Sutherland v. Olcott

36 N.Y. Sup. Ct. 161

• Court: New York Supreme Court
• Decided: January 15, 1883
• Status: Published

Opinion

Boardman, J.:

We concur with the learned justice who tried this action that the 'plaintiff is not entitled to recover. The attempt of the Albany Iron Manufacturing Company to increase its capital stock to $600,000 was a failure. It was never in fact increased to such amount nor was any amount in excess of $489,500 ever subscribed for. It having become evident that such excess could not be procured, the attempt was abandoned and the stockholders and directors, of the company, in May, 1875, took such action as rescinded the resolution to increase the stock to $600,000 and “fixed and limited” (in the language of the act of 1873, chap. 203) the capital stock at $489,500, which amount was about that time fully paid up. By the act of 1873 the Albany Iron Manufacturing ©ompany became the Olcott Iron Manufacturing Company, and on the 12th of July, 1875, the latter company made its certificate, fixing and limiting the capital stock at $489,500, and further certifying that said sum had been fully paid up and certificates for full paid stock had been- issued and delivered to the stockholders of said company, naming them and the number of shares held by each. This certificate was filed on the next day in the proper clerk’s office.

Under the act of 1867 (chap. 401) the old company had the power to increase its capital from $300,000 to $1,000,000. The act of 1873 gave the new company the power to fix and limit its capital stock. It seems to have been a just exercise of that power in naming a sum already subscribed for or capable of being realized and excluding stock not subscribed for and not attainable. The reduction of the capital stock from the nominal sum of $600,000 to $489,500 was not unlawful under the eighteenth chapter of part-1, 1 Revised Statutes (Eds. ed.), 559, *601. It was not a division, withdrawal or payment to stockholders of any part of its capital stock nor was it a reduction of its actual stock. The excess rejected was not and never had been any part of the actual capital stock of either company. Its rejection took away no assets of the company to the possible detriment of its creditors, because it disposed of nothing which the company owned and possessed. Hence we think the capital stock was legally fixed at $489,500.

Under the Laws of 1848 (chap. 40, §§ 10 and 11) the liabilities of stockholders for the debts of the company to an amount equal to the amount of stock held by them severally exist until the whole capital stock, fixed and limited by the company, shall be paid in. And the president and trustees shall, within thirty days after the last installment of capital stock shall have been paid in-, file a certificate of the amount of capital stock so fixed and paid in, which certificate shall be signed, by them and recorded in the proper clerk’s office.

The evidence does not show when the last payment was made upon the stock, making it fully paid up. Hence we cannot say that the certificate required to be made and recorded within thirty days thereafter was not so made and filed in time. It is quite possible that the stock was not fully paid up until July, 1875, in which case the certificate was made and deposited in the clerk’s office in due time. (Chase v. Lord, 6 Abb. N. C., 258, n.)

The failure of the clerk to do his duty by making a record of the certificate cannot prejudice stockholders or trustees who have done all that the law requires of them or that they have the power to do. (Boynton v. Hatch, 47 N. Y., 225.)

The plaintiff recovered judgment upon the note given October 25, 1875, months after the fixing of the amount of stock and the making and filing of certificate of amount and its payment in full. At that time there was no liability of stockholders under the law of 1848 by reason that the stock was not fully paid up. The judgment against the corporation - having been recovered upon these notes the present action against the stockholders must be restricted to the claim embraced in the judgment. The original consideration of the note cannot now be resorted to for the purpose of ante-dating the filing of the certificate July 13, 1875. Besides the evidence of such original consideration is too obscure and uncertain to form the basis of a claim prior to July 13, 1875, if otherwise proper.

We think the judgment is right and should be affirmed, with costs.

Bookbs, J., concurred; Learned, P. J., not acting.

Judgment affirmed, with costs.