Statement of case.

of 1848, chap. 40, § 14; 1 R. S. 601, § 2; 1 Otto, 47, 48; 56 N. Y. 564; 4 Abb. [N. S.] 107, 110; 6 Paige, 486, 488; 3 Sandf. Ch. 466, 499; Williams v. W. U. Tel. Co., 93 N. Y. 162.) All of the stockholders are liable. (Wheeler v. Millar, 90 N. Y. 359; Aspinwall v. Sacchi, 57 id. 335; Johnson v. Underhill, 52 id. 207-210; Shellington v. Howland, 53 id. 376; Schenck v. Andrews, 46 id. 593; Cuykendall v. Douglass, 19 Hun, 577; Booth v. Campbell, 37 Md. 529; Thompson on Stockholders, § 38; Morawetz on Private Corporations, § 597.) A certificate "stating the amount of the capital so fixed and paid in " must be signed and sworn to by the president and a majority of the trustees, and recorded in the county clerk's office within thirty days after the payment of the last installment of the capital stock so fixed and limited by the company. Unless this is done the stockholder's liability continues, although the whole amount of capital has been actually paid in. (Eaton v. Aspinwall, 3 Abb. Pr. 417, 423; affirmed, 19 N. Y. 119; Aspinwall v. Sacchi, 57 id. 334, 335; Chase v. Lord, 77 id. 7; Brown v. Smith, 13 Hun, 411; Schenck v. Andrews, 46 N. Y. 589, 593; Boynton v. Hatch, 47 id. 225-228; Boynton v. Andrews, 63 id. 93, 94, 97; 80 id. 650; Wheeler v. Millar, 90 id. 358.) The statutory liability is not limited to the original incorporators, but applies as well to those becoming stockholders after the incorporation. (Briggs v. Waldron, 83 N. Y. 582; Johnson v. Underhill, 52 id. 203, 212.) Each stockholder is liable severally to the amount of his stock, with interest from the commencement of the action, for all the debts, and the creditors may proceed by suits at law against each severally, or in equity against all. (Mathez v. Neidig, 72 N. Y. 100; Pfohl v. Simpson, 74 id. 137; Wheeler v. Millar, 90 id. 362-3; Handy v. Draper, 89 id. 234; Burr v. Wilcox, 22 id. 551; Aspinwall v. Sacchi, 57 id. 331; Thompson on Stockholders, § 353-365; Erickson v. Nesmith, 46 N. H. 371; Wehrman v. Reakirt, 1 Cinn. Sup. Ct. 230, 234; Stewart v. Lay, 45 Iowa, 604; Mandeville v. Riggs, 2 Peters, 482, 487.) The six years statute of limitations is the only statute applicable to creditors' suits against continuing stockholders. (Wiles

Statement of case.

v. Suydam, 64 N. Y. 176, 177; Conkling v. Forman, 48 id. 527; Knox v. Baldwin, 89 id. 610; Corning v. McCulloch, 1 id. 47; Handy v. Draper, 89 id. 334; Phillips v. Therasson, 11 Hun, 141; Booth v. Campbell, 37 Md. 529.) To enforce a stockholder's liability under section 24 of chapter 40, Laws of 1848, an action must be brought against a company on a debt payable within a year from the time it was contracted, within a year after it became due, and an execution must have issued against the company and returned unsatisfied. An action against one who has ceased to be a stockholder must be brought within two years thereafter. (Handy v. Draper, 89 N. Y. 337; Jagger Iron Works v. Walker, 76 id. 521; Parrott v. Sawyer, 13 Weekly Dig. 317; Wheeler v. Millar, 24 Hun, 541; 90 N. Y. 353.) The creditor's right of action is assignable, and the assignment carries with it all of the assignor's remedies against the stockholders. (Bolen v. Crosby, 49 N. Y. 183; Bonnell v. Wheeler, 1 Hun, 332; Pitcher v. Brayton, 17 id. 429; Pier v. George, 14 id. 368; 86 N. Y. 613; Sheridan v. Mayor, 68 id. 30; W. A. Co. v. Barlow, id. 34, 38, 39; Catlin v. Tobias, 26 id. 217; Smith v. Brady, 17 id. 173; Champlin v. Rowley, 13 Wend. 258; 3 Pars. on Cont. 36.) An action to enforce the liability of stockholders to creditors is properly brought by one for all. (74 N. Y. 137, 142; 72 id. 100; 73 id. 611; 91 id. 314; 101 U. S. 216.) When the liability of the stockholders is determined, the creditors are required, by notice, to come in and prove their claims. (2 R. S. 466, § 56; Code, § 1807, 9 Paige, 598; 45 N. Y. 310; 1 Hun, 655, 667; 2 Paige, 19; 4 Johns. Ch. 619, 647, 687; 1 Barb. Ch. Pr. 521-524; 2 Dan. Ch. Pr. 1209-1214; 1 Van Santv. Eq. Pr. 544, 546; Kerr v. Blodgett, 48 N. Y. 62, 66; Prouty v. R. R. Co., 1 Hun, 655–667; Morris v. Mowatt, 4 Paige, 142 2 Dan. Ch. 1212, 1213; 1 Barb. Ch. 525-6.)

Richard C. Steel for National Exchange Bank of Auburn, respondent. A stockholder's liability does not cease when the capital has all been paid in, but only when the certificate has

Opinion of the Court, per FINCH, J.

also been made and recorded. (Aspinwall v. Sacchi, 57 N. Y. 335.) Having enjoyed the benefits of this increased capital, and, in form, a dividend withdrawn pro tanto from creditors, assets of the corporation, for their individual benefit, stockholders must now be estopped from denying the fact that the capital stock was increased to $300,000. (Sewell's Case, L. R., 3 Ch. 131; Hull Flax and Cotton Mill v. Wellesley, 6 H. & N. 38; Reciprocity B'k, 22 N. Y. 18; Wakefield v. Fargo, 90 id. 217; Lathrop v. Kneeland, 46 Barb. 432.) The recorded certificate is not evidence (conclusive or prima facie) of full payment of the capital stock. (Schenck v. Andrews, 46 N. Y. 593; Boynton v. Hatch, 47 id. 225; Boynton v. Andrews, 63 id. 93.) The liability of stockholders for corporate debts under section 310 is not a penal liability. The statute is not to be strictly construed to discharge them from liability. (Aspinwall v. Sacchi, 57 N. Y. 335; Garrison v. How, 17 id. 466; Chase v. Ford, 77 id. 1; Bonnell v. Griswold, 80 id. 128; Pier v. Ilanmore, 86 id. 951.)

FINCH, J. If the certificate filed in 1873, asserting that the whole capital stock of $300,000 had been paid in, is conclusive in favor of the stockholders as against the creditors, the foundation upon which this recovery rests is taken away. One case furnishes a seeming authority for the doctrine, until its occasion and limitations are understood. (Stedman v. Eveleth, 6 Metc. 114.) That decision originated in an existing stockholder's liability so wide and destructive as to induce a conclusion that the certificate was required largely for their protection. The failure to pay in the whole capital stock threw upon the individual stockholder a liability, not measured by his shares, but extending to the whole corporate debt. In that respect the statute of Massachusetts was afterward changed by the substitution of a limited liability like our own; and the question of the effect of the certificate arising again, it was held that it was not conclusive, and the creditors might show non-payment in fact of the full capital, and found upon that the stockholder's liability to the par value of his shares. (Barre Nat.

Opinion of the Court, per FINCH, J.

B'k v. Hingham M'fg Co., 127 Mass. 563.) Nor is the conclusiveness of the certificate in any manner intimated or sustained by the case of Bonnell v. Griswold (80 N. Y. 128). The question there concerned, not the liability of stockholders derived from the fact of non-payment, but that of the trustees for making a false certificate of the alleged fact; and it does not follow, because a remedy is given against the officers for making no report, under one section, and for making a false report under another, that the liability of the stockholders for nonpayment of the full capital is thereby taken away. On the contrary the cases quite plainly indicate that it remains. (Schenck v. Andrews, 46 N. Y. 589; Boynton v. Hatch, 47 id. 225; Boynton v. Andrews, 63 id. 93; Brown v. Smith, 13 Hun, 411; 80 N. Y. 650; Wheeler v. Millar, 90 id. 358.) Under section 10 of the act of 1848 two things are requisite to end the stockholder's liability. The whole amount of capital stock must be paid in, and the certificate of that fact required by section 11 must be made and recorded. A false assertion of compliance does not make compliance with the first condition. The fact must exist, and then it must be certified. While the statute makes some papers presumptive evidence of specific facts, it does not give in terms even that force to the certificate in question. The penal provision (Pier v. Hanmore, 86 N. Y. 95), punishing officers for a false report of capital paid in is entirely consistent with a contract liability of the stockholders until that condition is in truth fulfilled.

Our next inquiry relates to the alleged increase of the capital stock. Originally, and by the articles of incorporation, which were duly filed in 1868, the capital stock of the iron company was fixed at $200,000. In March of the next year the trustees passed a resolution to increase the capital stock by adding thereto $100,000, the same to be divided pro rata among the existing stockholders, whose notes payable in one, two, three, four, five and six months, in equal amounts, were to be taken therefor, and the new stock issued upon their payment. In the succeeding April there was a meeting of stockholders, at which the resolution of the trustees was approved

Opinion of the Court, per FINCH, J.

and ratified, after a recital admitting its legal insufficiency as it stood. But no notice of such meeting of stockholders was given, as required by section 21, chapter 40, of the act of 1848, nor was any certificate of the proceedings of such meeting made, or filed, as required by section 22 of the same act. The attempted increase was, therefore, illegal, but the respondent insists that, nevertheless, as against the creditors of the company, the defendant stockholders by accepting their proportions of the increased stock, by voting for its increase, by taking dividends upon it, and holding it out to those dealing with the company as an actual component of its capital, are estopped from denying the legal validity of the increase and must be held responsible as if it was yalid. The authorities for this doctrine are numerous and strong. (Eaton v. Aspinwall, 19 N. Y. 119; Chubb v. Upton, 5 Otto, 665; Aspinwall v. Sacchi, 57 N. Y. 331; B. & A. R. Co. v. Cary, 26 id. 75; Kent v. Quicksilver M. Co., 78 id. 159; Sheldon H. B. Co. v. Eickemeyer Co., 90 id. 613.) The answer made to them is that an act absolutely and wholly void, because, under the law, incapable of being performed, cannot be made valid by estoppel. This is true where under the law there is an entire lack of power to do the act which is brought in question. The distinction is well illustrated in Scovill v. Thayer (105 U. S. 143). Under the law of Kansas no company like that then before the court could increase its capital to more than double an amount originally authorized. The capital was sought to be increased in excess of that amount. As against creditors it was claimed to be a valid increase by the operation of an estoppel, but the court ruled otherwise, and justly; for the very foundation of an estoppel, the misleading of creditors to their injury, was wanting. The latter knew and were bound to know that no power existed to so increase the capital, and therefore that it was not increased; and hence they were not, and could not be misled. But where, as in the present case, the abstract power did exist, and there was a way in which the increase could lawfully be made, and the creditors could, without fault, believe that the increase had been law