47 N.Y.S. 677 | N.Y. App. Div. | 1897
A recovery has been had in this action, based upon the certificate of incorporation of the plaintiff, in which the defendant appears to have subscribed for ten shares of stock of the plaintiff of the par-value of $100 each share. The averments of the complaint based, the liability- of the defendant upon a certain mutual agreement executed by the defendant with four other persons, whereby the former-agreed to. subscribe for ten shares of the capital stock of the plaintiff, then proposed to be organized as a corporation, and his four associates for five shares each. This agreement was followed by .the incorporation of the plaintiff, and the parties to the agreement, in the certificate above mentioned, subscribed for the respective shares mentioned therein. The court held that there could be no recovery upon the agreement, but that the liability of the defendant to the company was created by the certificate of incorporation and the subscriptions therein. The plaintiff was thereupon permitted to amend his complaint to correspond with the proof, and the view of the court. It is quite probable that no amendment was needed to entitle the plaintiff to recover, as the agreement constituted a valid binding subsci-iption for the shares of stock. therein agreed to be taken, which the plaintiff became entitled to enforce upon its incorporation ; and such appears to have been the view of the court on the motion for a new trial. (Buffalo, etc., R. R. Co. v. Gifford, 87 N. Y. 294.) It does not follow from this, however, that the plaintiff became entitled to recover. It appeared upon the trial that none, of ; the subscriptions1 were paid in cash at the time of subscription. The " shares subscribed for by the associates of the defendant were paid for.in services, and the only money -that was paid by any one came . from the defendant, who paid the expenses of incorporation, and for . some other matters, amounting in all to. the sum of $700. No other money was ever paid in by anybody. No business was done by the company, either in the manufacturing of articles proposed to be manufactured by it, or in making contracts which its business contemplated. The Only thing which. the company or-its stockholders- ever did in' the way of conducting its business was the execution of an agreement between the stockholders themselves. This agreement was made between Deering, as party of the first part, and the other stockholders as parties
The $15,000 working capital was never raised, no. money was paid' in, and so far as appears nothing further was done to forward the enterprise contemplated by the incorporation of the company. Understanding these facts, we are prepared to consider the rulings of the learned trial judge made upon the trial. The counsel for the defendant called as a witness one of the stockholders and was engaged in an attempt to show what was done by the company upon .failure to fulfill the contract above referred to. The court interposed with a statement that plaintiff could not recover upon that paper, and added: “ If you can prove now that the company released them from the subscriptions, or if it was paid, you may do so.” The counsel then proceeded to inquire what was done at a specified meeting of the board of directors respecting the subscription of the stockholders.' This was objected to on the ground that the minutes would show, and the court replied: “Yes, put the minutes in.” Inquiry was then' made respecting the minutes, and the question was asked, referring to the stockholders aside from Deering, “ Q, And were those four persons released, did he state?” This was objected to and the objection was sustained. The first president of the company, Mr. Lyon, was then called and interrogated respecting what transpired at the meet•ing above referred to; and questions were asked him concerning the
It is quite true that directors of a going concern having creditors, contracts, stockholders and a business, could not by agreement among themselves release each other from- their obligations to the company, to the prejudice of the company, its stockholders and creditors. But there can be no objection under the circumstances of this case to the parties in interest making an agreement by which the stockholders were released from liability to the company or to each other. They represented all the interest there was and were competent to contract. Any valid agreement then madé the court would enforce. The defendant became, therefore, entitled to show, if he could, that an arrangement was made by which he was discharged from liability. ' The proof rejected was offered for that purpose, was competent, and its rejection was error. It is said that no such defense was pleaded. No such question was raised by any objection, nor was any suggestion of the kind made upon the trial. The ruling of the court excluded the testimony upon the ground that if such agreement were established it would constitute no-defense.' If a suggestion of -this character had been made, the way was open for the defendant to apply to amend his pleading. But such course was futile under the rule adopted by the court. It is quite clear that if the court had regarded the agreement as establishing a defense, it would and should have, permitted an amende ment. . It may be that the defendant will require an amended pleads ing in order to now avail himself of this defense. But as no such question was raised upon the trial, we think it ought not to be considered here for the first time under the particular circumstances of this case and the course of the trial.
For error in rejecting the proof offered the judgment should be reversed and a new trial granted, with costs to abide the event:
All concurred.
Judgment and order reversed and new trial granted, costs to abide the event.