McMahon v. . MacY

During the months of October and November, 1854, Wilkins, Decker Co. were contractors on one of the sections of the Sackett's Harbor and Saratoga railroad; and during these months the plaintiff worked for them upon the railroad in person, and with his hired man and team; and they failed to pay him for the work from the 15th day of October to the 19th day of the next month. On the 21st day of December, 1854, the plaintiff commenced an action in the Supreme Court against the railroad company to recover the amount due him from the contractors for this work; and on the 31st day of March, 1857, he recovered a judgment against it for the sum of $248.08, damages and costs. From this judgment it appealed to the General Term of the Supreme Court, and the judgment was affirmed, and a judgment was *Page 158 entered for costs upon the appeal May 27, 1858, for $67.19. It then appealed to the Court of Appeals, and the judgment was again affirmed, and judgment for costs upon that appeal was entered December 26, 1861, for $157.69. Executions were issued upon all these judgments and returned wholly unsatisfied. Then this action was commenced against this defendant September 4, 1864, and a recovery was had for the whole amount of these judgments, with interest and costs. On the 11th day of August, 1854, Stanton Wilcox transferred to the defendant one share of the capital stock of the company; and on the 20th day of October, 1854, 2,500 shares; and on the last named day H. Stanton transferred to him 3,917 shares. These transfers were all absolute in form, and were made upon the books of the company. They all stood on the books in the name of the defendant until November 3, 1854, when he transferred 3,835 shares to John Hollister, and the remainder of the shares continued in his name until March 21, 1855, when he transferred them all to E.C. Hamilton. But ten per cent had been paid upon this stock. It was transferred to defendant by Stanton, to be held as collateral security for a debt due him from Stanton, and he paid no consideration for the transfer. The defendant transferred the stock, as above stated, at the request of Stanton, receiving no consideration for the transfers. It was, as a holder of this stock, that the defendant was sought to be made liable and was held to be liable in this action. It is supposed that the recovery was had against the railroad company under section 12, chap. 140 of the Laws of 1850, which makes every railroad company, upon certain conditions, liable for work performed by any laborer for a contractor engaged in the construction of its road. This action against the defendant is based upon section 10 of the same act, as amended by chapter 284 of the Laws of 1854, which is as follows: "Each stockholder of any company formed under this act shall be individually liable to the creditors of such company, *Page 159 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, and all the stockholders of any such company shall be jointly and severally liable for the debts due or owing to any of its laborers and servants, other than contractors, for personal services for thirty days' service performed for such company, but shall not be liable to an action therefor before an execution shall be returned unsatisfied in whole or in part against the corporation, and the amount due on such executions shall be the amount recoverable, with costs, against such stockholders; before such laborer or servant shall charge such stockholder for such thirty days' service he shall give him notice in writing, within twenty days after the performance of such services, that he intends so to hold him liable, and shall commence such action therefor within thirty days after the return of such execution unsatisfied as above mentioned; and every such stockholder, against whom any such recovery by such laborer or servant shall have been had, shall have a right to recover the same of the other stockholders in said corporation in ratable proportion to the amount of the stock they shall respectively hold with himself." If the plaintiff stood here without any judgment against the company, relying solely upon his original claim for work done for the contractor, it would not be claimed that he could succeed in this action. He was not a laborer for the company, and hence could not recover against the defendant under the second clause of the tenth section. He was not a creditor of the company, but of the contractor, and hence it is not certain that he could recover under the first clause of the section. And, in any event, his cause of action would be barred by the statute of limitations. Hence, if this recovery is to be upheld, it must be by reason of some effect to be given to the judgments against the company. What effect should be given to them in such an action as this is not entirely certain, as there is *Page 160 much conflict in the decisions upon the subject. I will, however, assume, as claimed by the counsel for the plaintiff, that the judgments are conclusive upon the defendant. Under section 10, the plaintiff was not required to sue the company, as a condition precedent, before he could, as a creditor, enforce his debt against the defendant as a stockholder. Such a condition is required only in the case of a suit against a stockholder under the second clause of the section for a recovery of a debt due to a laborer or servant of the company. This view of the section is justified by the whole frame-work of the section, and is demonstrated by its grammatical construction. Hence, if we assume that the judgments are conclusive as evidence, that the debt was, as alleged in the complaint, contracted in 1854, and that the defendant cannot dispute it, and that this action is brought to recover the debt thus conclusively established, yet the plaintiff must fail, as the debt, under this view of the case, was barred by the statute of limitations. The cause of action, under this view, accrued in 1854, and the defendant could have been sued at once. But if we assume that the judgments are not merely conclusive evidence of a debt of the company contracted in 1854, but that they are themselves debts constituting the plaintiff, at their dates, a creditor of the company, and that this action is founded upon such judgments for the recovery of them, as debts against the company, of the defendant as a stockholder, yet there is an insuperable difficulty in the way of a legal recovery in this case. Upon this assumption the plaintiff became a creditor of the company at the time his first judgment was recovered, which was on the 31st day of March, 1857, more than two years after the defendant had parted with his unpaid stock, and had ceased to be liable as a stockholder. We must treat the first judgment recovered either as conclusive evidence of a debt existing and due the plaintiff from the company in November, 1854, or as itself a debt constituting the plaintiff a creditor of the company at and from its recovery. It cannot be treated in any other way, nor receive *Page 161 any other effect, and hence, for the reasons stated, it cannot form any basis for upholding the recovery in this action. We might stop here, and there would be ample reason for reversing the judgment below; but there is still a further reason for doing so. It was shown upon the trial that the stock was transferred to the defendant, as collateral security for a debt due him from Stanton, and that it was held by him for that purpose only. The referee refused to give any effect to this evidence, holding that parol evidence could not be received to contradict or vary the written assignments or transfers, which were absolute in form. In this he erred. It is always competent to show that an assignment or conveyance, absolute in form, was only intended as a security. (Hodges v. Tennessee Marine andFire Ins. Co., 8 N.Y., 416; Despard v. Walbridge,15 N.Y., 374; Sturtevant v. Sturtevant, 20 N.Y., 39.) There is nothing in any statute which makes the books of the company the incontrovertible evidence of ownership of stock. A person may be the absolute, legal and equitable owner of stock without any transfer appearing upon the books. (McNeil v. Tenth Nat.Bank, 46 N.Y., 325.) Section 11 of the general railroad act of 1850 provides that no person holding stock in any railroad company, as collateral security, shall be personally liable as stockholder, but the person pledging the stock shall have the liability as stockholder. Under this law the evidence that the stock in question was assigned to the defendant as collateral security should have been received and considered, and should have secured to the defendant exemption from liability on account of the stock. I therefore reach the conclusion that the judgment should be reversed and a new trial granted, costs to abide event.