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Kincaid v. Dwinelle

37 N.Y. Super. Ct. 326 5 Jones & S. 326 Court N.Y. Super. Ct. Decision date 1874-05-02 English

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ALEXANDER KINCAID, Plaintiff and Respondent, v. WILLIAM H. DWINELLE, Dependant and Appellant.

Headnote

I. CORPORATION—DISSOLUTION—STOCKHOLDER.
1. Dissolution, what does not operate as. a. The appointment of a receiver, under section 86, article 2, title 4, chapter 8, part 3, Revised Statutes, with the powers conferred hy chapter 71, Laws of 1852, and chapter 463, Laws of 1860, does not.
RESULT OF THIS:
That notwithstanding such appointment and an accompanying injunction,
1. The company could still be sued as a corporation.
2. The summons in an action against the corporation may be served on the person who at that time was the president of the company, and whose term of office' had not expired by effluxion of time, and who had not-resigned at the time of service.
3. Those who' were then stockholders did not thereby cease to be such.
4. The statute of limitation, in the Laws of 1848, chapter 40, section 24, does not commence to run at such time.
5. A recovery may be had in an action commenced more
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than two years thereafter, against one who at that time was liable as a stockholder, under the provisions of section 14 of the act of 1848, for a clebt of the company, the judgment against the company for such debt having been obtained in an action commenced thereafter, by the service of the summons on the person who was at that time president, and whose term of office had not expired by effluxion of time, and who had not resigned at the time of service.
Before Monell, Ch. J., Curtis and Speik, JJ.
Decided May 2, 1874.
Appeal by defendant from a judgment entered on a decision made in a trial by the court, without a jury.
The New York Silk Manufacturing Company was duly organized as a corporation, under the laws of the State. On December 11, 1866, one Douglas recovered a judgment against said company for work, labor and services performed by him for - said company, as superintendent and employee. An execution was issued on such judgment against the property of said company, and was returned unsatisfied. Douglas thereafter sold and assigned his claim against said company and defendant herein, and the said judgment, to the plaintiff. Thereupon the plaintiff, pursuant to section 18 of the act of 1848, relating to the liability of stockholders of corporations for debts due and owing to their laborers, servants and apprentices, for services performed for such corporation, brought this action against the defendant, a stockholder in said company, to recover the amount of said claim of Douglas.
This action was commenced in April, 1872, and was tried by the court, without a jury.
On the trial, it appeared, that one Jason Crane having obtained a judgment against the company, and having issued an execution thereon, which had been returned unsatisfied, commenced an action against the
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company, pursuant to sections 36 and 37 of article 2, title 4, chapter 8, part 3, Revised Statutes.
In that action a receiver was duly appointed, pursuant to the above provisions of the Revised Statutes, and with the powers and duties thereby given and conferred, and also with the powers conferred by Laws of 1852, ch. 71, and Laws of 1860, ch. 463. Such appointment was made on April 24,1866, and the receiver duly qualified on or prior to that day.
It did not appear whether there had been any final decree or judgment in that action or not.
Judgment was recovered herein against the defendant, who appeals.
Haseall & Stetson, attorneys, and Francis Lynde Stetson, of counsel for appellant, urged :—I.
In consequence of the proceedings in the action of Crane v. Hew York Silk Manufacturing Company, and of the order appointing a receiver, the corporation was dissolved and ceased to exist from and after the day upon which the receiver qualified, to wit, April 23, 1866. The learned justice below rejected this proposition, and the court is now asked to review the question both upon its own merits, and in the light of authority. The life of the corporation was derived from the people, as expressed through the legislative will. “ Being the mere creature of law, it possessed only those properties which the charter of its creation con-. ferred upon it” (Ch. J. Marshall, 4 Wheat. 636 ). These properties were (Laws of 1848, ch. 40), the right to represent, under a common name, the joint interests of several individuals. The right, under its name, “of taking and granting property, of contracting obligations, of suing and being sued” (1 Kyd on Gory. 13). The possession of these properties constituting the very being of the corporation, a withdrawal, by legal process, of all of these rights, would neces
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sarily destroy the corporation (Slee v. Bloom, 19 Johns. 474 ; 2 Kyd on Corp. 467; In the matter of Berry, 26 Barb. 61 ).
II. The appointment of a receiver under § 36, art. 2, tit. 4, ch. 8, p. 3, Rev. Stat. with the powers conferred by the amendments of 1852 and 1862, operates as a dissolution of a corporation (Act. of 1825, ch. 325 ; 2 Rev. Stat. 369, 463 ; Laws of 1852, ch. 71; Laws of 1860, ch. 403; Mann v. Pentz, 2 Sandf. Ch. 257 -261; 3 Comst. 415; Verplanck v. Mercantile Ins. Co., 2 Paige, 452; Mickle v. Rochester City Bank, 11 Id. 118 ; Angelí v. Silsbury, 19 How. Pr. 51 ; Puller v. Webster Pire Ins. Co., 12 Barb. 293 ; Bangs v. McIntosh. 23 Id. 591).
III. The cases of Bank of Niagara v. Johnson, 8 Wend. 645 ; People v. Manhattan Co., 9 Id. 351 ; Michels v. Rochester City Bank, 11 Paige, 118, and In the Matter of Reformed Presbyterian Church, 7 How. Pr. 477 , are not in conflict with above decisions. They merely hold that a corporation cannot (except, perhaps, where it expires by effluxion of time), be dissolved without some judicial proceeding; but they do not undertake to determine what judicial proceedings will be sufficient for the purpose.
IV. The New York Silk Manufacturing Company having been dissolved in April, 1866, the plaintiff’s action, commenced in April, 1872, was barred by the statute, and should have been dismissed (As to limitation, see Laws of 1848, ch. 40, § 24). It cannot be claimed that one can, in any sense contemplated by the statute, be a stockholder of a corporation after it is dissolved, and consequently the two years limited by the statute for the bringing of actions against stockholders who shall cease to be stockholders, would expire in two years from the date of .such dissolution.
V. The corporation, being dissolved in April, 1866, could not afterwards be sued ; the only suit against the company for the collection of the debt covered by the
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present action was brought in November, 1866 ; consequently the complaint in the present action should have been dismissed upon the ground "that, as .a matter of law, the necessary preliminary suit had never been brought (Laws of 1848, ch. 40, § 24).
VI. In any event the preliminary judgment by default was irregular, and insufficient to form the basis of an action against a stockholder, the summons having-been served in November, 1866, upon Louis S. Bobbins, as president of the company, which was then in the hands of a receiver. When the summons was then served upon the (assumed) president, he was under injunction not to pay out or transfer any of the moneys, property or effects of the company. Such a service, considered as a notice to the defendant, was idle.
It. C. Elliott, attorney, and of counsel for respondent, urged:—I.
The corporation was not dissolved by the appointment of the receiver (Lea v. Amer. Att. & Pacific Canal Co., 3 Abb. Pr. N. S. 1; Abb. Dig. of Laws of Corp. p. 290-291, and cases cited; Angell v. Silsbury, 19 How. Pr. 48 ; Michels v. Rochester City Bank, 11 Paige Ch. 118 ; Nimmons v. Tappan, 2 Sweeney, 652 ; Mann v. Pentz, 3 N. Y. 415 ; Dambman v. Empire Mills, 12 Barb. 345 ).
II. A final order or decree should be entered to work a dissolution (Bank of Buffalo, 6 Paige, 503).
III. The order of sequestration can be dissolved, and corporation allowed to resume (lb. ; Ferry v. Bank of Central N. Y., 15 How. Pr. 458 ; Angel v. Sillsbury, 19 Id. 48).
IV. If the corporation was in such a condition that it could not be sued, defendant was responsible, without proof of any action brought against the corporation ( 52 Mo. 583 ; 8 Am. Law R. 561).

The appellant contends, that a receiver having been duly appointed in

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the suit by Jason Crane against the corporation, the corporation was ipso facto dissolved, and ceased to exist from and after the day such receiver qualified.

As the judgment recovered by Douglas, the.plaintifFs assignee, appears to have been regularly obtained on the face of the papers put in evidence, the only question is whether the appointment of the receiver in the above suit by Crane dissolved the corporation.

At common law, the only adverse legal proceedings was by scire facias, by which a chartered corporation could be completely gnd finally annulled and annihilated . It seems a judgment of seizure in a quo warranto information, or proceedings against the franchises of a corporation, either by charter or proscription, did not operate to dissolve a corporation, but only to suspend its operation during the pleasure of the crown (Grant on Corp. 295, 301).

In this State there has been one uniform course of decisions on the subject, the tenor of which is that the legal existence of a corporation cannot be attacked collatterally, but only by judicial proceedings and judgment of ouster. •

Although the powers conferred on the receiver in this case, by the order of this court appointing him, restrains the corporation from exercising its powers, and using its franchises, making its officers subordinate to the will and action of the receiver, by delivering to him all its assets, books and papers; still its legal existence continues, ¿and any creditor is at liberty to proceed against it, in its corporate capacity. The reason is very plain. The object of the receiver’s appointment, and the ends sought to. be attained thereby, may be accomplished, and all proceedings instituted by him settled and discontinued, without involving the consideration of any question whatever which might arise in any action instituted directly for the purpose of dissolving the corporation (The People v. The

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President of the Manhattan Company, 9 Wend. 351 . In the matter of the Reformed Presbyterian Church of New York, 7 How. Pr. 476 ; Mickles v. The Rochester City Bank, 11 Page, 125).

In this court (Nimmons v. Tappan, 2 Sweeny, 652 ), it was held that corporations are not dissolved by insolvency, or non-user. These are grounds for judically declaring them dissolved, and in the N. Y. Marble Iron Works v. Smith, 4 Duer, 362 , Oakley, Ch. J., says a corporation can only be dissolved by a surrender of its charter, accepted by this State, or by judicial proceedings instituted for that purpose. No corporation can be dissolved by a mere resolution of its directors, stockholders, or members ; not even when all the members concur in the act (See also Shellington v. Howland, 53 N. Y. 371 ).

The judgment must be affirmed, with costs to the defendant.

Monell, Ch. J., and Curtis, J., concurred.

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