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Warth v. Moore Blind Stitcher & Overseamer Co.

Supreme Court of New York, Appellate Division

July 7, 1911

APOLLONIA WARTH, Appellant,
v.
MOORE BLIND STITCHER AND OVERSEAMER COMPANY and Others, Respondents.

APPEAL by the plaintiff, Apollonia Warth, from a judgment of the Supreme Court in favor of the defendants, entered in the office of the clerk of the county of New York on the 9th day of July, 1910, upon the decision of the court, rendered after a trial at the New York Special Term, dismissing the complaint upon the merits.

COUNSEL

Edward S. Clinch [J. Brewster Roe with him on the brief], for the appellant.

Adam Frank, for the respondents Oettel and Ludwig.

Charles L. Hoffman [Henry A. Friedman with him on the brief], for the respondents Schlesinger and others.

Page 29

LAUGHLIN, J.:

The plaintiff sues in equity in behalf of all creditors of the defendant corporation, the Moore Blind Stitcher and Overseamer Company, which was incorporated in 1906 under the Business Corporations Law of New York, to enforce the liability of stockholders for unpaid subscriptions to capital stock. Section 59 of the Stock Corporation Law requires, as a condition precedent to the enforcement of such liability when based on section 56 of the Stock Corporation Law, that a judgment be first recovered against the corporation. The rule in equity aside from any statute is to the same effect. ( National Bank v. Dillingham, 147 N.Y. 603, 608.) This requirement was complied with by the recovery of a judgment in favor of the plaintiff against the corporation for $7,087.50 on the 1st day of November, 1907. The plaintiff alleges that at the time the debt upon which the action is founded was contracted the defendants were the holders and owners of capital stock of the corporation, which had not been fully paid; and further that 'the defendants above named are all the holders of capital stock of the defendant corporation, not fully paid, as aforesaid.' The allegation that the defendants are all the holders of capital stock upon which the subscriptions are not fully paid was denied, and on the trial evidence was offered and received which shows that some of the defendants whose subscriptions to capital stock have not been fully paid were not served and that other subscribers to capital stock and holders and owners of capital stock at the time the contract was made were not made parties defendant, and the court has so found. Many propositions are advanced by the learned counsel for the respondents upon which it is claimed that the judgment may be sustained; but we are of opinion that the objection that all stockholders of the company who are liable under the statute have not been brought before the court is well taken, and it is, therefore, unnecessary to consider the other questions.

Section 10 of chapter 40 of the Laws of 1848, entitled 'An act to authorize the formation of corporations for manufacturing, mining, mechanical or chemical purposes,' provided that the stockholders of a corporation incorporated thereunder should be 'severally individually liable to the creditors of the

Page 30

company in which they are stockholders to an amount equal to the amount of stock held by them respectively for all debts and contracts made by such company, until the whole amount of capital stock fixed and limited by such company shall have been paid in, and a certificate thereof shall have been made and recorded as prescribed in the following section.' It will be observed that this statute expressly imposed a several liability on the stockholders, and the statute has been so construed. (Weeks v. Love, 50 N.Y. 568.) When the Legislature came to enact the Stock Corporation Law (Gen. Laws, chap. 36; Laws of 1890, chap. 564), which superseded said chapter 40 of the Laws of 1848 (Close v. Potter, 155 N.Y. 145, 149), it incorporated a somewhat similar provision in section 57 thereof, as follows: 'The stockholders of every stock corporation shall, jointly and severally, be personally liable to its creditors to an amount equal to the amount of stock held by them respectively for all debts and contracts made by the corporation, until the whole amount of its capital stock shall have been paid in, and a certificate thereof, signed, verified and acknowledged by the president and a majority of the directors, shall have been filed and recorded in the office of the clerk of the county, where the principal business office of the corporation is located.'

The Stock Corporation Law of 1890 was amended and re-enacted in 1892 (Laws of 1892, chap. 688), and the provision of section 57 above quoted is found in section 54 of the Stock Corporation Law of 1892, by which it is changed to read as follows: 'The stockholders of every stock corporation shall, jointly and severally, be personally liable to its creditors to an amount equal to the amount of the stock held by them respectively, for every debt of the corporation until the whole amount of its capital stock issued and outstanding at the time such debt was incurred shall have been fully paid.'

It will be observed that in these provisions the Legislature in express terms imposed a joint and several liability, and the statute has been so construed by the Court of Appeals. (Lang v. Lutz, 180 N.Y. 254.) Those statutory provisions, however, did not relate to the original liability of the stockholders as subscribers, or to the transferees of stock on which the subscriptions

Page 31

had not been paid in full, but in effect imposed a double liability on stockholders. Even though the stock had been fully paid once, the stockholder became liable again for the face value thereof in the circumstances specified in the statute. In 1901, however, the Legislature by chapter 354 amended said section 54 of the Stock Corporation Law of 1892 by omitting the words in the prior statute expressly imposing a joint and several liability, and by wholly eliminating the double liability, and by imposing a liability only for the amount unpaid on the stock; and the statute, as thus amended, was re-enacted as section 56 of the present Stock Corporation Law (Consol. Laws, chap. 59; Laws of 1909, chap. 61) as follows: 'Every holder of capital stock not fully paid, in any stock ...


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