Wintringham v. Rosenthal

Barnard, P. J.: This action is one brought under the statute to make stockholders liable for debts of a corporation. It is simply an action depending upon a contract alleged to have existed between the bank and the defendant. One Edgar E. Brown subscribed for 500 shares of the capital stock of the bank. The par value was $50,000. He sold $5,000 to defendant in payment of an old debt he owed to defendant, defendant supposed it was full paid stock. It was transferred to defendant, and Brown subsequently paid forty per cent to the bank as it was called for. The defendant received dividends on the stock. The bank failed, never having received on the stock in question but the forty per cent. It will be admitted that the defendant took the stock subject to all the liabilities thereon. If Brown had failed to pay for it, the defendant got no better title than Brown had, but the defendant did not agree to pay the bank anything. The cases cited by plaintiff do not sustain the action. The case of Rosevelt v. Brown (1 Ker., 148) only holds that as to debts the holder of the stock is a stockholder under the statute. [582] The case of the Rensselaer, etc., Plankroad v. Barton (16 N. Y., 457) holds that an agreement to take stock imports a promise to pay for it. Johnson v. Underhill (52 N. Y., 203) holds that a purchaser of stock not transferred on the books of the company was liable to pay the debts of the company as if he had entered the transfer. The case of the Reciprocity Bank (22 N. Y., 9) was an action to enforce the payment of a debt against a stockholder. Dayton v. Borst (31 N. Y., 435) was a case brought by a receiver against the original subscribers for the stock. The case of Mann, Receiver, v. Currie (2 Barb., 294) is very similar in principle to the present case. There the vice-chancellor held the transferee of stock liable the same as an original subscriber. In Seymour v. Sturgess (26 N. Y., 134) the Court of Appeals, citing that case, held that no contract to pay for the stock can be implied from the mere purchase. That the effect of the purchase was to get a title conditional upon making the remaining payments, but leaves such payment optional with the purchaser. That it is only where there is an express agreement to pay that an action will lie by the corporation; “but if there be no such agreement the sole remedy for the corporation is by the sale of the shares of the delinquent members.” The judgment should therefore be reversed and a new trial granted, costs to abide event, and the order of reference be vacated. Gilbert and Dykman, JJ"., concurred. Judgment reversed and new trial granted, costs to abide event. Order of reference vacated.