 30 of the General Corporation Law has been repealed by chapter 932 of the Laws of 1896, amending the Stock Corporation Law (Laws of 1892, chap.'688) by adding section 57 thereto, as amended by chapter 760 of the Laws of 1900. That section provides for the dissolution of any stock corporation éxcept a moneyed or a railroad corporation before the expiration of -the time limited in its charter by vote of the holders of- two-thirds of its capital stock upon following a prescribed ■procedure. “* * *■ The said corporation by its board of direct* ors shall proceed to adjust and wind up its business, and affairs with, "power to carry out its contracts and .to sell its assets' at public or private isale, and to apply the- same in discharge of debts and obligations of such corporation, and, after paying and adequately providing for the payment of such debts and obligations, to distribute the balance of asset's among the stockholders of said corporation, according .to their respective rights and interest. Said corporation shall nevertheless continue in existence for the purpose of paying, satisfying and discharging any. existing debts or obligations, collecting and distributing its assets and doing all other acts required in order to adjust and wind up its business -and affairs, and may sue and be sued for' the purpose of enforcing such debts or obligations, until its business and affairs are fully adjusted .and wound up.” . The act contains no repealing clause. • As. illustrating the legislative intent that there is nothing inconsistent in the two provisions and *15that both continue in full force and effect, they have been re-enacted in the Consolidated Laws, chapter 23, the General Corporation Law, chapter 28 of the Laws of 1909. Section 30 of chapter 687 of the Laws of 1892 is re-enacted as section 35, and section 57 as added by chapter 932 of the Laws of 1896 and amended by chapter 760 of the Laws of 1900 is re-enacted as section 221. It is evident, I think, that there is no inconsistency. Section 57 was added purely in the interest of stockholders to provide a way for dissolution and merger. Ho notice was to be given to creditors and no machinery provided for the ascertainment of debts and the payment thereof, as in the ordinary voluntary dissolution proceedings under the' Code of Civil Procedure (§ 2419 et seq.). The,complaint at bar alleges “ that said defendants became possessed of the property and assets of said corporation and that said assets and property are more than enough to pay the claims and debts of said company, including the claim of the plaintiff; * * * that at the time of the dissolution of the said corporation aforesaid the cause of action hereinbefore set forth existed against the said- corporation ; that said corporation had knowledge thereof and that the same had not been in any wise liquidated or secured by said corporation or said defendants, and that by virtue of the dissolution of the said corporation a cause of action accrued against the said defendants under section 30 of the General Corporation Law.” If the property and assets of the corporation are in the hands of the defendants, as is admitted by the demurrer, why should the action not be brought directly against them ? They are only responsible to the extent of such property so in their hands. Why should it be necessary to first bring an action against the corporation which has nothing, is a mere shell •—• a name preserved indeed so that suit may be brought against it if it has not dispossessed itself of its property — in order that thereafter upon obtaining j udgment further proceedings may be brought against the same persons now sued, who by that time may have dissipated the fund which by law they hold as trustees for creditors ? It would require plain and positive pro- • visions to convince me that such is the present requirement of the statute.
General Railway Signal Co. v. Cade (122 App. Div. 106) is an authority. In that case, it is true, the Hew Jersey corporation laws were under consideration, but their provisions Were similar to *16the laws of this State. Section 53 of chapter 185 of the Hew .Jersey Laws of 1896 provided for the continuance of dissolved-corporations for the purpose of prosecuting and defending suits, and section 54, that the directors were constituted trustees, and section 55, that they were suable by the corporate name or in their own names, and jointly and severally liable for debts of the corporation to the amount of the moneys and property which should come into their hands. The court held that the action could be maintained against the trustees without the presence of the dissolved corporation as a party. “ While the action might have been brought- against the corporation, or it might properly have been made a party defendant herein under section-' 53, yet it would in this case be a mere nominal difference.” I think the majority opinion misreads that case. It was an action to compel the performance of a contract. The majority opinion'indicates that the ruling would not have been the same if it had been for a money judgment. It seems to me that the argument was that as there was no doubt that the action would have been properly brought if it had been for the recovery of money, there was no reason why the rule should not apply to an aetion for specific performance; The court said: “ Here was a- contract under which the corporation was obligated, not to pay money, but to transfer and convey .property. They were given power to convey property ; why might they not be sued, to enforce such conveyance, where the full purchase' price has been paid, as well as where the obligation was to pay money instead of to deliver conveyance of property ? This principle was stated in Beale Foreign Corp. (§ 826); Thomp. Corp. (§§ 6739, 6751); Clark & Marshall Priv. Corp. (§ 328d); Sturges v. Vanderbilt (73 N. T. 384); People v. O'Brien (111 id. 56); Marstaller v. Mills (143 id. 398).”
I think the complaint states a cause of action and that the judgment sustaining the demurrer thereto was wrong and should be reversed, with costs to the appellant, and the demurrer overruled? with costs, with leave to the respondent on payment thereof and within twenty days to withdraw the demurrer and plead over.
Patterson, P. J., concurred.
Judgment affirmed, with costs.