Bogardus v. Rosendale Manufacturing Co. — 6 N.Y. Super. Ct. 89

Majority

p. 89

Bogardus v. The Rosendale Manufacturing Company and others.

Headnote

A bill in equity cannot be filed against a manufacturing corporation and its officers, upon a mere legal demand, praying for a discovery of the names of the stockholders at the time the debt was contracted, for the payment of the debt, and for a receiver, before the creditor has established his demand in a suit at law, and without any allegation of the insolvency of the corporation, <&c.

The proper course for the creditor is, first to establish his demand, in a suit at law, and then file his complaint, in the nature of a creditor’s bill, against the company; to which he may make the officers parties, for the purpose of discovering the names of the stockholders. And such stockholders, when discovered, may be made defendants by a supplemental bilL

(Before Duer, Mason, and Campbell, J. J.)

May 23 ;

June 22, 1850.

In Equity. This was a demurrer by the defendants 'to the plaintiff’s bill of complaint. The bill was originally filed in the supreme court. It alleged that previous to the 28th of June, 1846, the defendant Livingston, president of the Rosendale manufacturing company, a corporation incorporated by and under the laws of the state of New York, by an act passed for that purpose, on or about the 16th of April, 1847, applied to the plaintiff for the purchase of a certain machine or mill manufactured by the plaintiff; that after some negotiation, Livingston, acting for the company, purchased such machine from the plaintiff; that the same was purchased by Livingston for the Rosendale manufacturing company, and was received and applied to the use of such company, and became its property; that for the purchase money Livingston gave to-the plaintiff a promissory note in these words:

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“New York, June 28th, 1846.

“ Ninety days after date tbe Rosendale Manufacturing Company promise to pay to tbe order of James Bogardus, eight hundred dollars, for value received.

(Signed,)

“John R. Livingston, Jun., .

$800. President,

16 Wall-street.”

The bill alleged that the plaintiff was ■ still the holder and owner of the note, and that the same, with interest, was still due and unpaid. That by the ninth section of the act. of incorporation of the Rosendale manufacturing company, it is among other things in substance provided — ■

“ That the stockholders of the said corporation shall be holden in their individual capacities, jointly and severally, for the payment of all debts contracted by the said company, to .the nominal amount of the stock held.by such stockholders respectively, and any person having any demand against the said company, may sue any stockholder singly, and any two or more stockholders thereof jointly, and recover in any court having cognizance thereof, provided such suit shall not be maintained without proof that such demand had been presented to the proper officer of the said company for payment, and the payment thereof neglected- or refused.” ■ ' '

The bill alleged the presentment of the note for payment, on the day it fell due; at the office of the company in New York, and the protesting thereof for non-payment, and another demand of payment made of the defendant, Livingston, as president, on the 11th of January, 1848, and a refusal to pay. The bill further alleged,- upon information and belief; that the- stockholders of the Rosendale; manufacturing company, at the time of the contracting of the debt, were numerous, and their names and residences, and the number of shares of stock held by each or any of them were unknown to the plaintiff, and could not be ascertained from any source of information accessible to him, and only by an examination of the books of the company in

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the custody of its officers, or from the officers .themselves. That the defendant, Livingston, as such president, and the defendant, Driggs, as the secretary of the company, .had,■, or one of them had, the custody, at the office of the said company, of the books of the’company, and had knowledge” of who were the stockholders, and of all other matters in relation thereto necessary to the plaintiff; and that the plaintiff was wholly unable, without a discovery from them; under-their .oaths ■ respectively, of the names of the stockholders of the company, at the time of the contracting of -such- debt, and of their residences, and the number of shares of their stock, respectively, at that time, to make the necessary parties to the plaintiff’s bill, so as to procure the release to which he was-entitled. The plaintiff further alleged that he had, through his- attorney,-.made application-to the defendant Driggs, as such secretary, at the office of the company, in New York, for permission to refer to the books of the company, to- ascertain the names of its stockholders; which application was refused.’ • That Livingston was a stockholder in the company, but to what amount the plaintiff'was ignorant, and he claimed a full discovery. The prayer of-the-bill-was, that the defendants might answer-and discover who were the-stockholders of the company, at the time of the contracting of the debt to the plaintiff, and at the -time of making of the promissory note, -and their residences respectively, and the number of shares of stock held by each, and the -nominal amount of such stock so- held-by each, and the -nominal value of a share of the stockand that a receiver of the several sums of money for which the stockholders were liable, by virtue of the act of incorporation, might be appointed;-and; that the claims of the plaintiff might be established by ai decree against-the company, and that hé might be paid his claims, &c.

To this bill the defendants demurred; and the demurrer being brought on for -argument at a special term of the supreme court held on the-8th of*November,-1848, the’same was overruled.- . From that decision the defendants-appealed to’-the general term of the supreme court; and the cause was subsequently-transferred to this-court. -

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JR. JE. Mount, Jun., for the appellants.

A. F. Smith, for the respondent.

By the Court.

The plaintiff is not entitled to the relief sought by this bill against the company. It sets forth a mere legal demand upon a promissory note. There is no allegation in it of the insolvency of the company for one year, or of any of the facts enumerated in the 38th section of the statute concerning proceedings against corporations, (2 R. S. 463,) which would authorize the court to pronounce this corporation dissolved. (Slee v. Bloom, 19 John. 456 ; Briggs v. Penniman, 8 Cow. 387 .) Nor does the bill contain any prayer for a decree of dissolution. It merely prays for payment of the note, and for a discovery of the names of the stockholders, and for a receiver, and for further relief. Livingston and Driggs are made defendants solely for discovery, and if the plaintiff is not entitled to the relief sought by the bill against the company, he is not entitled to the discovery; the discovery being incidental to the relief. (Vermilya v. Fulton Bank, 1 Paige, 37; Story’s Eq. Pl. § 312 & notes.) There are no statutory provisions allowing a bill to be filed on a mere legal demand, in the first instance, either against a corporation of this liind, or against one or more of the stockholders. But the creditor, if he wish to obtain a decree, such as is sought for in the present bill, must first establish his demand in a suit upon the note, and then file his complaint, in the nature of a creditor’s bill against the company, to which he may make the officers parties, for the purpose of discovering filenames of the stockholders, and such stockholders, when discovered, may be made defendants by a supplemental bill. (Judson v. Rossie Galena Co., 9 Paige, 598; Morgan v. New York & Albany Railroad Co., 10 Paige, 290.) .It is true that the 45th 'section of the statute referred to authorizes a proceeding in equity on behalf of the creditors of a corporation, against stockholders, on account of any liabilities created by law, and the act incorporating this company renders the stockholders liable in their individual capacity for all debts contracted by the company. But the diffi

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culty in this case is, that the fact is not yet legally ascertained that the plaintiff’s claim is a debt of the company. For aught that appears, there may be a perfect defence to it; and although a creditor might, perhaps, in a suit at law against a stockholder, be allowed to prove that the claim against the company was a valid and subsisting demand, yet the remedy given by the 45th and subsequent sections cannot, we think, be enforced until after the claim is established against the company, for until then the liability of the stockholders created by law is not ascertained.

It is only in the case of banking and insurance companies, or companies authorized to loan money on pledges or deposits, that a bill like the present could be sustained, if at all. A creditor of other corporations cannot make the stockholders or directors, who are personally liable, parties to a suit until after a decree against the corporation, and then by supplemental bill or otherwise. (2 R. S. 464, § 39 to 44 inclusive.)

The decree at the special term must therefore be reversed, the demurrer allowed, and the bill dismissed with costs.

Cases cited

Briggs v. Penniman 8 Cow. 387 N.Y. p. 92