Opinion
Argued March 18, 1890
Decided April 15, 1890
Everett P. Wheeler for appellant.
George H. Fletcher for respondent.
The object of this action was to compel the payment by the defendant of the sum remaining unpaid upon certain shares of stock alleged to have been subscribed for by her in the Kings County Manufacturing Company, a corporation organized under the General Manufacturing Act of this state of 1848.
The plaintiff insists upon the liability of the defendant to make this payment in order that it may be applied towards the discharge of the indebtedness of the corporation.
The allegations of the complaint, with respect to the defendant's agreement to take, or to a subscription by her for shares of the company's capital stock, were denied by the answer, as were all of the material averments of the complaint under which any liability to respond to the claim could be asserted. She alleged her purchase from the company at a time subsequent to the formation of the corporation of 150 shares of its capital stock, and the receipt by her of a certificate thereof in her name, and representing upon its face that the stock was full paid stock. She further alleged that the stock was made transferable upon the books of the corporation, and that subsequently, and at a time prior to the contracting of the indebtedness of the corporation, she transferred her stock to another person and surrendered her certificate to the officers of the company, who effected the transfer upon the company's books and issued a new certificate to the transferee. Upon the trial the plaintiff did not prove, or offer to prove, anything with respect to the defendant's acquisition or holding of the shares of stock, but contented herself with certain formal proof which did not touch the question of any share holding. There are several grounds upon which it is deemed that the judgment recovered by the plaintiff should have been reversed, but as all of the members of the court agree that in the exclusion of certain material evidence offered by the defendant grave error was committed, we confine our opinion to that ground in affirming the judgment of reversal at the General Term.
The defendant offered and sought to prove the sale and transfer of her stock in 1872 before the indebtedness of the company accrued, the surrender of her certificate and the issuance of a new one to the transferee. The plaintiff objected on the ground that the transfer was no defense to the suit, but the trial court sustained the objection and the defendant excepted. This was an error fatal to the plaintiff's recovery. As the case stood the plaintiff not only did not show that the defendant was a subscriber, or that she was a stockholder when the indebtedness of the corporation accrued, but when the defendant endeavored to show that she was not a subscriber and that she had ceased to be a stockholder she was prevented from doing so.
The act of 1848 imposes the liability to respond to the demands of creditors of the corporation upon those who are its stockholders. A transfer of stock made in good faith and at a time when the corporation is a going and solvent concern, and which is entered upon the books, would certainly relieve the transferer from all of the responsibilities which attached to him as a stockholder. To deny to the defendant the leave to prove these facts was to disregard the rules governing the liabilities of stockholders. All the authorities are to the effect, as is the plain reading of the language of the act, that the owners of corporate stock divest themselves of the liabilities incident to their relation to the corporation when they have actually transferred their stock in the manner provided by the law. ( Adderly v. Storm, 6 Hill, 624; Rosevelt v. Brown, 11 N.Y. 148; Johnson v. Underhill, 52 id. 203; Cutting v. Damerel, 88 id. 410; Laws of 1848, chap. 40, § 25.)
The judgment appealed from should be affirmed, with costs.
All concur.
Judgment affirmed.