Cochran v. Weichers

Decision Date25 February 1890
Citation23 N.E. 803,119 N.Y. 399
PartiesCOCHRAN et al. v. WEICHERS et al.
CourtNew York Court of Appeals Court of Appeals
OPINION TEXT STARTS HERE

Appeal from supreme court, general term, first department.

Defendants appeal from an order reversing an order of the special term which denied plaintiffs' motion to revive the action as against the executors of William A. Weichers, a deceased defendant.

REVIVAL OF ACTION-LIABILITIES OF STOCKHOLDERS.

Laws N. Y. 1875, c. 611, s 37, provides that in limited liability companies all the stockholders shall be individually liable to the creditors of the company 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 the capital stock of such company has been paid in, and a certificate thereof has been made and recorded. Held, that the liability of a stockholder in a company organized thereunder was not in the nature of a penalty, but of a contract obligation, and an action thereon survives against his personal representatives.

Abbett & Fuller,(Henry Schmitt, of counsel,) for appellants.

Henry D. Hotchkiss, for respondents.

O'BRIEN, J.

The plaintiffs are judgment creditors of the American Opera Company, Limited, a domestic corporation formed under chapter 611 of the Laws of 1875, for the incorporation of business corporations with limited liability. The capital stock of the company was fixed at $500,000, only $148,000 of which was ever paid in, and no certificate that the capital stock had been paid in has ever been made or recorded, as prescribed by the statute under which the company was incorporated. The plaintiffs' action is in the nature of a creditors' suit to settle the affairs of the American Opera Company, Limited, and to distribute its assets, as well as the proceeds of the stockholders'individual liability, among the company's creditors. Pfohl v. Simpson, 74 N. Y. 137. The complaint alleges the incorporation of the company; the amount of its capital stock; the amount paid in, as above stated; and the fact that no certific te of the company had been made or filed as required by the statute. Numerous persons have been joined as defendants with the opera company, as to whom it is alleged that they are either creditors or stockholders of the company and among these William A. Weichers was named as a defendant as to whom it was claimed that he was a stockholder holding 25 shares of the stock of the company. It is also alleged in the complaint that several of the parties defendant who were stockholders were indebted to the company for their stock. This allegation is general, and the particular persons claimed to be so indebted are not named. Weichers was served with the complaint, and appeared and answered. On or about December 14, 1888, he died, leaving a last will and testament wherein he appointed executors. The will has been admitted to probate by the surrogate of New York county, and letters testamentary issued to the executors, who have qualified and taken upon themselves the execution of the will. After the death of Weichers the plaintiffs applied to the special term to revive and continue the action against the executors, and the special term denied the motion, upon the ground that the cause of action stated in the complaint against the deceased was of a penal character, and did not survive. Upon appeal to the general term from this order, it was reversed, and the court directed that the action be revived and continued against the executors of Weichers, and that the plaintiffs have leave to serve a supplemental summons and complaint on the executors. From the order of reversal the executors have appealed to this court.

The cause of action stated in the complaint against the stockholders is twofold. First, it is alleged that many of them are indebted to the company for their capital stock; and, second, that as the capital stock was never fully paid in, and no certificate thereof ever made or filed, the defendants who were stockholders are liable for its debts to the extent of their stock. The question is whether a liability of this character on the part of a stockholder to the creditors of a corporation survives. If the liability is penal in its nature, it is conceded that it does not survive; while if the liability is in the nature of a contract obligation it is conceded that it does.

The provision of the statute of 1875, (chapter 611, § 37,) upon which this action is based, so far as the stockholders are concerned, is as follows: ‘In limited liability...

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18 cases
  • Austin v. Strong
    • United States
    • Supreme Court of Texas
    • January 25, 1928
    ...provided by the Constitution, and is bound by contract to all persons contracting with the corporation." In Cochran v. Wiechers, 119 N. Y. 399, 23 N. E. 803, 7 L. R. A. 553, a similar rule is recognized by this "Upon becoming the owner of the stock, he voluntarily assumes the obligations im......
  • Sullivan v. Associated Billposters and Distributors
    • United States
    • United States Courts of Appeals. United States Court of Appeals (2nd Circuit)
    • March 2, 1925
    ...v. Metropolitan Stock Exchange, 191 Mass. 117, 121, 77 N. E. 706; Motlow v. Johnson, 151 Ala. 276, 44 So. 42; Cochran v. Wiechers, 119 N. Y. 399, 23 N. E. 803, 7 L. R. A. 553; Koski v. Pakkala, 121 Minn. 450, 141 N. W. 793, 47 L. R. A. (N. S.) 183; Garrigan v. Huntimer, 20 S. D. 182, 105 N.......
  • Marshall v. Sherman
    • United States
    • New York Court of Appeals
    • December 19, 1895
    ...sense, but arises upon the statute as an implied obligation which the defendant assumed when he purchased his stock. Cochran v. Wiechers, 119 N. Y. 399, 23 N. E. 803;Flash v. Conn, 109 U. S. 371, 3 Sup. Ct. 263;Richmond v. Irons, 121 U. S. 27, 7 Sup. Ct. 788. The case involves questions whi......
  • Corrington v. Crosby
    • United States
    • United States State Supreme Court of North Dakota
    • September 29, 1926
    ...... penal, but is contractual in its character. Huntington v. Attrill, 146 U.S. 657, 36 L. ed. 1123, 13 S.Ct. 224;. Cochran v. Wiechers, 119 N.Y. 399, 7 L.R.A. 553, 23. N.E. 803; Flash v. Conn, 109 U.S. 371, 27 L. ed. 803, 3 S.Ct. 803. . .          By the. ......
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