Allen v. Clark — 13 N.Y. St. Rep. 609

Majority

p. 609

Horace J. Allen, App’lt, v. George C. Clark, Resp’t.^[1]

(Court of Appeals,

Filed January 24, 1888.)

Headnote

1. Corporations—Liability op trustees—Laws 1848, chap. 40, § 12, as amended by Laws 1875, chap. 510.

A judgment for costs against a corporation, in an action for trespass commenced by it, is a debt of the corporation which a trustee is liable for, on the ground of failure to make a report as required by Laws 1848, chap. 40, § 12, as amended by Laws 1875, chap. 510.

2. Same—Judgment for costs a debt op the corporation.

A judgment for costs is, in every sense, a debt of the company, which it is under precisely the same obligation to pay as any other debt.

8. Same—What debts trustees liable for—Construction op Laws 1848, chap. 40, § 12.

The clause, “ and for all that shall be contracted before such report

p. 610

shall be made,” which follows the words "debts oí the company then existing,” in section 12 oí said act of 1848 does not limit the meaning of the-latter words to such debts of a corporation as ai'e voluntarily contracted. The word contracted in said clause means the same as incurred and includes every debt for which the corporation becomes bound.

4, Same—Pbactice—Tbustee mat show judgment fob costs fbadduLENT, ETC.

A judgment for costs is not conclusive as 'against the trustee in an action brought against him under section 12 of said act, and it is open to show that the recovery was either collusive or fraudulent. Miller v White, 50 N. Y.. 137 , distinguished.

The plaintiff alleges in his complaint that the Clifton Mining company is and ever since the month of January, has been a manufacturing corporation, duly organized under and pursuant to the general manufacturing act of this state, passed in 1848, and the several acts amendatory thereof; that on 21st of September, 1885, that company became indebted to Isaac Starbuclc and others in the sum of $704.37, being the amount of a judgment duly rendered on that day in favor of them against the company in an action in the supreme court of this state, in which .action the company was plaintiff and they were defendants; that the action was instituted in March, 1884, by the company against them to recover damages for the wrongful taking and carrying away by them of certain logs from the land of the company, and the conversion of the same in 1880, 1881, 1882 and 1883, and the months of January and February, 1884; that they appeared in the action and interposed a defense therein, and such proceedings were afterward had that judgment was rendered therein in their favop against the company for the sum of $704.37, on the 21st day of t September, 1885, and the judgment roll was filed and the judgment docketed in the county of St. Lawrence on that day; that the judgment remained wholly unpaid and unsatisfied; that the judgment so recovered was subsequently assigned by Starbuck and others to this plaintiff, who thereupon became and now is the holder and owner of the same; that defendant has been one of the trustees of the company ever since its organization and is yet such trustee; that the company did not within twenty days from the first day of January in either of the years 1883, 1884, 1885 and 1886, make, publish or file a report as required by section 12 of the general manufacturing act, as amended by chapter 510, of the Laws of lb75, nor has the company since the 1st of January, 1886, published or filed any report whatever; that-the company contracted the debt which has been assigned to the plaintiff during the time the company was in default for not making and filing a report as required by the statute; that by reason of the premises, the defendant became and is liable to pay to the plaintiff the sum of $704.37,

p. 611

and interest thereon from September 21st, 1885. The defendant in his answer made several denials of matters set up in the complaint, and as a third defense alleged as follows:

“And for a third and further defense to the cause of action set forth in the complaint, the defendant alleges upon his information and belief that the judgment alleged in the complaint to have been recovered against said Clifton Mining Company by said Isaac Starbuck, John McCarty and John Matteson, was recovered for the costs and disbursements of said Starbuck, McCarty and Matteson, as defendants in said action and not otherwise, and that said action was brought for the cause of action set forth in the complaint.” The plaintiff demurred to this third defense on the ground that it “is insufficient in law, upon the face thereof, to constitute a defense to the plaintiff’s amended complaint.” The issue of law was brought to trial at a special term, and there the demurrer was overruled. The plaintiff appealed to the general term, third department, where the interlocutory judgment was affirmed, and he then appealed to this court.

E. II. Near, for app’lt; Louis HasbroucJc, for resp’t.

The sole question for our determination is, whether the judgment for costs in favor of Starbuck, McCarty and Matteson, in the action brought against them by the company for a tort, is a debt which can be enforced against the defendant as a trustee of the company, by reason of its failure to make, publish and file the report required by section 12, of the general manufacturing act, of 1848, as amended by chapter 510 of the Laws of 1875. That section provides that every such company “ shall, within twenty days from the first day of January, in each year * * * make a report * * which shall state the amount of capital and of the proportion actually páid in, and the amount of its existing debts * * * , and if any of said companies shall fail so to do, all the trustees of the company shall be jointly and severally liable for the debts of the company then existing, and for all that shall be contracted before such report shall be made,” etc. This judgment clearly was one of the debts which the company was bound to include among its “ existing debts” in the report which it was required to make, file and publish within twenty days after the first day of January, 1886. The section requires the report to state the amount of all its existing debts of every nature, and it is the clear meaning of.the section that if such report be not made, the trustees shall be personally liable for all debts which the company was thus bound to report. It may be inferred that it was the pur

p. 612

pose of the law-makers to require this report to be made, published and filed for the information, benefit and protection of existing creditors of the company not only, but of all persons who might thereafter enter into contract relations with it. It may also have been the purpose of the law-makers to require the report from every manufacturing corporation as a check upon extravagance and mismanagement of its affairs by its trustees,"by constantly keeping before them the reminder that at least once a year the affairs of the company are to be exposed to the public view. It may also be supposed that these reports were required so that information might be readily obtained by assessors for the purpose of taxation, and by other public officials who might have occasion to supervise the conduct of the corporation, or to proceed against it for any purpose whatever; and therefor to make sure of accomplishment of these important purposes, the trustees are made personally hable for all the debts of the company in case of failure of the company within the time specified to make the reports.

We think other sections of this statute throw some light upon the construction of section 12. In section 13 it is provided that “if the trustees of any such company shall declare and pay any dividend when the company is insolvent, or any dividend, the payment of which would render it insolvent, or which would diminish the amount of its capital stock, they shall be jointly and severally hable for all the debts of the company then existing, and for all that shall be thereafter contracted while they shall respectively continue in office.” There the same sweeping language is used, “all the debts of the company then existing,” and that would include such a debt as the plaintiff is seeking to enforce in this place. Section 23 of the same act provides that “if the indebtedness of any such company shall at any time exceed the amount of the capital stock, the trastees of such company assenting thereto shall be personally and individually liable for such excess to the creditors of such company.” The word “indebtedness,” in this section, clearly includes, not only every debt voluntarily contracted by the company, but every debt of every nature however contracted or arising.

This judgment for costs was, in every sense, a debt of the company which it was under precisely the same obligations to pay as any other debt. It is true it was not a debt existing antecedently to the judgment. But it was a debt created by the judgment itself; and as it was a debt against the corporation which it was bound to pay, it could be enforced against the defendant.

It may be that the judgment is not conclusive as against the defendant, and it is undoubtedly open to him to show

p. 613

that the recovery was either collusive or fraudulent. But is a debt created by the judgment itself. It is proved by the production of a judgment, and that is at least prima facie evidence of its existence. It is unlike the case of Miller v. White ( 50 N. Y., 137 ), where the judgment was upon a debt antecedently existing, in which case it was held that the judgment was neither conclusive nor prima facie evidence of the debt, and it was the duty of the plaintiff to prove and establish his debt independently of the judgment. The reason upon which that decision is based can have no application to a case like this, where there was no liability on the part of the company to pay the costs antecedently to or independently of the judgment.

We have carefully examined all the authorities to which our attention is called, and we find none of them in conflict with the views here expressed.

We have not overlooked the clause which follows the words, “debts of the company then existing,” to wit: “And for all that shall be contracted before such report shall be made.” The claim on the part of the defendant, that these words Emit the meaning of the former words to such debts of a corporation as are voluntarily contracted, we do not deem to be well founded. The word, “contracted,” here means the same as “ incurred,” and includes every debt for which the corporation becomes bound. There is no apparent reason for any discrimination as to the kind of debts, and we do not think any was intended.

Therefore, the judgments of the general and special terms should be reversed, and judgment given to the plaintiff upon his demurrer, with costs.

All concur.

Cases cited

Miller v. White 50 N. Y.. 137 N.Y. 1872-11-12 p. 610