194 A.D. 682 | N.Y. App. Div. | 1921
The three actions were tried as one. They were brought by the trustee in bankruptcy of the Cypress Knitting Mills, Inc., to recover from each defendant the unpaid portion of his subscription to the capital stock of the corporation. The amount claimed to be due in each case represented the par value of the stock issued for services to be thereafter rendered to the corporation. On a previous trial the court dismissed the complaint at the close of the plaintiff’s case. On appeal we reversed the judgments and directed a new trial. (Palmer v. Scheftel, 183 App. Div. 77; Palmer v. Buehler, 186 id. 939; Palmer v. Einsetler, 187 id. 890.) The plaintiff on this trial proved the same facts as on the former trial and rested. The defendants presented substantially three defenses: First. A partial defense, that they returned a part of the stock issued to them to the corporation. Second. That sixty-six other shares of their stock were sold to a Mrs. Comings and the company was paid therefor $3,300. Third. That each defendant subsequently turned over the remainder of his stock to one Rubinstein and was not the owner thereof at the time of the bankruptcy. The facts are somewhat involved; hence, in order to get a clear understanding, it will be necessary to repeat some of the facts discussed in the former appeal.
On the same day that defendants transferred parts of their holdings to Mrs. Comings, and pursuant to the same agreement, they transferred to the corporation other parts, as follows: Scheftel, twenty-two shares; Buehler, seventeen shares, and Einsetler, nineteen shares; a total of fifty-eight shares. In February, 1913, one Strathmeyer purchased the twenty shares of unissued stock of the corporation, and in
In February, 1914, negotiations were in progress between the corporation and one Rubinstein looking to the latter’s buying the assets of the corporation and assuming its liabilities. At this time Mr. Comings had obtained a judgment against the corporation for wrongful discharge from employment, and an appeal was pending, and Mrs. Comings was suing for damages for false representations in the sale of the stock to her. On February 26, 1914, the factory was destroyed by fire. It was insured for $9,000. Thereupon the negotiations were resumed and as a result the defendants transferred all their stock to Rubinstein, who was elected president and proceeded to liquidate the corporation. Scheftel transferred twenty-four shares; Buehler, fifteen; Einsetler, twenty-seven, and Strathmeyer, thirty. The defendants admit that their main purpose in making the transfer was to relieve themselves from personal liability to Mrs. Comings, while Rubinstein was speculating upon the outcome of the suits by Mr. and Mrs. Comings. If the Comings lost, he would get a bargain; if he had to pay the judgment, he considered he had paid all the assets were worth.
When the defendants subscribed for the stock and failed to pay the par value thereof, there arose a contractual liability on their part to pay the balance, which was enforcible at law by the corporation or its legal representatives (Stoddard v. Lum, 159 N. Y. 265, 275) and which inured to the benefit of its creditors. (Stevens v. Episcopal Church History Co., 140 App. Div. 570, 582.) The capital of a corporation is a trust fund for the benefit of its creditors, upon the faith and credit of which others extend credit to the corporation. Where stock, as in the instant case, purports to have been fully paid, but by reason of an improper allowance of credit for work, labor and services not performed upon the subscription it is not fully paid, the stockholder owes to the corporation as a debt the difference between the amount lawfully paid and the par value of the stock. The defendants could not escape this liability by a transfer of the stock back to the corporation; first, because there was no agreement on the part of the cor
To the extent, however, that this stock was subsequently issued to others who paid for the same in full, the defendants are entitled to credit. By its act in reissuing the stock the corporation ratified to that extent the surrender, and the par value having been paid to the corporation, its capital to that extent was made intact and the fund created for the benefit of creditors restored. This would apply to sixty-six shares issued to Mrs. Comings and ten shares issued to Strathmeyer. By reason, however, of the false representations of the defendants in the sale of the stock to Mrs. Comings, the corporation paid, or they caused to be paid, out of its assets $1,500. Their credit should be reduced by this amount, for the transaction netted the corporation only $1,800. The result would be as follows:
Scheftel, amount claimed.......................■ $2,500 00
Credit on sale to Mrs. Comings, four-elevenths of $1,800, or........... $654 55
and twenty-two fifty-eighths of $500
received from Strathmeyer, or..... 189 65
- 844 20
Leaving amount still due..................... $1,655 80
Buehler, amount claimed....................... $1,500 00
Credit, three-elevenths of $1,800, or. . $490 91
and seventeen fifty-eighths of $500,
or............................. 146 55
- 637 46
Leaving amount still due..................... $862 54
Einsetler, amount claimed...................... $1,500 00
Credit, four-elevenths of $1,800, or.. $654 55
and nineteen fifty-eighths of $500, or 163 79
- 818 34
Leaving amount still due..................... $681 66
In calculating the amount of stock issued to each, we find Buehler originally received forty shares. Yet he is credited with having returned and transferred to Mrs. Comings and to Rubinstein in all fifty shares. There is testimony that at some time subsequent to the original issue he obtained five shares, for which he paid $250. As it was testified that the remaining twenty shares of the original stock were issued to Strathmeyer, Buehler must have had reissued to himself ten of the shares which he had surrendered, for which he paid only $250. The evidence is not clear, and this situation was not discussed in the briefs of either counsel. It would appear that the plaintiff is entitled to recover' from Buehler $1,112.54, instead of $862.54, as above stated. If counsel can stipulate the facts, judgment can be entered in the Buehler action; otherwise, there will have to be a new trial in that action.
The judgments should be reversed, with costs, and judgment granted for the plaintiff in the action against Paul Scheftel for $1,655.80, with costs; and judgment granted for plaintiff in the action against George A. Einsetler for $681.66, with costs.
Settle orders on notice, when the Buehler case will be disposed of, and the question of the allowance of interest, which was not demanded in the complaints, may be settled.
Clarke, P. J., Dowling, Smith and Greenbattm, JJ., concur.
In the Buehler case: Judgment reversed and new trial ordered, with costs to appellant to abide event, unless counsel stipulate as suggested in opinion; in which event judgment ordered for plaintiff for $1,112.54, with costs. Settle order on notice.
.In the Einsetler case: Judgment reversed, with costs, and judgment ordered for plaintiff for $681.66, with costs. Settle order on notice.