58 N.Y.S. 748 | N.Y. Sup. Ct. | 1899
This is a representative action by the plaintiff, as a creditor of the Murray Hill Bank, against the stockholders, to ere-
The Murray Hill Bank was organized on August 29, 1870, under the provisions of chapter 260, Laws 1838. On April .11, .1878, the capital of the bank was reduced to $100,000. It has never been a bank of issue. On August 11, 1896, the superintendent of banks took possession and closed the doors, since which time the bank has never resumed business. In the same month two" actions were begun looking to the dissolution of the bank and the appointment of receivers. One -of these was instituted by the directors and one by the' attorney-general. The directors’ action, was after some litigation dismissed on the ground that it had been superseded by the attorney-general’s action. In this latter action temporary receivers were appointed'on September 12, 1896, and a judgment of dissolution was entered on October 12, 1896. Permanent receivers y^ere appointed on February 24, 1897, and such receivers duly qualified and have continued to act until the present time. From the evidence given on the trial, it clearly appears that, while the exact difference between the collectible assets of the bank and the valid claims against it cannot yet be determined, still there must certainly be a deficiency far exceeding the par value of the whole capital stock of the bank.
The present action was commenced by the service of the summons and complaint on eleven of the defendants on December 6, 1896. Service upon other defendants was made on various days during December, 1896, and January, February and March, 1897. The permanent receivers not having been appointed at the time the action was commenced, t-héy, of course, were not made parties; subsequently, however, pursuant to an order of the Appellate Division of this court, entered on the 20th day of May, 1898, an amended and supplemental summons and complaint was served, bringing in the receivers as defendants, and making certain other changes in the parties to the action.
■ Under the provisions of the Banking Law- (Laws of 1892, chap. 689) as it stood at the time this action was commenced a suit against stockholders for a contribution " could only be maintained by a creditor or creditors. On May 17, 1897, before the receivers had been made party defendants, and before all the present defendants had been served with the summons and complaint, the legislature amended section 52
Numerous reasons have been assigned why .this action should not be sustained either against any of the defendants, or against individual defendants, who claim exemption, from liability upon grounds specially applicable only to themselves. The objection which is insisted upon most strenuously by all the defendants, is that the amendment to the Banking Law passed on May 17, 1897, so operated upon this action as to forbid its further prosecution, and to vest in the receivers alone the right to, pursue the stockholders for contribution. Section 52 of fhe Banking Law, as it stood when this action was commenced, provided as follows: “ Except as prescribed in the stock corporation law, the stockholders of every such (banking) corporation shall be individually responsible, equally and ratab.ly, and not one for another, for all contracts, debts and engagements of such corporation, to the extent of the amount of their stock therein, at the par value thereof, in addition • to the amount invested in such shares. * '* * .” This section, as has. repeatedly been held, conferred a right of action upon the creditors. The amendment of 1897 (chap. 441) added to the words above quoted the following: “In case any such corporation shall have been, or shall be dissolved by final order or judgment of a court having jurisdiction, and a permanent receiver or receivers of the said corporation shall have been or shall be appointed, all actions or proceedings to enforce the liability of stockholders under this section shall be taken and prosecuted only in the name and in behalf of such receiver or receivers, unless' such receiver or receivers shall refuse to take such action or proceeding'upon proper request in that behalf made by any creditor,. and in that event such action of proceeding may be taken.by any creditor of the corporation.” ■ Chap. 441, Laws 1897,
The defendants, while conceding that in general a statute is to be construed only as operating prospectively, contend that this rule is not inflexibly applied to remedial statutes, and such they deem, the amendment of 1897 to be. They point out that it does not undertake to abrogate or lessen the liability of stockholders in favor of creditors, but simply changes the form of action by which that liability can be enforced, and many cases are cited in support of
So also in Southwick v. Southwick, 49 N. Y. 510, where after an action had been brought by a wife against her husband,, .a-statute was passed permitting, either to testify against the other in an action between them, it was ’ held to be applicable to all trials held' after the act took effect, even in-cases commenced-before the passage of the act, but the court was careful to explain that such a construction gave to the act what was really only a prosT pective effect. If,- however, there could be any doubt as to the-construction and effect of the amendment of May 17, 1897, considered in the light of adjudicated cases, the question would seem to be set. at rest by the, provisions of section 31 of the Statutory' Construction Act (chap. 677, Laws 1892). • The, amendment of May 17> 1897, to section 52 of the Banking Law, was in effect, so far as' concerned • the right- of a creditor to pursue the remedy in his own. name, a-repealing act. Prior to the amendment, the seer tion contained within its lines statutory authority for the- prosecution' of an action like the present by á creditor; the amendment-revoked that authority and to this extent repealed the.section as it originally stood; . Section 31 of the-. Statutory Construction Act provides for just.such a case, as.follows: “ The repeal of a statute or part thereof shall not affect or impair any act done or right - accruing, accrued or acquired, or- liability, penalty, forfeiture or punishment incurred prior to the time such repeal takes effect, but the same may be asserted, enforced, prosecuted'or inflicted, as fully and to the same extent as if .such repeal had not been effected; and all actions and proceedings, civil or criminal, commenced under or by virtue of any provision of a statute so repealed, and pending immediately prior .to the taking efféct of such repeal, may be prosecuted and defended -to final effect in the same ■ manner as- they might if such provision was not so repealed.”
It is also urged that this action was improperly brought, because* the receivers were not originally made parties to it. I am unable to see why the receivers were necessary parties prior to the amendment of 1897. Until that time they had no interest whatever in the controversy between the creditors and the stockholders. ETone of the money recovered was to pass through their hands, their only duty being to account for the assets of the corporation received by them. A necessary party to an action is one without whose presence a substantial decree cannot be made, and as the law stood at the time this action was commenced the receivers certainly were-not necessary parties within this rule. It is true that the Court of Appeals'has said that they were proper parties to such an action (Hirshfeld v. Fitzgerald, 157 N. Y. 166), but this is quite different from saying that they are necessary parties. It might have been convenient to have them in the action to facilitate the proof which the plaintiff is bound to make, that a contribution from the stockholder’s was necessary to discharge the liabilities of the bank, but such proof could easily be made without the presence of the receivers as actual parties to the litigation. ETor is it a defense to the action that all the stockholders were not served with process prior to May 17, 1897. If the action was well brought in the name of a creditor, it was a pending action when the amendment of 1897 was enacted. It is admitted that it was not the intention of the legislature by that amendment to relieve any stockholder fromi liability, but merely to modify the form of action for the enforcement of the liability. As I have already attempted to show, the effect of the amendment was not to abate the action as to those stockholders at least, who had been served prior to May 17, 1897, and unless the other stockholders could be brought into the action already commenced, by service after the date of the amendment, we should have the confusing result of one action by a creditor against certain stockholders and another by the receivers against other stockholders. The language already quoted from section 31 of the Statutory Construction Act seems broad enough to prevent this result. It- also appeal’s, that- certain persons who were
It is true that under subdivision 7 of section 438 of the Code of Civil Procedure the plaintiff might have obtained'an order for substituted service of the summons On the nonresident stockholders,' but a judgment obtained after such service would have been of no avaiPeither to the, plaintiff or to the other defendants, unless indeed, as does not appear to be the case, the nonrésidents had prop- ■ erty in this state, out of which judgment against them could be satisfied.' Two former stockholders; Henry Clausen and Samuel Cardwell, had died before the failure of the bank, owning shares of stock. • The legal title to the s£ock thereupon passed to their respective executor's. In each case the executors! had before the commencement of this action, and indeed, before the failure of the bank, submitted their accounts' to the surrogate, and, pursuant, to his decree, had transferred to themselves as trustees the shares of the bank stock. They had, however, never caused such transfer
To the ownership of bank stock always attaches by law, in. this state, the liability to contribute to pay the debts of the bank. The executors could have protected themselves' against this liability by causing the stock to be transferred out of their names on the books of the bank, or by taking security by way of reservation of assets or otherwise, to protect themselves against liability. Having done neither, they must abide by the consequences, recouping, themselves, if they can, by recourse to the transferees. The plaintiff was not bound to look further than the stock book to ascertain who were holders of the stock. To other objections taken upon the trial it is not necessary to refer, since, so far as this court is concerned, they have been settled by decisions rendered by the Appellate Division and the Court of Appeals in similar actions against the stockholders of other banks.
Certain questions have also been raised as to whether or not some of the defendants were actually stockholders within the purview of the statute when the liability attached. Such questions can best be answered upon the application for final judgment when all the facts will be before the court, at which time can also be decided the question whether the Contributions realized from the stockholders should or should not be paid over to the receivers for distribution.
Having considered and discussed so far as necessary for the purposes of an interlocutory decree, the objections urged against the maintenance of the action in its present form, it remains to be considered whether the proof offered upon the trial entitles the plaintiff to-relief.
In Hirshfeld v. Fitzgerald, 157 N. Y. 166, it was held that, in order to maintain such an action, the plaintiff must show that he was a creditor of the corporation; that the corporation was insolvent, and that a contribution from the stockholders was necessary in order to discharge the liabilities of the bank.
The evidence that the plaintiff was a creditor of the bank, and that it was insolvent was complete, and I do not understand that any defendant seriously questions these facts. The evidence was also conclusive that the assets of the bank which have been or can be collected by the receivers will be insufficient to discharge its liabilities. How great the deficiency will be cannot be deter
(1) Who are the creditors to whom the stockholders are liable and what are the amounts of their respective claims remaining unpaid.
(2) Who were the stockholders of the bank at the time its in-; solvency was adjudged, and -what was the par value of the stock-'held by each stockholder.
(3) Whether the deficiency of assets of the bank will ■certainly exceed $100,000, and if not, how large the deficiency will be.
■Ordered accordingly.