Farnsworth v. Wood

Full title: JOHN G. FARNSWORTH, as Receiver, etc., Respondent, v . DARIUS S. WOOD et…

Court: Court of Appeals of the State of New York

Date published: Feb 6, 1883

91 N.Y. 308 (N.Y. 1883)

Opinion

Argued January 29, 1883

Decided February 6, 1883

Abram Lansing for Woodward et al., appellants.

Willard Bartlett for S. Foster Dewey, appellant.

Joseph H. Choate for R.T. Wilson et al., appellants. S.W. Rosendale for respondent.

RAPALLO, J.

We are of opinion that these actions cannot be maintained. The plaintiff is the receiver of a corporation created under the General Manufacturing Law of 1848, appointed upon the sequestration of its property on the return of an execution, and seeks by this action to enforce against the stockholders, the personal liability to creditors which is imposed by that act upon stockholders in such corporations.

The liability does not exist in favor of the corporation itself, nor for the benefit of all its creditors, but only in favor of such creditors as are within the prescribed conditions. It is not a general right, but one which attaches to the particular creditors only who are within the conditions, and is to be enforced by these in their own right and for their own special benefit. The receiver in this case is not vested with the rights of action of these creditors, but only with the property which was sequestrated under the provisions of section 36, chapter 8, title 4, article 2 of the Revised Statutes, viz.: "the stock, property, things in action and effects of the corporation." The rights of certain creditors to prosecute their claims against certain of the stockholders never were the property of the corporation, nor rights of action vested in it, nor is there any provision of the statute, which transfers these rights of action from the creditors to the receiver.

The case of Story v. Furman ( 25 N.Y. 214) has no application to this case. That action was brought by a receiver appointed under a special act passed in 1852, for the dissolution of manufacturing corporations in Herkimer county, organized under the Manufacturing Law of 1811. It was known as the Herkimer County Act, and in express terms vested not only the corporate property, but the right to enforce the liability of stockholders for the corporate debts, in the trustees, or the receiver appointed in their place, as trustees for the creditors, and authorized them to make assessments upon the stockholders and collect them, and distribute the proceeds ratably among all the creditors. That act referred to the liability imposed by the act of 1811, which was an absolute liability to the extent of the amount of their stock, to pay all the debts of the company existing at the time of the dissolution. The machinery provided was appropriate to the enforcement of such a liability. But it was a very different liability from that imposed by the act of 1848. The case of Story v. Furman ( supra) is commented upon in the late case of Cuykendall v. Corning ( 88 N.Y. 129), and it is there held that the machinery for enforcing the liability of stockholders through a receiver by assessment, etc., provided by the Herkimer County Act, is inapplicable to corporations organized under the act of 1848.

The liability of stockholders under the act of 1848 is a several individual liability of each stockholder, directly to such of the creditors as have complied with the requisite conditions precedent. There is no statutory provision by which the rights of such creditors can be vested in a receiver of the corporation. Section 448 of the Code of Civil Procedure empowers one or more of the creditors to sue in behalf of all who are similarly situated and enjoin separate suits. This provision recognizes that the right of action is in the creditors, and is the only one by which any creditor can be enjoined from bringing his separate action.

The judgments should be reversed and judgment rendered for the defendants, on the demurrer, with costs.

All concur.

Judgments reversed.