First Department, July, 1911.

[Vol. 146. company in which they are stockholders 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 capital stock fixed and limited by such company shall have been paid in, and a certificate thereof shall have been made and recorded as prescribed in the following section." It will be observed that this statute expressly imposed a several liability on the stockholders, and the statute has been so construed. (Weeks v. Love, 50 N. Y. 568.) When the Legislature came to enact the Stock Corporation Law (Gen. Laws, chap. 36; Laws of 1890, chap. 564), which superseded said chapter 40 of the Laws of 1848 (Close v. Potter, 155 N. Y. 145, 149), it incorporated a somewhat similar provision in section 57 thereof, as follows: "The stockholders of every stock corporation shall, jointly and severally, be personally liable to its creditors to an amount equal to the amount of stock held by them respectively for all debts and contracts made by the corporation, until the whole amount of its capital stock shall have been paid in, and a certificate thereof, signed, verified and acknowledged by the president and a majority of the directors, shall have been filed and recorded in the office of the clerk of the county, where the principal business office of the corporation is located."

The Stock Corporation Law of 1890 was amended and re-enacted in 1892 (Laws of 1892, chap. 688), and the provision of section 57 above quoted is found in section 54 of the Stock Corporation Law of 1892, by which it is changed to read as follows: "The stockholders of every stock corporation shall, jointly and severally, be personally liable to its creditors to an amount equal to the amount of the stock held by them respectively, for every debt of the corporation until the whole amount of its capital stock issued and outstanding at the time such debt was incurred shall have been fully paid."

It will be observed that in these provisions the Legislature in express terms imposed a joint and several liability, and the statute has been so construed by the Court of Appeals. (Lang v. Lutz, 180 N. Y. 254.) Those statutory provisions, however, did not relate to the original liability of the stockholders as subscribers, or to the transferees of stock on which the sub

scriptions had not been paid in full, but in effect imposed a double liability on stockholders. Even though the stock had been fully paid once, the stockholder became liable again for the face value thereof in the circumstances specified in the statute. In 1901, however, the Legislature by chapter 354 am ended said section 54 of the Stock Corporation Law of 1892 by omitting the words in the prior statute expressly imposing a joint and several liability, and by wholly eliminating the double liability, and by imposing a liability only for the amount unpaid on the stock; and the statute, as thus amended, was re-enacted as section 56 of the present Stock Corporation Law (Consol. Laws, chap. 59; Laws of 1909, chap. 61) as follows: "Every holder of capital stock not fully paid, in any stock corporation, shall be personally liable to its creditors to an amount equal to the amount unpaid on the stock held by him for debts of the corporation contracted while such stock was held by him."

In Lang v. Lutz (supra), Judge GRAY, writing for the court and discussing the effect of the amendment made in 1901, which was not necessarily before the court for decision, said: "As to all cases, which might arise thereafter, I assume that it prescribes a new rule of liability under which the remedy available to a creditor is intended to be by way of an equitable action, or proceeding; wherein all the stockholders of the corporation should be made equally and ratably responsible for the payment of corporate debts."

That dictum has been since followed in a case affirmed by by the Court of Appeals (Ford v. Chase, 118 App. Div. 605; affd., 189 N. Y. 504); but it is not entirely clear from the questions certified that the point was involved in the appeal to the Court of Appeals. With all due deference to the expression of opinion by the Court of Appeals and to the decision in Ford v. Chase (supra), unless the statute in the amended form still imposes a several liability on the stockholders to particular judgment creditors of the corporation in an action at law, it creates no new liability and provides no new remedy not existing at common law; and in fact prescribes a liability and remedy less extensive and adequate than existed at common law, for at common law any judgment creditor had a remedy in

First Department, July, 1911.

[Vol. 146.

equity, in common with other creditors similarly situated, to compel the application of the assets of the judgment debtor to the payment of his judgment. In Stephens v. Fox (83 N. Y. 313) it was assumed without discussion that section 10 of the General Railroad Law (Laws of 1850, chap. 140, as amd. by Laws of 1854, chap. 282) imposed a several liability against the stockholders in favor of each creditor of the corporation, which might be enforced in an action at law. The provisions of the statute bearing on this question were as follows: "Each stockholder of any company formed under this act shall be individually liable to the creditors of such company, to an amount equal to the amount unpaid on the stock held by him, for all the debts and liabilities of such company, until the whole amount of the capital stock so held by him shall have been paid to the company."

Those statutory provisions are not distinguishable in phraseology from section 56 of the Stock Corporation Law. The question before the court for decision in that case was whether, in an action against a stockholder, the judgment against the corporation in favor of the creditor was competent evidence to show the plaintiff's status as a creditor of the corporation, and of the amount due. The court, in holding that the judgment was competent evidence on those points, said: "The liability of the stockholder is not created or enlarged by the statute. It rests upon his contract with the corporation, and the creditor is simply subrogated to the claim of the corporation against its debtor, in case he avails himself of his right under the statute to pursue the stockholder as such debtor to the corporation. A payment by the stockholder to the creditor, upon a recovery by him under the statute, will discharge the stockholder pro tanto from his indebtedness to the corporation. The creditor thus claims through the corporation, and to entitle him to this statutory subrogation or transfer, he need only show that he is a creditor."

In Mills v. Stewart (41 N. Y. 384) two opinions for affirmance were written and the majority of the court concurred in the affirmance, but not expressly on either opinion. Judge GROVER, in writing one of the opinions construing said section 10 of the Railroad Act of 1850, as amended in 1854, said: "It will

aid in the determination of the real question involved, which is, when the right of the creditor against the stockholder becomes absolute, to consider whether the statute creates a new liability in favor of the creditor against such stockholder, or only furnishes a simpler and less expensive remedy to enforce a pre-existing one. Prior to the statute in question, a delinquent stockholder was liable in equity for the payment of the debts of the corporation. (Mann v. Pentz, 3 Coms. [3 N. Y.] 415; Morgan v. N. Y. & Albany R. R. Co., 10 Paige, 290.) The remedy, it will be seen from the cases, was somewhat difficult, although the right of the creditor to enforce payment from delinquent stockholders was as perfect before as since the passage of the statute. This right of the creditor was based upon the debt owing by the stockholder to the company, and existed against all its debtors, irrespective of the consideration of the debts. It was based upon the principle that equity would aid the creditor in the collection of his debt against the property of his debtor, when his legal remedies had been exhausted without effect. It follows, that there must be an existing liability to the company at the commencement of the proceedings against the stockholder. The apparent design of the statute was to give the creditor a direct action against the stockholder instead of compelling a resort to the more difficult proceedings in equity, often embarrassing as to the necessary parties defendants, and not to confer any new right upon the creditor or impose in this respect any additional liability upon the stockholder."

The contract liability on an unpaid subscription for capital stock could be enforced by the corporation the same as a liability arising on any other indebtedness to it (Stoddard v. Lum, 159 N. Y. 265); and there can be no doubt but that the opinion of Judge GROVER, from which I have quoted, is sound, for a judgment creditor may, in the right of the corporation, enforce payment of his judgment by having collected and applied thereon any indebtedness to the corporation. This was recognized in Pfohl v. Simpson (74 N. Y. 137) wherein it was held that an action by a judgment creditor in his own right under the statute would be enjoined in an action in equity APP. DIV.-VOL. CXLVI. 3

First Department, July, 1911.

[Vol. 146. brought by a creditor in behalf of all of the creditors of a corporation to enforce this liability. The same principle was recognized in Farnsworth v. Wood (91 N. Y. 308). Under the act prior to the amendment, as under the act of 1848, to which reference has been made, the cause of action to enforce the double liability, as I have considered it, was not given to the corporation but only to the creditors and consequently they proceeded, not in the right of the corporation by subrogation as here, but in their own right. (Stephens v. Fox, supra ; Lang v. Lutz, supra; Weeks v. Love, supra; Farnsworth v. Wood, supra.) Unless, therefore, the statute as amended confers a right of action upon a judgment creditor of the corporation in his own right against a single stockholder, the subscription on whose stock has not been paid in full, subject, of course, to the action being enjoined in the interest of all creditors as already stated, it is not perceivable that it serves any useful purpose. As I view the case, however, it is not necessary to express a decided opinion on that question at this time. but it is deemed proper to make these observations to show that the question is not free from doubt.

If the statute gives the plaintiff a cause of action, or remedy, in her own right against the stockholders severally, she did not see fit to pursue that remedy; but, on the contrary, elected to pursue her common-law remedy as a judgment creditor and to come into a court of equity, and in so doing she is required to conform to the practice in such cases prescribed by the decisions of the courts, which is that the action, being to enforce a limited liability, must be brought against all stockholders who are liable, to the end that they may only be compelled to contribute to the extent necessary pro rata, as well as in the interest of all creditors to the end that they may share in the fund recovered in the same proportion. (Mathez v. Neidig, 72 N. Y. 100; Hallett v. Metropolitan Messenger Co., 69 App. Div. 258; Marsh v. Kaye, 168 N. Y. 196.)

By bringing the action in equity for the benefit of all creditors, the plaintiff conforms to the decisions of the courts, by which it has been held that the remedy is in equity, and necessarily so to insure the satisfaction of the claims of creditors of the corporation in the same proportion, provided the fund aris