32 N.Y. Sup. Ct. 91 | N.Y. Sup. Ct. | 1881
This action was prosecuted for the recovery of the sum of $5,000, being the amount of the defendant’s subscription for 100 shares of the capital stock of the plaintiff. These shares were of the par value of fifty dollars each, and the subscription by which the defendant agreed to take them was made before the company was completely organized. The company was incorporated under the authority of chapter 611 of the Laws of 1875. The certificate required for that purpose was filed, and the persons making it were empowered to open books for subscriptions to the capital stock, as that has been provided for by section 4 of this act. And the subscription made by the defendant was taken in the course of the proceedings for that purpose so authorized. But neither at the time when the subscription wag made, nor at any time after that, did he pay to the commissioners any part of the amount for which the ‘stock was afterwards to be issued to him. All that was done was to subscribe for the stock and deliver his check for ten per cent of the amount of the subscription. After the company was organized the board of directors declared the subscriptions to the capital stock to be due and payable, and because of a failure to pay on the part of the defendant this action was brought against him for the recovery of the amount. It was resisted chiefly because of the omission of the defendant to make the payment which the statute has required for the purpose of constituting a complete subscription to the stock of such a corporation. The provision of the act upon this subject is, that the commissioners shall proceed to open books for subscriptions to the capital stock of such corporations, but no subscription shall be received, unless at the time of making it the person so subscribing shall
The court at the. trial held that this requirement had not been observed; that the execution and delivery of the subscriber’s check for the ten per cent was not a payment of the amount of it in cash, and for that reason the subscription was ineffectual, and he never became liable upon it. Before the check was presented for payment it was countermanded by the defendant, and nothing, in fact, was ever received, either by the commissioners or the company itself, on this subscription. The provision contained in this act declaring how the payment shall be made for the purpose of completing the subscription is practically the same as that contained in the statute, relating to the formation of limited partnerships. There the contribution made to the capital by the special partner is required to be paid in cash; and in the case of Durant agt. Abendroth (69 N. Y., 148) it was held that a delivery of a check was not a compliance with what the law required to he done for the purpose of forming such a partnership. And as the act under which the plaintiff was incorporated has been enacted upon this subject in terms practically identical in their effect, this decision must be accepted as controlling in this case.
A different view of the effect of a check seems to have been taken in the case of Thorpe agt. Woodhull (1 Sand. Ch. Rep., 411), but as this authority is subordinate to that pronouncing the judgment in the preceding case, it cannot properly be followed in the determination of this appeal. As the language employed in the enactment of this statute has been construed, it can he satisfied only by a payment in cash or its actual equivalent. The object of the law in making this requirement was to prevent the organization of corporations upon mere paper capital, and the security of persons dealing with them requires that such organization should not he permitted. If a check could he received as a compliance with what the law has required on this subject from one person, it
A provision of a somewhat similar nature, though not as restricted in its expression as this, was considered in the case of the Union Turnpike Road agt. Jenkins (1 Caine, 381), and it was there held by the supreme court, the chief justice dissenting, that the failure to pay the per centage inquired upon the subscription would not prevent the maintenance of an action afterwards for its recovery. But this case was taken to the court of errors, and the decision made in it was reversed, because of the omission to pay the amount required to be received by the commissioners at the time when the subscription for the stock was made (Caine's Cases in Error, 86), and
The judgment, for the reasons already assigned, should therefore be affirmed, with costs.
Beady, J., concurs.