
    MILLER against WHITE.
    
      Supreme Court, Second District; General Term,
    
    
      February, 1870.
    Individual Liability. — Pleading. — Complaint against Trustees.—Judgment against Corporation.
    An action should not be dismissed at the trial, merely for insufficiency of the complaint, if the cause of action is proved, and defendant has not been surprised or prejudiced.
    In an action by the judgment creditor of a corporation to recover from a stockholder upon his individual liability, the debt of the corporation, a general averment of the recovery of the judgment and its being unpaid, is a sufficient statement of the indebtedness of the company to the plaintiff.
    A judgment against a corporation is evidence, and, it seems, conclusive, in an action to enforce the individual liability of the trustees.
    The case of Witherhead ®. Allen, 3 Keyes, 562, explained
    Under the General Manufacturing Companies act of 1848,—which declares that if a company fails to file an annual report, the trustees shall be liable for all* debts of the company then existing,—the liability is not restricted to debts which were contracted by the parties sued.
    In such an action, the allegation of the complaint, that defendants failed to file any such report as is required by law, within twenty days of the first of January in each year,—is sufficient, without further recital oi the statute requirement.
    Appeal from a judgment, and from an order denying a new trial.
    
      This action was brought by George W. Miller, plaintiff and appellant, against John P. White, Moores M. White, Warren Lazelle, and Samuel W. Torrey, defendants and respondents, to charge them as trustees of the Gutta Percha Manufacturing Coriipany, with a debt of the company, after judgment recovered against the company.
    The allegations of the complaint were as follows:
    “That the Gutta Percha Manufacturing Company are, and during the years 1864, 1865 and 1866 were, a corporation created by and under the laws of the State of New York, and were organized March 2, 1859, pursuant to an act of the legislature of said State, entitled “An act to authorize the formation of corporations for manufacturing, mining, mechanical and chemical purposes,” passed February 17, 1848, and the acts amendatory thereto, and the term of its existence is thirty years.
    “That on January 1, 1865, the said Gutta Percha Manufacturing Company were indebted unto the plaintiff.
    '“ That during the month of January, 1865, an action to recover said indebtedness was commenced in the supreme court of the State of New York, by the plaintiff, against said Gutta Percha Manufacturing Company. That a summons in said action was duly served upon the president of said company. That said company duly appeared and answered in the cause, and such proceedings were thereupon had that, on June 27, 1866, a judgment was duly rendered and entered in such action, in favor of the plaintiff, and against the said Gutta Percha Manufacturing Company, for the sum of twenty-four thousand seven hundred and thirty-four dollars and sixty-two cents. That execution thereon was issued to the sheriff of the city and county of New York, and returned wholly unsatisfied.
    “That said judgment is wholly unpaid, and is in full force a,nd owing by said company to the plaintiff, with' interest.
    That defendants Moores M. White, John P. White, arid Warren Lazelle, were duly elected trustees of such corporation in 1861, and, with the exception of John P. White, have since continued to be and to serve as such, and are now trustees thereof, and that John P. White continued as such trustee until February 16, I860.
    “ That defendant Samuel W. Torrey was, on February 15, 1865, elected a trustee of said corporation, and accepted the trust, and served as such, and on March 21 was re-elected trustee of said corporation, and accepted said trust, and has served and continued to be such trustee from his said election in February, 1865, until' the present time.
    "“That the county of New York is the county in which said corporation was located, in which its principal office has been, and in which its business has been carried on.
    “ That neither the said corporation nor the trustees thereof, nor did any of them, within twenty days from ' January 1, 1865, make, file or publish a report, as required by law in such case made and provided, verifte d by the oath of the president or secretary thereof, and file the same in the office Qf the clerk of the county where the business of the said corporation was carried on, nor within twenty days from January 1, 1866, nor within twenty days from January 1, 1867, nor have they, or any of them, ever, at any time during the years 1865, 1866, 1867, or 1868, made, published, signed, or verified, or caused to be made, published, signed, or verified, or filed in the office of such clerk, any such report, as is by law'required, since January 17, 1862.
    • “ Wherefore, plaintiff demands judgment against defendants, jointly and severally, for said sum of,” &c.
    The answers denied the alleged indebtedness of the corporation, or denied the amount claimed, and alleged that the judgment was obtained by fraud or collusion.
    "Upon the trial in November, 1869, after plaintiff’scounsel had opened the case, the counsel for the defendants, before any evidence had been given to the jury, moved the court to dismiss the complaint, on the ground that the same did not contain facts sufficient to constitute a cause of’action. The court granted the motion, and dismissed the plaintiff’s complaint, to which decision the counsel for plaintiff excepted.
    The plaintiff’s counsel afterwards made a motion for a new trial on the minutes, before the said justice, which motion .was denied, and the plaintiff thereupon appealed from the order denying a new trial, and from the judgment entered in the action.
   By the Court.—Pratt, J.

The complaint in this action was dismissed at circuit on the ground that it did not contain facts sufficient to constitute a cause of action. A motion was made for a new trial upon the minutes, which was denied.

Judgment was thereupon entered dismissing the complaint, and the plaintiff appeals from the order denying a new trial, and from the judgment.

The complaint alleges “that on January 1, 1865, the said Grutta Percha Manufacturing Company were indebted unto the plaintiff. That an action to recover such indebtedness was commenced in the supreme court; summons served upon the president. That the company appeared and answered, and such proceedings were had that, on June 27, 1866, judgment was rendered in plaintiff’s favor against the company for twenty-four thousand seven hundred and thirty-four dollars and sixty-two cents, which judgment is unpaid, in full force, and owing to the plaintiff.”

The defendants claimed at circuit that this allegation is not a sufficient statement of the indebtedness of the company to the plaintiff, .and that the complaint should have stated when the original indebtedness was contracted, what it was for, and how much, it was. The court held the allegation insufficient, and dismissed the complaint.

This decision we are asked to review.

The office of a pleading is to so apprise the parties to the action of the questions to"he litigated, that they may he- properly prepared to present their cause upon the trial. Technical rules are inevitable in any science ; but the extent to which they have been enforced in some stages of legal history, has been made a reproach to jurisprudence. The tendency of the present day is to relax strict rules whenever substantial justice will be advanced thereby. All the changes in the rules of pleading and practice for many years past have been i a this direction, and there can be no doubt that the present inclination of courts to try causes upon the merits, is an advantage to suitors, and better subserves the purposes for which courts are instituted.

As the law now stands (Code, § 173), courts have power, in furtherance of justice, to amend any pleading, process, or proceeding by adding or striking out the name of a party, or by correcting a mistake in any other respect, or by inserting other allegations material to the case, or, when the amendment does not substantially change the claim or defense, to conform the proceeding to the facts proved ; and this can be done either before or alter judgment.

This power is always exercised liberally, and where the court can see that no surprise is possible, and that the parties have been fairly apprised of the questions sought to be litigated, it is not very easy to put a case where substantial justice will not be best promoted by trying the cause upon the merits, and giving a judgment upon the testimony, and according to the proofs.

There is the less objection to this course from the fact that wherever a party finds himself in doubt as to the cause made by a pleading, he may apply to the court to have it made more definite and certain. By the defendants’ not adopting that course in the present instance, we might perhaps infer that they were in no great doubt as to the case to be made by the plaintiff upon the trial, and this would be strengthened by the fact that defendants were trustees of the corporation.

But we are not left to inference upon that subject, j. A judgment is a public record, and an examination of the judgment roll would certainly have conveyed all the information that could be desired as to the indebtedness upon which the judgment was recovered.

Our attention was called upon the argument, to the fact that the testimony upon which the plaintiff relied to prove his case had been taken upon commission, and filed in the clerk’s office many months before the trial.

This testimony fully sets out the facts upon which the indebtedness is claimed to have arisen, and makes it certain that proof of those facts upon the trial could not have been a surprise to the defendants.

In fact, the particularity with which the defendants in their answer describe the facts, shows that their knowledge was abundant, and that they must have come to trial prepared to go into the whole matter.

I am, therefore, of opinion that the proper course upon the trial would have been to hear the testimony in the case, and that the cause should go back for a new trial, and be determined, not upon a question of pleading, but upon the proofs. In my opinion, that course will be “in furtherance of justice.”

The discretion of the court being conceded to be a legal discretion, and not an arbitrary power, renders it proper to review at general term the course pursued at the circuit.

If my brethren agree with me, this view will determine the case, so far as the question of a new trial is concerned.

But an important question as to the weight to be given to the judgment, was much discussed before us, and as it may arise upon the next trial,-perhaps it is prudent to decide it now.

The question early arose in the jurisprudence of this State, and after much discussion, it was determined in Slee v. Bloom (20 Johns., 669), that a judgment against a corporation was conclusive evidence of indebtedness of the corporation in a subsequent action brought against a stockholder (unless impeached for. fraud), and that'the stockholder was bound as fully by it as the corporation itself.

That decision seems to have settled the law for many years,_and_that case is' laid down as a leading authority on the point in Ang. & A. on Corp., § 515, without any expression of "doubt as to 'the correctness of the doctrine. In Moss v. Oakley (2 Hill, 265), the late supreme court decided the question in the same manner.

In Moss v. McCullough (5 Hill, 131), a different doctrine is advanced, but the decision was reversed in the court of errors, and the case seems to have stopped at 7 Barb., 279, where Justice Willard, delivering the opinion of the court, adheres to the early rule to its full extent. He holds the judgment to be full proof of debt in an action against a stockholder, unless it is proved to be fraudulently obtained.

In Peckham v. Smith (9 How. Pr., 436), Justice Bacox discusses the question, and decides that the judgment binds the stockholder. This decision was affirmed at general term (see 21 N. Y., 101). In Strong v. Wheaton (38 Barb., 616), the supreme couit came to a contrary conclusion, and held the judgment not to bind the stockholder, arguing that the case of Slee v. Bloom had been misconceived, and did not, when properly understood, support the doctrine hitherto supposed.

" But in Belmont v. Coleman (1 Bosw., 188), Judge Hoffmax, before whom the case of Slee y. Bloom was finally closed, wrote a long and exhaustive opinion, reviewing all the cases, and -re-asserting the old doctrine of Slee y. Bloom, holding that a judgment against a corporation is full and complete evidence of indebtedness in an action against a stockholder.' So far as a general term decision can, that case seems to decide the question finally.

In Squires v. Brown (22 How. Pr., 35), as in the case at bar, a trustee was sued, and when the case reached the general term, Judge Woodruff, who delivered the opinion of the court, after approving the doctrine so often laid down, that a judgment against a corporation is conclusive upon a stockholder, goes on to say that in the case of trustees there is greater reason why they should be bound than in case of a stockholder, as they, personally transact the business of the corporation. In Belmont v. Coleman (21 N. Y., 96), three judges in the court of appeals decide that the-judgment is evidence. • As the. question was not necessary to the decision of the case, the other judges declined to commit themselves to the doctrine, and gave no opinion. In Conklin v. Furman (reported in a subsequent part (of this volume), Ingraham, J., after reviewing the cases, holds that the judgment against a corporation is conclusive upon stockholders,. unless impeached for fraud. A special term opinion by Brady, J. (Andrews v. Murray, 9 Abb. Pr., 8), is cited by plaintiff’s counsel, and seems to be authority for the same doctriné.

These are all the casés I have been able to find in this State in which'this question has fairly arisen.

In other States the doctrine of Slee v. Bloom is followed (14 Iowa, 235; 39 Me., 35; 49 Id., 527). And in Bank of Australia v. Nias (4 Eng. L. & Eq., 252), a stockholder was held to be concluded by a judgment against the corporation.

The rule that a judgment is evidence against a stockholder or trustee is supported by such a preponderance of authority that it should be left to the court of last resort to change it, if a change is desirable. But on principle, the cases cited seem to be properly decided. Any other rule would open the door to endless litigation between stockholders. One stockholder, when sued for a- corporate debt, might fail in disproving the existence of the debt. Upon the same evidence, when another stockholder is proceeded against, another jury may come to a different conclusion. When the action for a contribution should be brought to trial, the difficulty would be great. Probably the best interests of the stockholders themselves would be promoted by holding that a judgment against .the corporation, free from fraud, is-conclusive upon the question. Certainly it is for the interest of the community that a fact once properly established should not-again be brought in question.

And where trustees are sued, there can be no pretense of hardship in enforcing the rule. For if a judgment is unjustly obtained, they are guilty of a grave dereliction of duty if they fail to use the means- provided by law to have the judgment reversed or vacated. If they allow an unjust judgment to remain in force against the corporation whose interests they have undertaken to guard, they cannot complain when it is enforced against them personally. *

I have carefully examined the reported arguments and opinions, to see upon what ground it can be claimed that a judgment against a corporation has not the binding and conclusive nature of a judgment against an individual, but without success. Surely a judgment is as high evidence of indebtedness as the bonds that form a principal subject of financial transactiens. Are bank notes any higher evidence %

A judgment is the act of a court, before whom the parties have been brought, that is presumed to be impartial, and that will be prompt to correct any errors into which it may be led.

There seems to be no escape from the conclusion of Chief Justice Spencee in Slee v. Bloom (20 Johns., 669), that a judgment is as conclusive upon the stockholder as upon the corporation.

The case of Witherhead v. Allen (3 Keyes, 562) was an action against a joint stock company, where all the members are partners, and is not in point. The statute respecting those associations expressly declares that no action shall be brought against the individual partners, until one has been brought against the company upon the same demand.

Of course, the demand upon which an action is brought cannot possibly be the judgment that does not exist until the suit is ended. Before sueing the partners upon the judgment, it would be a condition precedent that a suit upon that judgment had been previously prosecuted against the company. That decision goes upon the language of that particular act, and can not affect the decision here.

Another point is urged against the complaint, that it does not state that the defendants were trustees when the debt was contracted.

The language of the statute is, that if the compánies shall fail to file a report, the trustees shall be jointly and severally liable for all the debts of the company then existing. The defendants ask us to exclude from the operation of the statute all such debts as were not contracted by the parties sued. No reason is given for taking this liberty with the statute, except that it is said to be a highly penal one. That affords no reason why the courts should repeal it. So long as it remains on the books, the courts must enforce it, according to a fair interpretation of its provisions.

The trustees having the custody of the books, and the control-of the corporate affairs, have the .means of knowing what debts are in existence, and therefore know the full measure of liability they assume by neglecting their duty.

The opinion of Chief Justice Comstock in Boughton v. Otis (21 N. Y., 264), is directly opposed to the construction claimed by defendants. “ A single case may occur where successive boards may be liable for the same debts, and that is where there are successive defaults in January. By the very terms of the statute, the trustees omitting to file their statement within the first twenty days of that month, are liable for all the debts then existing. .

“Now the debts then existing may be wholly or partly the very debts for which their predecessors became liable by reason of a default in the January of the previous year. But from this liability there is a chance of escape by a simple performance of the duty required.”

This opinion was expressly concurred in by a majority of the court, and was not dissented from by any member. It is in accordance with the language of the statute, and fatal to the construction contended for by defendants.

Shaler & Hall Quarry Co. v. Hall (10 Abb. Pr., 267), is to the effect that where a trustee fails to file a report in January, he becomes liable for debts contracted before "lie became trustee.

Some other objections were made to the complaint at general term,- but as it was conceded that they were not pointed out at circuit, they need not be considered. Had they been raised they, it is possible they might have been amended, and a party cannot be permitted to lie by until it is too late to obviate an objection, and then raise it for the first time.

But the objections do not seem to be important. The failure of the complaint to specify the date in • 1865 when John P. White resigned his trusteeship, if otherwise important, is cured by the answer, that fixes the date at February 16, 1865.

The allegation that “ defendants failed to file any such report as is by law required to be filed within twenty days of January 1 in each year,” is sufficient.

Public statutes need not be referred to in a pleading. The court is supposed to know them.

A new trial should be ordered, costs to abide event.

Gilbert and Tappen, JJ., concurred, Barnard, J., not sitting. 
      
      Present, Gilbert, Tapper and Pratt, JJ.
     