Hirshfeld v. Fitzgerald

• Decision Date: 22 November 1898
• Parties: HIRSHFELD v. FITZGERALD et al.
• Court: New York Court of Appeals Court of Appeals

157 N.Y. 166

51 N.E. 997

HIRSHFELD

v.FITZGERALD et al.

Court of Appeals of New York.

Nov. 22, 1898.

Appeal from supreme court, appellate division, First department.

Action by Jacob Hirshfeld against Lawrence J. Fitzgerald and others. From a judgment of the appellate division, First department (50 N. Y. Supp. 676), reversing a judgment dismissing the complaint, the defendants appeal. Reversed, and judgment of the trial court affirmed.

Gray and Vann, JJ., dissenting.

William B. Putney, Franklin Pierce, Joseph Fettretch,JohnA. Straley, and Albert Stickney, for appellants.

Samuel Untermyer, for respondent.

HAIGHT, J.

This action was brought by the plaintiff, as a creditor of the Madison Square Bank, in behalf of himself and all other creditors of the bank similarly situated who may choose to come in and share the benefits and expenses of the action, against the defendants, as stockholders of the bank, to enforce an alleged liability under section 52 of the banking law of 1892. The Madison Square Bank was organized in 1882 as a banking association, and carried on its business in the city of New York until about the 8th day of August, 1893, when it suspended payment, and an action was brought by the attorney general for its dissolution, which resulted in a final judgment entered on the 24th day of November, 1893, whereby the banking association was dissolved, and the defendants Miles M. O'Brien and James G. Cannon were appointed permanent receivers. It appears that this action was brought by the plaintiff at the solicitation of the receivers, who agreed with him to pay all the expenses of the action, including counsel fees. The complaint alleges that prior to the commencement of the action the plaintiff requested the receivers to institute an action against the other defendants for the enforcement of their liability as stockholders under the act, and that the receivers, alleging that no cause of action existed in their favor against the stockholders, refused to bring an action, and that they were consequently made defendants herein, but no personal judgment was demanded against them.

Before the trial of this action, certain of the defendants, stockholders of the bank, entered into negotiations with the plaintiff for the purchase of his claim, which resulted in his assigning the same to one Robert Clirehugh, who thereupon stipulated, as the owner of the claim, with the attorneys for the defendants, who were stockholders, that the action may be discontinued, without costs, and that an order may be entered to that effect; and also stipulating for a substitution of attorneys in the place of the attorney who had brought the action in behalf of Hirshfeld. The court having refused to allow a substitution of attorneys, or a discontinuance of the action, Clirehugh executed releases to the defendants who had joined in and contributed to the purchase of the plaintiff's claim. Thereupon, upon leave of the court, supplemental answers were served by a number of the defendants, setting up the sale and assignment by Hirshfeld to Clirehugh, and the releases made by him. Upon the trial which followed, these facts appearing, together with the fact that no other creditor had come in and been made a party to the action, the court held and decided that the plaintiff, Hirshfeld, was not a creditor of the bank, and was not entitled to recover a judgment for any sum of money against the stockholders as such creditor; that the action was not prosecuted by the real party in interest for any claim due from the bank, and that there was no party before the court entitled to recover any judgment in the action as and for a debt due from the bank. Judgment was ordered dismissing the complaint upon the merits. From the judgment entered upon this decision the plaintiff and the receivers appealed to the appellate division, which court reversed the judgment, and ordered a new trial.

The first question which we are called upon to determine is as to whether we have jurisdiction to review the order of the appellate division. In the body of the order reversing the judgment entered upon the decision of the special term the appellate division certifies that the reversal was upon the law and upon the facts. If it is true that the reversal was upon the facts as well as the law, then this court has no jurisdiction to review the order, for, under the constitution and the Code, our power is now limited to the review of questions of law, except where the judgment is of death. Upon the claim being made that there was no controverted question of fact in the case upon which a reversal upon the facts could be based, we allowed the argument of the case to stand over in order that the attention of the appellate division might be called to the matter, and that court have an opportunity to amend the order, if it so desired. That court, as we now understand, has refused to change its order, and we are, therefore, required to look into the case for the purpose of determining whether there are controverted facts or inferences to be drawn from conceded facts upon which a reversal upon the facts could be based. We have discovered none, and none which were material were called to our attention by counsel upon the argument.

In Otten v. Railroad Co., 150 N. Y. 395, 401,44 N. E. 1035, Vann, J., in delivering the opinion of this court, says: ‘An appellate court cannot invest itself with jurisdiction to reverse a lawful judgment free from legal error by the mere assertion that it reverses upon the facts, when the record shows that there are no questions of fact upon which to base a reversal. It cannot create a question of fact by declaring that there is one, nor, by assuming to reverse on the facts, reverse a determination that does not involve a question of fact. * * * Unless there was a material question of fact, the reversal was an unlawful exercise of judicial power, and constituted an error that may be corrected by this court.’ This opinion was concurred in by all the judges of the court, with one exception, and we regard it as controlling on the question under consideration. We have no power to review the facts, but we have the power to determine whether a question of fact is involved in the case, and, if there is none, we have jurisdiction to review the law.

The appellate division appears to have been of the opinion that an action could be properly maintained in the name of Hirshfeld, the plaintiff, after he had sold and transferred his claim to Clirehugh, and after Clirehugh had executed releases to a number of the defendants, and sought to discontinue the action. Section 756 of the Code of Civil Procedure provides that: ‘In case of a transfer of interest, or devolution of liability, the action may be continued, by or against the original party; unless the court directs the person, to whom the interest is transferred, or upon whom the liability is devolved, to be substituted in the action, or joined with the original party, as the case requires.’ Under this provision of the Code, it has been repeatedly held that the action may be maintained in the name of the original plaintiff, notwithstanding that he has, subsequent to the bringing of the action, assigned his claim to another party. It has also been held that the bringing in of the party to whom the cause of action has been assigned is discretionary with the court, but, in continuing the action in the name of the original assignor, he is deemed to act for and on behalf of his assignee, and to represent his interest in the litigation. In no case to which our attention has been called has the plaintiff been allowed to continue the action after he has assigned his cause of action in opposition to the wishes and interests of his assignee. If his assignee sees fit to settle, or demand that the action be discontinued, the provisions of this section furnish no authority for the further continuation of the action, or shield for the plaintiff, who, under such circumstances, should continue to prosecute it. The case of McGean v. Railroad Co., 133 N. Y. 9, 30 N. E. 647, is not in conflict with these views. In that case an action had been brought to restrain the operation and maintenance of the defendant's elevated railroad on the street in front of plaintiff's premises, and to recover damages. After issue was joined, the plaintiff conveyed his premises to another party, but expressly reserved all damages caused, or to be caused, by the present, past, or future maintenance and operation of the railroad, together with the fee and easements in the street. In that case it was held that the plaintiff had the right to continue the action to recover his fee and rental damages. Had he not retained the fee and rental damages, but had included them in the conveyance, and the purchaser had then settled with the railroad company, a very different question would have been presented.

It is now contended that the action brought by the plaintiff was representative, and on behalf of all the creditors of the bank, and that in bringing the action he became a quasi trustee for the other creditors, and that he could not settle or discontinue the action. This question is of great importance, and should receive careful thought and study; for, if the appellants are correct in their contention, stockholders in an action of this character have only to buy out or settle with the plaintiff to defeat a recovery against them. The courts, however, are not responsible for the statute. Our duty is to construe, and not to make, it. We think it must be conceded that the remedy contemplated by the statute was a representative action prosecuted by a creditor on behalf of himself and all other creditors similarly situated who should come into the action and share its expenses. By the provisions of the statutethe stockholders of every banking corporation shall be individually responsible, equally and ratably, and not one for another, for all...