Opinion
April Term, 1902.
Henry G. Wiley, for the appellants.
J. Warren Greene, for the respondent.
The action is brought to recover the penalty prescribed by section 52 of the Stock Corporation Law (Gen. Laws, chap. 36, and Laws of 1890, chap. 564, as amd. by Laws of 1892, chap. 688) for the neglect or refusal of the treasurer of a corporation to furnish a statement of the affairs of the corporation to a stockholder as therein prescribed.
The "C.A. Blanchard Company" was a domestic business corporation and its capital stock exceeded $100,000. More than three per centum of the capital stock of this company was issued to C.A. Blanchard, who held and owned the same. He owed the plaintiffs as copartners. The indebtedness was represented by promissory notes; and he transferred this stock to the firm as collateral security with authority to sell the same at public or private sale upon default in payment. After Blanchard defaulted in paying some of the indebtedness, the appellants authorized their attorneys to surrender the stock and have new certificates issued in their firm name. The attorneys delivered the stock to the secretary of the company on the 7th day of March, 1898, with instructions to have new stock so issued. Upon the day following the attorneys made a written request by mail upon the respondent, who was the treasurer of the company, for a statement of its affairs as prescribed in said section of the Stock Corporation Law. The demand was not made in the name of the pledgees or by the attorneys as attorneys in fact, nor was the authority to make the demand transmitted with it; but it was not returned, and subsequent promises on the part of the respondent to comply therewith doubtless constituted a waiver of any objection to the form of the request. New stock was issued to the appellants on the tenth day of March, and as no proof of the entries in the stock book was made, we think that the inference is that the stock remained in the name of Blanchard upon the books of the company until new stock was issued. Consequently at the time of the demand the appellants were not stockholders or owners of record. At least, the evidence does not show this, and the burden was upon the plaintiffs to establish their right to the statement at the time they made the request therefor.
It is urged on the part of the appellants that the allegations of ownership of the stock are admitted by the pleadings. The attempted denial of this allegation of the answer is in the following form: The defendant "for a first and separate defense alleges that he has no knowledge or information sufficient to form a belief * * * as to whether the plaintiffs were at any of the times mentioned in the complaint the owners or holders" of the stock therein mentioned. This form of pleading is not to be commended or encouraged, but, although inartistic, it constitutes a denial. ( Meehan v. Harlem Savings Bank , 5 Hun, 439; Grocers' Bank v. O'Rorke, 6 id. 18.)
If the plaintiffs were the owners of the stock at the time of making the demand it is not at all certain that they have not waived their rights under the demand, for they subsequently extended the time to comply therewith and entered into negotiations looking toward an examination of the books of the corporation by an accountant in lieu of a statement by the treasurer, which negotiations were never formally terminated, nor was any new notice given that appellants intended to insist upon a compliance with their demand. ( Toplitz v. Bauer, 161 N.Y. 325; Bailey v. American Deposit Loan Co., 52 App. Div. 402; S.C. affd., 165 N.Y. 672; Ver Planck v. Godfrey, 42 App. Div. 16. )
But this statute is highly penal. It was enacted for the benefit of stockholders and concerns them only. In order to enforce the penalty against the treasurer they must bring themselves within the terms of the statute. We are of opinion that the stock book of the corporation which contains the names of the stockholders and in which all transfers of stock are required to be entered, is ordinarily, at least, the treasurer's guide and authority in furnishing statements pursuant to the provision of section 52 of the Stock Corporation Law. If the stockholder wishes to enforce the penalty he must see to it that he is a stockholder of record at the time of making the demand upon the treasurer for a statement of the affairs of the corporation. We find no precedent precisely in point, but this appears to be the reasonable construction of the statute and will furnish a general rule that is fair and just, alike to the stockholders and to the treasurer, and which may be readily understood and enforced.
The action is based upon the theory that at the time of the demand the appellants were in a position to require that a statement of the affairs of the corporation be furnished to them. As has been seen, the stock at that time stood in the name of Blanchard and the new stock had not been issued to appellants. Not being stockholders of record we think that their demand was ineffectual and that the action cannot be maintained.
We do not consider that these views are in conflict with the case of Robinson v. National Bank of New Berne ( 95 N.Y. 637); Chemical National Bank v. Colwell (132 id. 250); Matter of Petition of Argus Co. (138 id. 557, 572), and like authorities holding that where stock is transferred absolutely the legal and equitable title vest in the transferee, and the corporation must, upon notice, recognize such title even before its entry in the stock book. In the case at bar, the appellants, although entitled to hold the legal title to the stock in their names, that being essential to enable them to sell it as authorized, are, nevertheless, pledgees and not absolute owners. ( Wilson v. Little, 2 N.Y. 443; Buffalo German Insurance Co. v. Third Nat. Bank , 162 id. 163; Newton v. Fay, 92 Mass. [10 Allen] 505; State ex rel. Koons v. First Nat. Bank of Jeffersonville, 89 Ind. 302.) Furthermore, it will be remembered that the surrender of the old stock was not made to the treasurer, and it does not appear that he had anything to do with its cancellation or issuing the new, or, in fact, that he had any knowledge of its surrender, and there can be no presumption of such knowledge at least until after the entries were made on the stock book.
After having the stock transferred to their name and becoming stockholders of record, they doubtless became owners of the stock within the fair intent and meaning of section 52 of the Stock Corporation Law, and then would be entitled to the statement therein provided for upon making proper demand. (Gen. Corp. Law [Laws of 1892, chap. 687, amdg. Laws of 1890, chap. 563], § 20; Stock Corp. Law, §§ 29, 40 Vail v. Hamilton, 85 N.Y. 458.)
It follows, therefore, that the complaint was properly dismissed, and the judgment and order should be affirmed, with costs.
VAN BRUNT, P.J., PATTERSON, O'BRIEN and McLAUGHLIN, JJ., concurred.
Judgment and order affirmed, with costs.