Moosbrugger v. Walsh

BRADLEY, J. The action is founded upon the alleged fact that the plaintiff was a creditor of the Pleasant Valley Vintage Company, and that defendants, as its stockholders, were liable to her as such creditor because the whole amount of the capital stock had not been paid in and certificate thereof filed. The referee found that the company was duly incorporated in July, 1891, pursuant to Laws 1890, c. 567, with a capital stock of $12,000; that in March, 1892, the capital stock was increased to $35,000; that the company continued business from the time of its incorporation until September, 1892, when proceedings were commenced for its voluntary dissolution, which was accomplished by final order in January, 1893; that neither [551] the original nor increased stock was fully paid, nor any certificate thereof filed; that on March 14, 1892, the defendants subscribed for two shares of the stock, of $100 each; that on April 4, 1892, their names were entered in the stock book of the company as stockholders; that Edward H. Newman, by his promissory note then made and delivered to the company, promised to pay to the order of H. B. Longwell, secretary of the company, $240, with interest, on or before October 1, 1892; that on May 13, 1892, D. J. Sunderlin, by his promissory note made and delivered to it, promised to pay to the order of the company $100, on or before November 1,1892; that both of those notes, before maturity, were indorsed by the company, and transferred for value to George W. Hallock; that when they became due the notes were presented for payment, which was refused, and notice of protest for nonpayment duly given to the company, which was charged with liability as such indorser; that on February 21, 1893, Hallock assigned to the plaintiff his claims and causes of action against the defendants by reason of such notes, and arising out of the liability of the company as such indorser; and that this action was commenced February 23, 1893. The facts thus found have the support of evidence. The statute provides that the stockholders “of the corporation shall be, severally, individually liable to its creditors for all debts and contracts made by the corporation until the whole amount of its capital stock has been paid in, and until a certificate thereof has been filed.” Laws 1890, c. 567, § 7. Inasmuch as the corporation was dissolved before the plaintiff became assignee of the claims in question, it is urged that she is not a creditor of the company, within the meaning of the statute. Hallock became a creditor of the company upon the indorsement and transfer by it of the notes to him, although the liability of the company was then contingent. Van Wyck- v. Seward, 18 Wend. 375. This liability became absolute in October and November, 1892. The dissolution was perfected in January, 1893. By the transfer afterwards made to the plaintiff by Hallock, who was a creditor of the "company, she took the relation he had as such, and in legal contemplation was a creditor of the corporation. Code Civ. Proc. §§ 1909, 1910. The defendants must be deemed subscribers to the increased capital stock, and their alleged liability is dependent upon their relation as stockholders resulting from such subscription. It is insisted that, in the proceedings to increase the capital, the provisions of the statute were not observed, and therefore there was no valid increase of the capital to support the alleged relation of the defendants as stockholders. In the method of proceeding to increase the capital of a corporation, prescribed by the statute, is the provision that a certificate be made showing, among other things, “the amount of capital actually paid in.” Laws 1848, c. 40, § 22. It is suggested that the certificate in the present case was defective in that respect, in the statement that “the whole of the said capital stock of $12,000 has been sold, and all but $-paid in.” The import of this is that the entire amount of the capital had been paid in. The certificate in that respect is in compliance with the statute. [552] It is true that the filing of the certificate is requisite to the increase of the capital. Id. It appears that, on March 17, 1892, the certificate was filed in the office of the clerk of Steuben county, where the business of the company was conducted. Although the question of the validity of the certificate was raised on the trial, no objection appears to have been there taken to the want of proof that it had not been filed in the office of the secretary of state. That question requires no consideration, as the objection cannot be effectually taken for the first time on this review. If it had been made at the trial, it may be that the fact would have been supplied by evidence. It must here be assumed, upon the facts as they appear, that the capital stock was increased pursuant to the statute, and that the defendants became stockholders of such increased capital. It may be that, notwithstanding the original capital stock had not been fully paid in, and a certificate thereof filed, the liability of the defendants as such stockholders is confined to the debts of the company : incurred since such increase of capital was accomplished. Veeder v. Mudgett, 95 N. Y. 295; Griffeth v. Green, 129 N. Y. 517, 29 N. E. 838. But that question does not arise in the present case. The notes of Newman and Sunderlin were made, and the liability of the company as indorser was incurred, after the increase of the capital stock. The assumption of the defendants’ counsel to the contrary is not supported by the record. ■ The evidence offered on the part of the defendants to prove that they were induced by fraud to subscribe for and take the stock of the company was properly excluded. Their remedy on that ground was for relief by way of rescission, and against the company, or some party representing it, as succeeding to its rights and remedies. Such .defense is not available as against its creditors in actions by them. McDermott v. Harrison (Sup.) 9 N. Y. Supp. 134; Bosley v. Machine Co., 123 N. Y. 550, 25 N. E. 990. The only relation of Hallock to the corporation was that of its creditor, and the plaintiff succeeded to his rights and relation as such. He and his successor in. interest cannot legally be prejudiced by the transaction between the company or its representative and the defendants, which led to the subscription to the stock and a taking of a certificate therefor by the latter. The creditor, having been prevented by injunction, followed by dissolution of the corporation, from so doing, was relieved from the statutory requirement of prosecuting the claim to judgment and execution against the company, which otherwise would have been a condition precedent to the action against the defendants. ■ Kincaid v. Dwinelle, 59 N. Y. 548. The judgment should be affirmed. All concur.