Court Opinion

ID: 5192313
Source: CourtListenerOpinion
Date Created: 2022-01-06 15:38:09.312396+00
Date Added: 2024-06-11T08:26:56.821418
License: Public Domain

Smith, J. (dissenting):
The reasoning of Justice Kellogg, to my mind, disregards one material fact. This devastavit has been made good to the corpora-; *230tion by an' assessment paid by the stockholders. Generally, for a devastavit of the assets of a corporation, the corporation only has a right of recovery. If the corporation refuses to sue, an action may be brought by a stockholder for the benefit of the corporation. But is this action brought for the benefit of the corporation ? If stockholders, to make good a devastavit of the directors, have been compelled to pay an assessment upon their stock, does the corporation still have a right to recover for that devastavit ? Are not the stockholders, to the extent to which they have made up the loss, subrogated in equity to the rights of the corporation as against the directors ? No right would then be taken from the corporation nor from its creditors, and the injury done to the individual stockholder could thus be directly compensated. Where an insurance company makes good to the owner a loss by fire occasioned by the negligence of a common carrier, that company is subrogated to the rights of the insured as against the common carrier for its negligence. In May on Insurance (Vol. 2 [4th ed.], § 454) the right is thus stated : “And the right is based upon the equitable doctrine that where one has been obliged to pay money to another by the non-feasance or misfeasance of a third, who, being at fault, ought to bear the loss, the party so paying, as by his direct obligation towards the party suffering the loss he may be compelled to do, shall be allowed, indirectly and through the right which the injured party had, to compel the wrong-doer to bear the burden which was imposed by his fault; although, between him and the wrong-doer, there is no direct relation upon which to found a cause of action. In other words, the party injured being so situated that he may call, by his right at law, upon the party who is responsible for the injury, or, by his contract, upon one who is not at fault, for his indemnity; if he elect the latter then the latter shall be allowed to do, in his name, what in the first instance the injured party might have done, and justice, as between all the parties, decrees ought to be done. * * * The insurer stands practically in the position of a surety, and whenever he has indemnified the owner for the loss, he is entitled to all the means of indemnity which the satisfied owner held against the. carrier. This right depends not upon privity of contract, but is worked out through the right of the creditor of owner and in his name, and exists although the insurer was not legally, bound to *231indemnify the insured for the loss he sustained.” (See, also, Insurance Co. v. The C. D., Jr., 1 Woods, 72; 13 Fed. Cas. 65 ; Connecticut Fire Ins. Co. v. Erie R. Co., 73 N. Y. 399 ; Fayerweather v. Phenix Ins. Co., 118 id. 327; Hall & Long v. Railroad Companies, 13 Wall. 369.)
If this subrogation be allowed to an insurance company which has no privity whatever with the wrongdoer, a fortiori should it be allowed to a stockholder to whom the wrongdoer owes the duty of diligence-. Primarily, the devastavit of the assets of a corporation constitute an injury to the corporation alone in which the stockholders are only indirectly interested. Where, however, they are required to make good to the corporation that loss, their interest then becomes direct, and I can see no reason why the injury to the corporation, which they have repaired, does not' become an injury to them for which they can recover.
The argument thus far proceeds upon the rights of a stockholder who has paid his assessment. If, however, his stock has beém sold in default of payment of that assessment, the purchaser upon that sale obtains the stock at its depreciated value. He has, therefore, suffered nothing by the wrong of the directors. The stockholder, however, who has lost his stock by reason of the assessment to make good the loss caused by the devastavit is the one who has suffered and to whom the right of action should belong. I agree that one who has sold his stock has no such interest that he can bring' an action to make good to the corporation this loss, but where the corporation is made whole by a compulsory assessment, to collect which • the stock has been sold, the right of a stockholder who has thus lost Ms stock is not a representative, but an individual right, for a direct injury to himself.
And such an action, I think, must be one in equity. To the extent to which the loss is made good by an assessment the stockholder is subrogated to the right of the corporation, but to that extent only. . Beyond that the loss is still the.loss of the corporation, for which it may sue. In an action brought by a stockholder, then, who has paid an assessment, or by a former stockholder who has lost his stock through failure to pay the assessment, the corporation is a necessary party defendant, in which action must be determined how far the assessment has. made good the loss caused by .the *232devastavit,, and to what extent the stockholder should be subrogated to the rights of the corporation as against the directors.
This is not the theory upon which the case was decided, nor is it the theory upon which it was tried, In the complaint, however, the devastavit is alleged, the assessment of the stock to pay there" for, and the sale of the stock to pay that assessment. The bank is made a party defendant, together with the delinquent directors. The defendants have answered, and the plaintiff is entitled to any relief justified by the facts alleged and the proof given. The judgment has not, I think, transgressed any of these rules, and should not be reversed because a wrong reason has been given therefor.
Judgment reversed, with costs, and action dismissed, with costs.