Court Opinion

ID: 5184760
Source: CourtListenerOpinion
Date Created: 2022-01-06 04:46:53.844617+00
Date Added: 2024-06-11T08:26:42.229458
License: Public Domain

Green, J. (dissenting):
The case of Marshall v. Sherman (148 N. Y. 9) cannot be considered an adjudication that the Supreme Court of this State possesses no jurisdiction over an action of this character nor any power' to grant the relief demanded.
The action in that case was brought by a judgment creditor of a foreign corporation, to enforce the statutory liability of a stockholder, the corporation having been dissolved and a receiver appointed. The Court of Appeals has explicitly declared that “ if, as sometimes happens, broader statements were made by way of argument or otherwise than were essential to the decision of the questions presented, they are the dicta of the writer of the opinion and not the decision of the court. A judicial opinion, like evidence, is only binding so far as it is relevant, and when it wanders from the point at issue it no longer has force as an official utterance. The failure to read the opinions of courts with this fact in mind gives rise to much fruitless litigation.” (Colonial City T. Co. v. Kingston R. R. Co., 154 N. Y. 493, 495.)
In the language of Chief Justice Shaw : “ This shows how necessary and important it is, in construing judicial decisions, to consider them as made with a tacit. reference to the subject-matter and the facts and circumstances of each case, and with the limitations and qualifications implied thereby.” (Atlantic Bank v. Merchants Bank, 10 Gray, 555.)
“ Since no two cases are precisely alike,” observes an able writer on jurisprudence (Austin), ‘‘the decision of a specific case may turn upon the reasons which are suggested to the judge by its specific peculiarities or differences. And that part of the decision which turns on those .differences, or that part of the'decision which turns on those special reasons, cannot serve as a precedent for subsequent decisions, or a rule or guide of conduct. For as every case has features of its own, and as every judicial decision is a decision on a specific case, a judicial decision as a whole or as considered in *571the' concrete, can have no application to another, and, therefore, a different case.” (2 Austin on Juris. 648.) Minute difference in the circumstances of two cases may prevent any argument from being deduced from the one to the other.
In the.absence, therefore, of any controlling authority or precedent, the question here presented must be determined upon principle.
The defendants, residents of this State, severally subscribed for shares of stock in an Illinois corporation, and in consideration of the issuing of such shares to them respectively, they agreed to pay for the same in such installments and at such time or times as should be determined by the directors. They also agreed that, if such corporation should cease to do business, or be dissolved, or if an execution against its property should be returned unsatisfied, each would pay his pro rata share of the debts or liabilities to the extent of the unpaid portion of his stock after exhausting the assets of the corporation, and that if any stockholder should not have property enough to satisfy his portion of such debts, then the amount should be divided among the remaining stockholders. The contract made was to be performed in Illinois and the subscribers agreed to fulfill their obligations there and to abide by its laws.
Having entered into these obligations, the defendants refused to perform them, and this action is brought by the official representative of the corporation and its creditors to compel contribution.
The plaintiff is seeking the aid of our courts, to enforce the performance of a plain contractual obligation or liability, and he is entitled to the relief prayed for if the court has the power to grant it, consistently with the rules of law and without prejudice to the reciprocal equitable rights of all the stockholders as between themselves. The liability of a stockholder to pay what is unpaid in respect of his shares is an obligation founded in contract and not depending upon statutes, and the sequestering of the unpaid subscriptions of the stockholders for the benefit of the creditors of the corporation, when it becomes insolvent, is merely a means devised by courts of equity to compel men to pay. their honest debts. (3 Thomp. Corp. §§ 2952, 3566.) And if the obligation thus assumed is valid and subsisting according to the law of the domicile of the corporation, it will, upon obvious principles, be enforced in the courts of every other State. (Id. § 3047.) Unpaid stock is as *572much a part of the assets of the corporation as any other, part of its property — there is no distinction. “Unpaid stock is as much a part of this pledge (trust fund), and as much a.part of the assets of the company, as the cash which has been paid in upon it. * * * As regards creditors, there is no distinction between such .a demand and any other asset which may form a part of the property and effects of the corporation.” (Sanger v. Upton, 91 U. S. 60. And see Dayton v. Borst, 31 N. Y. 435.)
The right to enforce payment of these unpaid balances will pass to an assignee for the benefit of creditors. (3 Thomp. Corp. §§ 3551, 3553.)
The objection to the jurisdiction of the court is founded upon the contention that the remedy adopted and the relief demanded are special and peculiar, and, therefore, local.
The objection to the jurisdiction of the subject of the action is based upon the contention that the remedy provided by the laws of Illinois is a special and peculiar one, local in its nature and character, and must, therefore, be sought in the tribunals of that State; that the courts of this State are necessarily precluded by the peculiar ■ nature and circumstances of the matter, from entertaining a suit of this description. It is difficult to perceive or to comprehend that there is anything peculiar or special in the equitable remedy to enforce contribution among stockholders of a corporation than there is in respect of- any other class of debtors who are under obligation to contribute their proportionate payments to the satisfaction of an indebtedness. This remedy is a common, ordinary and usual one, and there is no peculiarity pertaining to it. Since all the stockholders were not within the jurisdiction of the' courts of Illinois, the plaintiff was necessarily unable to.obtain full redress and relief. It became necessary, therefore, to pursue the non-resident debtors, and to institute suits against them in the proper forum. The courts of that State afforded all the relief they were able to grant, and there is no sound reason why the courts of this State should refuse such redress as they are competent to accord or confer. The Illinois courts could not grant complete relief; neither is it competent for our courts to accord the just, precise and adequate measure of redress. It is not true, therefore, that the laws of Illinois provide •a special and peculiar remedy which can be enforced only in that *573State, since there are many stockholders and debtors not resident within the jurisdiction, or reachable by process of the court.
The defendants’ counsel present the following as an argument against entertaining jurisdiction of this action: That in order to grant the relief demanded, it will be necessary to establish the amount of the corporate indebtedness, and also determine which of all the stockholders in this and other States are solvent, and how much of their subscriptions remain unpaid, in order to determine whether these defendants are liable for the whole amount of their unpaid subscriptions ; and that it appears that certain stockholders, resident in other States have never been parties to any action, nor could their rights be determined in this. The answer is that the amount of the corporate liabilities and the value of the assets have been established by the foreign decree, and that the amount of the unpaid subscriptions and the question of the solvency or insolvency of the respective stockholders, etc., are all matters of proof; and though the plaintiff may encounter some difficulty or impediment in the way of establishing,, by legal proof, the fact of insolvency of particular stockholders, that, that will not create an insuperable objection to granting any relief whatever. Whether the fact of insolvency can only be established by judgment against a stockholder and the return of an execution nulla bona, or whether it may be established by other prbof, is irrelevant to the question of jurisdiction. The plaintiff may not seek to charge the solvent stockholders with the proportionate share of the indebtedness imposed upon those that are insolvent. Though all the relief prayed for may not or cannot be granted, that is no reason why jurisdiction should not be entertained and appropriate redress be accorded. The amount of the assets and liabilities, and of the unpaid subscriptions, being ascertained and determined, the jfro rata share of the corporate debts chargeable, to the respective stockholders will be a matter simply of arithmetical computation.
In respect of the stockholders residing within States other than Illinois and Hew York, their absence cannot affect the jurisdiction of the court to proceed against the parties to the action.
To require persons who are without the jurisdiction of the court to be made parties would be equivalent to a dismissal of the' suit, and amount to a denial of justice. Hence, it is a rule of the Court of Chancery that when a person who ought to be a party is out of *574the jurisdiction, if the fact is stated in the bill and admitted by the . answer, or proved (if denied) at the hearing, that of itself' constitutes a sufficient ground for dispensing with his being made a party, and the court will proceed to a decree without him. It is an important qualification engrafted on this particular exception to the general rule, that persons who are out of the jurisdiction, and are ordinarily proper and necessary parties, can be dispensed with only when their interests will not be prejudiced by the decree, and when they are not indispensable to the just ascertainment of the merits of the case before the court. The doctrine ordinarily laid down on this point is, that where the persons who are out of the jurisdiction are merely passive objects of the, judgment of the court, or their rights are merely incidental to those of the parties before the court, then, inasmuch as a complete decree may be obtained without them, they may be dispensed with. (Story Eq. Pl. §§ 78-82; Angell v. Lawton,, 14 Hun, 71.)
Lord Elder observed that “there are many instances of justice administered in this court in the absence of those without whose presence, as parties, if they were within the jurisdiction, it would not be administered, as it obviously cannot be so completely, as if all persons interested were parties: But the court does what it can” (Story’s Eq. Pl. § 78, note.)
Where contribution only is sought, all the stockholders who can be reached by the process of the court may be joined in the suit. It is no objection that there are others beyond the jurisdiction of the court who - cannot, for that reason, be made parties. (Kennedy v. Gibson, 8 Wall. 498 ; Sackett's Harbor Bank v. Blake, 3 Rich. Eq. [S. C] 225, quoted in McDonough v. Phelps, 15 How. Pr. 381; and see Thomp. Corp. §§ 3495, 3541.)
In Mann v. Cookie (20 Conn. 178) a receiver of an insolvent Hew York railroad corporation was permitted to maintain a bill in chancery against a stockholder to enforce payment of the balance due on the shares subscribed by him.' The doctrine was stated to be that all subscribers-to the ¡capital stock of a corporation which, by its charter, may require or demand payment of the capital subscribed, incur a debt, which may be enforced by any appropriate common-law or equitable remedy, and, that this was the law of Hew York, by which the transaction was to be judged.
*575In Dayton v. Borst (31 N. Y. 435 ; 7 Bosw. 115) a receiver of a foreign corporation was held entitled to maintain an action at law to recover the amount of a subscription to the capital stock. The amount unpaid exceeded the amount of the indebtedness of the corporation, and the recovery was limited to the latter amount.
In Griffith v. Mangam (73 N. Y. 611; 42 N. Y. Super. Ct. 369) the action was brought by judgment creditors of a foreign corporation against a stockholder, who held stock not fully paid for, in an amount exceeding the plaintiff’s claim. It appeared that there were other stockholders who had not paid up their subscriptions in full. It was objected by the defendant that there could be no recovery by those creditors against him, a single stockholder, and that the action necessary to charge the defendant was one in equity, bringing in the other stockholders in like predicament with him. It was so held by the court below,, and the Court of Appeals sustained the objection upon the authority of Mann v. Pentz (3 N. Y. 416; Morgan v. New York & Albany R. R. Co., 10 Paige, 290; and see 3 Thomp. Corp. §§ 3428, 3429, 3469.)
In Pugh v. Hurtt (52 How. Pr. 22) an action by a foreign receiver to enforce the statutory liability of a stockholder was entertained. The foreign court directed the receiver to proceed to collect, by suit, the statutory liabilities of stockholders residing without the- jurisdiction. Lawrence, J., remarked: “ He is seeking to enforce the liability of the defendant as a stockholder of that company, which liability was voluntarily incurred by the defendant when he became such stockholder. In short, the plaintiff asks the intervention of this court to enable him to compel one of the citizens of this State to carry out and perform an obligation into which, of his own free will, he entered when he became a stockholder of a company organized under the laws of the State of Ohio. Instead of turning the plaintiff out of court, justice requires that, comity should be invoked in his favor, and that he should be aided and assisted by this court in enforcing the defendant’s liability.”
In McDonough v. Phelps (15 How. Pr. 372, 382) Hoffman, J., after reviewing the cases relating to the liability of stockholders upon their subscriptions, concluded that “ we find the principle that the tribunals of other States will enforce against a resident stockholder the same rights which the company, its creditors or representative, *576could have enforced against him in the State which created the corporation.” (3 Thomp. Corp. § 3048.)
In Holmes v. Sherwood (16 Fed. Rep. 725) a bill in equity was filed in the United States District Court in Iowa by judgment creditors of an Illinois' corporation to reach the unpaid balances on stock subscriptions, and the suit was entertained and the appropriate relief granted.
The Legislature in 1845 (Chap. 234) passed a statute to facilitate the collection of debts due by foreign' corporations. It provided that, upon the return of an execution against such corporation unsatisfied in whole or in part, the creditor might commence a suit in law or in equity against the stockholders, or any of them, to compel the payment of any sum or sums of money not paid in, or remaining due upon each share held by them, or any. of them, and that he might recover in such suit any sums to the amount due the plaintiff which such defendants would be liable to pay in any event in the State where such corporation was located. This statute was considered and applied in Seymour v. Sturgess (26 N. Y. 134); McDonough v. Phelps (15 How. Pr. 372). It was repealed, however, in 1877, and section 646 of the Code was enacted as a substitute for it.. That section provides that under ;a warrant of attachment against the corporation, the sheriff may levy upon the sum remaining unpaid upon a subscription to the capital stock of the corporation, made by a person within the county.
In Persch v. Simmons (3 N. Y. Supp. 788), Ingraham, J., held that a judgment debtor of a foreign corporation, after return of execution unsatisfied, may sue a stockholder indebted, to it for an unpaid subscription to its capital stock, under the provisions of section 1871 of the Code, which provides that, where execution is returned unsatisfied, the creditor may maintain an action against the debtor, or any other person, to compel the discovery of property or money due the debtor, to procure satisfaction of his demand. (And see Thomp. Corp. § 3064.)
The necessity of joining other stockholders in the action was not raised by the demurrer interposed, and, consequently, the point was not considered.
The complaint is demurred to also upon "the ground that the facts alleged do not constitute a cause of action, and in support of this *577objection, as well as the objection to the jurisdiction of the subject of the action, it is contended that no action can be maintained against these defendants until the amount to be collected from each stockholder is first ascertained and .assessed by order of the foreign court. That might be true if an action at law was.brought by the receiver or assignee against the separate shareholders to recover a proportionate amount of the corporate indebtedness. And yet, in the cases cited in this opinion, it was not considered a condition precedent to the maintaining of the action, though the point was not expressly adjudicated. ' And since the foreign court abstained from determining the amount of the indebtedness due from each non-resident stockholder and directed the assignee to institute this suit in the State of their domicile, for the determination of the extent of their respective liabilities, there is no apparent reason why our courts should not proceed and determine the matter in controversy. The defendants were not parties to the proceedings in the foreign tribunal, and would. not, we presume, enter an appearance therein; whilst here, they will have their day in court and have the opportunity to meet the proof adduced against them. The decree of the foreign court may be conclusive as to the amount of the assets and liabilities, and of the validity of -an assessment decreed against or upon the stockholders (Hawkins v. Glenn, 131 U. S. 319), but it would not be so in respect of the amount unpaid upon subscriptions to the stock.
In Kennedy v. Gibson (8 Wall. 498) it is said : “ The liability of the stockholders is several and not joint. The limit of their liability is the par of the stock held by each one. Where the whole amount is sought to be recovered, the proceeding must be at law. Where less is required, the proceeding may be in equity, and in such case an interlocutory decree may. be taken for contribution, and the case may stand over for the further action of the court — if such action should subsequently prove to be necessary — until the full amount of the liability is exhausted.”
In -view of these statutory provisions quoted and the authorities referred to, we are unable to perceive that the Supreme Court possesses no power or jurisdiction of the subject of the action' or to afford the relief demanded. If, as it is held, a foreign receiver may *578maintain an “ action at law ” against one stockholder, .why may he not be permitted to enforce contribution of their unpaid balances to the satisfaction and discharge of the coi*porate indebtedness? If jurisdiction exists in the one instance, may it be, logically, denied in the other ?
If all the stockholders of this corporation were within the jurisdiction of the court and served with process, would not jurisdiction of the suit be entertained ?
If so, then the non-residence of some of the stockholders, whose presence is not necessary to a determination of the liability of the parties defendant, cannot be set up to defeat such jurisdiction.
The judgment overruling the demurrer should be affirmed, with costs.
Follett, J\, concurred.
Interlocutory judgment reversed, with costs, and demurrer sustained with, costs, with leave to the plaintiff to amend, on payment of the costs of the demurrer and of this appeal.