Page:Henry Osborn Taylor, A Treatise on the Law of Private Corporations (5th ed, 1905).djvu/739

 CHAP. XIII.] SHAREHOLDERS AND CREDITORS. [§ 724. bolder of stock issued for property individually with the debts of the corporation, it was not enough to prove that the property was purchased at an over-valuation through a mere mistake or error of judgment on the part of the company's trustees. The purchase had to be shown to have been made in bad faith, with intent to evade the statute. But in such case in order to establish legal fraud it was only necessary to prove, (1) that the stock exceeded in amount the value of the property in exchange for which it was issued, and (2) that the trustees issued it de- liberately, and, with knowledge of the real value of the prop- erty, overvalued the same. 1 It might properly be left with the jury to say whether " the property was placed and taken at a higher valuation with a fraudulent purpose, with the intent to evade the statute." 2 § 724. Where the statute prescribes conditions precedent which are to be performed by a creditor to entitle him p er form- to sue a shareholder, the plaintiff must allege and ^editS-sof estopped from setting up its illegal or irregular issue (see §541), when they have voted for the increase, accepted the stock, and received divi- dends thereon. The new shares of the stock so in- creased become subject to the lia- bility of this section until fully paid up and a certificate filed; but the fact of their remaining vinpaid does not revive the liability of the hold- ers of the original shares, which are paid up, and a certificate filed as required. The provision that the certificate shall be matte tvithin thirty days is but directory. Veeder v. Mudgett, 95 N. Y. 295. Interest will be allowed on the creditor's claim from the time when he begins his action against the stock- holder, even though such allowance of interest increase the claim to a sum exceeding the amount of stock held by the defendant. Burr v. Wilcox, 22 N. Y. 551; Handy v. Draper, 89 N. Y. 334; Shellington v. Howland, 53 N. Y. 371. Contra, Cole v. Butler, 43 Me. 401, 405; Sackett's Harbor Bank v. Blake, 3 Rich. Eq. (S. C. ) 225, 233. And where the entire principal and in- terest of the debt do not exceed the amount of the stockholder's liability as limited by the statute, interest will be allowed as against the stock- holder from the maturity of the debt. Wheeler i>. Millar, 90 N. Y. 353. 1 Douglass v. Ireland, 73 1ST. Y. 100. See, also, Schenck v. Andrews, 57 N. Y. 133; Boynton v. Andrews, 63 N. Y. 93; Boynton v. Hatch, 47 N. Y. 225; National Tube Works Co. v. Gilfillan, 124 N. Y. 302. 2 Lake Superior Iron Co. v. Drexel, 90 N. Y. 87. For the present New York statute, see sec. 42, chap. 688, laws of 1892, as amended by chap. 354, laws of 1901. (Ante, § 522c, n. 3.) 719