Terry v. Rothschild

Headnote

Action against a stockholder ■ — what the plaintiff must show as to the return of an execution.

Two judgments were recovered by an individual against a corporation by default, and subsequently, after execution bad been issued and returned unsatisfied ^ upon such judgments, be commenced an action against a stockholder of the corporation to recover the amount thereof. Thereafter, and before the trial of the action against the stockholder, the two judgments recovered by default were opened ; trials were had upon the merits, which resulted in a recovery by the plaintiff in each action, in an amount, however, less than the amounts awarded to him by the judgments recovered by default. The plaintiff did not have the first two judgments modified so as to correspond with the recoveries, but instead he entered two new judgments upon which executions had not been issued at the time of tie trial of the action brought by him against the stockholder, nor was it shown upon the trial thereof that such judgments had not been paid.

Held,, that the actiombrought against the stockholder was not maintainable, as instead of having the two judgments by default modified so as to correspond with the recoveries after the trial upon the merits, the plaintiff elected to enter two new judgments, which became the measure of the liability of the corporation to him;

That the plaintiff, in order to be entitled to a recovery, against the stockholder, must show the issuance and return unsatisfied of executions, upon the judgments whiph were the foundation of the suit, and the issuance and return unsatisfied of the executions on the prior judgments was not sufficient.

Appeal by tbe plaintiff, Samuel H. Terry, from a judgment of tbe Supreme Court in favor of tbe defendant, entered in tbe office of tbe clerk of tbe county of New York on tbe 20tli day of December, 1892, upon tbe dismissal of tbe complaint directed by tbe court after a trial before tbe court and a jury at tbe New York Circuit.

In May, 1887, tbe “I. Herman Manufacturing Comjiany” was incorporated under chapter 40, Laws of 1848 — tbe Manufacturing Act — and tbe acts amendatory thereof, with a share capital of $10,000, divided into 10,000 shares of one dollar each. Tbe corporation was organized “ to manufacture Jersey and band-knit worsted goods, and anything connected therewith,” and was to exist during fifty years. Tbe number of its trustees was fixed at three. Salomon 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, 1889, 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, 1889) the plaintiff recovered a second judgment by default against the corporation in the City Court of New York, for $1,926.32 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 wrnre 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 the corporation was permitted to defend the actions, but, on appeal to the General Term of the City Court, the order was, November S, 1889, modified so as to permit the corporation to defend the actions, and the judgments to stand as security. The actions were subsequently tried on their merits, the plaintiff recovering in the one represented by the judgment first mentioned, $930.35 damages and $262.46 costs, total, $1,192.81, and in the action represented by the second judgment, $1,610.06 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.