Jeffery v. Selwyn — 173 A.D. 217

Majority

p. 217

William P. Jeffery, as Trustee in Bankruptcy of the All-Star Feature Corporation, Bankrupt, Respondent, v. Archibald Selwyn, Appellant.

First Department,

June 2, 1916.

Headnote

Corporation — liability on stock subscription— failure of subscriber to pay initial ten per cent —estoppel by accepting dividends, etc.— suit on stock subscription by trustee of bankrupt corporation— authority to sue cannot be collaterally attacked.

A person who subscribed for a specific number of shares of stock and who has received dividends thereon and has sold the stock for a substantial price, is estopped from denying his liability on his subscription on the theory that it was void in that the initial ten per cent required by the statute had not been paid.

Where, on the bankruptcy of the corporation, the Federal court authorized the trustee to sue for the recovery of unpaid subscriptions to capital stock, the authority to sue cannot be collaterally attacked in the action brought by the trustee. 1

If the order were improvidently made, recourse must be had to the Federal court.

Appeal by the defendant, Archibald Selwyn, from an order of the Supreme Court, made at the New York Special Term and entered in the office of the clerk of the county of New York on the 2d day of February, 1916, granting plaintiff’s motion for judgment on the pleadings, consisting of an amended complaint and the demurrer thereto.

Melville H. Cane, for the appellant.

John L. Lockwood, for the respondent.

The defendant subscribed for 102 shares of the stock of the All-Star Feature Corporation, paying $200 which the plaintiff alleges was paid to and accepted by the company as payment for two shares of stock. Thereafter the defendant received dividends on the 102 shares, and after holding this stock for seventeen months sold the same for a substantial price, thereby asserting ownership and receiving the profits. The action is by a trustee in bankruptcy to recover the $10,000 for the stock. Defendant demurs for insufficiency, relying, first, on the fact that ten per cent not having been paid on the subscription the subscription was void and he did not become a stockholder. (See Stock Corp. Law [Consol. Laws, chap. 59; Laws of 1909, chap. 61], § 53.) In my opinion he is estopped from asserting this claim, having accepted dividends on and sold the stock.

The defendant relies, secondly, on .the fact, that it does not affirmatively appear that the money is necessary to pay the creditors. The United States District Court had made an order authorizing the plaintiff to issue a call or demand.upon defendant for the amount due from him and authorizing the plaintiff to bring this action. The said court had jurisdiction of the subject-matter and the necessity of the call and the amount thereof was for it to determine. If the order was improvidently made recourse must be had to that court; it cannot be collaterally attacked in this action.

The order should be affirmed, with ten dollars costs and disbursements.

Clarke, P. J., McLaughlin, Dowling and Smith, JJ., concurred.

Order affirmed, with ten dollars costs and disbursements.