74 N.J. Eq. 352 | New York Court of Chancery | 1908
The bill in this case alleges that the Standard Car Truck Company, a corporation existing under and by virtue of the laws of the State of New Jersey, was organized with a total amount of capital stock of the par value of $150,000, the shares being $100 each; that the defendant, who was one of the organizers of the company and its principal stockholder, received one thousand four hundred and ninety out of the total issue of one thousand five hundred shares, and, upon the incorporation of the company, became, and has continued to be, one of its directors and its president; that the defendant, Mr. Barber, persuaded the complainant, Mr. Salford, because of the latter’s extensive acquaintance with railroad organizations, throughout the country, to enter into the employment of the Standard Car Truck Company for a period of three years, the complainant to be paid his necessary expenses and the sum of $7 for each truck he should succeed in getting various railroad companies to put upon its cars, and, in addition, the defendant was to give to the complainant $25,000 worth, par value, that is, two. hundred and fifty shares, of the full-paid capital stock of the company, and to have the complainant elected a director therein, to all of which the defendant agreed, and the company thereinafter, upon the request of the defendant, “ratified the employment of the complainant and provided for his compensation as above stated,"and he was elected one of the company’s directors; that for upwards of two years the complainant continued successfully in the active discharge of his duties under the terms of his em
The defendant was served personally with subpoena in this state on Januaiy 2d, 1901, and the cause slept until October 21st, 1907, when the complainant took an order on him to plead, answer or demur within thirty days after service upon his solicitor of a copy of the order. On November 4th, 1907, the defendant applied for and obtained an order for security for costs, the complainant being a non-resident of New Jersey, and, security being given, the defendant, on December 2d, 1907, filed a general demurrer to the bill.
Counsel for the defendant asserts that the demurrer to the bill raises the question of want of equity, and that the want of equity is, that the complainant has an adequate remedy at law. This was the only proposition discussed upon the hearing.
Eule 209 of this court requires that every demurrer, whether general or special, shall distinctly specify the ground or several
However, under the same rule (209, formerly 225), the grounds of demurrer must be specified even where the defect in the bill is plain, if that defect be collateral to the main issue. Van Houghten v. Van Winkle, 46 N. J. Eq. (1 Dick.) 380. In this case (Van Houghten v. Van Winkle) the defendant under a general demurrer relied upon laches as a cause appearing upon the face of the bill which showed a lack of equity. Chancellor McGill remarked (at p. 886) : “I will not say that the laches exhibited by this bill is not readily discernible, but I am most decidedly of the opinion that within the letter and spirit of the rule, it was the duty of the demurrant to indicate that it was because of laches that he demurred. Not only should specification be made where the defect in the bill is obscure, but also even where it is plain, if it is collateral to the main case made by the bill, as it is in this instance.” As no objection was made to the form of the demurrer it was sustained.
It is at least doubtful, to my mind, whether the question of adequate remedy at law- is not collateral to the main case, the same as laches was held to be in Van Houghten v. Van Winkle, ubi supra; but, be this as it may, it seems that legal remedy when relied upon for cause of demurrer in a chancery suit must be specified as a cause of demurrer. Bishop v. Waldron, 56 N. J. Eq. (11 Dick.) 484; S. C., on appeal, 58 N. J. Eq. (13 Dick.)
While I hold that the demurrer in this case is bad for want of specification oE the cause upon which the alleged lack of equity is rested, nevertheless, as the question of the sufficiency of the-bill was fully argued upon the demurrer, I -will decide that question also.
Counsel for the defendant urges specific performance of a contract for the purchase or sale of stock will not be decreed where the stock is purchasable on the market or has a money value which may be readily computed, and cites 26 Am. & Eng. Encycl. L. (2d ed.) 122.
This is undoubtedly a correct exposition of the law; but the stock of a commercial or industrial corporation, which is usually a close corporation, so called, that is, one owned and controlled by a coterie of individuals, is usually not for sale, and has no-
I think the complainant’s case falls more nearly within that other rule stated in 26 Am. & Eng. Encycl. L. (2d ed.) 122, namely, that where the corporate stock to which the contract relates is not procurable in the market, and its pecuniary value is not readily ascertainable, specific performance will, as a rule, be decreed, especially where the court acquires jurisdiction of the action on the ground that there is an action to enforce a trust.
In Adderley v. Dixon; 1 Sim. & S. 608, 610, Vice-Chancellor Sir John Leach said: “A court of equity will not generally decree performance of a contract for the sale of stock or goods, not because of their personal nature, but because damages at law, calculated upon the market price of the stock or goods, are as complete a remedy to the purchaser as the delivery of the stock or goods contracted for, inasmuch as, with the damages, he may purchase the same quantity of the like stock or goods.”
In Duncuft v. Albrecht, 12 Sim. 190, Vice-Chancellor Shad-well made a distinction between public stocks of a known market value, and stocks of a particular company with none in the market, remarking (at p. 199) : “Now, I agree that it has been long since decided that you cannot have a bill for the specific performance of an agreement to transfer a certain quantity of stock. But, in my opinion, there is not any sort of analogy between a quantity of three per cents, or any other stock of that description (which is always to be had by any person who chooses to apply for it in the market), and a certain number of railway shares of a particular description, which railway shares are limited in number, and which, as has been observed, are not always to be had in the market. And, as no decision has been produced to the contrary, my opinion is that they are a subject with respect to which an agreement may be made which this court will enforce.” This distinction was recognized and approved by Lord-Chancellor Chelmsford in Cheale v. Kenward, 3 De G. & J. 27. He remarked (at p. 29) : “Now, there is no doubt that a bill will lie for a specific performance of a contract to transfer railway shares.”
In Curtice Brothers’ Co. v. Catts, 72 N. J. Eq. (2 Buch.) 831, Vice-Chancellor Learning-held that no inherent difference between real estate and personal property controls the exercise of the jurisdiction of chancery to decree specific performance of a contract, and that where no adequate remedy at law exists specific
A vendor may bring a suit for specific performance against the vendee to recover purchase-money. Moore v. Baker, 62 N. J. Eq. (17 Dick.) 208.
In Goodwin Gas Stove, &c., Co.'s Appeal, 117 Pa. St. 514, the supreme court of Pennsylvania affirmed a judgment of the Philadelphia common pleas sustaining a master’s report. The master’s language is stated as follows (at p. 628) : “The stock is not listed in the stock exchange of this city (Philadelphia) or elsewhere. It cannot be brought in the market. It has no market price. So far as the master is informed there have been no open sales, all transfers having presumably been inter parties. It would seem to be difficult, if not impossible, to measure in money the value of such stock. Based upon its earning power, an estimate could be made of its value, and that sum of money fixed as the damages. The remedy, then, would not be complete. The damages must first be made out of some one whose ability to pay is not in evidence, and moreover, when the money damages are paid, stock in the same company cannot be pr'ocured. Other stock may possibly be purchased, while its earning powers may now be equal to those of the stock in question, non constat, that they will continue to be equal, or that the circumstances and conditions of the two corporations are not so widely different that the real estate of the stocks as investment securities, albeit to-day paying the same dividends, may not be very far apart.”
In Ashe v. Johnson’s Administrator, 2 N. C. 149, 155, the court remarked: “Again it is said equity will not enforce the specific performance of an agreement to transfer or to accept stock. The reply is, that may be so with reference to government stock in England, which, like corn or flour, may 'be bought for the money in market at any time, but the doctrine has no application to railroad stock.” This was in the year 1855, when railroad stocks generally were not as valuable as now, and consequently were not generally regarded as good investment securities, and, while the question was not definitely decided in
In his conclusions in Murray v. Skirm (Court of Chancery, 1905), which is unreported, Vice-Chancellor Bergen, speaking of certain shares of stock of a manufacturing corporation, said: “It was the stock of an industrial company, and its market value was an uncertain quantity.” This case was recently decided on appeal by the court of errors and appeals, and the decree of the vice-chancellor affirmed. Speaking for the majority of the court of errors and appeals in that ease, Mr. Justice Garrison in his opinion said: “If, in the absence of fraud, it be admitted that that question of the value of the stock is at all relevant to the present controversy, it must also be admitted that, strictly speaking, the market value of the stock was not proved, * * * the vice-chancellor properly declined to take par value as the equivalent of market value, and'he also rightly recognized that the price paid for stock to get a controlling interest was not a reliable criterion of the market value of the outstanding minority shares.”
In Raynolds v. Diamond Mills Paper Co., 69 N. J. Eq. (3 Robb.) 299, Vice-Chancellor Stevenson, speaking of the value of shares of corporation stock, said (at p. 309) : “But, .in fact, in this case the complainant’s stock is that of a private manufacturing corporation, a close corporation, whose stock does not appear to have any market value. * * * I think the distinction drawn by counsel for complainant between private manufacturing corporations like this paper mill company and banks and trust companies, and even railroad companies, the shares of which are readily salable at all times on the market, and the market price of which is directly affected by the prosperity of the corporation, ought not. to be overlooked,” &c.
In Baldwin v. Commonwealth, 11 Bush 417, a sale of turnpike stock", belonging to the State of Kentucky, was by legislative act ordered to be sold by the commissioners of the sinking fund, and it was there held that a bid made for such stock which was accepted, should be specifically enforced and the commissioners were ordered to execute th'e contract of sale and transfer the stock. It so happened that after the sale was
If the stock in question in this suit has no- market value for which adequate damages could be given at law, then this court undoubtedly has jurisdiction to specifically enforce the contract between these parties.
Now, I would have no difficulty in holding that complainant in this case is entitled to a decree for specific performance upon the admitted facts, were it not for the allegation in the bill that the stock of the company is now (1901) valuable and sells for almost par. It may be urged that this is an allegation that the stock is practically worth par and that it is salable. On the other hand, it may be urged that this is not an allegation that the stock is worth par, but that it is worth something less than par, and it is not salable on any market, and that, consequently, 'this is a case for specific performance rather than one for remitting the complainant to his action at law for damages.' These questions I will not attempt to decide. They make it at least doubtful whether or not the complainant has an adequate remedy at law, and this compels me to regard another question urged by counsel for the complainant, and that is that the bill in this case presents a case of- fraud and of trust mala fide.
The contract, it will be remembered, was that the complainant should enter into- employment of the Standard Car Truck Company for a period of three years, which he says he did, and that he served faithfully for over two years, and until discharged by the company without cause and at the instigation of the defendant. For that consideration, namely, his services rendered, he was to have two hundred and fifty shares of the company’s stock, of which the defendant delivered to him only thirty-five shares. He alleges that he is entitled to have the balance of two hun
I incline to the opinion that this is a case of fraud 'and of' trust mala [ida. The complainant performed the contract on his part, that is, he paid for the stock by his services, and therefore-became its owner by the law of this state. Delivery is not necessary to complete the sale of personal property. Frazier v. Fredericks, 24 N. J. Law (4 Zab.) 162, 169. In this transaction, I take it, title passed to the complainant.
It seems that the court of chancery in this state have jurisdiction in cases of fraud equally with courts of law even where there is a remedy at law. Eggers v. Anderson, 63 N. J. Eq. (18 Dick.) 264.
There is a constructive trust in this case. Mr. Perry says that constructive trusts are: “Third, trusts that arise from some-equitable principle independent of the existence of any fraud; as where an estate has been purchased, and the consideration money paid, but the deed is not taken, equitj'' will raise a trust by construction for the purchaser.” 1 Perry Trusts 168. The supreme court of Tennessee, in Matthews v. Crowder, 111 Tenn. 738, 743 (citing Perry 168), said: “Equity in such a case will regard the vendor as the trustee of the legal title of the land for the benefit of the vendee.” In my opinion, the defendant in this case holds the legal title to the shares of stock in question for the benefit of the complainant, and, therefore, specific performance is a remedy available to the complainant, irrespective of the question of the adequate of damages at law, and, too, irrespective of the question of fraud.
There is also apother reason for decreeing a specific performance. It is that the complainant has performed all the conditions on his part to be performed, so far as he was permitted to do so by the defendant, and he is, for that reason,- entitled to
In my judgment, where the vendee of real or personal property makes such performance of his part of the contract as satisfies the law, and the other party refuses to perform, a bill for specific performance will lie; and this is even more true in such a case as this, where not only has the complainant performed, but the defendant himself has made part performance.
In arriving at these conclusions, I have not overlooked Joslin v. Stokes, 38 N. J. Eq. (11 Stew.) 31, cited by counsel for the demurrant. Chancellor Runyon, in denying specific performance in that case, remarked that the complainant’s remedy was at law, “except, perhaps, as to the issuing of the stock.” In that case (Joslin v. Stokes) the complainant’s contract was with the defendants, and by its terms he was to acquire stock from a corporation, and the corporation was not bound. Other facts in that case differ from those in this case, and, therefore, in my judgment, Joslin v. Stokes is without controlling effect in the case at bar.
For the foregoing reasons the demurrer will be overruled, with costs.