Hyperlawhypertext legal database Anderson v. Haddon 9 Abb. N. Cas. 289

← Cases

Anderson v. Haddon

9 Abb. N. Cas. 289 Court N. Y. Supreme Court ; First Department, English

Delivered by Van Vorst, J.

Contents

Majority

p. 289
ANDERSON v. HADDON.
N. Y. Supreme Court ; First Department,
April, 1881.

Headnote

Liability of Stockholders in Foreign Corporations.—Ascertaining Amount of Liability by Foreign Court.—Effect of Foreign Decree on those not having Notice.—Power of Foreign Liquida- • tors to Sue.
Under a foreign act of incorporation, which provided that individual liability of the incorporators should be determined by liquidators to be appointed by the company in case of winding up, and enforced by a specified foreign tribunal, an action will lie in the courts of this State by such liquidators, upon the order or decree of the foreign tribunal, as upon a judgment.
The fact that the amount of the liability can only be ascertained by a particular foreign court, is no objection to an action here to enforce such liability after its amount has been so ascertained.
When a foreign act of incorporation provides a special method of determining the liabil'tv of its stockholders, they, by becoming such, assent to the provision, and are personally bound by the decree made pursuant thereto, although they have become non-residents, and have had no nonce and no opportunity to be heard; and1
p. 290
' the liability -may be personally enforced against them in another country.
Liquidators of a foreign corporation appointed pursuant to the act incorporating it, and whose attitude is sanctioned by a formal resolution of the stockholders, have power to sue a stockholder individually liable, in a foreign jurisdiction, as their authority is not solely derived from the foreign court.
. Demurrer to answer.
. •" William ' Anderson, George A. Jamieson, John Cameron and James -E. Haldane, as liquidators of the City of' Glasgow Bank, sued John Haddon, to compel him to contribute as a stockholder toward the liabilities of the bank.
The following facts appeared from the complaint :[2] The act of parliament incorporating the bank provided that its stockholders should be individually liable, and that the amount of their liability should be settled by liquidators who should certify their conclusion to the court of session in Scotland, which should enter a decree, &c.
• The liquidators were appointed by the stockholders of the bank pursuant to a provision in the act of incorporation, authorizing it and providing for the voluntary winding-up of the company. The proceedings were, as were required, conducted under the, supervision of the court of session.
p. 291
The defendant in his answer interposed five defenses ; the first was a general denial; the second alleged that the liability ivas only enforceable in the court of session
p. 292
of Scotland, and that the remedy provided in that court was exclusive of all others, and that therefore the court in which this action was brought had no jurisdiction of
p. 293
the subject matter. The third defense stated that the defendant was a resident of New York, and that the plaintiffs were appointed by a foreign tribunal and'
p. 294
engaged in administering a foreign bankrupt law. The fourth defense was that the foreign decree was made wholly without notice to defendant. The fifth defense,
p. 295
which also was pleaded as a counter-claim, was that plaintiffs had in their hands more than sufficient assets to satisfy the liabilities of the bank.
The plaintiff demurred to all the defenses except the first.[2]
Thomas G. Shearman (Shearman & Sterling), for plaintiffs and demurrer.
The averments of the answer are conclusions of law, and therefore nullities (Mc-Kyring v. Bull, 16 N. Y. 297 ; Buffalo v. Holloway, 7 Id. 493; Merritt y. Millard, 5 Bosw. 645 ; People v. McCumber, 15 How. Pr. 186 ; affirmed 18 N. Y. 315 ; Caryl v. Williams, 7 Lans. 416 ). Plaintiffs have power to sue here (Petersen v. Chemical Bank, 32 N. Y. 21 , 43 ; Hoyt v. Thompson, 5 Id. 320 ; S. C. again, 19 Id. 207, 226; Runk v. St. John, 29 Barb. 585 ; Barclay v. Quicksilver Mining Co., 6 Lans. 25 ; N. J. Lombard Bank v. Thorp, 6 Cow. 46 ; Bidlack v. Mason, 11 C. E. Green, 230 ; Dayton v. Borst, 7 Bosw. 115 ). A valid agreement that a certain court should be deemed to have jurisdiction, without service of process, is sufficient to give the court such jurisdiction, if it is authorized by the law to take it upon the strength of such an agreement. The defense of want of notice is bad, because it does
p. 296
not negative every possible method under which the foreign court might have acquired jurisdiction (Cassidy v. Leitch, 2 Abb. New Cas. 315; Cowan v. Braidwood, 1 M. & G. 882; Reynolds v. Fenton, 3 C. B. 187 ; Maubourquet v. Wyse, Irish Rep. 1 C. L. 471). The defense does not show that defendant was not a citizen of Scotland and that the Scotch law requires'further notice than was given (Douglas v. Forrest, 4 Bing. 686; Hay v. Fisher, 2 M. & W. 722; Becquet v. McCarthy, 2 B. & Adol. 951). The defendant, having voluntarily become a member of a Scotch corporation, is bound by the Scotch law governing that corporation, and is personally bound by any decree made under that law and by it declared" to be personally binding upon shareholders (Copin v. Adamson, L. R. 9 Ex. 345 ; affirmed, L. R. 1 .Ex. Div. 17; Vallee v. Dumergue, 4 Exch. 290 ; Bank of Australasia v. Harding, 9 C.B. 661 ; Bank of Australasia v. Nias, 16 Q.B. 717). Equality is equity ; and the defendant cannot resist the call upon him, by showing that other shareholders, no more bound to contribute than himself, have paid in enough to satisfy all debts. The liquidators have absolute power to compel payment of each stockholder’s whole liability, without regard to the actual needs of the insolvent bank (Kennedy v. Gibson, 8 Wall. 498 ; Casey v. Galli, 94 U. S. 673 ; National Bank v. Case, 99 Id. 628).
Edward Patterson, for defendant.
The liability did not exist at common law (Gray v. Coffin, 63 Mass. 199 ; Erickson v. Nesmith, 86 Id. 235 ; Patterson v. Baker, 50 Barb. 432 ; Woodruff v. Chittenden, 4 Bos. 417); and defendant is therefore only liable in the manner prescribed by the statute and in the particular tribunal specified by it (Lowrey v. Inman, 2 Sweeny, 128 ; affirmed, 46 N. Y. 119 ; Jessup v. Carnegie, 80 N. Y. 441 ; Smith v. Lockwood, 13 Barb. 209 ; Thurston v. Prentice, 1 Mann. [Mich.] 193 ; Bassett v. Carleton,
p. 297
32 Me. 553 ; Benwick v. Morris, 7 Hill, 575 ; Andover Turnpike Co. v. Gould, 6 Mass. 40 ; Franklin Glass Co. v. White, 14 Id. 286; Millar v. Taylor, 4 Burr. 2322 ; Dudley v. Mayhew, 3 N. Y. 15 ). The allegation that the foreign statute is a bankrupt law is one of fact and is admitted by the demurrer. Foreign laws are facts to be alleged and proved as such (Monroe v. Douglas, 5 N. Y. 447 ). Foreign bankruptcy trustees cannot sue a resident of this State in the courts of this State (Mosselman v. Caen, 1 Hun, 647 ). The foreign decree cannot have the force of a final j udgment, as defendant had no notice and no opportunity to be heard (Starbuck v. Murray, 5 Wend. 148 ; Rockwell v. Nearing, 35 N. Y. 314 ; Borden v. Fitch, 15 Johns. 121 ; Shepard v. Wright, 59 How. Pr. 512 ). The statute should be strictly construed (Souter v. Sea Witch, 1 Cal. 162 ; Smith v. Moffatt, 1 Barb. 65 ; Millered v. Lake Ontario, &c. R. R. Co., 9 How. Pr. 238 ; Ayers v. Knox, 7 Mass. 306 ). The counter-claim was a proper one (Code Civ. Pro. §§ 501, 506, subd. 4).

The complaint distinctly sets forth that the proper court in'Scotland has issued its process, awarded its decree and adjudged that the defendant pay the amount demanded by the complaint, and further shows that this was done on September 4, 1879.

That the court of session in Scotland had jurisdiction to do this, the answer impliedly admits. In fact, the answer avers that it had exclusive jurisdiction to make a decree binding upon the defendant which cannot be enforced elsewhere than in Scotland Because the defendant has left Scotland and taken up his residence in this country, of itself affords no valid reason why he may not be prosecuted here upon the judgment if this court has jurisdiction of the subject matter. But on the other hand, because the defendant has placed himself beyond the power of the court of session of Scot

p. 298
land to act upon him personally, through his change of residence, a reason exists why he should be sued here if there be no valid objection to the jurisdiction of this court over the subject matter. It is urged by the learned counsel for the defendant that where a right is created and a liability to respond exists “ solely by ■ force of some statute, then the remedy for the enforcement of such right given by statute, if any, is exclusive of all others, and that only can be adopted and prosecuted by the claimant.” And, further, “that where the right claimed is the creature solely of a special statute, it will not be enforced in courts or tribunals beyond or outside of the boundaries of the State by force of whose legislation the right is created or the liability incurred.” In support of this proposition several cases are cited, among which are Lowrey v. Inman ( 2 Sweeny, 128 ; S. C., 46 N. Y. 129 ); Dudley v. Mayhew, (3 Comst. 15).

In the case we are now considering, by the terms of the statute under which the City of Glasgow Bank was incorporated, there was imposed upon the stockholders unlimited liability for the debts of the corporation. It was a distinctive feature in Lowrey v. Inman (supra) that there was no personal liability resting' upon stockholders ; and that whatever liability they had incurred by becoming stockholders, was to be enforced only against property upon a judgment to be recovered against the corporation, and that the remedy could not be enforced elsewhere than in the State of Georgia.

It was conceded that if the act of incorporation imposed a personal liability it could be enforced elsewhere.

It is quite true that the particular manner of ascertaining the amount to be contributed by each stockholder can only be effectuated through the court of session of Scotland. But when the liquidators had ascertained and reported the same to the court, it might make a judgment or decree against the stockholders or

p. 299
contributors for its payment, which judgment could be enforced by execution.

That the decree of the court of session possesses all the attributes of a judgment, I have no doubt. And a judgment is a “ debt of record.” In one view it is a new debt, and in another it is the highest expression and evidence of a previous existing obligation or duty (Lewis v. Armstrong, 8 Abb. New Cas. 386, 389, and cases there cited). And as a judgment it may be the foundation of a suit in the courts of other States.

It appears to me that this conclusion is adverse to the defendant’s contention that this court has no jurisdiction of the subject matter of the action. In this ccnnection.it is proper to notice the defense, in which it is claimed that the decree of the court of session of Scotland has no extra-territorial force from the non-service of process upon the defendant, and the absence of of opportunity to be heard.

A kindred objection was considered in a case lately before me in this court, and to which I am referred by the learned counsel for the defendant (Shepard v. Wright, 59 How. Pr. 512 ).

Upon authority, it was there decided that in order that the court should have jurisdiction to render a judgment which would impose personal liability, to be recognized beyond the State in which the action origin- “ ated, it was necessary that the defendant be served with the process of the court, or voluntarily appear in the action.

It does not appear that the defendant was served with any process in the proceeding in the court of session of Scotland, or that he personally appeared therein. But the defendant, having voluntarily become a member of a foreign corpozutiozz, is bound by the law which created and governs the corporation. The act of incorporation provides a znethod for determinizzg and enforcing the liability of stockholders therein, in a

p. 300
special manner; and by becoming a stockholder, he assented to the proceedings to be taken in pursuance of its provisions for fixing such liability.

Under such conditions the defendant is personally bound by any decree made under that law, which, by it, is declared to be personally binding upon shareholders (Copin v. Adamson, L. R. 9 Ex. 345 ; S. C., 10 Eng. R. 492 ; affirmed, L. R. 1 Exch. Div. 17).

The defendant has voluntarily subjected himself to. the law under which the corporation was organized. The objection that the plaintiffs, as liquidators, taking their appointment in a foreign- country, and under a foreign law, have no status to maintain this action here,

I do not regard as well taken.

The foreign law, in substance, gives the liquidators power to collect the assets and enforce the calls, that would enable them to prosecute the decree which fixed the amount to be paid by each stockholder. Unless they could do this their appointment as liquidators would be fruitless.

I do not think that any analogy drawn from the . power and rights of foreign assignees in bankruptcy, or foreign executors, is in point. The liquidators receive their power and authority not from a foreign court, but from the appointment of the stockholders of the bank, who, at a general meeting and by formal resolution, placed them in the attitude they now occupy with regard to the assets of the bank and the closing up of its affairs.

To this method of appointment and this exercise of power the defendant must also be regarded as having agreed when he became a stockholder. v

■ I have no idea that tho defendant can resist this action, which seeks to enforce a call made upon him to contribute his proportion of the deficiency, for the reason that the plaintiffs have sufficient assets arising from contributions made by other stockholders. He

p. 301
must pay his proper proportion, and, if there be a surplus after the debts are fully paid, he will be entitled to his proportion thereof.

I regard the grounds of demurrer as well taken, and there should be judgment for the plaintiff on the demurrer, with liberty to the defendant to amend on payment of costs.

Cases cited