Shayne v. Evening Post Pub. Co.
| Decision Date | 01 October 1901 |
| Citation | 168 N.Y. 70,61 N.E. 115 |
| Parties | SHAYNE v. EVENING POST PUB. CO. |
| Court | New York Court of Appeals Court of Appeals |
OPINION TEXT STARTS HERE
Appeal from supreme court, appellate division, First department.
Action by Christopher C. Shayne against the Evening Post Publishing Company. From an order of the appellate division (67 N. Y. Supp. 937) reversing an order of the special term granting a motion to revive against the trustees of the dissolved corporation an action for libel commenced prior to its dissolution, plaintiff appeals by permission. Judgment of appellate division reversed, and that of special term affirmed.
The following is the question certified: ‘The defendant having been dissolved by the expiration of the term limited in its certificate of incorporation, and this action being for libel, and the action having for these reasons abated, has the court power to revive or continue the same against the trustees of the dissolved corporation in office at the time of such dissolution?’
Edward J. Gavegan, for appellant.
Lawrence Godkin, for respondent.
Plaintiff brought this action to recover damages for alleged libels published in the defendant's newspaper in February, 1899, and when the action came on for trial on the 15th day of May, 1900, the defendant's attorney brought to the attention of the court the fact that the corporate existence of the defendant had terminated on the next preceding 1st day of January. As the action had abated, the plaintiff thereafter moved the court at special term for an order continuing and reviving it against the former directors of the defunct corporation, and the motion was granted. The supreme court in its appellate division, however, reached the conclusion that the death of the corporation operated to destroy the cause of action, and so it reversed the order. There was a difference of view in the court, but the majority apparently felt constrained to follow the occasional dicta of judges that in actions of slander, libel, assault and battery, or false imprisonment the property of the shareholders of the corporation is no more subject to pursuit after the dissolution of the corporation than is the property of an individual after his death. The statute providing for the maintenance of actions against executors or administrators of a wrongdoer expressly excepts causes of the character last above named from the operation of the statute. 2 Rev. St. p. 447. This statute modified the rule of the common law so as to permit actions to be brought against executors or administrators for wrongs done to property rights or interests of persons, but it does not affect, one way or the other, causes of action against corporations. Nor is there any statute in this state indicating a legislative policy to prevent the maintenance of actions against a corporation or its trustees after dissolution, whether the cause of action be founded on a wrong or otherwise. Nor are we foreclosed by authority in this court from considering the question on its merits, for neither the diligence of counsel nor patient investigation on our part has brought to light any decision of this court bearing directly upon the question. For this court to lay down a rule which would cut off causes of action for wrongs against a corporation upon its dissolution would seem to be both arbitrary and unjust, and in some cases it could be taken advantage of by the officers of the corporation by permitting the charter to expire, and afterwards reorganizing, instead of renewing the charter before its expiration. In this case there is no question of the good faith of the defendant. Its charter was allowed to expire by an oversight, and for a little time it proceeded as if its charter were in full force and effect. But if it be true, as the defendant contends, that the termination of the charter operated of itself to put an end absolutely to all causes of action for wrongs, then it matters not whether the termination be due to oversight or design, for it is the civil death of the corporation, and not the cause of its death, that destroys causes of action for wrongs. It hardly need be suggested that, if such were the established rule, there would be found plenty of persons interested in corporations who would plan to so take advantage of it as that meritorious causes of action might be destroyed with only the temporary embarrassment and expense incident to the organization of a new corporation. Of still further importance, however, is the fact that such a rule would work unjustly in every case to a plaintiff in an action for libel such as this one, assuming, as we should, that the plaintiff has a meritorious cause of action.
If a recovery be had during the lifetime of the corporation, the moneys required to satisfy the judgment are necessarily taken from assets belonging to the stockholders, and reduce the value of their holdings in the amount required to pay the judgment. If a judgment be recovered after the termination of the existence of the corporation, the result is the same, for the avails of all the assets of the corporation, after payment of all just debts and claims owing by it, must be distributed among the stockholders if the corporation be wound up; or, if another course be taken, and a reorganization be had, the assets of the new corporation are reduced in value in the amount required to pay the judgment. So far as the stockholders, who are the owners of all of the assets of the corporation, are concerned, therefore, it matters not whether the judgment be taken before dissolution or afterwards, for in any event it is the assets of the corporation which are used in satisfying the demand. In the one case the action is prosecuted to judgment against the corporation, and in the other against the directors, who, by force of the statute, have become the trustees of the assets of the corporation for the benefit of the stockholders. But this is a difference of form, not of substance, for both the corporation and the trustees represent the assets out of which the judgment must be satisfied, and in which the stockholders are alone interested after the satisfaction of all just debts and demands. It is apparent, therefore, that the stockholders have no just ground upon which to predicate a claim that the party who has been wronged by the corporation shall be deprived of his cause of action in the event of the dissolution of the corporation. On the other hand, the plaintiff needs his damages, and in some cases the vindication which an award of damages brings, none the less because,...
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...English common law rule that the liabilities of a corporation are extinguished by its dissolution. See Shayne v. Evening Post Pub. Co., 168 N.Y. 70, 77, 61 N.E. 115, 155-116 (1901). In rejecting the traditional English rule, the New York Court of Appeals observed that it would be "unjust an......
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