Cuykendall v. Douglas

Hardin, J. : The learned counsel for the defendant insists “ that the verdict should not have been for more than seventy-five per centum of $1,500 and interest.” In October, 1867, a vote was taken at a stockholders meeting upon the resolutions for increasing the capital stock,from $250,000 to $500,000. The certificate filed with the clerk shows that more than two-thirds of the whole number of shares of the capital stock voted in favor of the resolution. There was no proof given to the contrary upon the trial. The 20th section of the act of 1848 (chap. 40), relating to the formation of corporations for manufacturing purposes, provides that “any company which may be formed under this act may increase or diminish its capital stock by complying with the provisions of this act.” Section 21 provides for a meeting of the stockholders, for the purpose of availing of the provisions of the act. It declares — 584 — that “ when any company shall desire to call a meeting of the stockholders ” for such purpose, “it shall be the duty of the trustees to publish a notice, signed by at least a majority of them, in a newspaper in the county, * * * at least three successive weeks,” and to deposit a notice in the postoffice, addressed to each stockholder. This is a duty imposed upon the trustees for the purpose of assembling the stockholders. The certificate which was filed was signed and sworn to by John A. Dodge, and it appears by the certificate of incorporation, made March 10, 1866, that ho was named as a trustee to manage the concerns of the company. There was no proof that he was removed or displaced, and the minutes of board of trustees show him acting at a meeting September 11, 1867, as such trustee, and it, therefore, sufficiently appears that when he was elected chairman of the stockholders' meeting, he was eligible as the chairman of the meeting, and answered the requirements of section twenty-second in that regard, and there is no force in the objection made to the certificate filed in October, 1867, in that regard. The certificate was “ verified by the affidavit of the chairman,” and “ it was countersigned by the secretary ” of the stockholders’ meeting. It was filed in the clerk’s office. The statute says: “And such a certificate shall be acknowledged by the chairman.” The certificate was produced from the clerk’s office. At the end of it and to the left of the signature of John A. Dodge were these words, ‘1 subscribed and sworn to before me, this 8th day of October, 1867, Daniel A. Robinson, Jr., justice of the peace of Cayuga county.” The force of the objection is aimed at the use of the word “ subscribed ” instead of the word “ acknowledged.” We fail to see that there is any force in substance in the objection, of which the defendant can avail himself successfully. The object of the statute was to provide a mode of proof of the instrument, to establish its genuine character, and as the signature was in presence of the justice and he had witnessed and certified it, we do not see why the object of the, statute was not answered. — 585 — A certificate of acknowledgment is only required to be in “ substantial compliance” with the statute. (Thurman v. Cameron, 24 Wench, 87; West Point Iron Company v. Reymert, 45 N. Y., 703; Canandarqua Academy v. McKechnie, ante, p. 63.) There was some evidence given tending to show that notice of the stockholders’ meeting was given to all of the stockholders. Tn the absence of any proof that due and sufficient notice was mot given to all, we think the book of minutes and the certificate, showing that more than two-thirds of the stockholders appeared in person or by proxy, and voted for the increase of- the stock, establish as against this defendant, that the stock was increased from $250,000 to $500,000, at a regularly assembled meeting of stockholders. September 9, 1868, a semi-annual dividend of five per cent was declared, and also a dividend of five per cent payable 20th of December, 1868, and one 20th February, 1869. There was proof of the payment of these dividends. The defendant December 24, 1868, acknowledged the payment of $120 as a dividend, and he received and indorsed a check for dividend, which was given February 20, 1869, by Dodge, as president of the company. February 7, 1868, the defendant wrote to the president that file was negotiating for five shares of stock óf the company issued to Loomis & Sands, and also for the three shares allotted on this “ original ” stock, and he asked for privilege of paying up the installment due on that stock February 1, 1868 ; and he received a letter from the company February 13, 1868, giving him the privilege of paying up the installment and having a receipt in full. February 17, 1868, defendant sent to pay the last named balance a draft, and he asked for a certificate of the five shares of Loomis & Sand stock bought by him. It was transferred to him February 8, 1868, in writing by the assignee of Loomis & Sands. January 29, 1874, the defendant sent in a receipt to the company for a. new certificate for twenty-four shares of stock of the company, and also acknowledged preferred stock. March 15, 1872, in chapter 108 of the laws of that year, the Legislature authorized the company to issue preferred stock, if a' majority of the stockholders should assent thereto. — 586 — On January 5, 1874, the defendant executed three several instruments covering twenty-four shares of stock, in each of which instruments occur substantially these words, viz. : “ For considerations mentioned in chapter 108 in the Laws of 1872, an act amending the same, and the assent and subscriptions made thereunder,, the undersigned hereby transfers and surrenders and delivers up-to the trustees of Dodge and Stevenson Manufacturing Company to be canceled, the within scrip and shares of capital therein mentioned, being nine shares in number, dated “Franklin, N. Y., January 5, 1874, Amos Douglass.” Proceedings in respect to. the preferred stock were had, and stated to defendant, and he was-asked by letter to send in his scrip as held by him, and to execute a surrender of it in the words given above. He sent in his. three certificates covering twenty-four shares of stock, with -a surrender attached to each certificate in the words given supra. We think the defendant was the owner of twenty-four shares of the stock of the company at the time it wont into liquidation, and. at the time the receiver made the assessment, and that he was. properly held liable to be assessed upon the twenty-four shares of the stock. The recovery was for seventy-five per cent on twenty-four shares, of $1,800, and forty-nine dollars interest thereon. Besides, the twenty-second section of the act provides, that when the certificate of the stockholders’ meeting is filed, “ the capital stock of such corporation shall be increased or diminished to the amount specified in such certificate.” It also provides the company shall be entitled to the privileges and provisions of this act.. The defendant as a stockholder was part of the company, and as he, in common with the company, had the benefit for a time of such “privilege and provisions,” it is just and proper that he should take the burdens and be subjected “ to the liabilities of the act.” (Act of 1848, chap. 40, § 22.) Again, it appeal’s that there was a stock book kept by the company, and an account thereon of defendant’s stock, and the receiver testified that he found the defendant’s name thereon. The exact contents of the book do not seem to be in the case, as made up before us, though the evidence shows the defendant’s name thereon. But in the absence of any proof by the defendant that he did not appear by the book to be owner of twenty587 four shares, we think, with the evidence before us already alluded to, that we should be justified in presuming that the twenty-four shares of defendant’s stock wore entered- upon the stock ledger which was open to inspection to “stockholders and creditors of the company.” (Act of 1848, chap. 40, § 25.) That statute declares. “ such book shall bo presumptive evidence of the facts therein, stated in favor of the plaintiff, in any suit or proceeding against-such company, or against any one or more stockholders.” (Section 25.) If that book was presented to the court when the assessment was made, and the amount of assessment required there determined upon from a consideration of the debts, liabilities and the number of shares held by the various stockholders, and the court found from the prima facie evidence in such proceedings that the-defendant was a stockholder of twenty-four shares, and directed an assessment of seventy-five per cent thereupon, why should he not be included ? However this view may bo, we think the defendant was clearly liable to bo assessed for twenty-four shares, and not for fifteen only. We come now to consider the motion made by the defendant,, to dismiss the complaint based upon a supposed failure “ to prove that any of the debts of the company were to be paid within one-year from the time it was contracted.” We might with propriety adopt the reasoning of Talcott, J., in Hurd v. Tallman (60 Barb., 272), aud conclude that the action, of the Supreme Court in appointing a receiver, and directing an assessment upon the stockholders of the company, was conclusive upon the stockholder in this action against him. If the order was irregularly made or prematurely made, the remedy was by an application to change the order, or by an appeal therefrom. (In re Reciprocity Bank, 22 N. Y., 9; Hurd v. Tallman, 60 Barb., 286; Whittlesey v. Franz, 74 N. Y., 461.) But we think there is a further answer to the position taken, by the defendant. It appears that, at the time of the dissolution* the company was in debt from $300,000 to $350,000, and that a large part of it was for debts not then matured. The dissolution was August 31,1874. It then appears the company was insolvent,. — 588 — and the trustees pursuant to the Herkimer county act (chapter 561 of Laws of 1852), which was by an act of 1853, chapter 179, made applicable to Cayuga county, provided no preferences shall have been made by the company, adopted a resolution dissolving the compay as they had a right to do. (Story v. Furman, 25 N. Y., 214, and cases there referred to, and Hurd v. Tallman, 60 Barb., 272.) The report of the president made to that meeting of the trustees stated “that the (then) present year’s business would show .a net loss to the company.” It appeared that as much as .$100,000 of the debts were due. It appeared that settlements were made -every year with one George Harding, and that his debt was in bills payable, and that the settlement of the year the company went into liquidation was not paid. It appears that there wore contingent liabilities upon indorsements or guaranties made by the company for about $10,475.72 upon “business paper owned by the company.” It also appeared that some of the claims against the company were for infringements of patents. The receiver was sworn and gave a general account of the debts, and it does not appear in his cross-examination or by any other evidence in the cause that the defendant’s debts were not contracted, as in the usual course of business of such company, payable in less than one year from the creation of the indebtedness. We think, therefore, it was fairly concluded by the trial judge that some, at least, if not ail the debts, were payable within one year from the time of their contraction. Nor was there any force in the learned counsel’s argument that this action could not be maintained without showing that the creditors had obtained judgments against the company. It appeared that many of the debts were not matured in August, 1874, when the company was dissolved. The dissolution of the company by the resolutions of August, 1874, under the act of 1852, put it out of the power of creditors to obtain judgments against the company, and had such judgments been obtained they would have been fruitless, as the creditors could not, by means thereof, upon executions or otherwise, seize the — 589 — funds in the bands of the trustees. (Shellington v. Howland, 53 N. Y., 375; Kincade v. Dwinnell, 59 id., 548; Whittlesey v. Frantz, 74 id., 460; Huguenot Nat. Bank v. Studwell, 74 id., 621.) They held the funds as trustees for the creditors. They stood for the time they held the assets as statutory receivers, appointed in virtue of the sovereign power, and such trustees or receivers-hold, by a tenure and for purposes as valid and effectual as do-receivers appointed by this court, the funds of an insolvent corporation. (Story, Receiver, v. Furman, 25 N. Y., 220.) The action by the receiver appointed by the Supreme Court,, named as the successor of the statutory receivers or trustees, is to-enforce in equity the liability of the stockholders, and a recovery by him as such is a bar to an action by a creditor. (Walker v. Crain, 17 Barb., 119; Story as Receiver v. Furman, 25 N. Y., 222.) In Pfohl v. Simpson et al. the action was by a creditor of The Peoples’ Safe Deposit and Savings Institutions to reach the liabilities of stockholders in equity, and I stayed actions brought by separate creditors against stockholders at law, and upheld the right of the creditor to enforce the stockholders’ liability for the benefit of all the creditors, and it was also held that such relief was within the equity jurisdiction of the court. The judgment was sustained by this court and the Court of Appeals. (Pfohl v. Simpson, 74 N. Y., 137.) We have considered above the only points raised in the argument before us, and we conclude thereon adversely to the defendant for the reason stated, and we must therefore direct judgment for the plaintiff, as receiver, upon the verdict, against the defendant, with costs. Talcott, P. J., and Smith, J., concurred. New trial denied, and judgment ordered for plaintiff on the verdict.