49 N.J. Eq. 82 | New York Court of Chancery | 1891
The complainant is the owner of fifty shares of the capital stock of the Saxonian Manufacturing Company. The defendants are Louis J. Bohmrich, Max Brand and the Saxonian Manufacturing Company. Bohmrich is the president of the defendant corporation and Brand is secretary and treasurer. The corporation was organized on the 11th day of June, 1890, under a general statute of this state, with a capital of $20,000, divided into two hundred shares of $100 each. No subscriptions to the stock were made, but two days after the organization certificates for the whole number of shares were issued. Fifty shares were issued to the complainant, for which he paid $5,000 in cash; forty-eight shares were issued to the complainant’s wife, for which sh.e gave her note, payable on demand, which the corporation still holds; fifty shares were issued to the wife of Bohmrich, for which she also gave her note, which is still held by the corporation; and one share was issued to Brand, for which he also gave his note. The fifty-one remaining shares were issued to Bohmrich. He paid nothing for them in money, nor did he, at the time of their issue, make a written transfer of any property for them, nor has he since. The complainant says that he has not paid for them in any way, but that they
The complainant’s right to maintain this suit is disputed. The contract, which he is asking to have enforced, was made by Bohmrich with the corporation, and hence, it is said, that nobody but the corporation can maintain an action on it. That would unquestionably be so if it did not appear that the corporation is-under the control of managers who cannot bring a suit, in the name of the corporation, for the purpose for which this suit is brought without accusing one of their number, and he their chief, of an attempt to defraud the corporation. If they could' be induced to consent to sue, it is manifest that their bias would constrain them to so conduct its prosecution as to insure defeat rather than success. When the complainant first insisted that Bohmrich should pay for the stock issued to him, and also when he instituted this suit, Bohmrich and his wife, Brand and the-complainant and his wife were the directors of the corporation. Brand is the partizan of Bohmrich. He was a witness for him, and gave substantially the same account respecting the means by which Bohmrich acquired his stock that Bohmrich himself did. It may be safely assumed, without proof, that Bohmrich’s wife-would not have voted that a suit should be brought to compel! him. to pay for his stock. She would, undoubtedly, have insisted, as he does now, that the corporation had no right of action against him, and that if a suit should be brought it would result in nothing but a useless expenditure of money. So that it is-obvious that, had the complainant, before bringing this suit, requested the directors to sue, for the same cause of action, his-request would have been denied by a vote of three to two. Bohmrich and his partizans had control of the corporation — they held one hundred and two of the two hundred shares of stock,, and had three votes out of the five in the board of directors. In this condition of affairs the complainant was under no duty, before bringing his suit, to ask the directors to sue in the name of the corporation. The rule is settled that such application need not be made when the interest or bias of the managers of the
Bohmrich does not pretend that he has paid for his stock with money, nor that he has made a written transfer of property to the corporation in payment of it. His certificate is not stamped, as the statute says certificates of stock issued in payment for property purchased shall be. Rev. 187 § 55. It does not declare upon its face that' the stock, for which it was issued, had been paid for by property and not by money. Nor does Bohmrich pretend that the corporation agreed with him that he might pay for his stock with property as distinguished from money. It is admitted that the corporation did not agree, by a vote of its-directors, or in any other way, that he might pay for his stock with property. There was no corporate action on the subject,, and, so far as appears, the question, as to whether or not he-should have the right to pay for his stock in a manner different from the other stockholders, was never suggested or mentioned: in the presence of either the directors or stockholders. These-are matters about which there is no dispute. Bohmrich rests his-right, as against the complainant, to the stock he holds on this-ground : he says, prior to the formation of the corporation, and also on the day the corporation was formed, it was agreed between the complainant and himself, that he should transfer to-the-corporation a business in which he was then engaged, together-with the machinery used in such business, his stock on hand,, fixtures, books of account and the lease of the premises where the business was carried on, and that in payment of such transfer-fifty-one shares of stock were to be issued to him. He further-says, that the stock he holds was issued to him in execution of this contract, with the knowledge and approval of the complainant. If this claim is true, it would seem to be quite clear that the-complainant is not entitled to the decree he seeks. Though the-corporation may not be bound by this contract, still it would seem, to be unquestionably just-, that the complainant should be held to> be bound by it to the extent of depriving him of the right to maintain an action in equity to compel Bohmrich to pay for his stock in a manner entirely different from that agreed upon; especially
The corporation was organized to manufacture and sell dress and cloak trimmings. Bohmrich had carried on this business* prior to the organization of the corporation, under the same name adopted by the corporation. He commenced business in March, 1890, and the corporation was formed in June following. Prior to March, 1890, Bohmrich had never manufactured or sold trimmings, and knew nothing about the business. "While lie carried «on the business he admits that he lost money. His sales amounted to less than $200. He says he had invested in the business, when the corporation was formed, about $1,660, including the sums he had paid for wages and rent. The person who purchased for him the machinery, utensils and stock he had on hand when the corporation was formed, says that his outlay for those purposes was less than $800. Bohmrich does not claim that the property he was to transfer to the corporation, under his arrangement with the complainant in payment of the fifty-one shares of stock, was worth $5,100; he, on the contrary, admits that it was worth only about $1,660, but says that the difference between the last named sum and the value of the stock was made up of the value of his time in establishing the business, of a lease of the premises where the business was carried on, and the good will of the business; in other words, that he was to be paid for his time, the lease a.nd good will over $3,400. But he does not say that any of these things, except the lease, was ever mentioned or alluded to in any conversation between the complainant and himself. He does not claim that the complainant ever agreed or consented that he should be paid for his
This is the way the proofs stand on the point in controversy. They fail to convince me that such a contract as that on which the defence rests was made. On the contrary, there is, in my judgment, very strong proof inherent in the negotiations between Bohmrich and the complainant, as Bohmrich himself describes them, tending to show that no such contract was made. The complainant took fifty shares of stock and paid $5,000 in cash. Bohmrich at the same time took fifty-one shares and paid for them with property, worth, according to his own valuation, less than $1,700, and this, he says, he did with the consent and approval of the complainant. And yet he admits that, during his negotiations with the complainant, the complainant did not ask, and he did not tell him, what the machinery had cost, nor what it was worth, nor how much money he had invested in the business. He says that nothing at all was said on either of these subjects. If Bohmrich’s evidence is true, the complainant consented that Bohmrich should receive $5,100 in stock for his property, without inquiry either as to the cost or value of his property, although, as part of the same transaction, it was understood that the complainant would put down, as the equivalent of Bohmrich’s property, $5,000 in cash. Not only so, but it appears from Bohmrich’s evidence that the complainant gave such consent with full knowledge, derived from Bohmrich himselfj that the property, which was to be transferred to the corporation, was not worth $4,000. Shortly prior to the formation-of the corporation Bohmrich says that he requested the. complainant to have the property, which he used in his business,, insured for $4,000, and that the complainant subsequently reported that the agent to whom he had applied objected to the risk on the ground that the property was not worth that sum. And Bohmrich says, on receiving this report, he said to the complainant that he knew that he did not have that amount of property in his factory, but it “ was apt to be there.” Now, it may be that the complainant made the contract alleged without
The complainant is entitled to a decree requiring Bohmrich to-pay the corporation for his stock. Whether he is entitled to credit for the value of his property, which the corporation has-used since its organization, is a question which was not discussed on the argument, and has, consequently, not been considered. It must, however, be decided before a decree is made.
The complainant is entitled to costs.