Court Opinion

ID: 3632193
Source: CourtListenerOpinion
Date Created: 2016-07-06 00:11:23.827977+00
Date Added: 2024-06-11T13:34:03.987328
License: Public Domain

Following the plaintiff's allegation in his complaint, that the defendant was a stockholder in the Sackett's Harbor and Saratoga Railroad Company, and that a certain amount remained unpaid upon his stock, is the allegation *Page 162 
that on the 31st of March, 1857, he recovered judgment against that company for the sum of $248.08, damages and costs, "for a debt contracted by them." It does not appear from the skeleton statement of the judgment given in evidence or otherwise, except from the report of the referee, for what cause of action the judgment was recovered. From that, it appears that the recovery, instead of being for a debt contracted by the company, was for work, labor and services performed by the plaintiff himself "and his hired man and team," for certain contractors engaged in constructing for the company a section of their road. The only question I propose to discuss arises upon the defendant's exceptions to the rulings of the referee, which were, in substance, that the judgment, as stated in his report, warranted a recovery by the plaintiff against the defendant in this action as well for the labor performed by the plaintiff's man and team as for the labor and services performed by the plaintiff in person.
Whether a judgment against a company is in a separate action against a stockholder for the recovery of the same debt, evidence of the debt sued upon, presents a question which has been much litigated in this State, and yet never decided in any of its courts of last resort. As early as 1822, SPENCER, Ch. J., as a member of the Court for the Correction of Errors, without alluding to the fact that the liability of stockholders, when sued separately, was remote and dependent upon the contingency of the ability of the creditor to collect his debt by execution against the company, or the relation of the stockholder, when thus sued, to the company, held that as the debt against the company was also a debt against the stockholder individually, and because the company itself was concluded by the judgment, the stockholder when sued alone was equally concluded. (Slee v.Bloom, 20 Johnson, 669, 684.) This opinion was afterward referred to with apparent approbation in Moss v. Oakley (2 Hill, 265, 267), the decision of the question not being regarded as necessary to the decision of the cases to which I have referred, but simply as the individual expression of a single judge in each case, was again presented in Moss v. *Page 163 McCullough (5 Hill, 131), in which, after a full review of all the cases, and a discussion of the principle involved by Justices COWEN and BRONSON, the court held, NELSON, J., concurring, that a judgment against the company was not, as against a stockholder when sued separately for the same debt, even prima facie
evidence of the debt sued upon. The case went back and was retried, and upon the same facts appearing, the plaintiff was nonsuited. Then, after the change wrought in our judicial system by the Constitution of 1846, the same case was brought before the General Term of the fourth judicial district, where a motion for a new trial prevailed, the court holding, among other things, that the judgment against the company was, in a separate action against stockholders, prima facie evidence of the debt sued upon. (7 Barb., 279, 296.) Whether a new trial was had, or what was the ultimate disposition of the case, does not appear from the reports. The question continuing to be unsettled, came up in the Court of Appeals in March, 1860. (Belmont v. Coleman,21 N Y, 96.) So far as appears from the report of that case, seven only of the eight judges, of which it was then composed, were present. Other questions were involved. BACON, J., who delivered the opinion of the court, held that the judgment against the company, was in a suit against a stockholder for the same debt,prima facie evidence of the debt; in this view two of his associates concurred, and four "refused to commit themselves to the doctrine that a judgment against the corporation was evenprima facie evidence against a stockholder" (id., 102), and the case was disposed of upon other grounds. In July, 1861, the question was again presented to the Supreme Court, of which Justice BACON was at the time the presiding justice, and it was then, by the unanimous judgment of the court, held that a judgment against the company was not even prima facie evidence in a suit against a stockholder for the recovery of the same debt. (Strong v. Wheaton, 38 Barb., 616, 621.) If, therefore, the defendant is not sustained by the weight of authority, he is certainly not so prejudiced by *Page 164 
adjudged cases as to prevent the question presented from being considered as if it was now presented for the first time. In cases where, as the plaintiff in this case assumes it to be indispensable to his right to recover against a stockholder that he should first recover judgment against the company for the same debt, after establishing the organization of the company, and that the defendant is a stockholder, three other things must be established by him, viz.: the existence of the debt, the recovery of the judgment and the issuing and return of execution unsatisfied. The failure of either would defeat the action. Neither of these facts are by statute made evidence of the existence of either of the other facts. In order, therefore, to determine whether, at common law, the judgment against the company was evidence as against the defendant, a stockholder, in this separate action against him for the same debt, it becomes necessary to ascertain the relation which the stockholder, when thus separately sued, bears to the company. The right of the plaintiff and the liability of the defendant when separately sued is, in brief, this: if his debt against the company could have been collected by execution upon his judgment the defendants are not liable; but if it could not, they are. To get more clearly at the relation between the company and its stockholders, let us carry out a case suggested by COWEN, J., in Moss v.McCullough, and suppose the statute to be silent on the subject of the individual liability of the stockholders, and, instead of a liability thus created, it had been created by contract, commencing with a recital, "That, whereas, the defendant is a stockholder in the company and desirous of giving it credit; and in consideration thereof, and that the plaintiff will render services and furnish materials for the use of the company, he agreed that, in case of the failure of the plaintiff to collect of the company the sum for which he should give it credit by judgment and execution, he would, in that event, pay the debt or any deficiency that should remain, after the return of execution, to the amount of the stock held by him in the company," it would amount to the same thing. The fact *Page 165 
that one liability is created by statute, and the other by contract, is quite immaterial; both being subject to the same rules of interpretation, leave the parties bearing the same relation to each other they would if both had been created by contract; and that relation is manifestly that of a mere guarantor that the debt is collectible of the company. Holding that relation, the judgment against the company was not evenprima facie evidence in this separate suit against the defendant. (Jackson v. Griswold, 4 Hill, 522, 529, 530.) The only purpose for which the judgment could be used as evidence would be after the existence of the debt had been established to prove that it had been prosecuted to judgment againt the company as one step requisite to establish the defendant's liability. If the judgment is even prima facie evidence, not having been made so by statute, I am unable to understand why it is not, like a judgment in any other case, conclusive. But assume it to beprima facie evidence of what it contains, leaving the defendant to show that the plaintiff was not, in law, entitled to such recovery, and the judgment itself, as stated in the report of the referee, being for an inseparable part of its amount for labor and services, not performed by the plaintiff himself, furnished, as the Court of Appeals have held (Atchison v. Troy and BostonR.R. Co., 5 Abbott, Sp. T. Rep., 329), a valid objection to the recovery, had the defendant had his day in court to make it, and hence the judgment should be reversed.
All concur with EARL, C.
LOTT, Ch. C., also concurs with GRAY, C., in holding that the judgment against the company is no evidence whatever of indebtedness against the stockholders.
Judge HUNT concurred in that portion of GRAY, C.'s opinion which holds that the record shows that the judgment was recovered against the corporation, for causes of action for which stockholders are not liable; and that the judgment *Page 166 
should be reversed for that reason. He also held that the judgment against the corporation was prima facie evidence against the stockholder.
All concur for reversal.
Judgment reversed.