Shipman v. Treadwell

Citation102 N.E. 634,208 N.Y. 404
PartiesSHIPMAN v. TREADWELL et al.
Decision Date20 May 1913
CourtNew York Court of Appeals Court of Appeals

OPINION TEXT STARTS HERE

Appeal from Supreme Court, Appellate Division, Third Department.

Action by Leonard H. Shipman, as receiver of the F. Gray Company, against George Curtis Treadwell and another. From a judgment of the Supreme Court, Appellate Division, Third Department (150 App. Div. 57,133 N. Y. Supp. 970), reversing a judgment of the Special Term (73 Misc. Rep. 587,131 N. Y. Supp. 67) in favor of the plaintiff, and ordering a new trial, plaintiff appeals. Affirmed.

See, also, 150 App. Div. 895, 897, 134 N. Y. Supp. 1146; 102 N . E. 1113.Andrew J. Nellis, of Albany, for appellant.

James F. Tracey, of Albany, for respondents.

CUDDEBACK, J.

This action was brought to charge the defendants as stockholders of an Ohio corporation with the amount of an assessment upon their stock to pay the debts of the corporation.

The Constitution of the state of Ohio, in force at the time the defendants' stock subscriptions were made, provided that each stockholder in a private corporation should be liable over and above the stock owned by him, and any amount unpaid thereon, to a further sum at least equal to the amount of such stock. Section 3258 of the Ohio Revised Statutes was to the same effect . Under the law of Ohio the subscriber for stock in a private corporationassumed the liability imposed by the Constitution and Revised Statutes as part of his subscription agreement. But the liability was secondary and contingent upon an insufficiency in the assets of the corporation to pay its debts.

Sections 3260 et seq. of the Revised Statutes of Ohio provide that a creditor of a corporation, seeking to charge the stockholders thereof with the liability aforesaid, may file his complaint for that purpose in any court of common pleas having jurisdiction. The court is authorized to take an account, and appoint a receiver of the corporation. All the stockholders may be made parties to the action, and nonresident stockholders may be brought in by publishing notice of the action. If the assets of the corporation are not sufficient to pay its debts, the court is directed to ascertain the liability of the stockholders, adjudge the amount payable by each, and enforce the judgment as in other cases. The receiver appointed in such proceeding is a quasi assignee, invested with the creditors' right of action to enforce the liability of the stockholders, and the court may direct the receiver to prosecute suits in his own name, as may be necessary, in other jurisdictions to collect from any stockholders.

By sections 5651 et seq. of the Revised Statutes it is provided that a corporation may be dissolved if insolvent, or, if the objects of the corporation have failed, upon the application of a majority of the stockholders, and a distribution made of its assets among those entitled thereto.

The corporation concerned in the case now before the court was declared insolvent in proceedings instituted by a majority of its stockholders under section 5651 of the Revised Statutes on April 16, 1901, and an order was then made dissolving the corporation.

Thereafter and on June 22, 1901, an action was brought in the court of common pleas of Miami county by a creditor of the corporation against all the stockholders including these defendants, under section 3260 of the Revised Statutes, and a receiver of the corporate property was appointed. Notice of such action was given to these defendants by publication thereof, pursuant to an order of the court. The defendants are residents of this state. They were not personally served with process in the action brought in the court of common pleas, and did not appear in such action. The defendant George C. Treadwell had subscribed for and held 72 shares of stock in the company, and the defendant Wilhelmina W. Collins 50 shares.

On May 6, 1907, a final judgment was rendered by the court of common pleas in the creditor's action against the stockholders, determining the amount of the indebtedness of the corporation after exhausting its assets, and the amount that would be required as an assessment upon each of the solvent stockholders to pay the deficiency in such indebtedness. In and by such judgment the sum of $4,458.24 was assessed against the defendant Treadwell, and $3,096 against the defendant Collins, and they were ordered to pay those amounts to the receiver of the company, the plaintiff in this action, on or before the first day of June, 1907.

The judgment also authorized and empowered the receiver to prosecute, in his own name as receiver, actions against nonresident stockholders in the jurisdictions where they might be found, to collect the amount due from them. Subsequently and on October 5, 1908, the plaintiff, as receiver, was specially directed by the court of common pleas to sue these defendants in this state; they having failed to pay their assessments on demand.

The trial court found, as matter of fact, the laws of Ohio and the proceedings in its courts as hereinbefore set forth. They are substantially the facts alleged in the complaint, and it has been held by this court that the complaint states a cause of action. Shipman v. Treadwell, 200 N. Y. 472, 93 N. E. 1104.

The defendants, however, now plead the statute of limitations contained in section 3258a of the Ohio Revised Statutes, viz.:

Sec. 3258a. An action upon the liability of stockholders under the last preceding section (§ 3258) can only be brought within eighteen months after the debt or obligation shall become enforceable against stockholders.’

Upon this section (3258a), taken in connection with section 390a of our Code of Civil Procedure, the defendants mainly rely to defeat the plaintiff's claim. Section 390a of the Code of Civil Procedure provides in substance that, where a cause of action arising outside the state is barred by lapse of time in the state or country where the cause of action arose, it is also barred in this state.

It is the claim of the defendants that the plaintiff's cause of action arose in the state of Ohio on May 7, 1907, the date of the rendition of the judgment in the creditor's action against the stockholders, or, at the latest, on June 1, 1907, the date when the defendants were required to pay their assessments to the receiver. The action in this state was begun December 10, 1908, more than 18 months after the entry of the Ohio judgment, and after the time of payment fixed by the judgment.

It is the claim of the plaintiff that the creditor's cause of action against the stockholders accrued at the time the corporation was declared insolvent and dissolved on April 16, 1901, and that it was subject to the limitation of the general six-year statute of the state of Ohio. Inasmuch as the creditor's suit against the stockholders was instituted on June 22, 1901, it was brought in time. To sustain this position, the plaintiff cites Barrick v. Gifford, 47 Ohio St. 180, 24 N. E. 259,21 Am. St. Rep. 798, and Younglove v. Lime Co., 49 Ohio St. 663, 33 N. E. 234. The plaintiff also claims that this action is merely ancillary to the creditor's suit in Ohio.

I think the cases cited by the plaintiff show that the action begun in Ohio by the creditors against the stockholders was timely brought, but I am also of the opinion that the receiver's action in this state is barred by the 18 months' statute of limitation.

[1] The suit in Ohio has a double aspect. It was a suit to wind up the affairs of the insolvent corporation and apply its assets in payment of its debts, and, if a deficiency existed, to determine how much each stockholder should pay to make up the deficiency. To that extent, the court had jurisdiction to proceed against the defendants not personally served with process. But as to the defendant stockholders who were personally served, the court could and did go further and render a judgment against them in personam for the amount of their liability.

Under the decisions both of this court and the United States Supreme Court, and upon the facts found by the trial judge as to the laws of the state of Ohio and the proceedings in its courts, it must be held that the judgment rendered in the court of common pleas is binding and conclusive upon the defendants in this action so far as it determined the amount of assets and liabilities of the insolvent corporation and the necessity of making an assessment upon the stock to the extent and in the amount ordered. Matter of Empire City Bank, 18 N. Y. 199;Shipman v. Treadwell, 200 N. Y. 472, 477,93 N. E. 1104;Howarth v. Angle, 162 N. Y. 179, 56 N. E. 489,47 L. R. A. 725;Bernheimer v. Converse, 206 U. S. 516, 27 Sup. Ct. 755, 51 L. Ed . 1163;Converse v. Hamilton, 224 U. S. 243, 32 Sup. Ct. 415, 56 L. Ed. 749.

These defendants, of course, remained free to show any defense personal to themselves against the creditor's claim. Lazier v. Westcott, 26 N. Y. 146, 82 Am. Dec. 404;Durant v. Abendroth, 97 N. Y. 132;Bernheimer v. Converse, 206 U. S. 516, 518, 27 Sup. Ct. 755, 51 L. Ed. 1163.

The fact, however, that such personal defenses remained to the defendants is not very important at this time because the defense of the 18 months' statute of limitation does not controvert anything decided by the Ohio court. There is no question about giving full faith and credit to the judicial proceedings of another state as required by the federal Constitution. The defense now urged is a defense which has arisen since the judgment of the Ohio court was made.

[2] The question is, when did the receiver's cause of action against these defendants accrue? In determining that question, it is necessary to understand clearly the position which the receiver occupies in our courts. The receiver, the plaintiff, is not here as an officer of the Ohio court, seeking by an auxiliary suit to enforce the judgment of that court. If such were his standing, the action could not be maintained. Hale v. Allinson, 188 U. S. 56, 23 Sup....

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