Summary
In Mahoney v. Bernhard (45 App. Div. 499; affd. on opinion below, 169 N.Y. 589) Mr. Justice BARRETT, writing for the Appellate Division of the first department, said: "Interest upon these contracts, debts and engagements runs until their total amount is ascertained and liquidated, and the ratable apportionment thereupon made.
Summary of this case from People v. Merchants' Trust Co.Opinion
December Term, 1899.
Benjamin N. Cardozo, for Emily H. Bradbury and other appellants.
Louis Marshall, for Nathan Westheimer and other appellants.
Henry D. Hotchkiss, for the respondent.
(Briefs filed by other appellants.)
This action is by a creditor of the Murray Hill Bank (an insolvent banking corporation) to enforce the statutory liability of its stockholders under the Banking Law (Laws of 1892, chap. 689, § 52). After the action was commenced by service of the summons upon some of the defendants, this section 52 was amended by chapter 441 of the Laws of 1897. The amendment was in these words: "In case any such corporation shall have been or shall be dissolved by final order or judgment of a court having jurisdiction, and a permanent receiver or receivers of the said corporation shall have been or shall be appointed, all actions or proceedings to enforce the liability of stockholders under this section shall be taken and prosecuted only in the name and in behalf of such receiver or receivers, unless such receiver or receivers shall refuse to take any such action or proceeding upon proper request in that behalf made by any creditor, and in that event such action or proceeding may be taken by any creditor of the corporation."
The main contention upon this appeal is based upon the effect which the defendants claim for this amendment. They insist that it applies to actions actually pending when it was passed; that such actions at once abated; and that the only remedy left to the creditors was to induce the receivers of this insolvent bank to proceed against the stockholders de novo under the authority thus newly conferred. And they point in support of their contention to the express retrospective language used in the amendment. We cannot agree to this view. There is nothing in the amendment to warrant the conclusion that it was intended to affect existing actions. It undoubtedly operated retrospectively where actions had not already been commenced. But where they had been commenced it is equally clear that they are not within its retrospective application. When the corporation shall have been dissolved — the amendment provides — and a permanent receiver shall have been appointed, then all actions to enforce the liability of the stockholders " shall be taken and prosecuted only in the name and in behalf of such receiver." That necessarily refers to future actions. It doubtless prohibits creditors, after the appointment of the permanent receiver, from taking and prosecuting — that is, from then bringing — such actions. But it does not prohibit them from continuing actions already taken and in process of prosecution. By this construction full effect is given to what is retrospective as well as what is prospective in the amendment. The former relates to the underlying condition, the latter to the action founded upon that condition. An intention to wipe out existing actions and to subject parties to fresh delays and possibly resulting defenses — such as the Statute of Limitations — should not be inferred from language admitting of a more reasonable purpose. We need not, therefore, consider the question whether the amendment affects the right or the remedy. There is much refinement on this head in the briefs. When express words are found in such a statute abating all existing actions, it will be time to consider views of the kind suggested.
An additional point is here made that the amendment applies at least to those defendants who had not been served with the summons at the date of its passage. There is no force in this suggestion. There is but one action; and that is an action against the entire body of stockholders. The amendment either applied to that one action or it did not apply at all. The action was "taken," in the sense of the amendment, when the summons was served upon one of this body of stockholders, defendants. Thereafter it proceeded in its regular course; and, consequently, it had been taken and was in due process of prosecution when the amendment was passed.
The appellants also contend that the executorships created by the wills of stockholders Clausen and Cardwell were ended by the surrogate's settlement of the accounts of their executors. This view is also, we think, erroneous. Section 2742 of the Code of Civil Procedure provides what shall be the effect of the judicial settlement of an executor's account. His final discharge is not in terms provided for. Nor was it here decreed. It is true that when executors, under a surrogate's decree upon their accounting, turn over to themselves, as trustees, the balance of the estate found to be in their hands, it is tantamount to a discharge with respect to the property so turned over. But the executorial functions are not absolutely terminated thereby; and we cannot at all agree to the appellant's proposition that thus "the executors became non-existent." They were in legal intendment discharged pro tanto. "Other assets," however, as Mr. Redfield, in his work on the Law and Practice of Surrogates' Courts (4th ed. 788), correctly says, "may be realized and new liabilities incurred;" and as to those the executorial duty continues. It follows that as the shares remained throughout in the names of the decedents upon the books of the bank, their estates, and, consequently, their executors, are liable under the statute, as well as the latter's unregistered transferees. (Banking Law, Laws of 1892, chap. 689, § 52; Stock Corporation Law, Laws of 1890, chap. 564, as amd. by Laws of 1892, chap. 688, §§ 29, 54.)
We think, however, that the defendants should not have been charged with interest from the commencement of the action. They cannot be mulcted beyond their precise statutory liability. By section 52 of the Banking Law ( supra) they are not made unconditionally liable for the par value of their stock, nor yet for the — unlimited — contracts, debts and engagements of the corporation. Each stockholder's individual liability is for his equal proportion of all contracts, debts and engagements of the corporation to the extent of the amount of his stock at the par value thereof. Interest upon these contracts, debts and engagements runs until their total amount is ascertained and liquidated, and the ratable apportionment thereupon made. This interest thus helps to make up the total sum to be apportioned, and the stockholder's liability is for his share of this total sum to the extent of the amount of his stock at its par value. But while interest thus enters into the process of ascertainment, it does not into the statutory limitation. The stockholder cannot, upon any pretext or principle, be made to pay a dollar more than the amount of his stock at its par value. That is his sole liability. That general liability is one thing, his precise duty another. The liability is for an equal proportion of the debts, but the duty to pay the equal proportion only arises when the apportioned sum has been ascertained and liquidated. At that point interest undoubtedly begins to run against the stockholder upon the entire amount of his stock, at its par value, if the apportioned sum has reached that "extent," upon a lesser sum if it has not. Primarily, however, the stockholder is liable only to the extent of the par value of his stock, not to the extent of that par value plus interest from any date. When the amount to be paid has been ascertained, then, of course, the extent of the liability becomes fixed and interest runs from that date as upon an ordinary judgment.
The other questions discussed by counsel were correctly decided below, and they call for no special consideration.
The judgment appealed from should be modified by striking out the provision which charged the defendants with interest from the commencement of the action, and, as modified, affirmed, with costs to abide the final result.
VAN BRUNT, P.J., RUMSEY, INGRAHAM and McLAUGHLIN, JJ., concurred.
Judgment modified as directed in opinion, and, as modified, affirmed, with costs to abide event.