Lead Opinion
This action was brought to charge the defendant' with the payment of certain judgments recovered by the plaintiffs against the Beverwyck Towing Company, a foreign corpoiation. The defendant demurred to the complaint on the grounds (1) that it did not state facts sufficient to constitute a cause of action, and (2) that there was a defect of parties defendant. The demurrer was sustained upon the first ground and from the interlocutory judgment thereafter entered the plaintiffs have appealed.
The complaint in substance alleges that the plaintiffs, in 1896, commenced an action in the Supreme Court of this State against the Beverwyck Towing Company, a corporation organized under the laws of the State of West Virginia, by the service of a summons upon the defendant in this action, whom they believed when the service was made was the president of such corporation, and that the defendant thereafter appeared and demanded a copy of the complaint, which was subsequently served and in which it was alleged that the. Beverwyck Towing Company, at a time' stated, was the owner and in control of a tugboat known as the Syracuse ; that it so carelessly and unskillfnlly managed the same, while having in tow a canal boat belonging to the plaintiffs, that it caused such canal boat to sink, whereby plaintiffs -sustained damage to the amount of $1,750, for which judgment was demanded; that an answer was interposed which admitted the incorporation of the defendant and that it was the owner and in possession of the tugboat Syracuse at the time stated. The answer also admitted plaintiffs’ ownership of the canal boat, and that it was taken in tow by the Syracuse and damaged, but denied that such damage -was by reason of its negligence or that it was liable for the same; that a trial was had in November, 1898, and a verdict rendered in favor of the plaintiffs,' upon which judgment was entered, which, on appeal was affirmed; that executions were issued which were returned wholly unsatisfied.
The complaint further alleges that in 1894 the defendant purchased all of the stock, bonds and property of the Beverwyck Towing Company, for which he agreed to pay the sum of $65,750 — $5,756 at the time the agreement was signed and the balance in annual payments of $12,000 each, until the whole sum had been
■ We are of the opinion that the case was correctly disposed of by the learned justice sitting at Special Term. The theory upon which the plaintiffs seek to maintain the action is that, inasmuch as the defendant owned, or would have owned, all of the stock of the towing company when he completed his agreement to purchase, he is in fact the corporation and that in equity he ought to pay the judgments which the plaintiffs recovered. . We are unable to see upon what legal principle the defendant can thus be made liable. It may be assumed, as of course it must be for the purpose of disposing of the demurrer, that every fact alleged in the complaint, as well as such inferences as can fairly be deduced from them, are true (Greeff v. Equitable Life Assurance Society, 160 N. Y. 19), and yet", after indulging in that assumption, it is difficult to see how the defendant can be bound by the judgments recovered against the Beverwyck Towing Company, or be held personally liable to pay the same. That action was against the Beverwyck Towing Company as a corporation, the organization and existence of which, as well as the ownership of the tugboat Syracuse, were alleged in the complaint and admitted in the answer in that action. The judgment, of course, conclusively established, as between the parties to the action, such facts, and that the corporation was negligent in the management of the canal boat belonging to the plaintiffs, for which reason it was' liable to them for the damages sustained, but it was not binding upon, and did not establish such facts against any one
The judgment appealed from is right and should be affirmed, with costs, with leave to the plaintiffs to' amend their complaint upon payment of costs in this court and in the court below.
Tan Brunt, P. J., concurred; Patterson, J., concurred in result; O’Brien and Laughlin, JJ., dissented.
Dissenting Opinion
This is a suit in equity to charge the defendant personally with three judgments heretofore recovered by the plaintiffs against the Beverwyck Towing Company in an action in the City Court of Hew York. The complaint in that action alleged that on the 25th day of May, 1896, the plaintiffs were the owners of the canal boat M. F. Hamm and her cargo which were being towed in the Hudson river by the steamboat Syracuse under an agreement and for a valuable consideration; that the defendant was a West Virginia corporation and owned the Syracuse, which was navigated by the agents and servants of the defendant; that through the negligence of the defendant’s servants and agents in making up or navigating the tow, the plaintiff’s said canal boat and cargo became a total loss. The answer in that action, which was verified by the attorney, admitted that the defendant owned the steamboat Syracuse and was engaged in towing the plaintiffs’ (janal boat, but it put in issue the value of the boat and cargo and also the allegations of negligence. The judgment was entered on the 2d day of December, 1898, upon the verdict of a jury for the sum of $1,126.02. The defendant there
The complaint herein sets forth these facts and further alleges, in substance, that on the 7th day of March,. 1894, the respondent “ purchased all of the stock, bonds, boats, office fixtures, furniture, etc., of the Beverwyck Towing Company, including the steamboat Syracuse,” for the agreed price and consideration of $65,750; that at the time of said purchase the respondent executed and delivered to George M. Van Hoesen, who was acting for the grantors or vendors two certain agreements in writing which are annexed to and made part of the complaint and marked Exhibits “ E ” and “ F; ” that thereupon said Van Hoesen gave the respondent an order upon the agent of the Beverwyck Towing Company to deliver to the defendant all of the vessels or floating property theretofore owned by the towing company and its office furniture and fixtures, all of which were so delivered, and respondent took and retained possession thereof until after said'25th day of May, 1896 ; that among the -.boats so delivered was1 the steamboat Syracuse, which, with the other boats, was thereafter navigated and controlled by the defendant the owner, he receiving and retaining to his individual use the earnings thereof and bearing the operating and running expenses; that after the. purchase of said boats and property the respondent c.onducted the towing business in the name of the Beverwyck Towing Company, but operated the boats by his own agents, servants and employees and for his sole individual benefit; that the'law under which the towing . company was incorporated provided that such a corporation should be managed and controlled by a board of directors, who should choose.-oneof their number as president, and that they might appoint and prescribe duties of the officers and agents; that the by-laws provided that the board of directors should; consist of five, all of whom were required to be stockholders of the company; that after the 7th day of August, 1894, the corporate organization of the towing company was not kept up by an election of directors or other officers; that the respondent was in fact the
Exhibit “ E,” annexed to the complaint, is an agreement between the Holland Trust Company and the respondent by which the former agrees to pay all claims then existing against the towing company, and the latter agrees to pay all claims that may arise thereafter. Exhibit “F,” annexed to the complaint, is also an agreement between the Holland Trust Company and the respondent. It recites the purchase by defendant of the whole issue of bonds of the towing company and that the same were issued on the 17th day of January, 1893, to said Yan Hoesen and were secured by a mortgage on five steamboats therein named, including the Syracuse. There were 132 of these bonds of the face value of $1,000, on one of which $500 had been credited. The purchase price recited in the agreement was $65,750. The agreement provided for the terms of payment, and that the bonds should be held by the trust company as security therefor; also that the bonds should be surrendered from time to time as payments were made in twice the amount of such payments. The complaint also alleges the payment of the indebtedness in full accompanied by the last delivery of stock to the respondent in the month of August, 1899.
Plaintiffs’ theory of their action is that respondent conducted the business in the name of the corporation as a trade name ; that the towing boat was owned by him and navigated by his agents and employees ; that the negligence charged and litigated in' the action in the City Court was in fact the negligence of this respondent, and that the case was defended, not by the corporation, but by him; that the judgments, although recovered in form against the Beverwyck Towing Company, were-in fact judgments against respondent; and plaintiffs invoked the aid of a court of equity to enter a decree to that effect to the end that proceedings may be had by the issue of execution or otherwise to enforce payment of the judgments against him.
. The object of the action being to have it decreed that defendant is chargeable with these judgments, it was not necessary for the plaintiffs to allege negligence on the part of the respondent. I-t was only necessary to set out the facts showing the nature of the former action,- the recovery had and the additional facts which render respondent liable upon the judgments. It.is not an action sounding in tort, but a suit in equity in effect to reform a judgment. The respondent contends that the appellants, having elected to sue the towing company, are now estopped from maintaining an action against him. We fail to see how any principle of estoppel applies. It is specifically alleged in the complaint that the' action was brought and prosecuted on the supposition that the corporation was still in existence and that it owned and operated the boats. There could be no: election without knowledge of the facts upon which the right to an election depended. The complaint shows •that plaintiffs were not, until after the recovery of the judgments, aware that the towing company was not the real party in interest. The plaintiffs are not seeking to charge the respondent as an undis
After August 7, 1894, the corporation remained in existence only in contemplation of law. It discontinued business and made no further use of its corporate name. The defendant succeeded to its business by purchase and appropriated the corporate name as a trade name for his individual business. He owned the boats individually and operated them, not for the corporation, but for himself. The members of the crew were not employees of the corporation, but were his servants, and for their negligence he was responsible. Manifestly, on the allegations of the complaint, the corporation, as such, had nothing to do with the business or with the defense of the action. Nothing remained of the corporation except the naked franchise to exist. No one had any interest in defending the former action except this respondent. Even though the corporation might have been responsible upon the theory of estoppel, it would have been an idle ceremony to have proceeded against it. The corporation, as such, had nothing to defend. The mere right to exist as a corporation with no property or assets and with all the stock outstanding in the hands of respondent could be of no value except to him. When, therefore, he assumed to appear in the action for the corporation, he was in reality appearing for himself. He was the real defendant. It is apparent from the allegations of the complaint that he defended the action, not for the corporation, but. for himself. The interests of the corporation would require the disclosure of the truth, viz., that the boats were owned and operated by the respondent and his employees. It is evident that plaintiffs intended to proceed against the owners and navigators of the boat. By the trade name which respondent employed they were led to believe that the towing company was the owner, and by the answer and defense interposed they were lulled into security in that belief. The answer further misled plaintiffs by admitting the ownership of the. boats in the corporation and navigation by its employees. The respondent being, the owner of
Equity may reform a written instrument where there has been a. mutual mistake or “ where there has been a mistake of one party accompanied by fraud or other inequitable conduct of the remaining parties.” (Pom. Eq. Juris. [2d ed.] § 1376.) The court has power to correct mistakes in judgments, decrees and other records where the error is merely clerical or ministerial and not .judicial. (Pom. Eq. Juris. [2d ed.] § 871; Code Civ. Proc. § 721, subd. 9; Id. §§ 722, 723; Partridge & Co. v. Harrow & Harrow, 27 Iowa, 96.)
It has been suggested that plaintiffs have an adequate remedy by motion to amend the judgment roll in the City Court. That is a statutory court without general equity jurisdiction, and even if it had the power, as to which we express no opinion, it is not conclusive of the equity powers vested in the Supreme Court by the -Constitution. Under the peculiar circumstances of this case we think the remedy by action better adapted to the relief sought- and that plaintiffs were not obliged,' before bringing suit, to exhaust a possible remedy by motion involving a discretion differing necessarily from the discretion of a court of equity exercised upon common-law proof of the facts that may be put in issue by the answer. (Cohen v. Dubose, 1 Harp. Eq. [S. C.] 102; 14 Am. Dec. 709; Partridge & Co. v. Harrow & Harrow, supra.)
The judgment should be reversed, with costs, and the demurrer overruled, with costs, but with leave to the defendant to answer upon payment of costs of the demurrer and of this appeal.
O’Brien, J., concurred.
Judgment affirmed, with costs, with leave to plaintiffs to amend on payment of costs in this court and in the court below.