Terry v. Rothschild — 31 N.Y.S. 1119

Majority

p. 1119

TERRY v. ROTHSCHILD.

(Supreme Court, General Term, First Department.

January 18, 1895.)

Headnote

Corporations—Action against Stockholders—Execution against Company.

Tlie issuance and return unsatisfied of an execution on a default judgment does not entitle the creditor to sue a stockholder for the debt (Laws 1848, c. 40, § 24), where the default was afterwards opened, and the credit- or’s recovery was reduced on a trial on the merits, on which recovery the creditor entered a new judgment, instead of modifying the default judgment so as to correspond with the reduced recovery, but did not issue execution on the new judgment.

Appeal from circuit court, New York county.

Action by Samuel H. Terry against Leopold Rothschild to charge defendant as a stockholder of the I. Herman Manufacturing Company. The complaint was dismissed, and plaintiff appeals.

Affirmed.

In May, 1887, the I. Herman Manufacturing Company was incorporated, under chapter 40, Laws 1848 (the Manufacturing Act), and the acts amendatory thereof, with a share capital of $10,000, divided into 10,000 shares of $1 each. The corporation was organized “to manufacture Jersey, hand-knit, worsted goods, and anything connected therewith,” and was to exist during 50 years. The number of its trustees was fixed at three. Solomon Herman, Leopold Rothschild, and Isidor Herman were appointed trustees for the first year. The principal office or place of business of the corporation was located in the city and county of New York. Rothschild remained a trustee and the president of the corporation until 1890. January 14, 1SS9, the plaintiff recovered a judgment by default against the corporation, in the city court of New York, for $1,829.52 damages and $18.55 costs (total, $1,848.07), for six items of indebtedness which the corporation incurred to the plaintiff between November 8, 1888, and December 20, 1888. On the same day (January 14, 1880) the plaintiff recovered a second judgment by default against the corporation, in the city court of New York, for $1,920.32 damages and $18.75 costs (total, $1,945.07), for four items of indebtedness which the corporation incurred to the plaintiff between November 23, 1888, and December 11, 1888. On the 14th of January, 1889, executions were issued on the judgments to the sheriff of the city and county of New York, who returned them, March 8, 1889, wholly unsatisfied. On March 9, 1889, this action was begun to charge the defendant, as a stockholder, pursuant to section 10 of said act, for the amounts of those judgments. May 10, 1889, the defendant answered herein. September 10, 1889, upon the motion of the defendant, the judgments were vacated, and it was permitted to defend the actions; but on appeal to the general term the order was, November 6, 1889, modified so as to permit the defendant to defend the actions, and the judgments to stand as security.

p. 1120

The actions were subsequently tried on their merits, the plaintiff recovering, In the one represented by the judgment first mentioned, $930.35 damages and $202.40 costs (total, $1,192.81), and, in the action represented by the second judgment, $1,010.00 damages and $292.39 costs (total, $1,902.45). Judgments on these recoveries were entered December 13, 1889. No executions have been issued on the judgments last rendered, which represent the claims of the plaintiff against the corporation and its stockholders. The number of shares of stock owned by the defendant was not shown, but it was shown that he had paid $3,000 into the corporation for shares, and that only $4,000 of the capital (fixed at $10,000) had been paid in by the shareholders. It was also shown that no certificate of the payment of the capital stock had been made and recorded, as required by the eleventh section of the act, and that at some time a receiver had been appointed for the corporation; but for what cause, when he was appointed, or whether the corporation was in the hands of a receiver at the time of the trial was not shown.

Argued before VAN BRUNT, P. J., and FOLLETT and PARKER, JJ.

John R. Abney, for appellant.

Mark M. Schlesinger, for respondent.

The judgments recovered January 14,1889, which this action was brought to enforce against the defendant, as a stockholder, were not in existence at the time of the trial of this action (December 13, 1892), but they had been superseded by the two judgments entered December 13, 1889, after a trial of the actions on the merits. By the trial on the merits, the damages recovered by the first judgment, of January 14, 1889, were diminished by $899.17, and the damages recovered by the second judgment, of January 14, 1889,' were diminished by $23.87. The plaintiff did not have the first two judgments modified so as to correspond with the recoveries, as he might have done; but, instead, he elected to enter new judgments, which became the measure of the liability of the corporation to .him. The corporation’s liability by the judgments of December 13, 1889, arose several months after this action was begun, and no executions have been issued on them, nor was it shown that they had not been paid. Section 24 of the act provides that a stockholder shall not be held personally liable for the debt of the corporation until a judgment has been recovered thereon, and an execution shall have been returned unsatisfied in whole or in part. The issuance and return, unsatisfied, of an execution on some other judgment, does not satisfy the statute. It must be on the judgment which is the foundation of the plaintiff’s suit. The judgment should be affirmed, with costs. All concur.