Caesar v. Bernard

Ingraham, P. J. (dissenting):

I dissent from the reversal of this judgment. The action is brought to enforce a liability imposed by section 66 of the Stock Corporation Law (Consol. Laws, chap. 59; Laws of 1909, chap. 61), and it is only-by virtue of this provision of law that the defendants can be held responsible in damages by reason of the transfer of the property of a corporation of which they were directors or officers. This section 66 of the Stock Corporation Law, as I read it, refers solely to" a corporation “ which shall have refused to pay any of its notes or other obligations when due.” There is not one word in this section which refers to any other corporation, and it seems to me clear that for the courts to make it apply to a corporation that has not failed “to pay any of its notes or other obligations when due ” is purely judicial legislation under an assumed intention of the Legislature which is without any reason to support it and which, as I view it, is a pure usurpation AT legislative power by the courts. Prior to •the enactment of the Stock Corporation Law there was a statute which had been in force for many years (Laws of 1825, chap. 325, § 6) which prohibited certain transfers of property of a corporation. But the Legislature when enacting the Stock Corporation Law imposed a more extensive liability, and it cannot be said that it did not intend to do what it said, but intended to extend the liability there imposed to all other corporations, although the language of the statute confines *734it to a corporation “which shall have refused to pay any of its notes or other obligations when due.” Although the construction which was given by the courts to the act of 1825 was quite justified by the language used in that statute, it seems to me clear that the Legislature, when it repealed that act and enacted the Stock Corporation Law, clearly intended to change the rule that had before been in force so as to confine this liability to the officers or directors of a corporation “ which shall have refused to pay any of its notes or other obligations when due,” thus giving the statute the meaning which its language clearly indicated. The intent of the Legislature was to prevent the transfer of any of its property by its officers or directors, when a corporation. “ shall have refused to pay any of its notes or other obligations when due,” or to prohibit any “such” corporation from making any transfer of property when insolvent or when its insolvency is imminent, with the intent of giving a preference to any creditor over the other creditors of the corporation. I expressed my views on "this question in O'Brien v. East River Bridge Co. (36 App. Div. 17), and those views were inferentially approved on appeal (161 N. Y. 539). This court has expressly given the same meaning to the word “such” in section 33 of the Stock Corporation Law, in Wadsworth v. Equitable Trust Co. (153 App. Div. 737), and- the Supreme Court of the United States has also put that meaning on such a statute in United States v. Gooding (12 Wheat. 460), where Story, «L, said: “The first point turns upon the interpretation of the words £ such ship or vessel ’ in each of these sections. To what do they refer ? The only ship or vessel spoken of in either section is such as have been built, fitted out, etc., in some port or place of the United States. £ Such ship or vessel ’ must, therefore, refer to a ship or vessel so built, fitted out, etc., as its antecedent, or the relative £ such ’ can have no meaning at all. The word is sensible in the place where it occurs, and it is the duty of the court, when it can, to give effect to- every word in every enactment, if it' can be done, without violating the obvious intention of the Legislature. This is a penal act, and is to be construed strictly, that is, with no intendment or extension beyond the *735import of the words used. There is no certainty that the Legislature meant to prohibit the sailing of any vessel * * * which had not been built, fitted out, etc., within the jurisdiction of the United States. * * * But it is sufficient to say that the word ‘ such ’ has an appropriate sense, and can be reasonably referred only to the ship or vessel previously spoken of; and such ship or vessel is not merely one built, fitted out, etc., but one built,, fitted • out, etc., in a port or place within the United States. The whole description must be taken together. If we were to. adopt any other construction, we should read the words as if (such ’ were struck out, and the clause stood, any ship or vessel.’ Such a course would not be defensible in construing a penal statute.”

I also dissent from the conclusion in the prevailing opinion that this statute is not a penal statute, but.is a remedial one. So far as it prohibits the transfer by a corporation of its assets that conclusion may be strictly correct; but so far as it imposes upon the directors or officers of a corporation who make a transfer prohibited by the statute in question a liability for any injury that is sustained by a creditor in consequence of the violation of the provision contained in that section, it seems to me that it is highly penal, making the officers and directors of the corporation liable, not for their own debts, but for the debts of the corporation, in consequence of an act which is prohibited by the statute. A liability imposed by such a statute is never extended by implication or construction.

I, therefore, dissent from the reversal of this judgment.

Dowling, J., concurred.

Determination and order reversed, with costs, and motion denied, with costs.