Case ID: ny-st-rep_46/html/0474-01.html
Source: Caselaw Access Project
Author: {"author": "Van Brunt, P. J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

James H. Ferguson et al., Resp’ts, v. George H. Gill, App’lt.
    
      (Supreme Court, General Term, First Department,
    
    
      Filed May 13, 1892.)
    
    1. Manufacturing companies—False certificate—Evidence.
    In an action against a trustee of a manufacturing company to enforce Ms liaMlity for debts of the company, because of having signed a false certificate that the capital stock had all been paid in, when, in fact, it had all been issued for a patent which was claimed to be worthless, evidence of consultations had with the owner of the patent as to its value is admissible upon the question of scienter, and its exclusion is error.
    2. Same—Indebtedness—Renewals.
    An indebtedness of the company is within the terms of the statute, although originally incurred prior to the filing of the certificate, where renewal notes therefor are given subsequent to such filing.
    3. Same.
    Reliance upon the certificate need not be shown to entitle the creditor to recover against the trustee.
    ,4. Same—Partnership claim—Effect of death of partner.
    The death of one member of a firm having a claim against a manufacturing corporation in no way affects the title of the surviving partners to the claim or their right to enforce the penalty prescribed by the statute against the trustees; in such case there is no devolution of title to the claim.
    
      Appeal from judgment entered after trial at circuit and from order denying motion for new trial.
    
      C. G. Rushmore, for app’lt; B. Estes, for resp’ts.
   Van Brunt, P. J.

This action was brought to enforce an alleged liability of the defendant for certain debts of a corporation organized under the manufacturing act, upon the ground that the defendant, being a trustee of the corporation, joined in the making and filing of a false certificate that the capital stock of said company had all been paid in.

Without considering in detail the facts developed upon the trial, it will only be necessary to refer to them in a general way to illustrate the questions which have been raised upon this appeal.

The statute under which the liability is claimed to arise reads as follows:

“ If any certificate or report made or public notice given by the officers of any such company in pursuance of the provisions of this act shall be false in any material representation, all the officers who shall have signed the same knowing it to be false shall be jointly and severally liable for all the debts of the company contracted while they are stockholders or officers thereof.”

The capital stock of the corporation in question having been issued ostensibly in payment for a patent, a certificate of paid up stock was filed, signed by the defendant and others, and it is claimed by the plaintiff that the patent in question was substantially worthless to the knowledge of the defendant and that therefore the certificate was false.

The plaintiff offered evidence tending to show that the patent had belonged to a previous corporation and was sold by the receiver for a very small sum of money; and it appeared from the minutes of the corporation that on the 5th of April, 1886, the purchaser from the receiver presented a bill of sale of the patent which was purchased by the company of which the defendant was trustee for the sum of one dollar. And it further appeared that by resolution the value of the patent was fixed at $100,000 and 1,000 shares of stock of the par value of $100 were issued partly to the seller and partly to other persons. On the 24th of May, 1886, it further appeared, the said seller made a proposition to sell and assign to the company in question said patent for 1,000 shares of the capital stock of the company, which offer was accepted by the company and the stock issued to the seller who subsequently distributed the stock in various ways.

The plaintiff further offered evidence tending to show that the patent in question was worthless.

Upon the part of the defendant testilnony was offered going to show a consultation had between the parties interested in this patent as to its value, which testimony was excluded and an exception taken. Evidence was also offered that certain work had been done under the patent which was also excluded.

This we think was error. The question involved was as to the knowledge of the want of value of the letters patent, and any communications which had been made to him upon the subject were competent upon the question of scienter. And in respect to the question as to work done, that evidence was offered to directly contradict evidence which had been given upon the part of the plaintiff to the effect that no work had been done under the patent; clearly within the issue and proper to be submitted to the jury upon the question of value.

It is further urged upon the part of the defendant that the indebtedness sued upon was not contracted subsequent to the filing of the certificate in question. But even if the original inception of the debt was prior to that time, it appears that there were various renewal notes given by which the debt was extended, and such renewal notes were given after the filing of the certificate, which brings the claim distinctly within the terms of the statute.

It is further urged that the plaintiffs are estopped from taking advantage of the act of the defendant in filing the certificate of fully paid stock, because they knew the value of these letters patent, and that the stock of the company was issued for the letters patent in question, and that, therefore, they could not have been deceived by the false statements contained in the certificate.

Thi's claim upon the part of the defendant rests upon the erroneous theory that reliance upon the certificate is necessary to be shown by the creditor before a recovery can be had. This is importing into the statute a provision which it does not contain. It is entirely immaterial whether the creditor relies upon the certificate or not. As long as the trustee knows the certificate to be false, and the debt is thereafter contracted while he is an officer of the company, it comes within the provisions of the statute.

It is further urged that the plaintiffs not being the original creditors of the "company, but having obtained whatever title they have to the claim by assignment or legal devolution, they cannot enforce the penalty provided by statute.

We are unable to see the force of this objection. The plaintiffs and each of them have always been the owners of the claim in question. They were partners with Henry Lovejoy, and the firm composed of those three members "were the owners of the claim. The death of Lovejoy in no way affected the title of the surviving partners to the claim. As soon as his title dropped out that of the surviving partners remained the same as it was before his death. Each partner is the owner of the whole of the copartnership assets and can sell the same and give a good title thereto. Consequently by the death of Lovejoy there was no devolution of title upon his surviving partners.

Because of the errors ill the exclusion of evidence heretofore mentioned, it is necessary that the judgment should bé reversed and a new trial ordered, with costs to the appellant to abide the final event.

Andrews, J., concursO’Brien, J., concurs in the result.