Court Opinion

ID: 5224134
Source: CourtListenerOpinion
Date Created: 2022-01-06 16:40:51.839699+00
Date Added: 2024-06-11T08:27:33.666486
License: Public Domain

Miller, J.:
The plaintiff,; claiming to be the owner of ninety shares of the defendant’s stock, sued to recover sixty per cent of the par value thereof, the amount of dividends representing returned capital, declared by the liquidating committee. For answer, the defendant denied that it had knowledge or information sufficient to form a belief as to whether the plaintiff was- the owner and holder of ninety shares of its capital stock and for a counterclaim alleged that the shares held by the plaintiff were ninety shares of an issue of two hundred and thirty shares, made to oné S. A. McCartney, upon which he agreed to pay $155 a share, but had in fact paid only $100 per share, leaving due and unpaid $55 per share. The court directed a verdict for the plaintiff for the difference between the amount of the dividend on ninety shares and the amount claimed to have been unpaid on ninety shares of the stock issued to the said McCartney, The plaintiff testified, and it is not denied, that he made an agreement with one Welsh,, representing the defendant, to Subscribe for ninety shares; of the defendant’s capital stock, and to pay therefor the sum of $155 per share, $100 for capital, $50 for surplus, and $5 for organization *147expenses. Welsh was the defendant’s vice-president, and it is undisputed that he was employed by it to procure subscriptions for its capital stock. Pursuant to that agreement, on May 1, 1907, the plaintiff made and delivered to said Welsh his promissory note for $13,950, secured by collateral. That note was discounted by the defendant, and the proceeds passed to the credit of Welsh. On May 3, 1907, the defendant issued two certificates of stock, one for forty-five shares to 0. P. Shinn, and one for ninety shares to S. A. McCartney. It received par for those shares, or $13,950, the amount which the plaintiff'had agreed to pay for ninety shares. On the face of each certificate was indorsed in red ink: “ One hundred dollars per share paid on this certificate.” While there is no direct testimony to the effect, it is plainly to be inferred that the proceeds of the plaintiff’s note were used to pay par on said one hundred and thirty-five shares. The two certificates for ninety and forty-five shares, respectively, assigned in blank by Shinn and McCartney, were mailed to the plaintiff by Welsh. The plaintiff immediately wrote Welsh, calling the latter’s attention to the fact that he had agreed to purchase only ninety shares, and refusing to accept the said certificates or to become responsible for the sums unpaid. He testified that Welsh replied in substance that a report to the Comptroller of the Currency was due, that the certificates had been made out in the manner stated for the purpose of making a showing to the Comptroller, that he would soon cause forty-five shares to be sold, and would then have a certificate issued to the plaintiff for ninety fully paid shares. The plaintiff further testified that he subsequently presented the said two certificates at the banking office of the defendant, and asked that a certificate be issued for his shares, and that Welsh put him off by saying that there had been some delinquent subscribers, that the president of the defendant was away, and that he would see that it was arranged. The shares represented by the certificates delivered to the plaintiff were never transferred to him on the books of the defendant, and on October thirtieth a resolution of the board of directors was adopted providing that no certificates “not fully paid as to capital and surplus” should be transferred upon the books until fully paid. On the 14th of *148January, 1908, the defendant’s stockholders adopted a resolution for its voluntary liquidation.
Even if the 135 shares issued to McCartney and Shinn had actually been transferred to the plaintiff, no question of statutory liability would be involved, because the full par value had been paid upon them. No question as to the rights of creditors is involved, because there are no creditors unprovided for. The question really is whether the defendant can recover of the plaintiff the amount unpaid on McCartney’s subscription on the theory that the plaintiff as transferee of McCartney succeeded to the latter’s liability. But the plaintiff refused to accept the transfer of the shares issued to McCartney, and the defendant, by the resolution of its board of directors, refused to accept the plaintiff as transferee. The National Banking Act (U. S. R. S. § 5139) provides: “The capital stock of each association shall be divided into shares of one hundred dollars each, and be deemed, personal property, and transferable on the books of the association in such manner as may be prescribed in the by-laws or articles of association. Every person becoming a shareholder by such transfer shall, in proportion to his shares, succeed to all the rights and liabilities of the prior holder of such shares; and no change shall be made in the articles of association by which the rights, remedies or security of the existing creditors of the association shall be impaired.”
Obviously the words “such transfer” refer to a transfer on the books of the association, and the cases dealing with the devolution of the statutory liability of the original subscriber upon a transferee recognize the principle that privity between the transferee and the corporation must be shown. (See Webster v. Upton, 91 U. S. 65; Richmond v. Irons, 121 id. 27.)
But, as I have said, there is no question in this case of statutory liability. The .defendant can only recover upon contract, express or implied. (Seymour v. Sturgess, 26 N. Y. 134; Christensen v. Eno, 106 id. 97; Glenn v. Garth, 133 id. 18.) We may assume, without deciding, that if the plaintiff had agreed to accept a transfer of the shares represented by the certificates delivered to him, knowing that $55 per share of the subscription price had not been paid,- and if the defendant had accepted him as a transferee, the law would imply a promise *149on his part, to pay the sum unpaid. But neither of those con ditions existed in this case, and there can he no pretense that any promise was ever made by the plaintiff to the defendant except to pay $13,950 on an original subscription for ninety shares of stock. The plaintiff performed his part of the contract. The defendant never performed its part, although the plaintiff frequently demanded that it do so. I know of no principle of law by which the party in default can recover of the one who has fully performed upon a liability of a third party which the party performing never expressly or by implication assumed.
It is wholly immaterial in this case whether the defendant made a false report to the Comptroller. It may be inferred that Shinn and McCartney had subscribed for stock which they were unable to pay for, and that to make as good a showing as possible of stock issued upon which par had been paid, the defendant, for its own purposes, used the plaintiff’s money to justify what was in fact only a fictitious issue to Shinn and McCartney. There is no question here of Welsh’s authority to do that; the defendant received the plaintiff’s money, and whatever benefit was derived from that transaction. Possibly the plaintiff winked at the deception practiced upon the Comptroller; but there is no such question involved in this case, and there are not sufficient facts in the record to determine it. If a wrong was done, it is not to be redressed in this action. We are concerned only with the plaintiff’s contract to subscribe and pay for ninety shares. He paid and the defendant received the full sum agreed upon, and the plaintiff is either entitled to the return of his money or to his rights under the contract. The delivery to him of certificates issued to other parties for more shares than he agreed to buy, not fully paid upon, was not a performance by the defendant of its contract to deliver a certificate for ninety full-paid shares, and according to the plaintiff’s testimony that was not intended by the defendant or accepted by him as such. He never became, nor consented to become, a transferee of those shares, and the defendant never recognized him as such. He merely held two certificates for one hundred and thirty-five shares, assigned in blank by the original holders, pending the performance by the defendant of *150its contract. He tendered the certificates delivered to him and demanded the one to which he was entitled under his contract. By retaining physical possession of them pending the performance by the defendant of its promise to comply with that demand, he did not subject himself to any liability, express or implied, contract or otherwise) upon which the defendant can maintain an action against him.
Of course, the defendant is entitled to the return of the two certificates which it delivered to the plaintiff, but he has tendered those certificates to it and never up to the commencement of this action or in his complaint asserted any right to either of them. According to the only contract ever made by him with the defendant, he is entitled to share with the other stockholders in the distribution of its capital upon the basis of being- a holder of ninety fully paid shares. That is the only right which he is asserting in this action. It was, therefore, error for the court to direct judgment upon the defendant’s counterclaim, and the judgment should be reversed and a new trial granted, with costs to appellant to abide the event.
Ingraham,’ P. J., Laughlin and Dowling, JJ., concurred; McLaughlin, J.:, dissented.