Battershall v. Davis

Leonard, J. There are two ‘questions only, in this case, that are entitled to be noticed. First. Whether a bond and mortgage given to secure the payment of a sum due to a manufacturing company, on a subscription for shares, can be collected after the subscriber has demanded scrip for his shares, and neglect or refusal by the company to issue it. The subscription for shares is a legal obligation which can be enforced by action, and by forfeiture for non-payment. It is therefore a good consideration for giving the security. If the bond and mortgage were to be declared void, the subscriber would remain liable for his subscription. The receipt given for the bond and mortgage by the company, says that Davis is to be credited for the full amount of it. The mortgage was probably taken as security for the debt due from the mortgagor to the company, and given to obtain indulgence. It makes very little difference to the debtor whether he pays his bond and mortgage, or his debt due for the shares for which he became a subscriber. The act under which the company was organized, declares that money only shall be taken in payment for shares, prohibits all loans by the company, and declares that all the officers shall be liable for all the debts of the company, to the extent of the loan. The act also directs that all stock must be paid for¿ half in one, and half in two years. How then could the company have lawfully issued the shares in question ? If the officers issued the stock without payment therefor in money, they made themselves liable for the amount. The officers could assent to giving indulgence and take a mortgage to secure the debt, and thereby protect themselves against liability. Were the company in existence, the court might stay the collection of the mortgage until the company should [327] issue the stock. I am not able to perceive that the defendant Davis would have any recourse to compel the company to issue scrip till the mortgage or the price of the stock should be paid. If the company, as in this case, should fail before the stock should be paid for, the party who had subscribed for the stock would still be liable to pay, although the stock had become worthless. The bond and mortgage is therefore, I conceive, founded on a valid consideration, and is obligatory upon the maker. [New York Special Term, April 2, 1860. Second. It is alleged ■ by the defendants that the proceedings in the action of Christie against the Company, for a dissolution thereof, wherein the receiver was appointed, and was afterwards authorized to sell the assets &c. of the company, was irregular and void, and that the title of the plaintiff to the bond and mortgage in question, is therefore nugatory and worthless. Questions of irregularity are to be settled in the action wherein they arise, unless questions of jurisdiction are involved. Davis cannot be permitted to question the appointment of the receiver, or the order directing the sale of the assets, including this mortgage, inasmuch as it appears from the petition of the receiver, upon which the order of sale was granted, that Davis joined in that application as well as several other stockholders and trustees of the company, It is not necessary to decide whether he could, under other circumstances, successfully dispute the authority of the court to appoint the receiver in this case. Leonard, Justice.]