The opinion of the court was delivered by: RYAN
Defendant moves to dismiss the 'First Cause of Action' pleaded, on the ground that it is legally insufficient and fails to state a claim upon which relief can be granted.
Plaintiff sues as statutory receiver of Distillers Factors Corporation, a New Jersey corporation, appointed by a final decree of the Chancery Court of the State of New Jersey.
The complaint setting forth this first claim, alleges that between February and June, 1947, while the corporation was insolvent or its insolvency imminent, it paid to defendant $ 149,164.08, with intent to prefer the defendant and that defendant had notice or reasonable cause to believe that these payments would effect a preference -- all in violation of the statutes of this state forbidding preferential transfers by corporations.
(1) The complaint is legally insufficient in that it fails to allege that Distillers Factors Corporation was a foreign stock corporation transacting business in this state.
The only statutes having any application to the claim pleaded are Section 15 and 114 of the Stock Corporation Law of New York, Consol. Laws, c. 59. It has long been held that the provisions of Section 15, formerly Section 48, do not apply to foreign corporations. Vanderpoel v. Gorman, 140 N.Y. 563, 35 N.E. 932, 24 L.R.A. 548, 37 Am.St.Rep. 601. 'Section 114 was confessedly passed to fill the gap left in section 15 when Vanderpoel v. Gorman * * * construed that section as limited to domestic companies.' Irving Trust Co. v. Maryland Casualty Co., 2 Cir., 1936, 83 F.2d 168, 170, 111 A.L.R. 781, certiorari denied 299 U.S. 571, 57 S. Ct. 34, 81 L. Ed. 421.
The pertinent provisions of Section 114 read as follows:
'Except as otherwise provided in this chapter, the officers, directors and stockholders of the foreign stock corporation transaction business in this state, * * * shall be liable under the provisions of this chapter, in the same manner and to the same extent as the officers, directors and stockholders of a domestic corporation, for the making of * * *
'4. Illegal transfers of the stock and property of such corporation, when it is solvent or its insolvency is threatened.'
The language of the statute limits its application, to a 'foreign stock corporation transacting business in this state.' The complaint contains no allegation that the Distillers Factors Corporation was transacting business in the State of New York. It fails to state a claim within the wording and limitations of the statute; it is therefore insufficient. Patterson v. Allied Chemical & Dye Corporation, D.C., 69 F.Supp. 804, 806.
(2) The complaint, it is urged by defendant, is further insufficient in that it attempts to extend the provisions of Section 114 beyond 'the officers, directors and stockholders of a foreign stock corporation,' in order to impose the same liability, which is provided for by Section 15 for domestic corporations, upon transferees of preferential payments, when they are not 'officers, directors or stockholders of such corporation.'
It was expressly held in Irving Trust Co. v. Maryland Casualty Co., supra, that this might be done. I find no further case on this since reported. This decision of the United States Court of Appeals in 1936 was prior to Erie R. Co. v. Tompkins, 304 U.S. 64, 58 S. Ct. 817, 82 L. Ed. 1188, 114 A.L.R. 1487. The court, at that time, felt free to place its own interpretation on the scope and meaning of Section 114, writing, 83 F.2d at page 170: 'Being a question of the meaning of a New York statute, we should follow the decisions of the Court of Appeals, if there were any; unfortunately there are none, for -german-American Coffee Co. v. Diehl, 216 N.Y. 57, 109 N.E. 875, is too far afield to help. So we are left, as since 1898 has been often the case when local insolvency statutes are in question, to our own judgment.'
It is beyond argument that today federal courts, in deciding questions involving interpretation of state statutes, are required to follow decisions not only of the highest state court, but in the absence of such rulings it is now 'indicated that intermediate state appellate courts were (are) to be followed, at least in the absence of 'convincing evidence' that the state's highest court would hold otherwise. N. Stoner v. New York Life Ins. Co., 1940, 311 U.S. 464 (61 S. Ct. 336, 85 L. Ed. 284).' 48 Col.L.Rev. 809; see also n. 13, King v. Order of United Commercial Travelers, 1947, 333 U.S. 153, 158, 68 S. Ct. 488.
Defendant calls attention to two decisions of the Appellate Division of the New York Supreme Court, First Department -- Matter of Hulbert Bros. & Co., 38 App.Div. 323, 57 N.Y.S. 38 (March 1899 Term), and Matter of Halsted, 42 App.Div. 101, 58 N.Y.S. 898 (June 1899 Term). Both decisions were rendered within two years after Section 114, then Section 60, was added to the Stock Corporation Law by c. 384 of the Laws of 1897, effective May 7, 1897. That these decisions were considered by the court in arriving at the conclusions expressed in the Irving Trust Co., case, supra, we have no doubt.
We find these two decisions of the Appellate Division frequently cited in briefs submitted to the Court of Appeals on the appeal of this case. In the petition for rehearing filed by respondents the court's attention was specifically called to Matter ...