19 Abb. N. Cas. 79 | City of New York Municipal Court | 1887
The plaintiff seeks to hold the defendant as a, stockholder of the American Opera Company, a corporation • created under the act of 1875 (chap. 611), upon two grounds, (1) because there is a balance due on his original subscription for stock, and (2) because the whole amount of capital stock fixed by the company, has not been paid in: As the consequences in either case are the same, the action will be treated as one to hold the defendant for the unpaid subscription.
The plaintiff is an ordinary contract creditor of the cor
The plaintiff claims that this rule has no application to a corporation created under the act of 1875 (chap. 611), because the only condition imposed to proceeding against the stockholder directly, is contained in these words : “No execution shall issue against any stockholder individually, until execution has been issued against the corporation and returned unsatisfied ” (§ 37). But this section must be read
Under the act just referred to, a judgment and execution returned unsatisfied, have always been held to be necessary pre-requisites to the maintenance of an action against the stockholder which will not be dispensed with even by an allegation of insolvency (Lindsley v. Simonds, 2 Abb. Pr. N. S. 69; Rocky M. N. Bk. v. Bliss, 89 N. Y. 338).
The plaintiff’s contention, that he may proceed against the corporation and the stockholder by separate actions, pari passu, and that the only effect of section 37, is to stay execution in the action against the stockholder until the execution against the company has been returned, is certainly anomalous, and might lead to strange results if held to be correct. Suppose the creditor recovered a judgment against the stockholder, but never recovered any against the company, how would the creditor get rid of the judgment obtained against him ? True, the creditor under the plaintiff’s construction of section 37, could never issue execution upon it, but it would nevertheless remain a cloud against the defendant’s credit, and a lien on his real estate, which could only be discharged by payment. Surely, the statute never contemplated or intended such a possibility, and yet the construction claimed by the plaintiff might lead to just such a result.
The courts in their endeavor to prevent a multiplicity of suits, have in some instances held that the remedy of the creditor to enforce unpaid subscriptions was by bill in equity on behalf of himself and others similiarly situated, in which the corporation and its stockholders may be brought in as defendants, that their various rights, liabilities and equities may be determined in one action, and this upon the theory that no one creditor can assume that he alone is entitled to what the stockholder owes, and that it is inequitable to permit him to sue at law to appropriate it exclusively to himself (Harris v. First Parish in Dorchester, 23 Pick. 112; Bush v. Cartwright, 7 Oregon, 329 ; Patterson v. Lynde,
For the reasons stated, it is evident that the plaintiff, as a ■simple contract creditor, cannot maintain the action, and that the demurrer to her complaint must be sustained, with •costs.