Opinion
March 4, 1908.
James G. Greene and William De Graff, for the plaintiff.
William Carter and Edwin A. Nash, for the defendant.
The defendant's exceptions should be overruled, and his motion for a new trial denied, with costs.
This action when tried and decided by this court ( 121 App. Div. 928), was regarded as controlled by our decision in the case of Avon Springs Sanitarium Co. v. Weed ( 119 App. Div. 560). That case has since been reversed by the Court of Appeals ( 189 N.Y. 557), and this case is here now on a reargument ordered by us ( 123 App. Div. 911), by reason of such Court of Appeals decision. So far as that case relates to any question here involved, we, of course, will follow the decision of the Court of Appeals. There are, however, other questions raised here which need to be considered.
The Weed case was brought to recover the amount of a subscription for stock in the plaintiff corporation. There was a demurrer to the complaint which was overruled by the trial court and affirmed by this court. Presiding Justice McLENNAN wrote a dissenting opinion to the effect that no action could be maintained upon the subscription, that it imposed no obligation on the defendant, and the reversal by the Court of Appeals was put upon that opinion. The present action was brought to recover upon a check for $250 drawn by defendant to the order of plaintiff upon the State Bank of Avon, dated December 1, 1905. It satisfactorily appeared at the trial that the defendant October 30, 1905, made a written subscription for five shares of stock in plaintiff; that the plaintiff being duly organized prior to the 1st day of December, 1905, the president of plaintiff delivered on that day the scrip to the defendant and received therefor the check in question. Later the same day the defendant stopped payment on the check, notified the bank not to pay it, but said nothing to plaintiff about it. January 8, 1906, the defendant sent the scrip to the president of plaintiff, by registered letter, directed to Rochester, N.Y. This letter was returned to defendant unopened, marked "refused," and has since been retained by him. The check was presented for payment January 12, 1906, payment was refused, and it was duly protested. The scrip was tendered to plaintiff on the trial. The subscription for stock in this and the Weed case was precisely the same, except as to the number of shares subscribed for. We must, therefore, start here with a recognition of the law that the defendant by reason of his subscription incurred no obligation that could have been enforced. After the subscription was made, however, the plaintiff was duly organized and the defendant accepted scrip for the stock subscribed for and gave the check in question. The defendant claims there was no consideration for this check. This is the only question we desire to re-examine here.
The action was commenced December 19, 1906, and the scrip was then still in defendant's possession. There is nothing to show the president of plaintiff ever knew anything about the registered letter or its contents, the scrip, or that there was any communication accompanying the same. The president lived in Rochester, near by, and the place of business of the plaintiff was at Avon, where defendant lived. A personal tender of the scrip could readily have been made to the president, or to the company itself, if desired. Both parties moved for a verdict so that the facts were by the decision settled in plaintiff's favor. This disposed of the other defenses set up in the answer, aside from the one of want of consideration. The subscription itself, under the Weed case, would not be any consideration for the check. Prior to December 1, 1905, the defendant was merely a subscriber for stock in a corporation not in existence when the subscription was made, but the corporation had prior to December 1, 1905, been regularly organized and its stock issued, and when on that day defendant accepted his scrip and gave the check, he became a stockholder in the corporation, and has ever since remained such and has ratified and confirmed his subscription. The issue to him of the scrip for the stock was a sufficient consideration for the check. It seems to me there can be no doubt as to this proposition, regardless of any obligation resting upon the original subscription for such stock. Suppose there had been no subscription at all, and scrip for five shares of stock had been delivered to, accepted and retained by the defendant and he had given his check therefor, would there have been any doubt as to the existence of sufficient consideration for the check? The check here was not given alone for the liability on the subscription, but for the purchase price of the stock of an existing corporation, delivered to and accepted and retained by him.
Stock is personal property, and the transfer thereof was a consideration for the check. ( Weaver v. Barden, 49 N.Y. 286, 289.)
In Buffalo Jamestown R.R. Co. v. Gifford ( 87 N.Y. 299) it was said by EARL, J.: "While the subscription was not valid and binding before the complete formation of the corporation, because there was no party with whom the defendant could then contract, yet after the corporation was formed, it accepted the subscription and recognized the defendant as a stockholder, and he recognized himself as a stockholder, and ratified and confirmed his subscription by payments thereon. He thus within all the authorities, upon general principles, became a stockholder in the company, liable to pay the full amount of his subscription" (citing several cases).
Presiding Justice McLENNAN, in his opinion in the Weed case (adopted by the Court of Appeals), after quoting the remarks of Judge EARL above, added: "In the case at bar, if the defendant had ratified the acts of the parties who formed the plaintiff corporation, no one would pretend that the payment of his subscription could not be compelled by such corporation."
Our former decision was correct.
All concurred, except McLENNAN, P.J., who dissented upon the authority of Avon Springs Sanitarium Co. v. Weed ( 119 App. Div. 560; revd., 189 N.Y. 557).
Defendant's exceptions overruled, motion for new trial denied, and judgment ordered for plaintiff upon the verdict, with costs.