Case ID: nys_1/html/0748-02.html
Source: Caselaw Access Project
Author: {"author": "Dy*kman, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Bulkley et al. v. Whitcomb.
    
      (Supreme Court, General Term, Second Department.
    
    June 25, 1888.)
    Corporations—Liability op Stockholders on Unpaid Subscriptions — Purchase op Judgments.
    In an action to charge a stockholder with a corporate debt under act 1848, § 10, which provides that until all the capital stock of a corporation has been paid in, and a certificate thereof made and recorded, each stockholder shall be individually liable for the corporate debts to the amount of his stock, defendant cannot set up as a defense that he has purchased judgments against the corporation aggregating the amount of his liability on his stock, without showing that he paid for the judgments the full amount for which they were recovered.
    On exceptions from circuit court, Kings county; Edgar M. Cullen, Justice.
    Action by Moses Bulkley and others against Parker B. Whitcomb. On trial the court directed a verdict for plaintiffs, to which defendant took exceptions, which are heard in the first instance at general term. Act 1848, § 10, provides that each stockholder of a corporation shall be individually liable, to the amount of his stock, for all debts and contracts made by such company, until the whole amount of the capital stock fixed and limited by such company shall have been paid in, and a certificate thereof made and recorded.
    
      Frederick A. Ward, for plaintiffs. L. Laflin Kellogg, for defendant.
   Dy*kman, J.

This action was brought to charge the defendant, as a stockholder in the Waverly Publishing Company, with a portion of the indebtedness of the company to the plaintiffs, upon the ground that, when the debt was contracted, the capital stock of the company had not been paid in, and the certificate thereof made and recorded as required by law. The proof adduced upon the trial was sufficient to charge the plaintiff as such stockholder. He was the holder of 20 shares of stock when the debt was contracted, and judgment had been obtained in favor of the plaintiffs against the corporation for the indebtedness; and, when the contract upon which the indebtedness arose was made, the stock had not been paid in, nor had the certificate of such payment been filed. The defense to the action is what is termed equitable offset; that is, the defendant claimed to be a creditor of the company in an amount equal to the original amount of his stock. It appeared that the defendant had purchased two judgments against the company, but it did not appear that he had paid for such judgments the full amount for which they were recovered and held against the company, and he did not, therefore, bring himself within the.rules of law enabling a defendant in such cases to interpose the defense of an equitable offset. If the stockholder, sued for the indebtedness of the corporation, can show, in his defense, that he has paid, on account of the debt of the corporation, or has become an honest creditor of the corporation in a sum equal to the liability which a statute has imposed upon him, namely, the amount of his stock, he will, so far as that remedy is concerned, have defeated the action; but, such a defense being one of an equitable character, it is essential to its maintenance to establish that the defendant, and the creditor by whom he is sued, stand upon an equality. But that cannot be made to appear by simply showing that the defendant became possessed of a judgment against the company, because, when the defendant buys such a claim, and neither puts anything into the treasury, nor relieves the corporation from any liability, he should not be permitted to offset his demand upon the company against a creditor’s demand upon him as a stockholder. The defendant, therefore, failed in his defense. The motion to dismiss the complaint was properly denied. The exceptions should be overruled, and judgment should be rendered for the plaintiff upon the verdict.