Opinion
April Term, 1899.
Louis Marshall, for the appellants.
Albert Stickney, for the respondents Bloomingdale and Stokes.
John A. Straley, for the respondents Buttenweiser and Mayer.
Benno Loewy, for the respondents Shayne and Wolfsohn.
L. Langdon Ward, for the respondent Josephy.
W.C. Prime, for the respondent Lounsbery.
Frederick W. Holls, for the respondents John Bopp, Lena R. Bopp, Ehret, Hasslocher and Tritsch.
Charles A. Boston, for the respondents Plant, Baldwin and others.
Samuel S. Thomas, for the respondent Pulsifer.
The plaintiff, as a creditor of the Madison Square Bank, brought this action in behalf of himself and all other creditors similarly situated, who might come in and contribute to the expenses of the litigation, against all the stockholders of the bank to enforce an alleged liability under section 52 of chapter 689 of the Laws of 1892 (The Banking Law). Before the trial he assigned his claim to one Clairhugh, who delivered releases to some of the stockholders. These facts having been made to appear upon the trial, the complaint was dismissed on the ground that the plaintiff was not then a creditor of the bank and, therefore, could not maintain the action. Judgment was entered to that effect, which on appeal to this court was reversed and a new trial ordered. Seventeen of the defendants thereupon gave the usual stipulation for judgment absolute and appealed to the Court of Appeals and that court reversed the order of this court granting a new trial, and affirmed the judgment of the Trial Term dismissing the complaint. After the decision of the Court of Appeals had been made the judgment of the Supreme Court, application was made by the petitioners for leave to intervene and be made parties plaintiff and to serve an amended summons and complaint. The application was denied, and from that order this appeal is taken.
When the decision of the Court of Appeals, reversing the order of this court granting a new trial and affirming the judgment of the Trial Term dismissing the complaint, was made the judgment of the Supreme Court, the seventeen defendants who had appealed to the Court of Appeals ceased to be parties to the action. They were no longer connected with it, and the condition of the action then was the same as though they had never been made parties. The question presented, therefore, is, can this action, under the facts here presented, be maintained against the remaining stockholders after seventeen of them had finally been discharged from liability? We do not think it can.
The statute (Laws of 1892, chap. 689, § 52) provides that the stockholders shall be individually responsible equally and ratably, and not one for another, for all contracts, debts and engagements of the corporation to the extent of the amount of their stock therein at the par value thereof, in addition to the amount invested in such shares. The manifest purpose of the statute is to provide a fund by contribution from all the stockholders, out of which all the creditors of the corporation are to be paid. To create this fund an equitable action must be brought by or in behalf of all the creditors against all the stockholders. In no other way can the claims of all the creditors be satisfied by an equal and ratable contribution of the stockholders. The action cannot be maintained against one stockholder or against any number of stockholders less than all, if all can be made parties. ( Marshall v. Sherman, 148 N.Y. 9.) In the case cited, which was decided after the enactment of the statute now under consideration, a creditor of a Kansas bank brought an action in this State against a stockholder of the corporation to enforce a liability under the laws of that State, and the court held that the action could not be maintained; that if a recovery could be had under any circumstances, it could only be in such form and by such modes of procedure as like liabilities created under our own statute are enforced against our own citizens. In delivering the opinion of the court Judge O'BRIEN said: "There is no reason why the plaintiff should be permitted to enforce his debt in this jurisdiction against a citizen of this State in a form of action different from that which a creditor of a domestic corporation may prosecute against a domestic stockholder; it is quite well established that in a case like this an action at law by a single creditor against a single stockholder for the recovery of a specific sum of money cannot be maintained in our courts under the statutes declaring the liability of stockholders. In such cases the liability must be enforced in equity in a suit brought by or in behalf of all the creditors against all the stockholders wherein the amount of the liability and all the equities can be ascertained and adjusted. * * * The liability of the stockholders is a fund to which all the creditors are entitled to resort after the corporate property has been applied upon the debts."
And the Court of Appeals, when the present case was last before it, approved the principle announced in the Marshall Case ( supra) and the rule there laid down governing the liability of stockholders. Judge HAIGHT, in delivering the opinion of the court, said: "It was evidently not intended by the provisions of this statute that one creditor should be preferred and paid to the detriment of other creditors, but that the stockholders should be responsible equally and ratably for all of the debts of the corporation to the extent of their capital stock at par value. In other words, they were to contribute equally and ratably for the payment of the whole indebtedness." ( Hirshfeld v. Fitzgerald, 157 N.Y. 179.)
When the motion of the petitioners was made, which resulted in the order appealed from, seventeen of the stockholders of the Madison Square Bank, as we have already seen, were not, and could not be made, parties to this action. The complaint had been dismissed as to them, but their liability to contribute had not been extinguished. Had the motion therefor been granted, it would not have benefited the petitioners, because they could not have maintained the action against the other defendants.
It follows that the order was right and must be affirmed, with ten dollars costs and disbursements.
VAN BRUNT, P.J., BARRETT, RUMSEY and PATTERSON, JJ., concurred.
Order affirmed, with ten dollars costs and disbursements.