94 N.Y.S. 310 | N.Y. App. Div. | 1905
The facts are not disputed, and the question presented depends upon the liability of the defendant for an assessment levied upon certain stock of a Minnesota corporation by a judgment of order of the courts of that State. In considering this question it must be borne in mind that the defendant is a resident of the State of New Jersey with a place of business in the State of New York; that he is not and never has been a resident of or domiciled in the State of Minnesota, and was not a party nor did he appear in any of the proceedings in the courts of that State which resulted in the appointment of the receiver, or in imposing the assessment upon the owners or holders of the stock of this corporation of which the plaintiff was appointed receiver. The learned referee found that on May 12, 1882, a corporation known as the North Western Manufacturing and Car Company was incorporated under the laws of Minnesota. The opera
It also appeared that on May .6, 1901, a judgment was recovered against the thresher company by the Merchants’ National Bank of St. Paul, and that on August 16, 1901, a judgment was entered in the District Court of Minnesota sequestrating the property of the thresher company and appointing the plaintiff herein as the receiver thereof, and upon this receiver there was conferred the power to enforce the collection of any assessments or stockholder’s liability either in the courts of Minnesota or in the courts of any other State or territory. The plaintiff duly qualified as such receiver and entered upon the discharge of his duties as such. ■ On the 16th of pril, 1902, the plaintiff, as receiver, presented a petition to the istrict Court praying that said court by order or judgment direct
The referee found as a fact that the defendant, prior to January 1, 1903, had no knowledge or notice of the proceedings in the District Court of Washington county, Minn., in which the plaintiff was appointed receiver of the thresher company, in which an assessment was levied upon its stockholders and that he was not within the jurisdiction of the said District Court; that said assessment was made upon the finding of said court that the holders of 18,301 shares of the preferred stock of the said corporation, of about 9,877 shares of the common stock, and the beneficial holders of 3,518 shares of common stock included in certain common stock stand ing in the name of the trustees, were financially able to pay such assessment; and that upon these solvent stockholders there was levied an assessment sufficient to pay all the debts of the corpora tion; that such assessment was also levied to meet a very consider able expense which the plaintiff had theretofore incurred in main States, and a large amount of anticipated additional expenses to b< incurred by him in enforcing such assessment in many difieren States and in many different counties of such different States a against the solvent stockholders, as well as the general expenses o
There was no finding by the learned referee as to the amount of the indebtedness of the thresher company or the actual amount of a ratable assessment upon this stock which had been held for the defendant. The liability of the defendant is based entirely upon the force of the adjudication of the Minnesota court imposing the assessment as binding on the defendant, and the learned referee has held, as a conclusion of law, that the defendant is liable, as a stockholder of the thresher company, for the amount of the said assessment of eighteen dollars per share upon 400 shares of the common stock of that company. In his opinion he stated that the defendant, as a stockholder, was concluded by the judgment of the court in the proceeding against the corporation; that in such corporate matters he was, in fact, represented by the corporation and, in law, bound as a privy.
To this conclusion of the learned referee I do not agree. The liability of a stockholder of a Minnesota corporation is based upon the provisions of section 3 of article 10 of the Constitution of that State which is as follows: “ Liabilities of stockholders. Each stockholder in any corporation (excepting those organized for the purpose of carrying on any kind of manufacturing or mechanical business) shall be liable to the amount of stock held or owned by him;” and upon the provisions of chapter 272 of the Laws of Minnesota of 1899, which is entitled “An act to provide for the better enforcement of the liability of stockholders of corporations.” This latter act provides that the District Court, upon the petition of a receiver of such á corporation, appointed by said court, after notice, and upon proof by affidavit or otherwise as to the probable indebtedness of the corporation, and the expenses of such receivership and the probable amount of assets available for the payment of such indebtedness and expenses, and also as to what parties are or may be liable as stockholders of said corporation and the nature and extent of such liability, shall, if it is satisfied that the ordinary assets of said corporation, or such amount as may be realized therefrom within a reasonable time, will probably be insufficient to pay and discharge
It seems to me that a stockholder against whom such a liability is sought to be enforced is entitled to his day in court, and to insist that the facts upon which the liability is sought to be enforced shall be established by competent evidence as against him, in an action to which he is a party, and where the court seeking to enforce the liability has jurisdiction over him. And this has been recognized by the Conrt of Appeals in Howarth v. Angle (162 N. Y. 179). That action was brought to recover the amount due from a stockholder of a bank incorporated under the laws of the State of Washington, for an equal and ratable proportion of an alleged deficiency claimed to be due from the defendant on account of his ownership of-sixty-five shares of the capital stock of the said bank, and in speaking of such an action Judge Vann says : “The stockholders, however, may controvert in our courts all the essential
The learned referee called attention to this statement of Judge Vann, but refused to follow it upon the ground that this was not a point essential to the decision of the Court of Appeals in that case, and that the weight of authority is that the stockholder is concluded by the judgment of the court in the proceeding against the corporation, and that in such corporate matters he is in fact represented by the corporation and in law bound as a privy. The injustice in this case is striking, for here this defendant is not only held liable for his proportion of the debts of the corporation, but is also held to be liable for the proportion of those debts which the court in Minnesota has assumed to be payable by the stockholders of the corporation who are insolvent; and there is also imposed upon this defendant liability for the amount that the receiver will have to pay in enforcing the liability of this defendant and other solvent stockholders. The court of Minnesota assumed to impose this liability upon the defendant by virtue of the statute of that State passed in 1899, many years after the defendant had abandoned his stock in this corporation.
It follows that the judgment appealed from must be reversed and a new trial ordered before another referee, with costs to the appellant to abide the event.
McLaughlin, J., concurred; Patterson and Laughlin, JJ., concurred in result.
Judgment reversed, new trial ordered before another referee, costs to appellant to abide event.