Allen v. . Clark

| NY | Jan 24, 1888

[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] The sole question for our determination is whether the judgment for costs in favor of Starbuck, McCarty Matteson, in the action brought against them by the company for a tort, is a debt which can be enforced against the defendant as a trustee of the company, by reason of its failure to make, publish and file the report required by section 12 of the general manufacturing act of 1848, as amended by chapter 510 of the laws of 1875. That section provides that every such company "shall, within twenty days from the first day of January in each year * * * make a report * * * which shall state the amount of capital, and of the proportion actually paid in, and the amount of its existing debts * * * and if any of said companies shall fail so to do, all the trustees of the company shall be jointly and severally liable for the debts of the company then existing, and for all that shall be contracted before such report shall be made," etc. This judgment clearly was one of the debts which the company was bound to include among its "existing debts" in the report which it was required to make, file and publish within twenty days after the 1st day of January, 1886. The section requires the report to state the amount of all of its existing debts of every nature, and it is the clear meaning of the section that if such report be not made the trustees shall be personally liable for all debts which the company was thus bound to report. It may be inferred that it was the purpose of the law-makers to require this report to be made, published and filed for the information, benefit and protection of existing creditors of the company not only, but of all persons who might thereafter enter into contract relations with it. It may also have been the purpose of the law-makers to require the report from every manufacturing corporation as a check upon extravagance and mismanagement of its affairs by its trustees, by constantly keeping before them the reminder that at least once a year the affairs of the company are to be exposed to the public view. It may also be supposed that these reports were required, so that information might be readily obtained by assessors for the purpose of taxation, and by other public officials who might have occasion to supervise the conduct of the corporation, or to proceed against it for any purpose whatever; and, therefore, to make sure of the accomplishment of these important purposes, the trustees are made personally liable for all the debts of the company in case of the failure of the company, within the time specified, to make the report.

We think other sections of this statute throw some light upon the construction of section 12. In section 13 it is provided that "if the trustees of any such company shall declare and pay any dividend when the company is insolvent, or any dividend the payment of which would render it insolvent, or which would diminish the amount of its capital stock, they shall be jointly and severally liable for all the debts of the company then existing, and for all that shall be thereafter contracted, while they shall respectively continue in office." There the same sweeping language is used "all the debts of the company then existing," and that would include such a debt as the plaintiff is seeking to enforce in this case. Section 23 of the same act provides that "if the indebtedness of any such company shall at any time exceed the amount of its capital stock, the trustees of such company assenting thereto shall be personally and individually liable for such excess to the creditors of such company." The word "indebtedness" in this section clearly includes, not only every debt voluntarily contracted by the company, but every debt of every nature however contracted or arising.

This judgment for costs was in every sense a debt of the company which it was under precisely the same obligation to pay as any other debt. It is true it was not a debt existing antecedently to the judgment, but it was a debt created by the judgment itself, and as it was a debt against the corporation, which it was bound to pay, it could be enforced against the defendant.

It may be that the judgment is not conclusive as against the defendant, and it is undoubtedly open to him to show that the recovery was either collusive or fraudulent. But it is a debt created by the judgment itself. It is proved by the production of the judgment, and that is at least prima facie evidence of its existence. It is unlike the case of Miller v. White (50 N.Y. 137" court="NY" date_filed="1872-11-12" href="https://app.midpage.ai/document/miller-v--white-3578365?utm_source=webapp" opinion_id="3578365">50 N.Y. 137), where the judgment was upon a debt antecedently existing, in which case it was held that the judgment was neither conclusive nor prima facie evidence of the debt, and that it was the duty of the plaintiff to prove and establish his debt independently of the judgment. The reason upon which that decision is based can have no application to a case like this where there was no liability on the part of the company to pay the costs antecedently to or independently of the judgment. We have carefully examined all the authorities to which our attention is called, and we find none of them in conflict with the views here expressed.

We have not overlooked the clause which follows the words "debts of the company then existing," to wit: "And for all that shall be contracted before such report shall be made." The claim on the part of the defendant that these words limit the meaning of the former words to such debts of a corporation as are voluntarily contracted, we do not deem to be well founded. The word "contracted" here means the same as "incurred" and includes every debt for which the corporation becomes bound. There is no apparent reason for any discrimination as to the kind of debts, and we do not think any was intended.

Therefore the judgments of the General and Special Terms should be reversed and judgment given to the plaintiff upon his demurrer with costs.

All concur.

Judgment accordingly.