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Former section 58.
See section 24, chap. 40 of 1848, and section 25, chap. 611 of 1875, now repealed.
Under this section, a creditor can not bring suit against a stockholder after two years from the time he ceased to be such. Walton v. Coe, 110 N. Y., 109. The creditor, as he can not bring suit at all until after judgment and execution against the company, is subjected to the danger that, by litigation and delay in the action against the company, his remedy against a stockholder who has ceased to be such may be wholly lost. Id.
After two years have elapsed from the maturity of a corporate debt without suit, the statutory liability of a stockholder, under this section, is completely discharged. See Parrott v. Colby, 6 Hun, 55; aff'd 71 N. Y., 597.
The time within which an action must be begun for the recovery of a debt owing by a corporation, so as to lay a foundation for a recovery under section 57 of this act, begins to run on the day when the debt first became due. Hardman v. Sage, 124 N. Y., 25.
A suit for the collection of the debt must be brought against the corporation within two years after it becomes due, in order to such liability, unless some cause intervenes before the expiration of such period sufficient to excuse such action. Hardman v. Sage, 47 Hun, 230; Kincaid v. Dwinelle, 59 N. Y., 548; Caykendall v. Corning, 88 id., 129.
Where the time of the payment of a debt is extended by the taking of a promissory note, which is sued within two years from the date of its maturity, but more than two years after the debt becomes due, the claim of the creditor against the stockholders is lost and they can not be charged with the payment of the debt. Hardman v. Sage, 124 N. Y., 25.
In Fisher v. Marvin, 47 Barb., 159, it was held that the debt was contracted when the renewal note was given, but this case was overruled on this point by Jagger Iron Co. v. Walker, 76 N. Y., 521.
Where a note payable four months after day was discounted for the company, and subsequently renewed once for four months and again for five months, and upon maturity of latter renewal note, an action was brought against the company, it was held, in Veeder v. Mudgett, that it was a debt to be paid within one year from the time it was contracted, and that the suit was brought within one year after it became due, within the section 24 of the act of 1848.
The fact that an action was not brought against the corporation within two years as required by this section, is matter which the defendant must plead in his answer. Woodward v. Holland M. Co., 39 N. Y. St. Rep., 411. It is not neces sary for the complaint to negative such defense. Id.
In an action, under this section, to enforce the personal liability of stockholders for debts due to the laborers of the company, the complaint must show that the debt was to have been paid within two years from the time it was contracted. Dean v. Mace, 19 Hun, 391.
In case of a series of renewals of a note given for goods purchased, the indebtedness against the corporation arose on the purchase, and became due on the maturity of the first note within the meaning of this section. Jagger Iron Co. v. Walker, 76 N. Y., 521. If the action against the corporation is not, in such case, brought within two years after the maturity of the first note, a stockholder is not personally liable for the debt. Id.
Before a creditor of a corporation, can recover of a stockholder, under this section, the debt of the orporation to him, he must prove the existence of the debt, recovery of a judgment and the issuing and return of an execution thereon unsatisfied.. Berridge v. Abernethy, 24 W. Dig., 513; Richards v. Beach, 27 id., 355. A suit against the company on notes given to secure a debt is not an action for the collection of the debt such as last section contemplated. Griffith v. Green, 31 N. Y. St. Rep., 705.
This section makes the prosecution of a suit against the company a condition precedent to the right against a stockholder. Birmingham Nat. Bk. v. Mosser, 14 Hun, 605; Lindsley. Simonds, 2 Abb., N. S., 69.
A proceeding in rem affecting only attached property of the corporation and execution against that property is not a compliance with the condition of this section. Rocky M. Nat. Bk. v. Bliss, 89 N. Y., 338. Nor is the recovery of a judgment and issuing of execution in another state such compliance. Id. A judgment in and execution issued out of a court of this state are required. Id.
This section must be construed as requiring the recovery of judgment in the action against the company, and the return of an execution unsatisfied on such judgment. Lindsley v. Simonds, 2 Abb., N. S., 69. The complaint in the action against stockholders must allege judgment and execution unsatisfied. Id. This case was overruled in Handy v. Draper, 23 Hun, 256, on this point, but this latter case was reversed in 89 N. Y., 324.
A creditor can not maintain an action against a stockholder under section 57, until he has obtained a judgment upon his claim against the corporation. And an execution has been issued thereon and returned unsatisfied. Handy v. Draper, 89 N. Y., 334; Kincaid v. Dwinelle, 59 id., 548; Lindsley v. Simonds, 2 Abb., N. S., 69; Dean v. Mace, 19 Hun, 391.
No action can be maintained by a judgment creditor to enforce the individual liability of a stockholder in a business corporation, until execution has been issued and returned unsatisfied. Richards v. Beach, 19 Abb. N. C., 84. Nor can such action be maintained for unpaid subscriptions, or on account of unpaid capital stock. Richards v. Coe, 19 Abb. N. C., 79.
This section requires a judgment to have been recovered against the company in the courts of this state. Dean v. Mace, 19 Hun, 391.
A compliance with the condition precedent prescribed by this section is excused, when rendered legally impossible or fruitless. Shellington v. Howland, 53 N. Y., 371; Lovett v. Cornwell, 6 Wend., 369; People v. Bartlett, 3 Hill, 570; Loomis v. Tifft, 16 Barb., 541. Such effect is produced, where the creditor is prevented from prosecuting his action against the corporation to judgment and execution, either by the act of the stockholder or the operation of a paramount statute. Shellington v. Howland, ante.
A failure to sue the corporation within two years after the maturity of the debt, is excused by its dissolution within such two years, and will not prevent an action against a stockholder on his unpaid subscription. Arnot v. Sage, 5 N. Y. Supp., 477.
A final judgment dissolving the corporation in an action brought by the people, relieves the creditor from the necessity of an attempt first to recover the debt of the corporation. Hardman v. Sage, 124 N. Y., 25; Shellington v. Howland, 67 Barb., 14; aff'd, 53 N. Y., 371; Kincaid v. Dwinelle, 5 J. & S., 326; aff'd 59 N. Y., 548; Flash v. Conn., 109 U. S., 371; Birmingham Nat. Bk. v. Mosser, 14 Hun, 605; Handy v. Draper, 89 N. Y., 335; Rocky M. Nat. Bk. v. Bliss, id., 338; Cuykendall v. Corning, 88 id., 129.
Whenever a stockholder shall be divested of his interest in or control over the affairs of the corporation, by actual dissolution thereof by formal judgment, or by a surrender of its corporate rights, privileges and franchises, the time begins to run, and, at the end of two years therefrom, the stockholder is no longer liable for any debt of the corporation. Hollingshead v. Woodward, 107 N. Y., 96. When the organization is divested of its rights, privileges, franchises and property by virtue of the appointment of a receiver, the members cease to be stockholders within the meaning of this section. Id.; Slee v. Bloom, 19 Johns., 456; Bradt v. Benedict, 17 N. Y., 93; Bruce v. Platt, 80 id., 379. The case of Kincaid v. Dwinelle, 59 N. Y., 548, was commented on and distinguished in Hollingshead v. Woodward, 107 N. Y., 96.
Proof of the debt against the corporation in bankruptcy was held, in Shellington. Howland, 53 N. Y., 371, not to be a bar to an action thereon against the stockholder.
It is not a sufficient excuse for a non-compliance with this section to show that within two years a petition in bankruptcy was filed by the creditor and others against the company, upon which it was adjudged a bankrupt, and in which proceedings the creditor duly proved his claim. Birmingham v. Mosser, 14 Hun, 605; Ansonia B. & C. Co. v. Ñ. L. C. Co., 53 N. Y., 123; Kincaid v. Dwinelle, 59 id., 548.
$56. Increase or reduction of number of shares. A stock corporation may provide that the number of shares into which its capital stock is divided shall be increased or reduced by a two-thirds vote of all stock duly represented at a meeting held and conducted in like manner, and upon filing a like certificate, as required for the increase or reduction of its capital stock. If such increase or reduction of the number of shares be so authorized, the corporation shall issue to each stockholder certificates for as many shares of the new stock as equal in par value the shares of the old stock held by him, upon surrender and cancellation of such old stock. This section does not authorize the increase or reduction of the capital stock of such corporation.
Added by chap. 196 of 1893.
§ 57. Voluntary dissolution.- Any stock corporation, except a moneyed or a railroad corporatien, may be dissolved before the expiration of the time limited in its certificate of incorporation or in its charter as follows: The board of directors of any such corporation may at a meeting called for that purpose upon, at least, three days' notice to each director, by a vote of a majority of the whole board, adopt a resolution that it is in their opinion advisable to dissolve such corporation forthwith, and thereupon shall call a meeting of the stockholders for the purpose of voting upon a proposition that such corporation be forthwith dissolved. Such meeting of the stockholders shall be held, not less than thirty nor more than sixty days after the adoption of such resolution, and the notice of the time and place of such meeting so called by the directors shall be published in one or more newspapers published and circulating in the county wherein such corporation has its principal office, at least once a week for three weeks successively next preceding the time appointed for holding such meeting, and on or before the day of the first publication of such notice, a copy thereof shall be served personally on each stockholder, or mailed to him at his last-known post-office address. Such meeting shall be held in the city, town or village in which the last preceding meeting of the corporation was held, and said meeting may, on the day so appointed, by the consent of a majority in interest of the stockholders present, be adjourned from time to time, and notice of such adjournment shall be published in the newspapers in which the notice of the meeting was published. If at any such meeting the holders of two-thirds in amount of the stock of the corporation, then outstanding, shall, in person or by attorney, consent that such dissolution shall take place and signify such consent, in writing, then, such corporation shall file such consent, attested by its secretary or treasurer, and its president or vice-presi dent, together with the powers of attorney signed by such stockholders executing such consent by attorney, with a statement of the names and residences of the then existing board of directors of said corporation, and the names and residences of its officers duly verified by the secretary or treasurer or president of said corporation, in the office of the secretary of state. The secretary of state shall thereupon issue to such corporation, in duplicate, a certificate of filing of such papers and that it appears therefrom that such corporation has complied with this section in order to be dissolved, and one of such duplicate certificates shall be filed by such corporation in the office of the clerk of the county in which such corporation has its principal office; and thereupon such corporation shall be dissolved and shall cease to carry on business, except for the purpose of adjusting and winding up its business. The board of directors shall cause a copy of such certificate to be published at least once a week for two weeks in one or more newspapers published and circulating in the county in which the principal office of such corporation is located, and at the expiration of such publication, the said corporation by its board of directors shall proceed to adjust and wind up its busi ness and affairs with power to carry out its contracts and to sell its assets at public or private sale, and to apply the same in discharge of debts and obliga. tions of such corporation, and, after paying and adequately providing for the payment of such debts and obligations, to distribute the balance of assets among the stockholders of said corporation, according to their respective rights and interests. Said corporation shall nevertheless continue in exist
ence for the purpose of paying, satisfying and discharging any existing debts or obligations, collecting and distributing its assets and doing all other acts required in order to adjust and wind up its business and affairs, and may sue and be sued for the purpose of enforcing such debts or obligations, until its business and affairs are fully adjusted and wound up.
Added by chap. 932 of 1896. In effect May 27, 1896.
§ 58. Merger. Any stock corporation lawfully owning all the stock of any other stock corporation organized for, or engaged in business similar or incidental to that of the possessor corporation may file in the office of the secretary of state, under its common seal, a certificate of such ownership, and of the resolution of its board of directors to merge such other corporation, and thereupon it shall acquire and become, and be possessed of all the estate, property, rights, privileges and franchises of such other corporation, and they shall vest in and be held and enjoyed by it as fully and entirely and without change or diminution as the same were before held and enjoyed by such other corporation, and be managed and controlled by the board of directors of such possessor corporation, and in its name, but without prejudice to any liabilities of such other corporation or the rights of any creditor thereof. Added by chap. 932 of 1896. In effect May 27, 1896.
$59. Change of place of business.- Any stock corporation now existing or hereafter organized under the laws of this state, except monied corporations, may at any time change its principal office and place of business from the city, town or county named in its certificate of incorporation, or to which it may have been changed under the provisions of this section, to any other city, town or county in this state, in which it may desire to actually transact and carry on its regular business from day to day, provided, and such change has been authorized by a vote of the stockholders of said corporation at a special meeting of stockholders called for that purpose. When such change shall be authorized by the stockholders as herein provided, the president and secretary and a majority of the directors of such corporation shall sign a certificate stating the name of said corporation, the city, town and county where its principal office and place of business was originally located. and to which it may have been subsequently changed, and the city, town and county to which it is desired to change its said principal office and place of business, and that it is the purpose of said corporation to actually transact and carry on its regular business from day to day at such place, and that such change has been authorized as herein provided, and the names of the directors of said corporation and their respective places of residence, which certificate shall be verified by the oaths of all the persons signing the same, and when so signed and verified, shall be filed in the office of the secretary of state and a duplicate thereof in the office of the clerk of the county from which said principal office and place of business is about to be removed or changed, and another in the office of the clerk of the county to which said removal or change is to be made, and thereupon the principal office and place of business of such corporation shall be changed as stated in said certificate.
Added by chap. 929 of 1896. In effect June 16, 1896.
§ 60. Liabilities of officers, directors and stockholders of foreign corporations.-Except as otherwise provided in this chapter the officers, directors and stockholders of a foreign stock corporation transacting business in this state, except moneyed and railroad corporations, shall be liable under the provisions of this chapter, in the same manner and to the same extent as the officers, directors and stockholders of a domestic corporation, for:
1. The making of unauthorized dividends;
2. The creation of unauthorized and excessive indebtedness; 3. Unlawful loans to stockholders;
4. Making false certificates, reports or public notices;
5. An illegal transfer of the stock and property of such corporation, when it is insolvent or its insolvency is threatened; 6. The failure to file an annual report.
Such liabilities may be enforced in the courts of this state, in the same manner as similar liabilities imposed by law upon the officers, directors and stockholders of domestic corporations [Added, ch. 384 of 1897.]