Court Opinion

ID: 5220662
Source: CourtListenerOpinion
Date Created: 2022-01-06 16:33:11.015334+00
Date Added: 2024-06-11T08:27:30.642628
License: Public Domain

Laughlin, J.
(dissenting):
The appellant demurred to the complaint, and thereupon the motion for judgment against him on the pleadings was made1 and granted. The complaint contains four counts on separate causes of action, for work, • labor and services, consisting of dredging, performed by the plaintiff for the W. H. Beard Dredging Company, which was a corporation duly organized under the laws of West. Virginia, and for the rent of a scow. The judgment demanded is that the defendants account for the property of the corporation which was transferred to them, and that it be adjudged that plaintiff has a lien thereon for the amount of the indebtedness and that the property be sold to satisfy the same, or that plaintiff have judgment against the defendants for the amount of such indebtedness. The three individual defendants were directors of the W. H. Beard Dredging Company, and two of them compose the copartnership firm of William Beard & Co., and they are sued in both capacities. The plaintiff’s debtor is-not made a party defendant. Plaintiff seeks to hold appellant liable to account and for the indebtedness as' a director of the debtor corporation and as' *350a member of the copartnership firm to which all of the assets of the debtor corporation have been transferred. The grounds of the demurrer are that there is a defect of parties defendant in that the debtor corporation is hot joined, and in that the stockholders thereof are not joined, and also that causes of action have been improperly united in that causes of action against the directors of the debtor corporation have been united with causes of action against its assignees; and further that the complaint' does hot state facts sufficient to constitute causes of action.
I am of opinion that the debtor corporation is a necessary party defendant, and that the complaint does not state facts sufficient to constitute a cause of action against the-appellant, The theory upon which the learned counsel for the respondent attempts to sustain the action, Without joining the'-debtor corporation, is that it has been dissolved and that its assets there-. upon passed into the hands of the directors as trustees. I thirds, however, that this, does not dispense with the necessity] of suing the corporation and establishing the 'indebtedness! against it by an adjudication which would thus be binding, not • only on the corporation, but on its directors, stockholders and other creditors as well. The statute of West Virginia, with respect to the continuance of the corporate existence after dissolution for the purpose of suing and being sued in liquidating the business of the corporation, differs in, phraseology from that of our own State, but not, I think, in substance. Under Our statute it has been quite recently held by this court that an action for an indebtedness owing by the corporation cannot be maintained against the directors after dissolution without joining the corporation. (Cunningham v. Glauber, 133 App. Div. 10.) Subdivision 3 of section 221 of the General Corporation Law of New York (Consol. Laws, chap. 23; Laws of 1909, chap. 28), providing for the continuance in existence of a dissolved corporation for the purposes in question, is as follows: 'c 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 su§ and be sued for the purpose *351of enforcing such debts or obligations, until its business and affairs are fully adjusted and wound up.”
Section 59 of chapter 58 of the Code or Statutes of the State of "West Virginia, set forth in the complaint, provides as follows: “When a corporation shall expire or be dissolved, its property and assets shall, under the order and direction of the board of directors then in office, or the receiver or receivers appointed for the purpose by such circuit court as is mentioned in the fifty-seventh section of this chapter, be subject to the payment of the liabilities of the corporation, and the expenses of winding up its affairs; and the surplus, if any, then remaining, to distribution among the stockholders according to their respective interests. And suits may be brought, continued or defended, the property, real or personal of the corporation, be" conveyed or transferred under the common seal or otherwise, and all lawful acts be done, in the corporate name, in like manner°and with like effect as before such dissolution or expiration; but so far only as shall be necessary or proper for collecting the debts and claims due to the corporation, converting its property and assets into money, prosecuting and protecting its rights, enforcing its liabilities, and paying over and distributing its property and assets, or the proceeds thereof to those entitled thereto.”
These statutory provisions with respect to the point in question are not, I think, distinguishable, and the construction placed upon our statute should be applied to the statute of West Virginia.
The learned counsel for the appellant also contends, on the authority of Styles v. Laurel Fork Oil & Coal Company (47 W. Va. 838), that the stockholders are necessary parties, and that we should be governed by the construction placed upon the statute in this regard by the courts of West Virginia (O’Reilly, Skelly & Fogarty Co. v. Greene, 18 Misc. Rep. 423), but I do not deem it necessary to express an opinion on those questions.
Technically speaking, there is no cause of action stated against the members of the copartnership firm of William Beard & Oo. upon any possible theory, for while it is alleged that all of the assets of the corporation were transferred to *352that firm, it is not alleged that the assets had any value, or that there were in fact any assets. However, the point that the complaint fails to state a cause of action is well sustained on a broader ground. Each count of the complaint contains the allegation that “on or about the 14th day of March, 1910, the said W. H. Beard Dredging Company was duly authorized to be dissolved and discontinue business as a corporation, and surrendered to the said State of West Virginia its charter and corporate franchise and duly authorized its existing Board of Directors, who were William Beard, Lavinia Beard and John B. Summerfield, to proceed to pay off and discharge its debts, liabilities and’ obligations, and to transfer and set over to William Beard and Lavinia Beard, composing the- firm of William Beard and Company, the whole of the property belonging to the said corporation, the W. H. Beard Dredging Company, both real and personal, together with all choses in action and the good will of said corporation. ” It is thus expressly alleged that the trustees -were authorized to- transfer and set over the property of the corporation to the copartnership, and' it is further alleged- that this was done, but the allegation in which it is stated that the property was so transferred contains the averment that this was done “in- violation of ” the statutes of West Virginia.. That is an allegation of a legal conclusion. If, as alleged, the directors were authorized to pay off and discharge the debts, liabilities and obligations.of the corporation, and to transfer the assets to the copartnership, it is difficult to see, on the mere allegation that the transfer was made, how the transfer was in violation of the statutes. ’ It is not to be mferred that they were to discharge the obligations of the corporation by dividing up the assets as they existed among the creditors, and; if so, the allegation of the complaint that they were authorized to transfer the assets of the corporation to the copartnership could only be true on the theory that the copart-nership as a creditor was entitled thereto. It is to be presumed that they were authorized to sell and dispose of the assets of the corporation and to use the proceeds to discharge the obligations of the company.- The consideration for the transfer of the assets of the corporation to the copartnership is not stated. It is not to be presumed that such transfer was *353made at an inadequate consideration. The mere fact, therefore, that- the directors, on the dissolution of the corporation, received its assets as trustees for the- creditors, and that they transferred the same to the copartnership, does not establish a liability on the part of an individual director or member of the copartnership firm either to account or for a personal judgment.
I, therefore, vote for reversal.
McLaughlin, J., concurred.
Order affirmed, with ten dollars costs and disbursements, with leave to defendant to withdraw demurrer and to answer on payment of costs.