Cleveland, L. & W. Railway Co. v. Kent

34 N.Y.S. 427, 87 Hun 329, 94 N.Y. Sup. Ct. 329, 68 N.Y. St. Rep. 384
CourtNew York Supreme Court
DecidedJune 14, 1895
StatusPublished
Cited by3 cases

This text of 34 N.Y.S. 427 (Cleveland, L. & W. Railway Co. v. Kent) is published on Counsel Stack Legal Research, covering New York Supreme Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Cleveland, L. & W. Railway Co. v. Kent, 34 N.Y.S. 427, 87 Hun 329, 94 N.Y. Sup. Ct. 329, 68 N.Y. St. Rep. 384 (N.Y. Super. Ct. 1895).

Opinion

O’BRIEN, J.

This suit is brought for the purpose of charging the respondents and some of the other defendants with personal liability for the debts of the Brock Hill Coal Company, a foreign corporation, organized under the laws of Ohio. It does not appear that any of the other defendants have been served with process, or have ap[428]*428peared in the action. The complaint alleges that the plaintiff, as well as the coal company, is a corporation organized under the laws of the state of Ohio, in which state the latter company has its chief office and place of business, and was engaged in the operation of coal mines, with a capital stock of $200,000, owned by the respondents and two others; that the other defendants named, 27 in number, claim to be creditors of the coal company; that the coal company is indebted to the plaintiff in the sum of $11,419.95; that in legal proceedings in the state of Ohio a receiver of the coal company’s property was appointed, and the court administered on all its assets, and sold and disposed of the same, and applied the proceeds to the payment of the company’s obligations, and that there still remain obligations of the company to the plaintiff and to the creditors defendant wholly due and unpaid. It is further alleged that by the statutes of Ohio the stockholders of the coal company “are each liable, in addition to their stock, to an amount equal to the stock by them subscribed, or otherwise acquired, to the creditors of the corporation, to secure payment of the debts and liabilities of the said corporation”; “that such individual liability of stockholders may be enforced by any stockholder or creditor by action jointly against all holders or owners of stock, which action shall be for the benefit of all the creditors of the corporation and against all persons liable as stockholders.” ” The sections of the statute of Ohio are annexed to the complaint as an exhibit, and section 3260 of the statute provides:

“A stockholder or creditor may enforce such liability by action jointly against all the holders or owners of stock, which action shall be for the benefit of all the creditors of the corporation, and against all persons liable as stockholders; and in such action there' shall be found and determined the amount payable by each person liable as stockholder on all the indebtedness of the corporation, in which adjudication no costs shall be taxed to nor collected of any stockholder to an amount which, together with the amount to be paid on said indebtedness, will exceed the amount of the stock on which he is liable.”

The prayer of the complaint is that the defendant creditors may be required to set forth and prove the amount of their respective claims against the coal company; that the court will proceed to ascertain and determine the amount of stock held by the defendant stockholders, and that after the determination of the amount of stock held by such defendant stockholders and the amount of debts owing by the coal company to the plaintiff and the defendant creditors, the court determine the amount of assessment upon the said stock that will be necessary to pay the costs of the proceeding and the debts, and that judgment be entered against the said stockholders respectively for the amount of assessment required for such purposes. The demurrer was sustained in the court below upon the case of Barnes v. Wheaton, 80 Hun, 17, 29 N. Y. Supp. 830, which is authority for the proposition that an action to enforce the statutory liability of the stockholders of an insolvent Ohio corporation cannot be maintained in the courts of 'this state, for the reason that the Ohio statute provided a special remedy, which is exclusive of all other remedies, and can only be administered in Ohio. We might well rest our decision, as did the court below, upon that authority, because not only is it [429]*429well reasoned, but it has support in principle. The rights of creditors of a corporation against the corporators rest upon the statute, and where an obligation or liability is imposed, and a remedy is given, these should be held to be inseparable, and creditors should be required to confine their remedy to the line prescribed by the statute. The distinction between statutes which, in addition to imposing liabilities, omit a remedy, and those which impose liability and fix the remedy, is lost sight of by the plaintiff, as will be seen by reference to the cases cited in support of the complaint, most, if not all, of which are instances where a statutory right was not coupled with a statutory remedy for its enforcement Where, therefore, the remedy is of such a character that it can only have effectual operation in one forum, one interested should not be permitted to enforce it in any other place. Statutes relating to procedure have no extraterritorial effect. As will be seen from a reading of the Ohio statute quoted, there is a restriction in regard to costs, but such restriction could not be given effect in this state, because such subject would be controlled by our own law, and yet that restriction is an integral part of the statutory remedy.

It is urged with much force that the objections pointed out do not go to the jurisdiction of the court to entertain the action. It is true that the cases are very exceptional in which the court has not jurisdiction where the parties have been brought before it by personal service, and the subject is one upon which it is not forbidden to adjudicate. So here, as a clean-cut question of jurisdiction, it may be doubted whether it would be correct to declare that, as between the plaintiff who comes into this forum and certain of the defendants who are brought in by personal service, the court would not have jurisdiction. That our courts will not in all cases entertain an action, even though it has jurisdiction, has been many times held. Cross v. Trust Co. (Sup.) 10 N. Y. Supp. 781, affirmed 131 N. Y. 330, 30 N. E. 125; Ferguson v. Neilson (Sup.) 11 N. Y. Supp. 524. It being, therefore, unnecessary to determine the question as to whether this court has or has not jurisdiction, we are clear that upon the facts presented it should not assume it, for reasons which, in addition to those already stated, may be briefly mentioned. If this were an action at law to enforce a statutory liability for a right given by an Ohio statute to an individual creditor against an individual stockholder, then this court would have and could assume jurisdiction. Where, however, an action in equity is necessary, and where, as here, what is sought is an accounting between creditors and stockholders to enforce a remedy given by the Ohio statute, in which suit it is necessary to have a marshaling of assets, and an accounting between creditors and stockholders, and a determination of the amount of liability, respectively, of each individual stockholder, such a suit, in the absence of the corporation itself, and in the absence of all those interested in the accounting, notably creditors over whom it is not shown that the court can acquire jurisdiction, should not be maintained in this state. In such a suit all the creditors and all the [430]*430stockholders of the company should be parties; but it is not alleged, nor can it be presumed, that any of the creditors or any of the stockholders are residents of this state, and within the jurisdiction of the court.

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Bluebook (online)
34 N.Y.S. 427, 87 Hun 329, 94 N.Y. Sup. Ct. 329, 68 N.Y. St. Rep. 384, Counsel Stack Legal Research, https://law.counselstack.com/opinion/cleveland-l-w-railway-co-v-kent-nysupct-1895.