69 N.J. Eq. 679 | New York Court of Chancery | 1905
(orally).
This is a bill filed under our Corporation act to have the defendant corporation, the Basic Company, declared insolvent and placed under disabilities in reference to the exercise of its franchises by an injunction and a receiver appointed. At the start the question was raised whether either of the complainants was qualified under our statute to bring this suit. One of the complainants alleges that he is a stockholder holding one share of stock» of the par value of $10, the total capital stock being $1,000,000, par value. The other complainant, alleged to be a creditor, but practically counsel for the complainants withdrew the claim that this co-complainant could be qualified as a creditor, and the question was presented whether Mr. Hoopes, the remaining complainant, is shown here to be a stockholder, so as to be.qualified to be the actor in this statutory suit against the corporation.. The court suggested, and I think counsel acquiesced in the suggestion, that it would be proper to take the proofs, first, in regard to the status of Mr. Hoopes as a stockholder. Whether counsel acquiesced or not in that suggestion, it seems to me that in most cases it would be very wrong indeed to compel a corporation to submit all its financial affairs to the inspection of the court and the public as long as it was uncertain whether the party complainant bringing the corporation into court had any status as a stockholder to carry on the suit. When the suit is commenced by bill a proper mode of contesting the capacity of the complainant as a creditor' or stockholder to bring the suit would be by plea. When the suit is commenced by petition, so that the technical rules of pleading which distinguish between demurrers, pleas and answers are to a large extent inapplicable, the answer to the petition, in my opinion, may well be strictly confined to the defence which we are considering in all'cases where that defence is set up. But in all cases under. our statute, whether on bill or petition, the trial
My conclusion is that the complainant is not qualified under our statute as a stockholder. The leading facts are these: At a time antedating the commencement of this suit by quite a period the complainant Mr. Hoopes, having a very considerable stock interest in this corporation, transferred all his holdings of stock to- the Union Dredging Company, and received in exchange about $60,000 par value of the stock of the Union Dredging Company. He admits on the stand, with great frankness, that what he received was full compensation fox his stock. At the time this transaction occurred the Union Dredging Company transferred back to him a single share of stock of the par value of $10, the share of stock by virtue of which he (Mr. Hoopes) now undertakes to sustain in this court his suit as a stockholder and invoke the statutory remedy against this corporation. There is no doubt, however, about what the purpose of this transfer, was. There was no intention that Mr. Hoopes should be the beneficial owner of this share of stock. The transfer was made in order that he might appear on the books of the company as a stockholder, and thus apparently be qualified to act as a director. The intention was that he should become, and he did become, what is commonly called a “dumm)'” director. Immedately after the transfer of this stock—this single share of stock—to him, and its proper transfer on the only stock book they had, Mr. Hoopes, immediately after, or within a year or two—not later than the summer of 1904, long before this suit was brought—endorsed the share in blank and handed it back to the real owner’ the Union Dredging Company. There is a discrepancy in the testimony as to the time-when this was done. It is no.t material, even if we accept the complainant’s testimony, because' this transfer was made, as I said, not later than the summer of 1904. I strongly incline to the opinion that the transfer was made immediately after the share was made out to him. The share was made out to him for the purpose which I mentioned; he endorsed it and handed it back, and he did not have it in his possession afterwards; and whichever date we
There is one case, and one only, that I know of, where the meaning of the word “creditor” in this clause of the act which I have read was the subject of investigation. There have been a number of cases where the meaning of the word “creditor” in
The ease that I referred to a moment ago, which I think is the -only case where the meaning of the word “creditor,” under
In the case of Gallagher v. Asphalt Company of America, 65 N. J. Eq. (20 Dick.) 258, I referred to this subject as follows: “The meaning of the word ‘creditor/ as used in our statute in defining the classes of persons who are authorized to 'maintain this statutory proceeding, has been discussed in several cases [which are here stated]. It is settled that the word ‘creditor’ is not used in our statute in a narrow, technical sense. It is used in a broad sense, and I think it is safe to say that the general intention is that if a party is so related to the corporation and its assets as to be entitled to a share of what is divided among creditors—if the party can come into the proceedings as a claimant and prove his claim so as to be entitled to a dividend— it must be generally true that he is qualified as a creditor to institute the proceedings which result in the distribution of the assets in part, to himself. But in this case it is not necessary to lay down so broad a rule as that in order to find that the complainants are qualified as creditors.”
In that case I indicated a general opinion that as a general rule if the party posing as a creditor claiming the right to institute this statutory action stood in such relation to the assets that he had a right to a share or a dividend, then he was properly qualified as a creditor to institute the action. Such further reflection as I have given to the subject has not disturbed that impression. I think, however, especially in view of this decision of Vice-Chancellor Stevens, one modification is necessary. The party who claims to be a creditor só as to be entitled to institute this action must, I think, at the time he comes into court with his bill, be a creditor as distinguished