McDowall v. Sheehan — 36 N.Y. St. Rep. 104

Majority

p. 104

John McDowall, Resp’t, v. Cornelius Sheehan, App’lt.

(Supreme Court, General Term, Third Department,

Filed February 18, 1891.)

Headnote

1. Manufacturing- companies—Trustee mat recover for services.

A trustee of a corporation created under the manufacturing act, chapter 40, Laws of 1848, may recover for services rendered to the corporation.

2. Same.

Where a trustee has recovered against the corporation a judgment for such services, it is proper and necessary, in an action against a stockholder, under § 10 of said act, to prove the judgment.

Appeal from judgment in favor of plaintiff.

This was an action by plaintiff as a creditor of a corporation created under the manufacturing act, chapter 40, Laws 1848, known as the “ Saratoga Union,” to recover a debt from defendant, a stockholder, to the amount of his stock. Plaintiff was a trustee of the corporation, as well as a writer for it. Under § 10, stockholders are severally liable to creditors, up to the amount of their stock, until the whole capital stock has been paid in and a certificate to that effect shall have been made and recorded. Under §24, no stockholders shall be personally liable for a debt which is not to be paid within one year from the time it was contracted, nor unless suit is brought against the company within one year after the debt shall become due. The plaintiff’s claim was based on a contract for services, made March 18, 1887, and .$500 loaned July 27, 1887, for which a note was given. Certificate of incorporation was filed May 27, 1887. On October 16, 1888, plaintiff, having been at work to that date under said contract, brought suit on.

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these claims against the corporation (his services amounting then to some $1,400), and recovered judgment April 25, 1889. Execution was issued and returned unsatisfied. The defendant claimed that the money put by him in the corporation was a loan. A certificate representing the money was issued to plaintiff, who alleged upon tlie trial that he was acting for the defendant Sheehan, who did not wish his name to appear. The plaintiff paid nothing, and subsequently endorsed the certificate in blank, and it was handed to Sheehan. The recovery in this action was for $1,000, the amount of defendant’s stock.

John Foley (J. W. Crane, of counsel), fór app’lt; Charles Lester, for resp’t.

There is sufficient evidence to show that defendant was a stockholder. He paid his $1,000 through Judge Putnam to the company, and he received through Judge Putnam a certificate issued in the name of McDowall and assigned by McDowall in blank. The acceptance and retention of this certificate showed that instead of making a present of the $1,000 to the company, he took stock therein. ,

It is true that he did not intend that his $1,000 should be so paid as to cause any personal liability. But Judge Putnam had been told that all the stock but $1,500 had been subscribed for (or paid) and had repeated this information to defendant, and thereupon had been authorized to pay the defendant’s $1,000 together with his own $500.

It turned out that the statement thus made to Judge Putnam was not true. But the plaintiff was not responsible for that error, and knew nothing of it. Nor can it be said that the plaintiff obtained anything by that untruthful statement and thus became responsible for it. The money paid by Judge Putnam went to the company and did not belong to the plaintiff.

There can be no doubt that for work done by the plaintiff for the company he had a right of action against it, although he was a trustee.

It was proper and necessary to prove the judgment against the company. The plaintiff then gave other evidence tending to show that the company owed him.

Even if the liability on the note could not be a ground of recovery in this action because the action against the company was not commenced within the year, yet that objection does not lie against the cause of action for plaintiff’s services. For the plaintiff’s services continued till October, 1888, and in that month the action against the company was commenced.

The defendant urges that some of these services were rendered before the company was formed. This is immaterial, since a ' sufficient amount of service was rendered after the company was formed, to make an indebtedness to the plaintiff of over $1,000. And the recovery is only for $1,000.

The plaintiff was not a stockholder, although these shares had been issued to him. That had been done because defendant did

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not desire to appear as a stockholder. But plaintiff never paid for the share and assigned the certificate to defendant at once, and defendant must have accepted it; for it was produced by him at the trial.

Judgment affirmed, with costs.

Mayham, J., concurs; Landon, J., not acting.