Court Opinion

ID: 6140859
Source: CourtListenerOpinion
Date Created: 2022-02-05 14:38:34.684931+00
Date Added: 2024-06-11T08:54:38.153110
License: Public Domain

Van Hoesen, J.
I concur with the chief justice in the opinion that the defendant is liable, even though he . were induced by fraud to become a shareholder in the company. The authorities cited are conclusive upon that point.
I am furthermore of opinion that the defendant did not free himself from liability to the creditors of the company, when, after it had become insolvent, he succeeded in getting possession of some of its notes and obligations. I am not prepared to apprise the stockholders of bubble companies, whose capital stock is not paid in, that they may escape liability to the creditors of the companies by buying up the worthless paper which the companies have set afloat, and using it as an offset to the claims of those creditors. The unpaid subscriptions to the capital stock of a company constitute .a trust fund for the payment of creditors. Those subscriptions must be paid into the company’s treasury, pr be used in paying valid claims that would otherwise have to be satisfied out of the treasury. *445When a stockholder buys a claim against the company, he pays nothing into its treasury, nor does he diminish the amount of claims upon it. Why, then, should he be permitted to offset his demand upon the company against the creditor’s demand upon him as a stockholder? If he buy a claim, he may collect it in the ordinary way from the company, but it would make the law which' requires capital to be paid in a nullity to hold that the stockholder had paid his subscription to the capital stock, when all he had done was to buy a claim against the company. In the case of Sawyer v. Hoag (17 Wall. 622), the supreme court of the United States used the following language in respect to the right of a stockholder to offset a claim against the company, when sued for the benefit of the creditors, of the company: “ To warrant a set-off, the debts must be mutual / must be in the same right. The case before us is not of that character. The debt which the appellant owed was a trust fund, devoted to the payment of all the creditors of the company. As soon as the company became insolvent, the right of set-off for an ordinary debt to its full amount ceased. It ber came a fund belonging equally in equity to all the creditors, and could not be appropriated by the debtor to the exclusive payment of his own claim. The unpaid stock was a trust fund for all the creditors, which could not be applied exclusively-to the payment of one claim, although held by the stockholder who owed that amount on Ms subscription.”
I think that the principle enunciated by the supreme court of the United States is applicable to the case before us, and that the judgment of the court below should be affirmed, with costs.
J. F. Daly, J., concurred.
Order affirmed, with costs.