Thorp v. Woodhull

The Assistant Vice-Chancellor.

The complainant insists that the consideration for the bond and mortgage has wholly failed, by reason of the perverseness of the company in refusing to transfer the shares of stock; and that the scrip for the same was unwarrantably and unjustly withheld from him.

The bill states that by the arrangement between Cruikshank and the commissioners, he was to give his bond and mortgage to the company; and the commissioners agreed to issue to him therefor $16,000 of the capital stock; and that thereupon he executed the bond and mortgage in question.

The proof is somewhat variant from the charge in the bill, in reference to the $800, paid by Freeman’s check, and also as to.the number of lots agreed to be mortgaged. But assuming the allegation to have been proved, it appears that the commissioners, or the officers of the company, as soon as the title was examined, did place the $16,000 of stock in the name of Cruikshank on the books of the company. The stock was thus issued to him as fully and effectually as the commissioners could issue it, or direct it to be done. The making of the certificate that Cruikshank held the stock, or what is called giving out scrip for it, was certainly not within the scope of their duty or their authority. Whether any of the original stockholders received any further or better evidence of their title to the stock of the company, than was contained in the stock ledger, I do not learn from the testimony. The act incorporating the company has no provision on the subject of the evidence of the right to shares, or on that of transferring them. The Revised Statutes, in the enactments relative to corporations, require monied corporations to keep a book for the registry of transfers of shares of its stock, but they contain no allusion to scrip or certificates. They also empower all corporations to make bylaws for the transfer of their stock. It does not appear that this company made any by-laws on that subject. Thus, I cannot find in the charter, in the general law, or in the contract of the parties, any requirement or provision for the issuing of scrip or certificates declaring the complainant’s or Cruikshank’s ownership of the shares in question. (See farther on the subject of the scrip for shares, and transfer on the stock register of a corporation, The Commercial Bank of Buffalo v. Kortright, 22 Wend. 348.)

In the Chester Glass Company v. Dewey, (16 Mass. R. 94,) one of the objections to the recovery was that the defendant could not be a member of the company without a certificate of his share; it having been provided by the general act on the subject, that certificates of the shares should issue to the stockholders. But the court held that the issuing of the certificates was not essential to the existence of the corporation, and that the corporation might be compelled by a Court of Chancery to give certificates.

The stock in question, for a time at least, appears to have been under the control of Cruikshank, as the absolute owner. He transferred a part of it by his attorney, thereby recognizing and asserting a title to the stock and afterwards more emphatically asserted a perfect title, by executing a proxy to Mr. Patterson, authorizing him to vote upon the stock in his behalf, at the election of directors of the company. This transaction is not explained.

The evidence in the case is conclusive to my mind that the complainant, through Cruikshank acting for him, received from the company in the stock placed in the name of Cruikshank on their books, the stipulated consideration for his bond and mortgage, as stated in the bill. Cruikshank thereby became a stockholder of the company, owning absolutely 320 shares of their stock; and entitled to all the rights and privileges of a stockholder.

The contract between Cruikshank and the company, upon which the bond and mortgage were given, was thus executed and at an end.

The subsequent conduct of the company in refusing to permit the transfer of the stock and to issue scrip for it, is relied upon as authorizing the complainant to rescind the contract and to have the bond and mortgage given up and cancelled. It is needless to inquire whether the officers of the company were warranted in their refusal; for it cannot affect my conclusion. I think that the- subsequent conduct of the corporation and its officers, does not authorize this court to open and rescind a contract which has been fully executed by the parties.

I cannot infer from Nones’ affidavit in connection with the complainant’s motion to the court in January, 1839, that any of the officers of the company then knew of the interest of the latter in the stock; and the proof does not establish such knowledge prior to July, 1839.

If the company’s refusal to permit a transfer were as injurious to the complainant as he alleges, the law provides for him a prompt and adequate remedy by an action on the case ; In re Shipley v. The Mechanics' Bank, (10 Johns. 484;) or an action of assumpsit against the corporation; Commercial Bank of Buffalo v. Kortright, before cited, (22 Wend. 348.)

But this court has no jurisdiction of the subject; nor can it indirectly acquire jurisdiction, by going back and overturning the executed agreement, which preceded the injuries complained of.

It appears that the check given by Freeman on subscribing, was not paid on presentment, nor ever fully paid. A part of it was satisfied by the company’s crediting thereon a dividend on the stock standing in the name of Cruikshank. It is now contended by the complainant, that the acceptance of the check instead of cash, by the commissioners, was illegal, and the whole transaction was therefore void.

Section eight of the charter, provides that two dollars and fifty cents on each share subscribed shall be paid to the commissioners at the time of subscription: The check was given for that amount, on the 320 shares subscribed by Freeman. It was received as cash. The $800 was paid to the commissioners in the same manner that the great mass of debts is paid in this city, by a check on a bank. It does not appear that the commissioners had any knowledge or suspicion that the check was not good, or that it would not be paid in due course. They received it at their own risk. It seems that the corporation took it from them as equivalent to cash, and it is not proved but that the commissioners and the officers of the corporation believed it to be equivalent.

The company went into operation under its charter. The amount of the check being covered by Cruikshank’s mortgage, there was no violation of the eleventh section of the charter, which requires the whole capital to be paid in, or secured to be paid, before the corporation commenced business.

The case of Crocker v. Crane, (21 Wend. 211,) was relied upon to establish that the whole transaction was void. In that case, the commissioners appointed to'distribute the capital stock of a railroad company, were prohibited from receiving subscriptions unless two dollars on each share subscribed should be paid at the time of subscription. When the books were opened, they received uncurrent money for awhile, and then received checks for the amounts payable on subscription. They required the checks to be indorsed, thus manifesting that they were not drawn against funds already deposited in bank, and were not intended to be paid on presentment. The judge who delivered the opinion of the court, said he could not doubt upon the evidence, but that the whole was an evasion of the act of incorporation, and he expressed a strong opinion that the check was void, as contrary to the policy of the statute; and as a consequence, it would follow in that case that the contemplated corporation did not come into existence.

In this case, it does not appear that a check was taken from any other subscriber for stock. And the judge says, in Crocker v. Crane, that the receiving an occasional check by the commissioners, might have been a fair substitute.

Besides, whatever may have been the rights of the state to resume the corporate franchises on this ground, or the rights of other persons interested in the company, certainly Cruikshank himself has no cause to complain. His agent, Freeman, offered the check as a payment,, and as equivalent to specie. The commissioners accepted it as such, and awarded the stock to him; and the company, on going into operation, placed the stock in the name and to the credit of the principal, on their books. He cannot now be permitted to' deny that the check was a payment, within the terms of the act of incorporation.

The complainant stands in the place of Cruikshank, and has no other or greater rights.

The bill cannot be sustained on the evidence,-and it must be dismissed with costs. The dismissal will be without prejudice to the complainant’s- remedy at law, or against the receiver, for the refusal of the company to permit a transfer of the stock, or to issue the customary certificate therefor-.