Opinion
June Term, 1896.
Charles Roe, for the appellant.
James G. Greene, for the respondent.
In Seymour v. Sturgess ( 26 N.Y. 141) ALLEN, J., in speaking of the liability of a stockholder upon an original subscription or as transferee of stock, said, viz.: "Without a promise, proved in one way or the other, a party cannot be charged in assumpsit. If the circumstances negative all presumption of a promise, there is no rule of law applicable to any class of cases which compels courts to disregard the circumstances and adjudge a promise to have been made against the evidence. In the class of cases referred to (actions upon unpaid subscriptions for stock and against assignees of stock not fully paid for) courts have had respect to the terms of the contract and certificate and the circumstances of the case, leaving it for other tribunals, in applying the same principles, to observe and give effect to different circumstances as they may arise, and declare what, in each case, is the contract or agreement of the parties. The Company was here incorporated, not to accomplish a great public object, but for the immediate profit and advantage of its projectors, and to enable them to dispose of their land and mines, and with a view to a development of their resources by those who should associate together in the corporation." In that case no formal subscription was made for the stock. None is found in the appeal book before us. In the course of the opinion in that case it is further said: "But if there be no such agreement, the sole remedy for the corporation is by the sale of the shares of the delinquent members;" citing numerous cases. And the learned judge further added: "There was no express contract by the defendant Sturgess, or by any one to whose rights and liabilities he has succeeded, to take and pay for the stock; and no implied contract or promise is made out by the evidence. On the contrary, every circumstance shows that no such promise was made, or intended to be made, or understood to have been made; and it follows that there is no personal liability which can be enforced by the corporation, or in behalf of and for the benefit of a creditor of the corporation."
That case was referred to with approval in Wintringham v. Rosenthal (25 Hun, 580) in which case it appeared that Brown had subscribed for 500 shares of the capital stock of a bank and transferred 50 shares of them to the defendant, and in an action brought by the receiver of the bank to recover the unpaid calls upon the stock, it was held that the defendant was not liable for the same. And near the close of the opinion in that case BARNARD, P.J., said: "It is only where there is an express agreement to pay that an action will lie by the corporation; `but if there be no such agreement the sole remedy for the corporation is by the sale of the shares of the delinquent members.'"
In Billings v. Robinson ( 94 N.Y. 415), near the close of the opinion, FINCH, J., said: "It was said in Seymour v. Sturgess ( 26 N.Y. 141) that in actions upon unpaid subscriptions for stock, and against assignees of stock not fully paid for, courts have had respect to the terms of the contract and certificate, and the circumstances of the case."
In The Fifth Avenue Bank v. F.S.S. G.S.F.R.R. Co. ( 137 N.Y. 231) a secretary and treasurer of a company forged certain certificates and caused the same to be issued against the corporation in which he was acting with apparent authority, and innocent parties relied upon the representations made by him and the instruments issued, and the corporation of which he was an officer was held to be liable. That case is commented upon extensively by VAN BRUNT, P.J., in Mutual Life Ins. Co. v. Forty-second Street G. St. F.R.R. Co. (74 Hun, 505; S.C., 26 N Y Supp. 547).
To support the defense interposed by the defendant he was sworn as a witness, and he was interrogated as to what Reynolds said at the time he, the defendant, purchased the stock of him, and after the referee had excluded the conversation held with Reynolds, in which the defendant claimed that he had represented that the stock was fully paid up, he testified that, before purchasing the stock he had a talk with the directors or managers of the company about the stock. He says: "I had a talk at that time before I purchased the stock of Mr. Reynolds; I talked with Mr. Aris and with Mr. Ranger at the company's office." When asked for what purpose, an objection was interposed by the plaintiff, on the ground that it was incompetent, and the objection was sustained and an exception was taken. Thereupon the further question was propounded to the witness: "Q. What office did Mr. Aris hold at that time?" This was objected to by the plaintiff's counsel, and thereupon the following questions were propounded: "Q. Did you know at that time that Mr. Aris was an officer in the company? A. I do not know whether I knew it before or not. I went there and inquired if Mr. Aris and Mr. Ranger were officers of the company; Mr. Aris stated that he was the manager. Q. What was your conversation with Mr. Aris about the stock? A. I inquired as to the value of the stock and the advisability of purchasing stock of the company. Q. That was with Mr. Aris? A. Yes. Q. What did he say? A. He said that the stock was valuable stock, and advised me to buy it at a reasonable figure; I inquired of him about the liability of the stock, as to the value of the stock, and he said it was valuable stock, and he said that the stock was fully paid; he told me that the stock of the company that had been issued was paid-up stock." The witness stated that at the time he made the inquiries of Aris he did not have the certificates, and on being interrogated in the course of his cross-examination, he says: "He (Aris) said that it was paid-up stock. * * * I went to Mr. Aris as an officer of the company; I went to the company and found Mr. Aris was the officer; * * * I was led to believe by the officers of the company that the stock was fully paid up, and I did not examine the stock critically."
Subsequently Ranger was called as a witness for the plaintiff, and he testified that he "never told him (the defendant) that all the stock of the Kettle Falls Land Company was full paid stock; Mr. Aris also had his headquarters at the office. * * * I never heard Mr. Aris tell defendant that the stock was full paid."
Aris was not called as a witness, and no reason appears in the appeal book why his testimony was not offered by the plaintiff.
In the certificate of incorporation both Aris and Ranger appear as incorporators and as directors, named in the certificate, to manage the affairs for the first year, and they executed the certificate of incorporation on the 22d of September, 1890.
If the witness Roe had been permitted to testify that Reynolds, at the time of the negotiation of the stock, represented to him that it was fully paid-up stock, that fact would have borne to some extent upon the question as to whether he relied upon the assumption that it was paid-up stock when he purchased the same, and in connection with the evidence that he did give would have been corroborative of the position he took that the defendant's officers represented to him that the stock was paid up; and in furtherance of that same idea the referee might properly have allowed the witness to answer the question for what purpose he went to the company's office to inquire about the stock. The important inquiry was whether the defendant ever agreed to purchase any shares other than those that were fully paid up. If the referee, after receiving all the evidence offered, had given full force and effect to that which bore upon the question, he might have found that the defendant inquired of the corporation, and was by it informed that the stock was paid up, and that he relied upon such information, and, therefore, ought not to be held liable as having made either an implied or express promise to pay future calls upon the stock. (Cook on Stockh. § 418; Van Cott v. Van Brunt, 82 N.Y. 535; Barr v. N.Y., L.E. W.R.R. Co., 125 id. 263; Holmes v. Willard, Id. 75, 80.)
There does not seem to be any laches on the part of the defendant that would prevent him from availing himself of the doctrine of estoppel if the facts are as claimed in his testimony. This case differs from Trenton Banking Co. v. Duncan ( 86 N.Y. 221).
Upon another trial the facts in respect to the representations made to the defendant by Reynolds and by the plaintiff's officers may more fully appear and a more intelligent conclusion be formed upon the evidence relating to the question of the representations made by the plaintiff's officers to the defendant before he became a purchaser of the stock. We are, therefore, of the opinion that, under the rule laid down in Guernsey v. Miller ( 80 N.Y. 181), we should order a new trial instead of dismissing the plaintiff's complaint. (See Foot v. Ins. Co., 61 N.Y. 571. )
The foregoing views lead to the conclusion that the judgment should be reversed and a new trial ordered, with costs to abide the event.
All concurred.
Judgment reversed and a new trial ordered, with costs to abide the event.