Gale v. Troy & Boston Railroad — 21 N.Y. St. Rep. 702

Majority

p. 702

John B. Gale, Resp’t, v. Troy and Boston Railroad Company, App’lt.

(Supreme Court, General Term, Third Department,

Filed February 7, 1889.)

Headnote

ZRailboads—Consolidation not a defense to action against old cobpobations—Laws 1869, Chap. 917.

Where two railroad, corporations are consolidated, an. action can he maintained against the old corporation for debts existing at the time of the consolidation.

B. A. Parmenter, for app’lt; John B. Gale, for resp’t.

Three cases. Two of these are actions on unpaid bonds past due of the defendant. The third is an action on unpaid interest of such a bond. The bonds are ¡secured by a mortgage to trustees.

The defense is that subsequently to the execution of the bonds and mortgage, and in June, 1887, a consolidation •agreement was executed between the defendant and the Fitchburgh Railroad Company, under chapter 917, Laws of 1869, the general consolidation act, by which the two companies were consolidated under the name of the Fitchburgh Railroad Company.

The defendant claims that the effect of that consolidation is such that thereafter no action at law can be maintained •against it for debts existing at the time of the consolidation. The ground is that thereafter all the property of both ■corporations vested in the new; that it would be unjust that creditors of the old companies should maintain actions by which nothing could be collected.

Section 5 of the act provides that a pending action against •either of the consolidating companies shall not abate by the consolidation but may be conducted to final judgment in the name of the existing corporation. It provides also that by order of the court the new corporation may be substituted. Hence it is evident, that without such order, an action pending at consolidation of the nature of those in question, could proceed to final judgment against this -defendant. Thus it is manifest that the statute did not take away the right of action against the consolidating -companies. If it had done so, the pending action would have abated. If a pending action is not to abate, it is reasonable to say that a similar right of action is not ■destroyed.

Again, the fifth section says, that “ the rights of all creditors of * * * either of said corporations * * * «hall be preserved umimpaired and the respective corporations shall be deemed to continue in existence to preserve the same.” This language seems to be unequivocal. The

p. 703

right of a creditor is not preserved unimpaired, when it is taken away. Before the consolidation this plaintiff had the-right to sue and recover at law against this defendant. The defendant now says that such right was taken away by the consolidation. That seems to us directly contrary to the statute.

The defendant urges that because it has no property it cannot be sued on its debts. It is a new doctrine that when a debtor has assigned all his property for the benefit of creditors and" has nothing, he has escaped all legal liability on his debts. If a man were sued on a bond, it would be an ingenious attorney who would set up as a defence in the answer that the defendant had no property, and, therefore, should not be harassed by a useless action.

A majority of this general term have just decided that no action on these bonds lies against the consolidated corporation. If the defendant is correct, then no action at law lies against any one in these cases; in which event the-rights of creditors would be very decidedly impaired.

Whether the legislature can destroy or athorize debtors to destroy the right of action of creditors to recover debts, we need not decide; for it seems, to us, that they have-made no attempt to do this.

Judgment affirmed, with costs in each case.

Landon and Ingalls, JJ., concur.