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Glenn v. Lancaster

21 Abb. N. Cas. 272 Court New York Court of Appeals ; English

Delivered by Lawrence, J.

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p. 272
GLENN v. LANCASTER.
New York Court of Appeals ;
April, 1888.

Headnote

Trial; mode of.] An action by a trustee for benefit of creditors of a corporation, against a stockholder, to recover upon the unpaid subscription to the stock the sum already fixed by call thereon, alleged to have been duly made for payment of its debts, and demanding judgment only for the amount so called for, is an action in which plaintiff is entitled to trial by jury.
Pleading; cause of action and defense.] The fact that defendant’s-answer in such a case impeaches the call and states grounds entitling defendant to an accounting as to the indebtedness and the-amount equitably apportionable against the defendant answering,
' does not alter the rule as to the mode of trial.*
Appeal from an order of the General Term of the first-department, which affirmed an order of the Special Term denying a motion to strike the cause from the Special Term calendar.
John Glenn, as trustee of, and for the benefit of the creditors of the National Express and Transportation Company, brought this action against Robert A. Lancaster, David J. Garth and other defendants.
The complaint alleged, as a first cause of action: (1) that the defendants were co-partners, and as such became assignees-of, holders of four hundred and ninety shares of the-express company named ; (2) that the company was and continued to bo a Virginia corporation, and defendants became owners of their four hundred and ninety shares-by -assignment from the original subscriber therefor and others accepted by the company as stockholder's; (3) that by virtue of the contract between the corporation and the original subscribers the latter agreed for themselves and their •assigns for value to pay $100 for each share subscribed for, in such instalments and as and when called upon according
* See note at the end oí this case.
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to the law under which the company was incorporated; (4) that by reason of these facts the defendants became liable to-pay such subscriptions ; (5) that at the time the defendants-took their assignment $80 per share remained unpaid ; (6) that the company had made an assignment for benefit of creditors and the trustees had accepted the trust with the assent of the defendants as stockholders; (7) that at the time of making the assignment only $20 per share had been called and the residue had been suffered to remain in the hands of the persons liable to pay it, subject to be called for according to the terms of the subscription and the Virginia, statute; (8) that the trustees named in the assignment not having performed the trust, one William H. Glenn, a creditor, on behalf of himself and all the other creditors, brought, an action against the company, its officers and the trustees; named in the assignment, to obtain an adjudication as to its-validity, and to require a call to pay whatever might be-found on an accounting sufficient to satisfy the creditors, and! by a supplemental bill the removal of the original truscees, the appointment of new ones and a decree in equity making a call or assessment after an accounting, was sought. That the Virginia court in this suit adjudged the trusteeship to be valid and that the trustees were thereby vested with the right to recover the unpaid subscriptions, provided a proper call therefor should have been made, and thereupon proceeded to establish the claims of creditors and adjudged that a call or assessment of thirty per cent, was necessary for their payment ; to remove the original trustees and appoint the present plaintiff [John Glenn] trustee in their stead ; assess the stockholders thirty per cent., direct. the present plaintiff to-proceed to collect that amount, and, lastly, to retain the cause so that a further call might be made if it should prove necessary ; (10) that the present plaintiff as new trustee duly qualified and as substituted trustee was entitled to collect the thirty per cent., and had made demand upon the defendants ; (11) that by reason of the premises defendants became liable to the plaintiff in the sum of $14,700, being
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thirty per cent, on the stock held by them which they had refused to pay.
For a second cause of action, the plaintiff reiterated all the allegations of the first cause of action, and added that upon further proceedings in the suit mentioned a further call for the residue of fifty per cent, on the stock had been adjudged, by reason whereof and the demand and non-payment the defendants were indebted to the plaintiff in the further sum of $24,500 ; and demanded judgment for $39,200.
The defendants Lancaster and Garth interposed separate answers.
Lancaster admitted the co-partnership and put in issue substantially all the allegations of the first cause of action, -except the non-payment of money demanded.
For a separate defense he alleged (1) that the firm mentioned were brokers and bankers engaged in buying corporate stock for their customers, and as such caused to be purchased for customers, four hundred and ninety shares of the stock, but did not cause nor authorize it to be transferred into their own name, and they were never owners of it; (2) set up the statute of limitations ; (3) that he had been discharged in bankruptcy.
The answer further alleged that the association called the «express company, pretended to be a corporation, remained in ■existence but a short time, when it ceased to exist, its officers all resigned, etc., that the pretended company opened books of subscription, and that over ten thousand persons, scattered all over the country, a small number only residing within this State, subscribed, and that only a part had paid the twenty per cent., and no measures had ever been taken to enforce the liability for the residue, and that meanwhile the statute of limitations had barred claims against them; that at the time of the assignment for benefit of ■creditors the debts exceeded. the assets, that the trustees never filed any inventory nor rendered any account, but wasted the assets, and the plaintiff had never rendered any account nor taken measures to recover the assets : that the
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abandonment of its business by the company, and its neglect to enforce the liability of stockholders, was a breach of the contract of subscription which discharged the others, or at least limited their obligation to an obligation to contribute after an accounting in equity, and the application of the assets which had already been wasted; and that any subscriber who should pay more than his due proportion should have the right to recover over against the others, but that the pain tiff had released a large proportion of the subscribers at á nominal percentage of their subscriptions; that there had never been any accounting in respect to the indebtedness or the liability of the subscribers and that the court in which the present action was brought was without jurisdiction to enforce the Virginia decree, and the call founded thereon or made therein by reason of defects in the proceedings in the Virginia courts, which were stated in detail. The answer further alleged that plaintiff had no other right than as the representative of creditors of the company; that the laches of such creditors precluded them from enforcing the subscriptions, and the proceedings of the Virginia courts were without jurisdiction.
The separate answer of the defendent Garth raised the same questions.
Defendants Garth and Lancaster served notice of trial for the October Term of the Court, 1887, at Special Term, without a jury, and filed notes of issue at the Special Term.
When the October calendar was called by Lawrence, J., plaintiff objected to trial of the issues without a jury,, and moved that the case be struck from the Special Term calendar. The motion was opposed by the defendants. The justice reserved decision, and on October 10, 1887, handed down an opinion in these words :

The motion to strike this cause from the calendar will be denied on the authority of Griffith v. Mangam ( 73 N. Y. 611 ), and Mann v. Pentz (3 Comst. 415).

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From the order entered on this decision plaintiff appealed to the General Term, where it was held that as defendants-had a right to be heard on the question of what assessment was necessary, since they were not represented in the Virginia litigation, and as the amount of debts and contributions-could only be ascertained by equitable proceedings, plaintiff was not entitled to a jury trial.

The following opinion was there rendered :[1]

The ground upon which the plaintiff claims a jury trial is that the only relief demanded is that the action is on contract, and only a money judgment is-asked for.

An inspection of the complaint, however, shows that ■equitable relief must necessarily be given if the plaintiff at all succeeds in the action.

It may be true that the foundation of the action is upon contract entered into between the company, of which the-plaintiff is a trustee, and the defendants as stockholders.. But it may be a question of grave doubt whether the defendants are in any way bound by the levying of the assessments-upon the stock in the courts of Virginia, without having been-in any way represented in that litigation. They have a right,, to be heard upon the question as to what assessment is necessary in order to pay the debts of the corporation, and this-amount can only be ascertained by equitable proceedings, and it forms the sole basis upon which the plaintiff can possibly recover.

Under these circumstances, therefore, although the plaintiff is not asking in his complaint for equitable relief, it is necessary that he shall obtain such relief before he can proceed in the recovery of the money judgment which he-has demanded.

The case, therefore, was of equitable cognizance, and the court did- not err in denying the motion. The order-should be affirmed, with costs.

* Van Brunt, P. J., Brady and Daniels, J J.

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The plaintiff then appealed to the court of appeals.

Burton H. Harrison, for the appellant.

W. W. MaoFarland (Reynolds & Harrison and William O. Olopton, attorneys), for the respondents.

The defendants noticed this cause for trial at a special term and placed it upon the special term calendar.

The plaintiff thereupon moved that the cause be struck from that calendar upon the ground that the issues joined in the action were triable by a jury. The motion was denied, and then the plaintiff appealed to the general term, and from affirmance there to this court.

The complaint did not claim any equitable relief, nor set forth any cause of action entitling the plaintiffs to equitable relief. The only judgment demanded was for a sum ■of money; and hence, under section 968 of the Code, the action was triable by jury. It is strictly a common law action to recover certain assessments alleged to have been made by the decrees of a Virginia court, having jurisdiction on account of unpaid subscriptions to stock held by the defendants in the National Express and Transportation ■Company. The theory of the complaint is that the defendants, as stockholders, became legally bound by virtue of the proceedings in the Virginia courts to pay the assessments made, and no manner of equitable relief is sought.

It is not for us now to determine that upon the facts alleged the plaintiff can succeed in the action as one at law to recover a sum of money only. It is certainly difficult to perceive how with this complaint and these parties this action could successfully proceed as one in equity. All that we determine is that in form and substance the action is based upon contract, express or implied, and is to recover a sum of money only, and that, therefore, under the section cited, it should have been brought to trial at a jury term. The section of the Code provides that every issue of fact

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must be tried by a jury, unless a jury trial is waived or a reference is directed “ in an action in which the complaint demands judgment for a sum of money only.” We know of no exception that can be engrafted upon this provision. While in equity actions, relief may sometimes be granted by a judgment for money only, yet where that is the only relief demanded, and no other relief is sought, the case is. brought within the section, and the action must be tried before a jury.

The orders of the general and special terms should therefore be reversed and the motion granted, with costs of appeal to the general term and to this court.

All the judges concurred.

Note on the Mode OB' Tbial.

Plaintiff's power to fix the mode of trial.] The general principle is* that, for the purposes of fixing the mode of trial, the character of the action is determined by the complaint, and the answer cannot change it. Welsh v. Darragh, 52 N. Y. 590 .

If plaintiff sues for equitable relief—in this case reformation of a " contract by inserting therein the name of one of the defendants as a party, gnd for damages against him,—the failure of the allegations of' the complaint to make a case for equitable relief does not justify forcing him to trial before a jury. He has a right, if there is to be a trial, to have his right to equitable relief determined before the court without a jury. Clark v. Blumenthal, 52 Super. Ct. (J. & S.) 355.

On the other hand, if plaintiff brings the cause to trial before the-court without a jury, and the court are of opinion that the case alleged is not one for equitable relief, but only legal relief, defendant has a right to trial by jury before such relief is awarded. And on objection made as soon as the failure to establish a right to equitable relief appears, the court should send the cause to the jury term for trial-Willis v . Bellamy, 52 Super. Ct. (J. & S.) 373.

Plaintiff's waixer of the right.] By bringing an action for both legal and equitable relief, plaintiff waives his right to trial by jury; and the court have power to refuse to settle for jury trial even the issues on which the legal relief depends. Cogswell v. N. Y. and New Haven R. R., 105 N. Y. 319 .

Plaintiff hound hy the frame of his own action.] If plaintiff’s com

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plaint fixes the character of the action as in .equity, defendant has a right to insist on its being tried as such and not before a jury. Watson v. Manhattan Ry. Co., 17 Abb. N. C. 280 .

Defendants course to avoid waiving his objection.] If plaintiff notices for trial by jury, a cause in which he seeks both legal and equitable relief, defendant may await the trial to learn whether plaintiff intends to waive the demand for equitable relief; and may meanwhile serve cross-notice of trial, and answer ready on the call of the calendar; and nevertheless may, if plaintiff, on opening his case shows that he seeks the equitable relief, object to trial by jury and demand trial by the court without jury. Watson v. Manhattan Ry. Co. (above cited).

Nature of action not changed by counter-claim,.'] If plaintiff’s complaint fixes the character of the action, defendant’s answer does not change it, even by setting up a counter-claim for equitable relief in connection with a mere defense. The defendant may still insist on a jury trial of the issues raised by the complaint and defense ; and if the coupter-claim requires a different mode of trial, it may be tried afterward. Untermeyer v. Beinhauer, 105 N. Y. 521 .

Issue necessary.] The right of trial by jury (in divorce) depends on there being an issue of fact, and extends only to such issue. The questions, if any, necessary to be determined, beside the issues raised by the answer and triable by jury, may be tried by the court without jury. Galusha v. Galusha, 43 Hun, 181 .

Interpleader.] If defendant, by motion, procures a third person to-be brought in as an adverse claimant, and deposits the fund in court- and is discharged (Code Giv. Pro. § 820), the controversy between the plaintiff and the person thus brought in, is an equitable one not involving a right of trial by jury, even though plaintiff’s claim against defendant was of right triable by jury. Clark v. Mosher, 107 N. Y. 118 .

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