Opinion
June 18, 1909.
Henry F. Wolf [ Walter Loewenthal with him on the brief], for the appellants.
Thomas Sproull, for the respondent.
The plaintiff, a domestic corporation, recovered a judgment of $3,000 against A.R. Keller Co., Incorporated — one of the defendants — also a domestic corporation, in an action against it as indorser upon a promissory note. Execution was issued upon the judgment and returned wholly unsatisfied, and then this action was brought to compel the directors to account for the management and disposition of the assets of the corporation, for the appointment of a receiver, and for other relief. After issue had been joined, upon motion of the plaintiff, a receiver was appointed pendente lite, to whom the directors were ordered to turn over all of the property of the corporation, and the defendants appeal from this order.
It appears from the papers used upon the motion that on the 30th of December, 1907, the directors of the defendant corporation filed in the office of the Secretary of State a consent and statement, signed by all of the stockholders, of its voluntary dissolution and on the following day there was filed in the office of the clerk of the county of New York a certificate of the Secretary of State to the effect that the statement referred to had been filed in his office and it appeared therefrom that the corporation had complied with section 57 of the Stock Corporation Law in order to be dissolved. On the 30th of November, 1907, the directors of the defendant corporation, who were all of the stockholders, distributed among themselves all of its assets. On the tenth of October immediately preceding the time the distribution took place, one Sellers delivered to the corporation his note for $3,000 payable to its order ninety days after date. This was indorsed by the corporation and, at the time its assets were distributed among the stockholders, delivered to A.R. Keller, one of the defendants, who, in turn, delivered it to the plaintiff for value. The note was not paid at maturity, was duly protested, and an action subsequently brought against the corporation as indorser, which resulted in the judgment above referred to.
At the time the certificate of dissolution was filed the corporation was only contingently liable, but such liability had to be provided for before all of its assets could be distributed. This contingent liability became absolute when the maker of the note failed to pay it at maturity and the same was duly protested. The judgment which was thereafter recovered by the plaintiff conclusively established its right to recover against the defendant corporation. The distribution of all of its assets without making provision for this debt was illegal ( Saranac L.P.R.R. Co. v. Arnold, 167 N.Y. 368), and to the extent of the damage sustained by the plaintiff by reason thereof made the directors jointly and severally liable to it. (Stock Corp. Law [Gen. Laws, chap. 36; Laws of 1892, chap. 688], § 23, as amd. by Laws of 1901, chap. 354; revised in Stock Corp. Law [Consol. Laws, chap. 59; Laws of 1909, chap. 61], § 28.) When the dissolution took place the directors became the trustees of the creditors of the corporation and as such it was their duty to settle its affairs, collect the assets, pay the debts, and divide among the persons entitled thereto the money and other property remaining. They had authority to sue for and recover the debts and property of the corporation as such trustees and they became jointly and severally, personally, liable to its creditors to the extent of the property which came into their hands. (Gen. Corp. Law [Gen. Laws, chap. 35; Laws of 1892, chap. 687], § 30; revised in Gen. Corp. Law [Consol. Laws, chap. 23; Laws of 1909, chap. 28], § 35.)
But notwithstanding that the distribution of the assets was illegal, it does not follow that in this action a receiver pendente lite should be appointed. The defendant corporation has no property. It has all been distributed, and to compel the other defendants to turn over to the receiver property which they now hold would be granting by an order precisely the same relief that the plaintiff will get if it obtains a judgment. Not only this, but the defendants, other than the corporation, are all of the directors who participated in the distribution and under the statute, as we have seen, they are jointly and severally, personally, liable to the plaintiff to the extent of the damage sustained by it. The plaintiff, therefore, if it obtains a judgment, can issue an execution thereon and levy upon whatever property the directors have, including that distributed, if they now have it. The appointment of a receiver would accomplish no useful purpose and I think, upon the facts set out in the record, one ought not to be appointed.
The order appealed from, therefore, is reversed, with ten dollars costs and disbursements, and the motion denied, with ten dollars costs.
INGRAHAM, CLARKE and SCOTT, JJ., concurred; LAUGHLIN, J., dissented.
I dissent upon the ground that, in my opinion, a receiver should be appointed unless the individual defendants give an undertaking as security for any judgment recovered by the plaintiff.
Order reversed, with ten dollars costs and disbursements, and motion denied, with ten dollars costs.