Lawyer v. Rosebrook — 16 N.Y. St. Rep. 316

Majority

p. 316

John F. Lawyer v. Frank Rosebrook et al.

(Supreme Court, General Term, Third Department,

Filed May, 1888.)

Headnote

Corporation— Stockholders—Liability where capital stock not paid evidence.

This action was against several persons, stockholders of a certain corporation to recover the amount of a judgment previously recovered by plaint

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iff against said corporation, on which, execution had been issued and returned unsatisfied. The ground of the action is that the capital stock has not been paid in, and a certificate of such payment has not been made and filed as prescribed by law. On the trial this judgment against the corporation was given in evidence by plaintiff. Meld, that it was not conclusive, even if admissible, against the defendants. That the defendants were entitled to show that there was no debt due the plaintiff. Miller v. White, 50 IT. Y., 137, distinguished.

This action was tried before a jury at the Albany county circuit, and a verdict rendered for the plaintiff under direction of the, court, which ordered the exceptions to be heard in the first instance at the general term.

D. C. Robinson, for pl’ff; Gilbert W. Minor, for def’ts.

This is an action against several persons, stockholders of “The Perfect Hatcher Company, Limited,” a corporation, to recover the amount of a judgment previously recovered by plaintiff, against said corporation, on which execution had been issued and returned unsatisfied. The ground of the action is that the capital “stock has not been paid in and a certificate of such payment has not been made and filed as prescribed by law. On the trial, the judgment was given in evidence by plaintiff. The defendants then offered to show certain facts set up in their answer tending to show that there was no cause of action in favor of the plaintiff against said corporation, and other matters tending to show that the judgment was not regularly obtained and was fraudulent, or at least the result of a mistake. This evidence was all excluded on 'the ground that the judgment against the corporation was conclusive against the defendants. A verdict was directed for plaintiff and exceptions were ordered to be heard in the first instance by the general term.

The case of Miller v. White ( 50 N. Y., 137 ), although that was an action against directors, seems to show plainly that that judgment was not' conclusive, even if admissible against these defendants. A remark in Kincaid v. Dwinelle ( 59 N. Y., 551 ) shows that suchis the case. There the court say: “The judgment against the corporation is of no virtue or effect in the action against the stockholders, and is only evidence as proving the performance of the condition.” It is not necessary to cite other cases. The plaintiff, however, relies on Stephens v. Fox ( 83 N. Y., 313 ),‘and on the provision of the Revised Statutes that stockholders who have not paid their stock shall be bound to pay what is due thereon to such proportion as is necessary to satify debts. 1 R. S., 600, § 5. Stephens v. Fox was brought under the railroad act to recover from defendant so much of the amount which had not been paid on his subscription to stock as would be necessary to pay plaintiff. And in that case the judgment was held to be evidence.

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The reason of this is that the defendant owed to the corporation and to any one who succeeded to its rights, the amount which he had agreed to pay and which he had not paid. It was of no importance to him whether he paid that to the corporation or to a creditor of ' the corporation. And the court recognized the principal of Miller v. White as sound. Now in the present case the plaintiff’s complaint is based not on the ground that each one, or any one of the defendants was still indebted on his subscription, but upon the ground that the whole capital had not been paid. The statute under which plaintiff sues, makes stockholders liable to an amount equal to their capital stock until the whole capital shall have been paid, and a certificate thereof filed. Thus it will be seen that this is a very different liability from the mere liability to pay what each stockholder has by his subscription purchased. The plaintiff also cites Wheeler v. Miller ( 90 N. Y., 353 ). But on turning to that same case in 24 Hun, 541 , it wifi be seen that the validity of the debt was contested upon the trial, although a judgment had been recovered against the corporation. See page 544. So that the principle of Miller v. White is recognized. That case also was an action based on the fact that the defendant still owed the corporation his subscription, and much of the contest was on that question of fact. Now in the present case the complaint shows that the ground of action is not on the unpaid subscription of any individual. * Indeed it might be questionable whether in an action for their unpaid subscription the stockholders could be joined. Bub we need not pass upon that point.

We think that the defendants should have been allowed to show that there was no debt due the plaintiff, and perhaps he may be obliged to show that fact affirmatively to maintain this case.

Verdict set aside, and motion for new trial granted, costs to abide event.

Landon and Ingalls, JJ., concur.