ERROR to the Circuit Court of the United States for the Northern District of New York.
This suit was brought in 1869 by Dexter A. Knowlton, a citizen of Illinois, against The Congress and Empire Spring Company, in the Supreme Court of the State of New York, to recover the sum of $13,980, with interest from Feb. 20, 1866. In 1876 he died, and the suit was revived and continued by the administrators of his estate. They are citizens of Illinois, and on their application the suit was, March 20, 1877, removed to the Circuit Court of the United States. The parties, by written stipulation, waived a jury. The court tried the case, and found the facts to be substantially as follows:--
The Congress and Empire Spring Company is a corporation organized under the statute of the State of the State of New York of Feb. 17, 1848, authorizing the formation of corporations for manufacturing, mining, mechanical, or chemical purposes, and subsequent acts amendatory thereof. Its capital stock was $1,000,000, divided into ten thousand shares of $100 each, issued in payment of property purchased by the trustees of the corporation for its use.
The mode by which such a corporation might increase its capital stock is prescribed by sects. 21 and 22 of chapter 40 of the laws of 1848.
Sect. 21 prescribes how the notice of a meeting of the stockholders to consider the proposition to increase the capital stock shall be given, and what vote of the stockholders shall be necessary to carry the proposition.
Sect. 22 prescribes how the meeting of the stockholders, called under sect. 21, shall be organized, and declares that if a sufficient number of votes has been given in favor of increasing the amount of capital stock, 'a certificate of the proceedings, showing a compliance with the provisions of this act, the amount of capital actually paid in, . . . the whole amount of debts and liabilities of the company, and the amount to which the capital shall be increased, . . . shall be made out, signed, and verified by the affidavit of the chairman and countersigned by the secretary, and such certificate shall be acknowledged by the chairman and filed, as required by the first section of this act; and when so filed the capital stock of such corporation shall be increased . . . to the amount specified in such certificate, . . . and the company shall be entitled to the privileges and provisions, and subject to the liabilities, of this act, as the case may be.'
The corporation passed a resolution, Jan. 11, 1866, to increase its capital stock by the addition thereto of $200,000, for the purpose of building a glass factory for the manufacture of bottles and providing a working capital. It also resolved that the books of the company should be opened for subscriptions to the additional stock, and that each stockholder should be allowed to take one share of the new for every five shares he held of the original stock, and that when he had paid $80 on each share the company should issue to him a certificate as for full-paid stock.
At a meeting of the board of trustees of the corporation, held Feb. 8, 1866, a dividend of four per cent on the original stock was declared, payable Feb. 20, and it was resolved that a call of twenty per cent on the new stock should be made, payable on the latter date; that the books of the company should be at once opened for subscriptions to the new stock; that each stockholder should have the privilege of taking one share of the new for every five shares of the old stock held by him, and that on failure of any stockholder to pay, on or before that date, $20 on each share of the new stock taken by him, all his claim to such new stock should be forfeited and the same divided ratably among the stockholders who had paid the instalment of $20 per share.
In pursuance of the resolutions the trustees immediately issued a stock subscription agreement, by which the subscribers stipulated to take the number of shares set opposite their names and to pay for each share $80, in instalments, as called for by the directors; and upon failure to pay the instalments within sixty days after call, that the money already paid on the stock should be forfeited to the company. By the same agreement the company bound itself to pay interest up to Feb. 1, 1867, on all sums paid on the new stock, and on Feb. 8, 1867, to issue for every share of said new stock on which $80 had been paid a certificate to the holder as for full-paid stock; and it was provided that the holders of such stock should be entitled to vote thereon, and the same should draw dividends and be treated in all respects as full-paid stock.