Court Opinion

ID: 6136086
Source: CourtListenerOpinion
Date Created: 2022-02-04 21:42:21.290723+00
Date Added: 2024-06-11T08:54:30.806151
License: Public Domain

Lawrence, J.:
Many questions of evidence are discussed in the brief presented by counsel upon the argument of this appeal, some of winch probably are fatal to the judgment in this case; but in the view which we take of this case, it is not necessary to consider them. It is quite apparent that the plaintiff, as the assignee of Mirrick, obtained no other or greater right than Mirrick possessed against the defendant as the purchaser of or subscriber to the shares of stock mentioned in the complaint. Upon looking into the order of July 19, 1877, appointing Mirrick receiver, it will be found that he was appointed receiver of the property, estate, effects, choses in action, books of account and legal and equitable interests of the said Kings County Manufacturing Company, etc. If the claim in question does not come under one or the other of the claims or interests specified in that order it is quite clear that the plaintiff has no cause of action.
In Farnsworth v. Wood (91 N. Y., 308), which was an action brought by the plaintiff as receiver of the Eagle Mowing and Reaping Machine Company, a manufacturing corporation organized *196under tlie general manufacturing act, to enforce tbe liabilities imposed by section 10 of that act upon stockholders in favor of creditors, it was held that the liability of the stockholder does not exist in favor of the corporation itself, or for the benefit of all its creditors, but only in favor of such creditors as are within the prescribed conditions, and is to be enforced by them in their awn right a/nd for their own especial l/enefit.
Rappalo, J., in delivering the opinion of the court, says, at page 313: “ The receiver in this case is not vested with the rights of action of these creditors but only with the property which was sequestrated under the provisions of section 36, chapter 8, title 4, article 2 of the Revised Statutes, viz.: The stock, property, things in action and effects of the corporation; the.rights of certain creditors to prosecute their claims against certain of the stockholders never were the property of the corporation, nor rights of action vested in it; nor is there any provision of the statute which transfers these rights of action from the creditors to the receiver.”
If it is sought to maintain this action because of the provisions of section 10 of the general manufacturing act, the case cited seems to us to be precisely in point, and it, therefore, follows that the ''earned justice erred in dircting a verdict in favor of the plaintiff.
If, however, it is claimed that the liability sought to be enforced arises because of the provisions of section 5, title 3, chapter 18, part 1 of the Revised Statutes (1 R. S., p. 600), which section is applicable by reason of section 26 of the manufacturing act of 1848, which provided that all corporations formed under this act should be subject to the provisions of title 3, chapter 18 of the Revised Statutes, which section reads as follows:
“ Where the whole capital of a corporation shall not have been paid in, and the capital paid shall be insufficient to satisfy the claims of its creditors, each stockholder shall be bound to pay on each share held by him, the sum necessary to complete the amount of such share, as fixed by the charter of the company, or such proportion of that sum as shall be required to satisfy the debts of the company,” the reasoning of the case cited would be equally applicable.
But we are not left without an equally authoritive decision upon this very section. In the case of Mann v. Pentz (3 N. Y., 415), *197the right of a receiver to enforce liabilities arising under section 5, above referred to, was the question involved, and it was distinctly held that a receiver could not maintain such an action. The court says, after quoting the language of the section : “ The liability is, therefore. clear, but how is it to be enforced ? The statute itself does not define the method to be pursued, but leaves the remedy to be-enforced by such practice and in such form as the nature of the right to be asserted, and the relief sought may require. It being a statute liability, if the receiver can select one stockholder and collect the whole amount unpaid upon his shares of the stock, there is no reason why his remedy is not as perfect at law as in equity. JBut the nature of the right to be enforced and the circumstances under wnieli it is to be enforced render the proceedings under this statute eminently proper for a court of equity and the practice should be such as to effect the equitable designs of the statute and not be unnecessarily oppressive upon those against whom the proceedings are directed. This liability is only incurred when the capital paid m is not sufficient to' satisfy the debts against the corporation, and then only to an amount sufficient to satisfy such debts. It is, therefore, necessary that an account of the assets and of the debts should be taken of the amount of the capital remaining unpaid upon the shares, and the amount unpaid by each stockholder, in order that they may be made equally liable. I can see no way in which this could be effected under the practice before the Code, except by a bill filed in behalf of all the creditors against the corporation, making the delinquent stockholders also defendants. The court would then have the power to do complete justice and make each delinquent stockholder pay his due proportion and no more. This is the practice established by the Revised Statutes to enforce a liability somewhat analogous against directors and stockholders of moneyed corporations (2 R. S., 464), and the same practice is suggested by Judge Jackson in Vose v. Grant (15 Mass., 505), and by Judge Story in Wood v. Dummer (3 Mason, 308). The creditor, therefore, who filed the original bill against the railroad corporation, when he found that the property of the company was not sufficient to pay all the debts, should have amended his bill and made the delinquent shareholders parties to the original bill. The receiver had no power as such to file this bill. There is nothing in the original bill nor in the *198order appointing the receiver, which indicates that it was the object of that suit that the receiver should have any other or greater powers than receivers in ordinary creditor’s suits.”
It is, therefore, distinctly held that a receiver appointed in a creditor’s suit as the receiver in this case was, cannot enforce liabilities Under this section which requires the marshaling of obligations and claims in order that one stockholder may not be called upon to bear a greater burden than by the statute has been imposed upon him. The fact that the case cited relates to procedure before the Code in no way militates against or weakens the reasoning employed. The principle upon which the case rests is, that a receiver in an ordinary creditor’s suit, has no power to enforce a liability under this’section.
The judgment should be reversed, and a new trial ordered, with costs to the appellant to abide the event.
Van Brunt, P. J., and Bartlett, J., concurred.
Judgment reversed, new trial ordered, costs to appellant, to abide event.