Opinion of the Court, per O'BRIEN, J. [Vol. 152. their benefit, we think that the measure of damages awarded by the trial court to the plaintiff was not proper nor warranted by any proof or findings in the case. The directors were, by the judgment, held liable to the shareholders for all the money they had invested in the concern and which was represented by the stock. They were also held liable for all the debts upon the theory that the shareholders were, by law, personally liable for such debts, and this contingent liability was computed as part of the damages. It was not claimed that the shareholders had, in fact, paid any of the corporate debts or had been made liable to pay by any suit or judgment, and it was impossible to say that they ever would pay. Moreover, it was undisputed that a portion of the money paid in by the shareholders was disbursed for the ordinary and legitimate expenses of the business, such as office rent, clerk hire, salaries and the like, besides some other items amounting to a considerable sum, for which the directors could not, upon any fair theory, be made liable. It is not at all likely that under the most prudent management the business of one month could be conducted without some loss. It was a new concern without any business and without the necessary machinery for commencing business. The liability of shareholders for corporate debts is founded upon the statute, and their own voluntary act in becoming members of the corporation by purchase of stock, and to attribute this contingent liability to the acts or omissions of the directors in the management of the business was a remote conclusion not warranted by any feature of the case. The money disbursed from the treasury to defray the expenses of a new business not yet established could not in any view of the case be held to be an element of loss or damage to the shareholders, and much less could such a loss be attributed to the negligence of the directors. The relations of trust and fidelity existed between the corporation and the directors, and not between the latter and the shareholders, and they could be held liable on the ground of negligence only for such damages sustained by the corpora tion as were the natural and proximate result of their acts or omissions. It is obvious that in this case the directors have been held liable for moneys that represented no element of damage whatever to the corporation, and which could not be recovered by the corporation had the action been brought in that form. The defendants have not only been practically treated as insurers and the shareholders relieved from all risks of the business in which they had invested their money, but they were permitted to recover in anticipation of some statutory liability as members of the corporation that had not matured in any judgment and may never mature. They were thus subjected to a measure of liability without precedent, and that cannot, under any possible view of the case, be sustained or defended. We have recently held that, in actions of this character, the liability is not in equity but at law. That question has not been raised on this appeal, and since the judgment was properly reversed on other grounds, it is not necessary to refer to the point now. There are some other questions in the case; but, since they have all been considered in the court below and properly disposed of, any further discussion of them is unnecessary. The order should be affirmed, with costs, and judgment absolute ordered for the defendants. All concur, except HAIGHT, J., not sitting. THE UNITED GLASS COMPANY, Appellant, v. CALVIN P. II. VARY et al., Respondents. 1. MANUFACTURING CORPORATION - CONDITION PRECEDENT TO ACTION AGAINST STOCKHOLDER. Failure to proceed to judgment and execution against a corporation, before bringing an action against a stockholder, as required by section 24 of chapter 40 of the Laws of 1848, cannot be excused except when the performance of the condition is impossible. 2. RESTRAINING ORDER TO EXCUSE PRIOR ACTION AGAINST CORPORATION. An order of the court restraining creditors of a corporation from com 152 121 153 505 152 121 171 494 Opinion of the Court, per ANDREWS, Ch. J. [Vol. 152. mencing or prosecuting any action against it, made as a mere preliminary and precautionary order in a suit by a stockholder against the corporation for an order appointing a receiver of its property, is not sufficient to excuse a creditor, who has made no effort to procure a modification of the order, from proceeding to judgment and execution against the corporation before bringing an action to enforce the liability of a stockholder. United Glass Co. v. Vary, 79 Hun, 103, affirmed. (Argued February 9, 1897; decided March 2, 1897.) APPEAL from a judgment of the General Term of the Supreme Court in the fifth judicial department, entered June 28, 1894, which affirmed a judgment in favor of defendants entered upon a decision of the court dismissing the complaint on trial at Circuit. The nature of the action and the facts, so far as material, are stated in the opinion. H. J. Cookinham for appellant. The court, having the entire property and estate of the refrigerator company under its control and in the hands of its own officer, issued an order restraining any creditor from bringing any action against such company to enforce its liability for debt, and thus excused the plaintiff from recovering judgment and having execution returned unsatisfied. (Hunting v. Blun, 143 N. Y. 511; Jones v. Blun, 145 N. Y. 333; Shellington v. Howland, 53 N. Y. 371; Flash v. Conn, 109 U. S. 371.) Horace McGuire for respondents. In order to maintain an action at law to enforce the statutory liability of a stockholder of a corporation under the act of 1848, it is a condition precedent that such creditor shall have reduced his claim to judg ment against the corporation and execution thereon have been returned unsatisfied, unless there exists a sufficient reason for not having done so. (R. M. Nat. Bank v. Bliss, 89 N. Y. 338; Kincaid v. Dwinelle, 59 N. Y. 548; Nat. Bank of A. v. Dillingham, 147 N. Y. 603.) ANDREWS, Ch. J. The liability imposed upon stockholders in a manufacturing corporation, organized under chapter 40 of N. Y. Rep.] Opinion of the Court, per ANDREWS, Ch. J. the Laws of 1848, by section 10 of the act and the amendments thereto, for the debts of the company, is controlled by section 24. By that section it is made a condition precedent to the maintenance of an action to enforce the liability of a stockholder created by section 10, that a suit for the recovery of the debt should have first been brought against the company and "an execution against the company shall have been returned unsatisfied in whole or in part." (Handy v. Draper, 89 N. Y. 334.) Subsequent to the enactment of the statute cases arose where by reason of the dissolution of the corporation and other obstacle it was impossible for a creditor to comply with the condition that he should first proceed to judgment and execution against the company. The question was thus presented to the courts whether for any reason the condition precedent could be dispensed with. If the statutory obligation assumed by a stockholder when he became such, towards the persons who were or might become creditors of the corporation, is in its nature contractual, then it would seem to be proper to apply to the case the general principle applicable to contracts, that when the performance of a condition precedent is rendered impossible by an intervening act of the law, performance is excused. (Jones v. Judd, 4 N. Y. 412; Baker v. Johnson, 42 N. Y. 126.) Whatever may be the nature of the obligation, whether it is regarded as a duty resting upon the stockholders imposed by law, or in the nature of a contract obligation, it is the manifest duty of the court not to permit any dispensation with the express requirement of the statute, upon grounds less imperative than those upon which courts proceed in dealing with conditions precedent in ordinary contracts. The stockholder of a corporation assents to be bound by the statute under which it was organized. The creditor also looks to the general law or the charter under which the corporation is created, to ascertain and define the liability of stockholders. While on the one hand the stockholder should be held to his statutory liability, on the other the creditor has no right to demand that statutory conditions qualifying his liability should Opinion of the Court, per ANDREWS, Ch. J. [Vol. 152. be disregarded or that conditions should be dispensed with, because their observance would be inconvenient or involve trouble or expense, provided they are capable of performance. Both the stockholder and the creditor may be supposed to have understood, and the stockholder to have impliedly assented, that the intervention of a paramount authority, by which the performance of the condition was rendered impossible, would excuse compliance. Nothing short of this ought to avail as an excuse consistently with a proper regard for the statute or the rights of the stockholder. We do not refer, of course, to cases which may be imagined where a stockholder by his conduct has precluded himself from objecting that the condition precedent has not been performed. It is no excuse for not first proceeding to judgment and execution against the corporation that it is in fact insolvent and has no property out of which the debt could be collected. The statute has made the judgment and return of execution unsatisfied the only test of the inability to collect of the corporation. In creditors' bills the same test is exacted before a bill to reach equitable assets can be filed. The admitted insolvency of the debtor is not enough. (Estes v. Wilcor, 67 N. Y. 264; Adsit v. Butler, 87 id. 585.) There are several cases in this court in which the question of dispensation with the condition in the 24th section of the statute of 1848, that judgment and execution shall first go against the corporation, has been considered. It was held in Hardman v. Sage (124 N. Y. 25) that a dissolution of the corporation by judicial decree during the time in which the creditor might bring his suit dispensed with the condition. There can be no doubt of the soundness of this view. The very entity of the corporation ceases and is extinguished on dissolution. There is no longer any corporation which can be sued. The law has rendered it impossible to take the proceedings contemplated by the statute. In Shellington v. Howland (53 N. Y. 371) there was a double ground on which a dispensation with the condition was urged. The corpora |