Church, Ch. J.
The object of this application is, to compel the executrix of E. P. Cooke, deceased, to pay to the plaintiff, as receiver, appointed under the laws of the state of New-York, the balance due for stock subscribed, by the deceased, to the capital of the Canajoharie and Gatskill Railroad Company, to whom the whole assets and credits of that company have been assigned.
Every thing which appertains to the rights of the plaintiff, or fixes the obligation of the defendant, has transpired in the state of New-York, of which state all the parties, then in interest, were citizens.
The charter of this company, with all the proceedings under it, and the construction given to them by the courts of New-York, must chiefly guide us in the decision we make. The original, as well as the amended charter, made it lawful for [186]*186the directors of the company to require payment of the sums subscribed, at such times, in such proportions, and on such conditions, as they should see fit, under the penalty of the forfeiture of the stock and of previous payments thereon.
The rail-road company was duly organized under its charter, its original capital fully subscribed, and ten per cent. thereof paid in. Afterwards, authority was given to increase the capital stock four hundred thousand dollars.
Soon after the original stock was taken up, Marvin and Day purchased 11,265 shares of it, and then became insolvent and unable to pay the unpaid balance which would be due to the company upon its calls ; and thereupon, on the 3d day of July 1835, they transferred these shares to Cornwall, Mesick and Donnelly, in trust for the rail-road company ; and although this trust did not then appear upon the transfer, nor upon the company’s books, yet, in our opinion, the transaction was such, as to reinvest the 11,265 shares again in the company ; and so it was treated ; for the corporation immediately thereupon received new subscriptions for capital to the same amount. Among the new subscribers was Edward P. Cooke, the deceased, who became a subscriber for forty shares. This subscription was obtained, by the president of the company, Thomas B. Cooke; it was peculiar in its form, and made upon a condition that all future calls should be paid as required, or the shares should become the property of the company, and be sold for their benefit. This was followed by a transfer of the forty shares, by the trustees, to the said E. P. Cooke, upon the books of the company, and also by a certificate of the president. All the other subscriptions, by other subscribers, were in writing, without any such condition. The special terms of Cooke’s subscription were not known generally to the other subscribers, and the subscription itself was retained, by the president, Thomas B. Cooke.
The charter of this rail-road company, as we have seen, contains a provision, that the directors may require payment of subscriptions, under a penalty of the forfeiture of the shares. This has become a common, if not an universal provision in all charters creating monied or stock corporations ; its forms may vary in different charters, but the purpose is the same in all-to enforce the punctual payment of the entire capital stock, and to secure to the corporation and to its creditors [187]*187an additional or cumulative remedy beyond that afforded by the common law.
It seems now to be generally admitted, that all subscribers to the capital stock of a corporation, which, by its charter, may require or demand payment of the capital subscribed, have incurred a debt, which may be enforced, by any appropriate common law or equitable remedy, and that such remedy is not at all impaired, by the further provision for the forfeiture of stock. Such is the law of this state, as established and recognized in the cases of the Hartford and New-Haven Rail-road Co. v. Kennedy, 12 Conn. R. 499. The same v. Boorman, Id. 530. Ward v. Griswoldville Manufacturing Co. 16 Conn. R. 593. And such also is the law of the state of New-York, by which this transaction is to be adjudged. Troy Turnpike and Rail-road Co. v. McChesney, 21 Wend 297. Herkimer M. & H. Co. v. Small, 2 Hill, 127. 129. Sagory v. Dubois, 3 Sandf. Ch. R. 466. Mann v. Currie, 2 Barb. Sup. Ct. R. 294. Mann v. Pratt, 2 Sandf, Ch. R. 273.
Was E. P. Cooke a subscriber to the stock of this railroad corporation, and subject to the same responsibilities as other subscribers ? We think he was.
It is true, that Marvin and Day had purchased a large number of original shares, and if Cooke had purchased of them, he could not have been treated as a subscriber, but as an assignee only. Hartford and New-Haven Rail-road Co. v. Boorman, 12 Conn. R. 531. Huddersfield, Canal Co. v. Buckley, 7 Term R. 76. Sagory v. Dubois, 3 Sandf. Ch. R. 466. But before any scrip had been issued to them,they had relinquished their stock to the company, through the agency of its trustees, and the corporation had become reinvested with it, to issue again as original stock. And, as such, it was reissued, and Cooke, became a subscriber, and his shares were duly transferred to him on the books of the company, and he received a certificate as an original stockholder; and these shares have ever since stood as his on the books of the company.
We do not think that the subscription of E. P. Cooke, although different in terms from others, was' different in its legal effect, or reserved to him a privilege, or created for him an exemption, not common to all. Nor ought we to believe, [188]*188that such was the intention of the parties ; as then we should impute to them a fraud upon the creditors of the company, by enabling Cooke to withhold a portion of the capital from their reach, and a fraud upon other subscribers : all were entitled to stand on equal terms, and to have their subscriptions subject to the same conditions. If Cooke had purchased his shares of Marvin and Day, he could have made no stipulations with them which could have exonerated him from future calls ; and if he was a mere purchaser of the company’s stock, as the defendant claims, he could no better make a bargain which should operate to the injury of the company’s creditors, and stand opposed to the spirit of the charter.
We do not discover any essential distinction between the condition of Cooke, as a subscriber for this stock, which had once before been taken up and relinquished, and his condition if he had subscribed originally : in both cases, his subscription amounts to nothing more than a purchase of stock or shares which the company had to sell. 12 Conn. R. 510, 511.
Edward P. Cooke was, therefore, we conclude, an actual subscriber to the stock of this company, and not a mere contractor for it, with an option to take or refuse it.
If the corporation had the power, by such a stipulation as this, or by any other, to preclude themselves from a remedy to enforce the payment of the full amount subscribed for, it does not follow, that the creditors of the company can be precluded, by any such condition.
Free access — add to your briefcase to read the full text and ask questions with AI
Church, Ch. J.
The object of this application is, to compel the executrix of E. P. Cooke, deceased, to pay to the plaintiff, as receiver, appointed under the laws of the state of New-York, the balance due for stock subscribed, by the deceased, to the capital of the Canajoharie and Gatskill Railroad Company, to whom the whole assets and credits of that company have been assigned.
Every thing which appertains to the rights of the plaintiff, or fixes the obligation of the defendant, has transpired in the state of New-York, of which state all the parties, then in interest, were citizens.
The charter of this company, with all the proceedings under it, and the construction given to them by the courts of New-York, must chiefly guide us in the decision we make. The original, as well as the amended charter, made it lawful for [186]*186the directors of the company to require payment of the sums subscribed, at such times, in such proportions, and on such conditions, as they should see fit, under the penalty of the forfeiture of the stock and of previous payments thereon.
The rail-road company was duly organized under its charter, its original capital fully subscribed, and ten per cent. thereof paid in. Afterwards, authority was given to increase the capital stock four hundred thousand dollars.
Soon after the original stock was taken up, Marvin and Day purchased 11,265 shares of it, and then became insolvent and unable to pay the unpaid balance which would be due to the company upon its calls ; and thereupon, on the 3d day of July 1835, they transferred these shares to Cornwall, Mesick and Donnelly, in trust for the rail-road company ; and although this trust did not then appear upon the transfer, nor upon the company’s books, yet, in our opinion, the transaction was such, as to reinvest the 11,265 shares again in the company ; and so it was treated ; for the corporation immediately thereupon received new subscriptions for capital to the same amount. Among the new subscribers was Edward P. Cooke, the deceased, who became a subscriber for forty shares. This subscription was obtained, by the president of the company, Thomas B. Cooke; it was peculiar in its form, and made upon a condition that all future calls should be paid as required, or the shares should become the property of the company, and be sold for their benefit. This was followed by a transfer of the forty shares, by the trustees, to the said E. P. Cooke, upon the books of the company, and also by a certificate of the president. All the other subscriptions, by other subscribers, were in writing, without any such condition. The special terms of Cooke’s subscription were not known generally to the other subscribers, and the subscription itself was retained, by the president, Thomas B. Cooke.
The charter of this rail-road company, as we have seen, contains a provision, that the directors may require payment of subscriptions, under a penalty of the forfeiture of the shares. This has become a common, if not an universal provision in all charters creating monied or stock corporations ; its forms may vary in different charters, but the purpose is the same in all-to enforce the punctual payment of the entire capital stock, and to secure to the corporation and to its creditors [187]*187an additional or cumulative remedy beyond that afforded by the common law.
It seems now to be generally admitted, that all subscribers to the capital stock of a corporation, which, by its charter, may require or demand payment of the capital subscribed, have incurred a debt, which may be enforced, by any appropriate common law or equitable remedy, and that such remedy is not at all impaired, by the further provision for the forfeiture of stock. Such is the law of this state, as established and recognized in the cases of the Hartford and New-Haven Rail-road Co. v. Kennedy, 12 Conn. R. 499. The same v. Boorman, Id. 530. Ward v. Griswoldville Manufacturing Co. 16 Conn. R. 593. And such also is the law of the state of New-York, by which this transaction is to be adjudged. Troy Turnpike and Rail-road Co. v. McChesney, 21 Wend 297. Herkimer M. & H. Co. v. Small, 2 Hill, 127. 129. Sagory v. Dubois, 3 Sandf. Ch. R. 466. Mann v. Currie, 2 Barb. Sup. Ct. R. 294. Mann v. Pratt, 2 Sandf, Ch. R. 273.
Was E. P. Cooke a subscriber to the stock of this railroad corporation, and subject to the same responsibilities as other subscribers ? We think he was.
It is true, that Marvin and Day had purchased a large number of original shares, and if Cooke had purchased of them, he could not have been treated as a subscriber, but as an assignee only. Hartford and New-Haven Rail-road Co. v. Boorman, 12 Conn. R. 531. Huddersfield, Canal Co. v. Buckley, 7 Term R. 76. Sagory v. Dubois, 3 Sandf. Ch. R. 466. But before any scrip had been issued to them,they had relinquished their stock to the company, through the agency of its trustees, and the corporation had become reinvested with it, to issue again as original stock. And, as such, it was reissued, and Cooke, became a subscriber, and his shares were duly transferred to him on the books of the company, and he received a certificate as an original stockholder; and these shares have ever since stood as his on the books of the company.
We do not think that the subscription of E. P. Cooke, although different in terms from others, was' different in its legal effect, or reserved to him a privilege, or created for him an exemption, not common to all. Nor ought we to believe, [188]*188that such was the intention of the parties ; as then we should impute to them a fraud upon the creditors of the company, by enabling Cooke to withhold a portion of the capital from their reach, and a fraud upon other subscribers : all were entitled to stand on equal terms, and to have their subscriptions subject to the same conditions. If Cooke had purchased his shares of Marvin and Day, he could have made no stipulations with them which could have exonerated him from future calls ; and if he was a mere purchaser of the company’s stock, as the defendant claims, he could no better make a bargain which should operate to the injury of the company’s creditors, and stand opposed to the spirit of the charter.
We do not discover any essential distinction between the condition of Cooke, as a subscriber for this stock, which had once before been taken up and relinquished, and his condition if he had subscribed originally : in both cases, his subscription amounts to nothing more than a purchase of stock or shares which the company had to sell. 12 Conn. R. 510, 511.
Edward P. Cooke was, therefore, we conclude, an actual subscriber to the stock of this company, and not a mere contractor for it, with an option to take or refuse it.
If the corporation had the power, by such a stipulation as this, or by any other, to preclude themselves from a remedy to enforce the payment of the full amount subscribed for, it does not follow, that the creditors of the company can be precluded, by any such condition. This corporation was not created for its own sake, nor to serve its private ends alone, but for public purposes; and it would pervert some of the great ends of its being, and the objects of its charter, if it had legal power to dispose of its stock upon any terms which should defeat the public interests and defraud its own creditors. This plaintiff, as receiver, is here the representative of the creditors, seeking to enforce their claims against a delinquent subscriber. Lees v. Canal Co. 11 East, 645. Ward v. The Griswoldville Manuf. Co. 16 Conn. R. 593.
We do not intend to say, that if stock or shares which have been issued and paid for, shall again fall into the hands of a corporation, that they, may not be sold again, by the company, upon such terms as other holders of stock may sell it, as this would be no diversion or withdrawal of the capital.
[189]*189The facts specially alleged in the answer of the defendant, that by reason of them, E. P. Cooke was discharged from all liability to pay any thing upon the twenty shares of stock, parcel of the forty shares subscribed for, because they had been transferred back again to the company, we cannot admit to be sufficient to discharge his estate from this claim of the receiver.
We waive the consideration of any question as to the authority of Thomas B. Cooke, the president of the company, to make the arrangement of the 24th of March 1841, and whether the company would itself have been bound by it. The corporation was, at this time, greatly insolvent, and its creditors had a right to insist, that the capital should be kept good, and no part of it diverted or withdrawn.
As this court said, in the case of the Hartford and New-Haven Rail-road v. Kennedy, so we now say, that this company was formed for the purpose of raising the necessary funds in money, to prosecute and complete a work of great public utility. The forty shares subscribed by E. P. Cooke, was a part of these monied funds or capital; and the public and creditors had a right to rely upon them, as so much money, and as a warrant of credit, not only for prosecuting the work, but as a fund for the payment of the present and future liabilities of the rail-road company.
If these twenty shares have been, as the defendant claims, effectually released by Cooke, and relinquished to the company, and received by them, then just so much has been taken away from its available means. Whether this was done with an intent to defraud the public, or the creditors of the corporation, as a question of fact, it is not for this court to determine ; but that its consequences would operate as a fraud upon both, we cannot doubt; and this is reason enough why we cannot sustain this transaction.
The suggestions of the defendant’s counsel, that no question of fraud, actual or legal, can be entertained here, because fraud is not alleged in the plaintiff’s bill, we do not regard-No question of fraud is made in the bill, or grows out of it, but arises solely from the facts set out in the defendant’s answer ; and from these facts and their necessary consequences, we repudiate the relinquishment of the twenty shares, as fraudulent in law, at least.
[190]*190But as against the creditors and stockholders of this corporation, there has never been a legal transfer of these twenty shares back again to the company, however it might have been treated as between Cooke and the company. The power of attorney to effect this transfer, was kept, by the president, in his own pocket; he never acted under it; and the whole forty shares remained, standing on the books of the company in the name of E. P. Cooke, as a continuing stockholder, up to the time of his death. The receiver, as agent of the creditors, could look no where else for the owner.
The supreme court of the state of New-York, in the cases of Mann v. Currie and others, arising under this charter, have taken the same view of this question. 2 Barb. Sup. Ct. R. 294. See also Adderley v. Storm, 6 Hill, 624. 629.
We have no doubt but this bill must be sustained, and interest be added to the unpaid balance due on the stock subscribed for, from the time fixed by the receiver for payment, by his public notice for that purpose.
We entertain no doubts upon the various questions submitted to us upon this record ; but if we had, we should consider ourselves bound to acquiesce in the construction of this charter, and to regard the proceedings under it as they have been judicially considered in the state of New-York. The courts of that state, in cases growing out of proceedings under this charter, have entertained the same views as we have now expressed. Mann v. Currie & al. 2 Barb. Sup. Ct. R. 294. Mann v. Pentz & al. 2 Sandf. Ch. R. 257. Sagory v. Du-bois, 3 Sandf. Ch. R. 466.
We shall advise, that the plaintiff is entitled to the relief he asks.
In this opinion the other Judges concurred.
Decree for plaintiff.