JOHN B. JONES, Appellant,
BEAVER NATIONAL BANK, Respondent.
APPEAL by the plaintiff, John B. Jones, from a judgment of the Supreme Court in favor of the defendant, entered in the office of the clerk of the county of New York on the 18th day of April, 1911, upon the verdict of a jury rendered by direction of the court.
Manton M. Wyvell, for the appellant.
Saul J. Baron, for the respondent.
The plaintiff, claiming to be the owner of ninety shares of the defendant's stock, sued to recover sixty per cent of the par value thereof, the amount of dividends representing returned capital, declared by the liquidating committee. For answer, the defendant denied that it had knowledge or information sufficient to form a belief as to whether the plaintiff was the owner and holder of ninety shares of its capital stock and for a counterclaim alleged that the shares held by the plaintiff were ninety shares of an issue of two hundred and thirty shares, made to one S. A. McCartney, upon which he agreed to pay $155 a share, but had in fact paid only $100 per share, leaving due and unpaid $55 per share. The court directed a verdict for the plaintiff for the difference between the amount of the dividend on ninety shares and the amount claimed to have been unpaid on ninety shares of the stock issued to the said McCartney. The plaintiff testified, and it is not denied, that he made an agreement with one Welsh, representing the defendant, to subscribe for ninety shares of the defendant's capital stock, and to pay therefor the sum of $155 per share, $100 for capital, $50 for surplus, and $5 for organization
expenses. Welsh was the defendant's vice-president, and it is undisputed that he was employed by it to procure subscriptions for its capital stock. Pursuant to that agreement, on May 1, 1907, the plaintiff made and delivered to said Welsh his promissory note for $13,950, secured by collateral. That note was discounted by the defendant, and the proceeds passed to the credit of Welsh. On May 3, 1907, the defendant issued two certificates of stock, one for forty-five shares to C. P. Shinn, and one for ninety shares to S. A. McCartney. It received par for those shares, or $13,950, the amount which the plaintiff had agreed to pay for ninety shares. On the face of each certificate was indorsed in red ink: 'One hundred dollars per share paid on this certificate.' While there is no direct testimony to the effect, it is plainly to be inferred that the proceeds of the plaintiff's note were used to pay par on said one hundred and thirty-five shares. The two certificates for ninety and forty-five shares, respectively, assigned in blank by Shinn and McCartney, were mailed to the plaintiff by Welsh. The plaintiff immediately wrote Welsh, calling the latter's attention to the fact that he had agreed to purchase only ninety shares, and refusing to accept the said certificates or to become responsible for the sums unpaid. He testified that Welsh replied in substance that a report to the Comptroller of the Currency was due, that the certificates had been made out in the manner stated for the purpose of making a showing to the Comptroller, that he would soon cause forty-five shares to be sold, and would then have a certificate issued to the plaintiff for ninety fully paid shares. The plaintiff further testified that he subsequently presented the said two certificates at the banking office of the defendant, and asked that a certificate be issued for his shares, and that Welsh put him off by saying that there had been some delinquent subscribers, that the president of the defendant was away, and that he would see that it was arranged. The shares represented by the certificates delivered to the plaintiff were never transferred to him on the books of the defendant, and on October thirtieth a resolution of the board of directors was adopted providing that no certificates 'not fully paid as to capital and surplus' should be transferred upon the books until fully paid. On the 14th of
January, 1908, the defendant's stockholders adopted a resolution for its voluntary liquidation.
Even if the 135 shares issued to McCartney and Shinn had actually been transferred to the plaintiff, no question of statutory liability would be involved, because the full par value had been paid upon them. No question as to the rights of creditors is involved, because there are no creditors unprovided for. The question really is whether the defendant can recover of the plaintiff the amount unpaid on McCartney's subscription on the theory that the plaintiff as transferee of McCartney succeeded to the latter's liability. But the plaintiff refused to accept the transfer of the shares issued to McCartney, and the defendant, by the resolution of its board of directors, refused to accept the plaintiff as transferee. The National Banking Act (U. S. R. S. § 5139) provides: 'The capital stock of each association shall be divided into shares of one hundred dollars each, and be deemed personal property, and transferable on the books of the association in such manner as may be prescribed in the by-laws or articles of association. Every person becoming a shareholder by such transfer shall, in proportion to his shares, succeed to all the rights and liabilities of the prior holder of such shares; and no change shall be made in the articles of association by which the rights, remedies or security of the existing creditors of the association shall be impaired.'
Obviously the words 'such transfer' refer to a transfer on the books of the association, and the cases dealing with the devolution of the statutory liability of the original subscriber upon a transferee recognize the principle that privity between the transferee and the corporation must be shown. (See Webster v. Upton, 91 U.S. 65; Richmond v. Irons, 121 id. 27.)
But, as I have said, there is no question in this case of statutory liability. The defendant can only recover upon contract, express or implied. (Seymour v. Sturgess,26 N.Y. 134; Christensen v. Eno, 106 id. 97; Glenn v. Garth, 133 id. 18.) We may assume, without deciding, that if the plaintiff had agreed to accept a transfer of the shares represented by the certificates delivered to him, knowing that $55 per share of the ...