Clevenger v. Moore

• Citation: 71 N.J.L. 148,58 A. 88
• Parties: CLEVENGER v. MOORE.
• Decision Date: 13 June 1904
• Court: United States State Supreme Court (New Jersey)

58 A. 88

71 N.J.L. 148

CLEVENGER

v. MOORE.

Supreme Court of New Jersey.

June 13, 1904.

(Syllabus by the Court.)

Action by William M. Clevenger, trustee, against Richard M. Moore. Verdict for plaintiff. Rule to show cause denied on condition.

Argued November term, 1903, before GUMMERE, C. J., and DIXON, SWAYZE, and HENDRICKSON, JJ.

J. H. Gaskill, for plaintiff.

Samuel Iredell and Howard Carrow, for defendant.

HENDRICKSON, J. This is a rule to show cause why a new trial should not be had. The suit was brought by the trustee of a bankrupt corporation to recover of the defendant the amount remaining due upon stock alleged to have been subscribed for and then held in the bankrupt company pursuant to the order and direction of the United States District Court of New Jersey. The number of shares alleged to be so held was 104, of the par value of $100. The plaintiff claimed that no part of the subscription for the stock had been paid by the defendant, and sued to recover the sum of $10,400. At the conclusion of the plaintiff's case a motion to nonsuit was made, upon grounds to be hereafter noted. The motion was denied by the court, and exception to such denial was duly taken and sealed. The defendant had testified at the call of the plaintiff. The defense rested without calling witnesses, and thereupon the plaintiff's counsel, conceding that the defendant, under his evidence, which was uncontradicted, was entitled to a credit of cash paid to the company from time to time amounting to $2,600, moved the court to direct a verdict for the plaintiff for a balance of $7,800, which was done over objection, and a verdict was rendered accordingly. To this direction exception was duly taken, and allowed and sealed. The contention was and is that the defendant was a promoter of the company; that he had given the company the benefit of his special, and expert knowledge in its organization and conduct, which, under an alleged contract with the company, was to be full payment and satisfaction for the stock; and that upon these grounds the refusal to nonsuit and the direction of the verdict were erroneous.

It is contended that the refusal to nonsuit was error because the trustee made no assessment, but simply demanded the whole amount due upon the stock. The answer to this is that the trustee followed the direction of the order of the United States District Court, which had jurisdiction of the matter, which was to make the assessment for "the whole amount remaining unpaid on said stock." The decree recites that the defendant was duly notified of that proceeding. The propriety or validity of that assessment cannot be questioned collaterally. Hood v. McNaughton, 54 N. J. Law, 425, 427, 24 Atl. 497; Hawkins v. Glenn, 131 U. S. 319, 9 Sup. Ct. 739, 33 L. Ed. 184; Cumberland Lumber Co. v. Clinton Hill Lumber Mfg. Co., 57 N. J. Eq. 627, 629, 42 Atl. 585.

The next ground of error is that this suit can only be maintained in equity. In a suit to wind up the affairs of an insolvent corporation, where it becomes necessary to order an assessment to be made upon unpaid subscriptions of stock to satisfy the claims of corporate creditors, a court of equity is the proper tribunal; but where, in a suit in that jurisdiction, such an assessment has been ordered, an action at law may be brought against a stockholder to collect his quota. Cumberland Lumber Co. v. Clinton Hill Lumber Mfg. Co., supra; Hood v. McNaughton, supra. It is intimated, rather than urged, that the suit must have been brought in the United States courts, but this point is clearly untenable. The twenty-third section of the bankruptcy act of July 1, 1898, c. 541. § 23, 30 Stat. 552, 553, recognizes the jurisdiction of the state courts over suits brought by the trustee. 5 Cyc. 250; 3 U. S. Comp. St. 1901 (West Pub. Co.) p. 3431. This construction of section 23b was sanctioned by the Supreme Court of the United States in Bardes, Trustee, etc., v. Bank, 178 U. S. 524, 20 Sup. Ct 1000, 44 L. Ed. 1175.

The next contention is that the defendant never subscribed in writing for these shares of stock, and that for only four of them did he become obligated under the certificate of incorporation. The answer to this is that the defendant, after denying that he subscribed for more than 4 shares, testified further that he sold and assigned to Mr. Whitney 48 shares out of the 100 shares of his own original stock in the company; that the stockbook stubs showed the issue of 100 shares of the stock to the defendant, and that they were signed by the defendant as president of the company; that the defendant, besides being a director and president of the company, also acted as its treasurer, receiving money on account of subscriptions of stock, and paying out moneys in its building operations. These conditions continued for several years, and during the whole period of the company's solvency. In a suit brought in the interest of the unpaid creditors of the corporation, the defendant cannot now be heard to deny that he became and was a stockholder to the extent of the 100 shares. This arises out of the principle that is well established that even without a formal subscription, or where it is irregular, the contract may be inferred from acquiescence and acceptance of the benefits of membership. 26 Am. & Eng. Enc. of L. (2d Ed.) 904, and cases cited.

A further contention is made that the certificates were irregular, in being attested by the secretary instead of by the...