In re Frye's Estate

DWIGHT, P. J.

Letters of administration were granted to the appellant, on his own petition, as a creditor of the estate. They were revoked by the order here appealed from, on the ground that he was not in fact such creditor. The facts established by the evidence were, briefly, as follows: The decedent, Frye,.being engaged in the business of buying and selling grain at Rochester, procured the organization of an incorporated company to purchase the business from him. The organization was in all respects in 'accordance with law. The proper certificate of incorporation was duly executed and filed, which showed that not less than 10 per cent, of the capital stock was subscribed, and that 10 per cent, of the amount subscribed had been paid in cash to the directors, and officers were duly elected, of whom Frye was the treasurer; but the company never became qualified to do business, because one-half of the capital stock was never subscribed. The appellant was an original subscriber for five shares of the stock at the price fixed, of $50 a share, and paid 10 per cent. ($25) thereon at the time of the organization. Very few, if any, subscriptions to the stock were ever made, beyond the 10 per cent, mentioned in the certificate; and the business was never transferred to the company, but, pending the expected transfer, was carried on as before, by Frye, individually. Frye came to be in want of money for the business, and, upon that fact becoming known to Atwood, the latter paid- him $975, and took from him a certificate of 20 shares of full-paid stock of the company, of the par value of $1,000, which included the 5 shares, originally subscribed by him, on which he had paid $25 at the time of the organization. Atwood also received from Frye the promise to pay him the interest on the $975 until the business should be transferred to the company, it being understood between them that Frye would make use of the money in his own business until that time. The certificate given to Atwood bore the names of the president and treasurer of the company, it having been one of a number which were signed in blank by the president for the convenience of the treasurer, in case of the sale of stock.

This was the transaction between Frye and Atwood, out of which, if at all, arose the relation of debtor and creditor between them. We think it reasonably clear that the relation was not created thereby. The transaction was no doubt irregular, in some respects, but its character was not obscure. It was clearly the intention of Atwood to increase his holding of the stock of the company from 5 shares to 20 shares, and to pay for the whole of it in full. This it was entirely competent for him to do, and this was undoubtedly the effect of the transaction. He testifies that he dealt with Frye as the treasurer of the company, and paid him the money as such; and the certificate which he received, if not, in all respects, regularly issued to him, was good, at least as a voucher, and entitled him to a certificate for 20 shares of full-paid stock. The money, therefore, paid by him, belonged to the company, and he had no claim to recover it from Frye. It was not paid to him under any mistake of fact, and there is no ground for imputing to him any fraud in the transaction, as between himself and Atwood. All the facts of the case were equally known to both parties, and it was the intention of both that Frye should use the money in the business until the business should be transferred to the company. The facts of the case are, we think, equally fatal to the contention of the appellant that he was the creditor of the decedent in respect to the interest which the latter agreed to pay him for the use of the money pending the transfer of the business to the company. Such an agreement was clearly an unlawful one, as being, in effect, if not in intention, a fraud upon the company, to which the money belonged; and, the parties thereto being in pari delictu, neither will be heard to assert a claim against the other based upon that agreement. The views here expressed are based, we conceive, upon elementary principles, and, if correct, they result in the denial to the appellant of the relation of creditor, to any extent, of the decedent, and consequently in the affirmance of the order revoking the letters of administration which were issued to him in that capacity. Decree appealed from affirmed, with costs to the respondent. Ail concur.