The New York herald. [volume] (New York [N.Y.]) 1840-1920, 1854-07-16
Superior CorFf-Heneral Term.
Before Hon. Judges Mitchell Roosevelt and C.eske,
r JusticoaL i. ~ s...rE

Superior Corrf-GensrsI rerm.
Before Hon. Judges Mitchell, Roosevelt and Cleske,
as8 Justices. = eeest ~ aN
sAMURL =. TRACY vs. ANN .. YATES.
By The COURI-R00sEvELT, J--Mrs. Yates is
sued as one Of the alleged stockholders OF an In
solvent manufacturing corporation She denies the
held in December, 1861. Under the ruling Of the
Judge verdict was rendered for the plaintiff for
50 600 81; and bill OF exceptions having been
taken by the defendant, the canse is now brought
before the general term on appeal. Although
great many points have been raised and argued.
the controlling question, it seems TO me, and the
only one necessary to be disposed Of is. was Mrs.
Yates. under the circumstances, q stakeholder
within the meaning of the law SO as to subject her
TO liability for the debts due from the corpora
ton to the plaintiff? The oct Of l84S, pro-
vioing for the voluntary formation Of incorporated
manufacturing companies, declares that any three
or more persons, upon fling the proper certificate,
duly signed and acknowledged by them shall become
a body corporate. The certificate under which the
manufacturing company IN question organized IT.
Mrs. Yates. She was therefore clearly not on orr
ginal stakeholder; or rather, more properly speak
ing, not an original corporator. How, then, and
when, did she become stakeholder! Her stock
certificate bears date and issued, on the dth of
March, 1850; whereas the notes on which this suit
is brought and the sales in respect Of which they
were given. are all Of date prior to the 18th of
January. The plaintiff nevertheless, in his replica
was such et0ckhoider, prior and subsequent to said
sales and the giving Of said notes." Il appears
however, to have been the practice Of the company
to give receipts at first instead of the more formal
certificates. But the President swears he "never
signed a receipt for stock for Mrs Yates" Still
receipt was given to her, dated October 20. lS49
signed I'D. w. Townsend, Trustee" No authority
in Townsend TO bind the company in that manner
shown, and the paper itself merely states that
he, Townsend, had received from Mrs. Yates
her note dfted Oct. for five months, for s. 600;
which. when paid, will be in full for fifty shares Of
the capital stock of the New York Croton and
Steam Faucet Manufacturing Company" SO that
even if Townsend had autholity-one trustee to
bind fivethe agreement was to sell prospe ctively
and conditionally. And accordingly no stock certi
licate was issued 10 Mrs. Yates until the 4th Of
March--the day which the note matured and was
paid II seems to me clear, therefore, that she was
not stockhoider, il ever, within the meaning Of
the statute, until that day; and that the credit
given by the plaintiff to the company being all an
tecedeDt, was not founded upon any responsibility
actual or supposed on her part to pay the debt or
any potion Of it. On the trial ii was sought to
make her stakeholder as carly as Oct. ls4o, and
alleged entries OF that date in the companys books
were given in evidence for that purpose, It ap.
peared that these entries were not original sub.
scrptions; that they were copied some weeks after
the LIST from loose memoranda; and, what is still
more decisive. that the company, as corpo
ration. "a circumstance strangely overlooked
at the tlial,) had no existence, il ever
until the 18th, when the articles Of association
Assuming. then, that Mrs. Yates. il ever, became
stakeholder and not Sefore the 4th Of March, long
after the plaintiffs sale to the company, is she
nevertheless, liable in this suit merely because she
may have been stakeholder when Il was institut
edY The statute (sec. lO) declares that all the
stockholders of every company incorporated under
it shall be individually liable for all the debts Of the
company to On amount equal to the amount Of stock
held by them respectively, until the whole capital
shall have been paid in, and a certificate to that
effect duly recorded. And such payment on pain of
dissolution, is required to be paid onehalf in one
year, and the residue in two years. from the time of
incorporation and in money, and nothing but mo-
ney" There would seem to be a manifest equity
on the one hand in charging members of the COM
pany with "debts contracted by such company"
while they were members; and on the other, a mani
fest inequity in charging those who came in after
with debts contracted before. This principle also
is clearly recognized in the section Of
the act, which provides that suit shall be brought
against any who shall cease to be SUCH
(for any debt y unless commenced within two wears
from the time he shall have ceased to be stock
holder" thus showing that transfer Of stock was
not TO be deemed transfer of liability: and it will
hardly be commended that the transfer, although not
ferer, superadded for the same debt tho liability Of
the transfeIee. Persons trusting these companies
a,e presumed TO do so partly on tie fsifh of the
stock, and partly the faith of the stockholders.
And, accordingly, the act Is 25) provides that
book, open at all times to the inspection Of credi.
tors, shall be kept by the company containing the
names oil all persons who are, or within six years
shall have been stockholders, showing the number
Of shares of EACH the places Of their residence and
the times when they became the owners of such
shares, and the amount of stock actually paid in.
How, then, with such provision in his favor could
creditor be presumed to part with his property on
the faith OF subsequent stockholders, over whose
selection he bad no control, and whose, sovency
or insolvency he could by no possibility foresee
or even conjecture? And If not, what equity ia
there in allowing him to sue both those whom
be trusted and those whom he did not
In this case, too, there appears to be peculiar
hardship on the defendant. She has not only paid
up her shares in full, thus losing her whole s. OOO
but 10 now caledon to pay S. 900 more and that on
account OF whatshec onceives to be, aud, on the
trial, offered toproreko be- mere -swndie, con-
trived by thesgettersup of the pretended corpora.
ton. In mysgiew. as already. ysnggested, there is
equity iIEfhis claim, as against her and no rule
ofinterpretation which. when fairly applied to the
language offhe statute matter of strict law, can
render her liable. The proper persons (if the facts
be as the defendant offered 70 prove) to be sued BY
the creditors, the individuals who contrved the
fraud and profited by its accomplishment To them
the plaintiff should look. They framed the articles
of association. and under their own hands certified
and declared to the public that "they had formed
the New York Croton and Steam Faucet Mauufac-
turing Company" And il would be peculiarly fit
and proper that they who raised the steam and as
sumed its control, should bear the consequences,
whether designed or not, Of the explosion. At all
events in our view, the defendant is not liable.
new trial must therefore be ordered.
C0roners Inquests.
kiiIED RI RUNAWAY HoRsx-Coroner Gamble yes