Travis v. Travis

124 N.Y.S. 1021 | N.Y. App. Div. | 1910

Carr, J.:

One Frank Travis was engaged in the business of real estate' brokerage in the firm of John L. Travis & Son in the year 1906. He knew of some real property which could be purchased for $9,000, subject to a mortgage of $4,500. If he could get'a purchaser for the property the vendors’ broker was to divide with him equally the commissions to be paid by the Vendors, amounting to $500. Desiring to effect a .sale of this property he went to some of his relatives and procured the formation of a corporation to buy the property. - He represented to the parties who entered into the agreement to form the corporation that the lowest price at which the property could be bought was the sum of $10,000. The agreement was that four persons should each contribute--$l,500 to buy the property, and receive in return, each respectively, fifteen shares of the stock of the purchasing corporation. He was to be one of the four contributors to the purchase price, and to stand on an equal plane with his fellows. The company was formed accordingly; he was elected its treasurer, and each of his three associates paid in their respective contributions of $1,500 each, and received their proportions' of the capital stock, fifteen shares, respectively. A certificate for fifteen shares was likewise issued to him. The property was purchased by the corporation in question for an assumed consideration of $10,000. It came out subsequently that the net actual consideration of the sale did not exceed $9,000. In other words, his associates contributed the whole amount of the purchase price, and he gave nothing. Out of this $9,000 he received, without the knowledge of his associates, the sum of $250 from the vendors’ broker as a division of the brokerage fees paid by the vendors. As the matter then stood, his associates had paid for the whole property, and indirectly had paid his commissions, and he had received fifteen shares of stock in the corporation, which are concededly of considerable value, without contributing one dollar in cash. The plaintiff, John L. Travis, is a member of the same firm of which Frank Travis was a member. He claims that by a mutual agreement between Frank and himself, based upon a consideration, Frank was' to hold six shares of the stock issued to him, under the circumstances above related, in trust for him, John L. He brings this action to enforce the alleged trust against both the corporation and the transferee of the stock formerly held by Frank. The corporation defends on the ground that Frank obtained the stock in question without consideration, and that the certificate thereof should be canceled as null and void. The transferee from Frank offered in court to surrender the certificate for cancellation. Judgment was given dismissing the plaintiff’s complaint. From this judgment the plaintiff appeals. On the face of the transaction Frank Travis cheated his associates. In fact he did not contribute one dollar, as but $4,500 in cash was needed to buy the property, and all of this amount was furnished by his associates. If it can be worked out that he made any contribution for the stock of the corporation, this contribution came necessarily from a secret profit which he made by putting through the sale at the apparent price of $10,000, and secretly receiving back the difference between that and the true price, and, in addition, by receiving secretly a portion of the commission of the vendors’ broker. As between Frank Travis and the corporation there was no actual consideration for the stock issued to him unless the law will permit him to profit ¡ by his trickery and gross breach of faith. That the law will not so permit him is well settled. (Duncomb v. N. Y., H. & N. R. R. Co., 84 N. Y. 190; Redhead v. Parkway Driving Club, 148 id. 471.) The vice affecting the legal rights of Frank Travis in the stock so issued to him pervades whatever rights the plaintiff has against the corporation under the agreement with Frank; and, so far as this action is concerned, they both stand exactly in the same shoes.

The judgment should be affirmed, with costs.

Woodward, Jenks, Thomas and Rich, JJ., concurred.

i

Judgment affirmed, with costs.