3 Md. Ch. 418 | New York Court of Chancery | 1851
There can be no doubt that a special case must in general be shown before the Court will allow a defendant to amend his answer, and this for reasons too obvious to be stated. Amendments have been allowed where new matter has come to the knowledge of the defendant since his answer was filed, or in case of surprise or mistake, or where an addition has been made to the draft of the answer after the defendant has perused it, and in some other special cases, treated of in the books of practice, and in reported cases, 2 Danl.’s Ch. Pr., 911, 912.
In the opinion and order of this Court, of the 22d of November, 1848, the cause was referred to the Auditor, with directions to state an account, in conformity with the principles which, in my judgment, in the then condition of the cause, should govern it; and the complainant was given liberty to surcharge and falsify the settlement of the 1st of June, 1844, in several particulars specified in the opinion; but inasmuch as the defendant, standing upon that settlement as a compromise of conflicting claims, did not seek to surcharge and falsify, the order of this Court necessarily limited the right to the complainant, so that every error in the accounts upon which the settlement was made injurious to the defendant (if any such there be), could not be examined into or corrected. In this state of the cause an appeal was taken by the defendant to the Court of Appeals, which, at its December term last, passed an order remanding the record to this Court, under the provisions of the 6th section of the Act of 1832, ch. 302, without reversing or
The Court of Appeals further said in their order, that they concurred with the Chancellor in the opinion and decision given by him, but forasmuch as his decision restricted the right to surcharge and falsify to the complainant alone, they modified his opinion so far as to extend the right to both parties, which was deemed essential to the substantial justice of the case, in the event of the defendant, by amendment of its pleadings, placing itself in such an attitude as will authorize the Chancellor to make such enlargement and extension.
The Court of Appeals, then, in the exercise of the discretion conferred upon them by the Legislature, have thought fit to remand this cause to this Court, and in explicit terms have authorized the parties to amend the pleadings, if deemed necessary by them, and to take further testimony; and they have also made the right to surcharge and falsify reciprocal, deeming such course essential to the substantial merits of the cause, provided the defendant, by amendment, put itself in a condition to authorize the Chancellor to give that privilege to it.
The Court of Appeals have not said, nor upon any just construction of their order can they be understood to mean, that the defendant may amend its answer so as to place itself in a condition to surcharge and falsify the accounts, provided it shall be shown to the Chancellor that the matters, in respect of which it seeks so to surcharge and falsify, were recently discovered, or were not known to the defendant at the time of filing the original answer, or at the original hearing of the cause in this Court. On the contrary, it is most manifest from
The other exceptions maintain, that many of the particulars in respect of which the defendant proposes to surcharge and falsify the settlement were conclusively adjudicated by the former order of this Court, and as the Court of Appeals concurred in that order, and the reasons upon which it was passed, nothing settled by it is now open.
I have carefully read over the answer, and compared it with the former opinion and decision of this Court, and do not find it obnoxious to this objection. It does not propose to relitigate what has been already adjudged, though it does propose, in some instances, by counter charges, to show that sums which were allowed the complainant have been paid. It would be tedious, and indeed, pressed as I am at this time, it would be impossible to go in detail over the various points adjudicated by the Court, by the order of November, 1848, and specify particularly why I think the amended answer does not propose to retry or controvert them. But one or two points will be adverted to as examples.
The first error adjudged to exist in the account, was that the complainant w'as entitled to be credited with dividends upon the whole capital invested in the Savage Railroad Company, and this the defendant does not, and cannot now be allowed to dispute.
Second, that it was erroneous to charge the complainant with ten per cent, on the cash balances in this account; and this, therefore, is no longer open to, nor does the amended answer propose to call it in question. Third, that the sum of
Now surely if the complainant, notwithstanding this decision against him at that time, is at liberty to bring forward further proof in support of this charge, and his right to do so cannot be disputed, with what propriety can it be said the defendant shall not be equally favored with reference to the first-named sum, because the decision with regard to it was adverse to him upon the proof then in the record ?
With regard to the charge against the complainant, for moneys expended in erecting the furnace, the answer does not propose to open the question anew, the judgment of the Court
That this cause has not progressed as speedily as the complainant may desire, and that further delays may be encountered before it is brought to afinal conclusion, may be a subject of regret. But sitting here to administer the law according to my best judgment, I cannot permit these considerations to operate so as to take from the defendant rights and privileges which the Legislature, in its wisdom, and the Court of Appeals, in expounding the will of the Legislature, have secured to him. An order will be passed, overruling the exceptions.
[After the amended answer was filed, and the case was about to be sent to the Auditor for an account and further proof, an order was passed, on the 6th of September, 1851, by consent of parties, that defendant should bring into Court all its books of accounts, other than those of recent transactions, which are understood to be those opened or commenced on or about the year 1842, and that complainant have leave to inspect said excepted books at the counting-house of the town agent, at all reasonable times, and reserving liberty to him to apply for further orders in respect of said excepted books, if he shall be deterred or impeded in the exercise of his privilege of such examination, or if from other causes, such application shall be deemed necessary by him. ' The books so ordered to be brought in, are all the books kept either in town or at the factory.
Under this order, the books prior to 1842 were brought into Court, and on the 29th of January, 1852, the complainant filed a petition, stating that he had been permitted from time to time to examine the excepted books kept by the town agent, but in so doing, he has been subjected to many and great annoyances, which tend much to thwart his purposes, and to delay this cause, and that he has been prevented from making any examination whatever into the books kept at the factory, although it was well understood at the date of said order, that he proposed to examine them, and that they would be brought to the office of the town agent, or some facility tendered him
Upon this petition, the Chancellor, on the same day (29th of January, 1852), passed an order, setting it down for hearing upon notice to defendant; and upon the hearing thereof, on the 17th of February, 1852, delivered the following opinion.]
The present application, which is brought before the Court upon the order of the 29th of January last, and upon which counsel have been heard, is not to enforce obedience to the order of the 6th of September, 1851, passed by consent of parties, and, therefore, I am not called upon to pronounce an opinion upon the scope and true intent and meaning of the last-mentioned order. It is understood, that the books of account, prior to the year, 1842, which alone were directed to be brought into Court, have been so brought in; and the application now is, that those opened or commenced since that
The order of September last, reserves to the complainant liberty to apply for further orders, in respect of the books opened since 1842, if he shall be deterred or impeded in the exercise of his privilege of examination, or if from other causes such application shall be deemed necessary by him. And in virtue of the liberty so reserved, the present application is made. The defendant resists it upon several grounds, and among others, upon the ground that the complainant specified in his petition, the books and papers the evidence that he expects to prove by them.”
The petition of the complainant, after complaint following to his exclusion from the rights which pertain to him as a stockholder, he is unable to designate the book necessary for him to inspect, states, “ He can only say hat if kept with any regard to good faith and accuracy, they contain contain evidence pertinent to the issue in this cause.” And this makes it necessary to inquire, whether under the law and practice of this Court, in reference to this subject, a suflicient foundation has been laid for an order to compel the defendant to bring in the books ?
I do not deem it necessary to enter into an examination of the complainant’s right, as a corporator, to inspect the books of the corporation; nor into the rights of partners, with regard to the partnership books, because the complainant and defendant are not partners; nor is he here in his capacity as a corporator, asking for a discovery of the general transactions of the corporation. This suit is brought for no such purpose, its object being to set aside a particular settlement made between the parties, and for leave to surcharge and falsify the accounts
In the case of Williams and Bradford vs. Williams, 1 Md. Ch. Decisions, 199, it was observed, that the power to compel parties to produce books and papers, though clearly belonging to the Court, was a power to be exercised with caution; and that the party invoking it “ should, with a reasonable degree of certainty, designate the books and papers required, and the facts expected to be proved by them.” And the cases referred to in the notes to 1 Bland, 90, and that of Duvall vs. The Farmers’ Bank, 2 Bland, 686, were referred to, as showing this to be the rule.
Assuming this to be so, it appears to me, that the petition in this case is insuflicient as the foundation of the order prayed. It not only does not designate the books called for, nor the facts expected to be proved by them; but the allegation, general as it is, that they contain evidence pertinent to the issue, is stated hypothetically, the allegation being “that if they have been kept with any regard to good faith and accuracy, they must contain evidence pertinent to the issues in the cause.” But, as was said by Chancellor Hanson as far back as 1803, “ in all cases, where books have been ordered to be produced, the particular books have been specified, and the Court has been first satisfied of the necessity of producing them.” 1 Bland, 90. It appears to me, therefore, that it would be a most inconvenient and unjustifiable expansion of the rule, to apply it to a case like the present, and merely upon the suggestion, that possibly they may contain evidence material to the issue to order the books of a corporation to be brought into Court.
[Further proceedings were then had in the cause, and accounts were stated by the Auditor, to which exceptions were filed; at the hearing of which, the Chancellor, on the 22d of October, 1852, delivered the following opinion, wherein the nature of the exceptions and the facts of the case are fully stated.]
In the opinion of this Court, delivered on the 22d of November, 1848, and by the order of that date, several of the errors specified in the bill, and constituting the grounds of surcharge and falsification relied upon by the complainant, were adjudicated in his favor; and the opinion and judgment of this Court with respect to these errors, having been approved by the Court of Appeals, they must he regarded as settled, unless the proof taken since that order, should he considered sufficiently strong to warrant different conclusions.
The language of the Court of Appeals, in their order passed at December Term, 1850, is, that they “ concur in the opinion and decision of the Chancellor but as his decision restricted the right to surcharge and falsify the account to the complainant alone, they modified his opinion so as to make the right to surcharge and falsify reciprocal, as essential to the substantial merits of the ease, and leave was given to amend the proceedings accordingly.
The defendant has availed himself of this privilege, and much additional proof has been taken, hearing more or less upon some of the questions formerly decided, leaving others of them to rest upon the record, as it stood at the time that decision was made.
It was supposed, by the defendant’s counsel, that the case of Snowden vs. Dorsey, 6 H. & J., 114, and the numerous cases
And with these remarks, I proceed, as briefly as possiblé, but after a very careful examination of all the proceedings and evidence in the cause, had or brought in subsequently to the order pf November, 1848, to express my opinion upon the questions, which, in my judgment, now remain to be decided; and, in doing this, I shall first take up the grounds of surcharge and falsification stated in the bill, and then those specified in the amended answer.
The first error alleged in the bill, in the account J. J., is the charge of $150 cash, advanced to the complainant, to pay his travelling expenses to Boston. This was alleged to be too much by fifty dollars, but it is now admitted that the charge is correct, and it must stand.
The second error has relation to the Railroad account. I have already expressed the opinion, that the complainant is entitled to be credited with the whole'of whatever sum may be regarded as a proper compensation for the use of the Savage Railroad, and, as ten per cent, was the rate of compensation allowed in the account No. 2, stated by O. D. Williams, that rate was allowed on the whole cost of the road. The decision, that complainant is to be regarded as the sole proprietor of the road, and entitled to be credited with whatever may be
The next item of surcharge stated in the bill is the sum of $1,350, as for cash paid complainant by C. D. Williams, that
The next succeeding ground of complaint against the account specified in the bill is directed against the charge of $2,353 33, as paid in purchase of land from Herbert and Worthington.
In the former opinion it was said, that the complainant’s salary could not be credited later than the 6th of July, 1839, and that it could not be allowed to exceed the sum of $1,000 a year, and in that respect no change is proposed now, or can be made.
Passing then from the items of surcharge and falsification specified in the bill, those insisted on in the amended answer remain to be considered.
1st. The first is, that of the $6,500 credited for salary in J J, from the 1st of July, 1832, to 1st of January, 1839, the sum of $3,500 being the -whole amount due up to the 1st of January, 1836, was paid to the complainant by himself, acting in that behalf as agent of the defendant, and this is admitted by the complainant to be true. Of course the account in this respect is erroneous, and must be corrected.
2d. The second item of surcharge, which relates to the complainant’s salary for the last six months, has already been disposed of.
3d. The third item of surcharge has reference to the credit of $1,128 96, for dividend on the defendant’s stock, declared the 1st of October, 1839, which the amended answer alleges was paid, without, however, undertaking to say when or in what mode it was paid. I am not satisfied of the fact of the payment, and therefore this allegation of error in the account is not maintained.
4th. The fourth item is a mere allegation of general error in the account, as the result of omissions and errors, and need not be particularly noticed.
5th to 12th. The items from five to twelve, inclusive, relate to the interest which the answer alleges should be charged against the complainant on the several sums specified therein.
13th. The thirteenth ground of surcharge relied upon in the answer, has already been noticed and disposed of.
14th. This item of surcharge, which applies to the railroad account, has likewise been examined and disposed of in considering the second error specified in the bill, and nothing further need be said regarding it.
15th. This allegation in the amended answer, which charges the complainant with the receipt of moneys prior to the settlement of this account J J, for which it was said he had not in any manner accounted, is understood to be abandoned. The moneys thus alleged to have been received, and not accounted for by the complainant, are stated and enumerated in a paper marked Exhibit A A, No. 3, filed with the amended answer; but, as appears by the report of the Auditor, this paper was sent to the defendant’s solicitor for proof, and has not been returned, and no proof whatever has been offered in support of it. This item of surcharge, therefore, must be disregarded and rejected.
16th. The sixteenth item of surcharge in the amended answer has respect to certain orders, drawn by the complainant, which the defendant alleges were paid out of moneys or other means of the defendant, appertaining to defendant’s store, and for which orders the complainant received credit, as if the sums for which they were drawn were paid by himself, but for which he gave no credit to the defendant. These orders, which are stated in the defendant’s Exhibit A A, No. 4, amount in the aggregate to $5,624 32, commencing in the year 1836, and terminating in May, 1839. In examining this item it is very material to consider (indeed the fact bears with irresistible force upon the question), that it has not been shown, nor has
These observations apply also to the eighteenth and nineteenth items of surcharge in the amended answer, and show that they cannot be maintained.
In coming to the conclusion that the complainant is not properly chargeable with the items of claim specified in the 16th, 18th, and 19th paragraphs of the amended answer, the letters of C. D. Williams to George Williams, dated in August and September, 1839, are certainly entitled to considerable weight. The complainant resigned his agency for the defendant on the 6th of July of that year, and was succeeded by the writer of these letters, and it must be presumed they were written after an examination of the accounts. It will be seen upon reading them, that no such claims as are now preferred against the complainant were then made. In that of the 21st of August, 1839,
17th. In this item the defendant claims to recover from the complainant the sum of $808, paid to Hugh McEldery, on the 6th of July, 1840, as damages on a contract .for lumber to be furnished by him to the defendant, for the erection of an additional cotton mill, upon a contract made with him by the complainant, acting in that behalf for .and on account of the defendant, but without any authority for that purpose from the defendant, as the answer alleges. It appears by the deposition of Mr. McEldery, that the contract for this lumber was made in February, 1889, by the complainant with the witness, and that this contract, after the lumber was ready for delivery, was cancelled, at the urgent solicitation of George Williams, the town agent of the defendant, in consideration of the payment to the witness of the sum in question, which was in fact paid on the 6th of July, 1840. The complainant does not appear to have been consulted in regard to this compromise with Mr. McEldery. In fact, before the note was given for the payment of the amount agreed upon, the complainant had fallen into a condition of mental imbecility; and had ceased to be the agent of the defendant, the note being signed by his successor, Mr. C. D. Williams. The Auditor reports that it would seem the complainant was not justified in entering into this contract, and that he is properly chargeable with the sum paid. It is unquestionably a circumstance against the propriety of now charging the complainant with this money, that it does not appear, at.the time-of its payment, to have occurred to C. D.
Mr. George Williams, according to the proof of McEldory, did not, when informed by the latter that the timber was nearly ready for delivery, question the obligation of the defendant to comply with the contract, by receiving and paying for it. On the contrary, he applied to tho witness to release the defendant from the contract, and it was only on his urgent solicitation that the former consented to do so. And the agent at the factory, recognising the right of the town agent to make the compromise, gave his note, as agent, for the amount agreed' upon, which note ivas duly paid' out of tho funds of the Company. , Now, it appears to nib, that if the contract between the complainant and MeEldfery. for tho lumber, could be considered as binding on the Comp any $ as falling within the general scope of his authority as agent-(as is assumed in the amended answer), it may with equal propriety be assumed, from the acts. of the town and country agents subsequently, 'in settling the claim and paying the money, without the suggestion .of a doubt regarding the authority of the complainant to make tho eontraet, that he was authorized to make it. And especially may such authority be assumed, when we find, that only very recently has the claim to charge the complainant with the money so paid, been brought forward. But conceding, that the complainant, in making this contract Avith McEldery, though acting within the general sphere of his authority, was guilty of an abuse of power, which Avould have rendered him responsible for the damage resulting from it, how can it be maintained, that the defendant shall, by a compromise, made in the complainant’s absence, and Avithout his knowledge or concurrence, fix the amount of his liability ? For these reasons, I think this ground of claim against the complainant must he rejected.
20th. This item of surcharge in the amended anSAver having been withdrawn, need not be noticed.
21st. In this paragraph of the answer, the defendant surcharges the account, by insisting that the complainant is
22d. In this paragraph of the amended answer, the defendant insists, that complainant should be charged with various sums of money, paid away and expended by him, in connexion with the proposed establishment of a Bank, and for tavern bills, travelling expenses, and for newspapers, &c., not at all connected with the business of the Company, and for which the Company was in no wise bound or liable. And the answer exhibits two papers, marked A A, No. 5 and A A, No. 6, showing the amounts and dates of the sums so expended. And this part of the answer, furthermore, insists, that complainant is justly chargeable for house-rent, and for some other small matters, not particularly enumerated. The Auditor reports, that no evidence has been offered to show that the Company ever authorized any action in reference to the establishment of a Bank, and I have been unable to discover any; I am, therefore, of opinion, that the complainant should be charged with such sums of the funds of the defendant as he expended in the steps taken by him to establish the Bank, but I do not think he is chargeable with travelling expenses, news
23d. Under this division of the amended answer, the attempt is renewed to charge the complainant with the sums expended in erecting the furnace and its appendages, and the charge has been pressed in the argument with much earnestness and force. As the case was presented by the record, upon the former hearing, it was not only the judgment of this Court, but that of the Court of Appeals also, that the complainant was not so chargeable, and, therefore, in the absence of new proof, it cannot, according to the views already expressed, be regarded as an open question. But an additional deposition has been taken, that of Mr. Henry H. Williams, and this deposition, it is supposed, in connexion with the proof formerly in this cause, is sufficient to induce the Court to change the judgment heretofore expressed. I do not, however, think so. Much of the same description of evidence was before the Court when the order of November, 1848, was passed. No doubt was then entertained, or is now entertained, of the veracity of the witnesses who deposed upon this subject, or of the truth of the facts to which they respectively deposed. The evidence now derived from Mr. Williams can, then, only be regarded as
' 24th. No new evidence has been taken in regard to what would be a proper allowance to the complainant for entertaining the proprietors and others, at the factory and hence the formey decision of this Court upon that subject must stand.
. 25th.. It.has already been said that the complainant is justly phargeable with the sum of $2,353,33, stated in'account J J, as - having , been paid to Herbert'and Worthington for land, after, deducting therefrom the sum of $590, claimed in-the bill to haye been paid out of the complainant’s own moneys. Upon this subject, the Auditor reports that it would seem that the defendant received from the land 327J cords of wood, after the purchase by Lansdale (being of Herbert’s land), and he submits whether the complainant should not be credited with the value thereof, to be determined hereafter. And with regard to the land purchased from Worthington, the Auditor says it is in proof that on two several occasions rent was received for it and paid into the store, though it is denied that any agent o.f the Company wa.s authorized to receive such rent, or to treat the land as-the property of the defendant. It has been urged, as it seemed to. me at the time, with great force, that as no claim on account of this wood, or for those rents, was asserted in the bill, that the complainant could not be credited in respect of either, but upon reflection, I have come to a different conclusion. The aim of the bill was to get rid entirely of this charge,-upon the ground that the lands were purchased by the complainant as-agent for the Company with the concurrence and under the .direction of stockholder owning more ’than a major part of the stock, and therefore no complaint .was made, or could consistently.be made, with .respect to wood or rents taken and received by the defendant, from and for the use of
That there is a great deal of complication and difficulty in this case, it is impossible to deny, and though the conclusions I have formed upon the various questions involved in it are the result of a very careful consideration, aided, as I have boon, by full and able arguments, I am quite sensible of the probability that I may, upon many of them, have fallen into error. Should this bo so, the steps necessary for their correction will doubtless be taken by the aggrieved party.
Tho case will be sent to the Auditor, with directions to restate the accounts upon tho principles,' and according to the views hereinbefore expressed, and when this report comes in, tho extent and character of the decree will be determined, duo regard being had to the orders already passed in the cause.
[An order was passed accordingly, dated' the 80th of October, 1852, and the Auditor having stated accounts in accordance therewith, exceptions were again filed thereto, at the hearing of which the Chancellor delivered the following opinion, on the 27th of January, 1858.]
This cause, standing ready for hearing upon exceptions to the report of the Auditor of the 12th of November last, and
That report, and the accounts accompanying it, purports to have been made in pursuance of the order of the 30th of October preceding, and as, in my opinion, it does conform therewith, and is supported by the evidence, it follows that the exceptions on both sides must be overruled, and the report confirmed.
The first exception of the complainant is to the charge against him of $500, in the account F, with interest thereon from the 16th of August, 1849, which in the exception is spoken of as a supposed payment in relation to Heigham. It is not deemed necessary again to go over and restate the grounds upon which, in the former opinion of this Court, the propriety of the chai'ge in question is vindicated. The argument now is, that in the cash account in the agent’s ledger, there stood a balance to the credit of cash of $562 39, and that consequently, even upon the hypothesis that the agent had improperly credited himself with the sum of $500, the correction should be made by erasing said entry, or by a neutralizing entry on the debtor side of the account, and that, adopting either mode, there could still remain due to the complainant on the cash account, a balance of $62 39. It is obvious, however, that this mode of getting rid of the charge, assumes the correctness of the entire cash account, which with the exception of the item of $500, was not put in issue. The defendant, by the amended answer, specifically charged that the complainant was responsible for this sum of $500, paid to the Farmers’ Bank of Maryland under the circumstances therein detailed. The parties went to trial upon this specific allegation and none other. In no part of the pleadings was it pretended that this item of $500 should not be debited to the complainant, because there stood a cash balance to his credit of a larger amount. If such defence had been set up by the pleadings, the entire cash account of the complainant would have been open for examination, and it is of course impossible to say to what results such an examination would have led. It has been several times
The claim for interest could not well be disputed, supposing the principal sum to be due, unless some equitable objection to its allowance could be presented. But the only objection is the existence of the cash balance on the agent’s ledger. If, however, the cash account in the ledger could be looked to for the purpose of getting rid of the claim for interest, I can see no good reason why it might not be permitted to extinguish the principle also. It cannot, in my opinion, have any influence one way or the other. It is not involved in the pleadings, and must be disregarded altogether.
The defendant’s first exception objects to the allowance to the complainant for the use of the Savage Railroad. In the former, as well as in the last opinion of this Court, the complainant has been treated as the sole proprietor of the railroad. Whatever was advanced or paid on account of that road was considered as advanced to and paid for him, and whatever was to be paid by the defendant for the use of the road was to be credited to him. It is said in this exception of the defendant, that the complainant’s bill, and his Exhibit No. 4, recognises and admits that the defendant made certain payments to the stockholders of said Company, which should be deducted from the sum allowed the complainant for the use of the road.But these admissions and recognitions, such as they are, were in the record when the opinion and order of the 22d of November, 1848, was passed. By that opinion and order, the complainant was considered and adjudged to bo the Railroad Company, and
When this cause was last before the Court, in view of the evidence introduced, after the decision-of 1848 was made, I deemed it proper to reduce the allowance from ten percent, to six percent, on it’s cost to be paid by the Cotton Company for the use of the road and $100 addition,for Repairs. The Auditor has stated the account in conformity- with the -last opinion, and consequently the exceptions .'of. the defendant -thereto must be overruled. In the second¡’part of the third exception it is alleged that all the repairs needed by the road, during the period it was used by the defendant, were made and paid for by the defendant. There does not appear to me to be any evidence -of this allegation.
The defendant’s first exception to the account E, grows out of the exceptions to the account E, and has already been disposed of.
The second exception to the account E objects to the allowance of $119 98, received from Samuel Jackson for rent, upon the ground that the persons who received it had no authority on behalf of the defendant to give receipts, and because it has not.been proved that said sum went, in point of fact, into the funds, of the defendant. But the authority of these persons to give the receipts was adjudicated in the opinion of October last, and I agree with the Auditor, that the proof does show that the money was paid into the defendant’s store, and consequently enured to the benefit of the defendant. The exceptions, therefore, will bé overruled-.
The. only,.remaining question relates to the form of the decree. It appears by the proceedings that the .settlement, which the bill impeaches,, was made on the 1st of June, 1844. Ac
But it now appears, as the result of the accounts stated by the Auditor, under the directions of this Court (which accounts are to be confirmed), that the sum actually due from the complainant to the defendant, in June, 1844, instead of being $9,632 32, was only $4,764 06, and that consequently there has been an over-payment of $4,868 26, and the question is as to the character of the decree by which the complainant is to be redressed.
In his bill he alleges that the capital stock of the Company, which in the year 1839 amounted to $108,200, being reduced by the merger of $9,632 32 of the complainant’s stock, was, after the transfer of that stock, brought down to $98,567 68, and the prayer is, that an account may be taken, under the direction of the Court, of the transactions specified in the bill; and if on said accounting any balance should be found due the complainant, payment thereof may be decreed, and a re-transfer of the stock awarded him, and if any balance is ascertained to be due from him to the Company, he may be declared en
The defendant, in answering that part of the bill which speaks of the merger and reduction of the capital stock of the Company, by the transfer to it of the complainant’s stock, says the transfer “ had the éffect, by operation of law, to merge, extinguish, and annihilate so much of the capital stock of the respondent, and practically to reduce it from an amount of $108,206 83, at which it stood before the transfer, to the amount of $98,574 51, being a reduction to the extent of $9,632 32.”
Both parties, therefore, speak of the transfer as effecting a merger of the stock transferred; but they differ in this, that the complainant insists, that the stock merged may be recreated, or resuscitated, by the decree of this Court, directing the defendant to make a re-transfer to the complainant. Whilst the defendant maintains, that the stock was absolutely annihilated by the transfer to the Company, the transfer enuring to the benefit not of the defendant in its corporate capacity, but to the benefit of the respective proprietors of shares in their natural capacities.
Before expressing an opinion upon the power of this Court to resuscitate this stock, or on the propriety of exerting the power, if it exists, it may be well to dispose of an objection, founded upon the order of the 22d of November, 1848, by which it is supposed this question was adjudicated.
In the opinion, and also in the introduction to the order, it was declared that the charge of fraud in fact, in procuring the settlement of the 1st of June, 1844, was not sustained by the proof. And it was thereupon ordered, “ that said settlement should stand and be establishedbut liberty was given to the complainant to surcharge and falsify the accounts, upon which the settlement was founded, in certain particulars therein specified. The settlement of the 1st of June, 1844, by which the amount supposed to be due from the complainant to the defendant was ascertained, not being obnoxious to the imputation of fraud in fact, it was adjudged that it should stand until the
In the argument of this cause in the Court of Appeals, upon an appeal from the order of November, 1848, the counsel for the complainant appear, by a statement of their points with which I have been furnished, to have objected to that part of the order which declared “ the settlement should stand and be established,” and to have insisted that the settlement should have been annulled and an immediate re-transfer of the stock decreed. And this, it is argued, shows that in the opinion of the complainant’s counsel the order settled the question in regard to the stock. Such, however, is not my view of the point; but conceding the counsel may so have understood the order, it certainly cannot be insisted that the Court is bound by such interpretation of it.
In passing the order referred to, this Court did not intend to adjudicate the question now presented. It was not the design of that order to pass upon the form and character of the final decree, which should be passed in the cause when the accounts between the parties should be taken. And I shall now, therefore, very briefly state my views upon this question.
Cases have been cited to show, that if the shares of an incorporated company are transferred to the corporation, they
But it does not follow, that though the shares transferred to the corporation are merged forthe time being, that they may not be subsequently revived. Lilt is believed that but few of the banking institutions, in this State, are not authorized to take their own stock in payment of, or in pledge to secure debts due them; and whatever may be the temporary legal effect of the transfer, it has always been supposed, and the practice has been in conformity with such general understanding, that they were authorized to re-issue the stock whenever they thought fit to do so. It never was the understanding, so far as I am informed, that such transfer of its own stock to a bank, had the effect to lessen its capital. In the case of Ex parte Holmes, before referred to, the Court distinctly recognised the right of the company to take its own stock in pledge, or payment for debts due it, a right, they say, resulting from necessity; and it cannot well be doubted, that, having the right thus to take, they had the further right to sell and re-transfer to realize the money due them
But if it were conceded that the shares of the stock transferred by the complainant to the defendant, in 1884, were so entirely merged as to be incapable of resuscitation, there would be no difficulty in restoring to the complainant the number of shares originally standing in his name, if the justice of the case requires it.
By the Act of 1821, ch. 201, sec. 2, the capital stock of this
Cases are abundant to show, that if a deed is executed under suspicious circumstances, or is merely constructively fraudulent, this Court may, and should, permit it to stand as a security and indemnity to the grantee. It is not to be set aside absolutely, as would be done if found to be fraudulent in fact; but this Court, unlike a Court of Law, which can take no middle course, and must pronounce one way or the other upon the validity of the deed, may adopt the milder and more equitable course, and suffer it to stand, not as an absolute conveyance, but simply as a security for the sum really due.
In this case it has been several times said, and is repeated, that there is no foundation whatever for the charge of fraud, in fact, against any of the parties to the transaction in question. But still, the judgment of the Court was, and that judgment has been approved by the Court of Appeals, that the settlement of June, 1844, by which the sum supposed to be due from the complainant to the defendant was ascertained, was, in the contemplation of a Court of Equity, constructively fraudulent, and there can be no doubt that the transfer of the complainant’s stock to the defendant was made because — and only because — of that supposed indebtedness. The agreement and transfer signed by the parties conclusively prove this. A purchase and sale of this stock was not intended, but a transfer in payment of a supposed pre-existing debt.
Assuming that the Court has the power to direct a re-transfer of this stock to the complainant, or to order new
It will be borne in mind that one of the grounds upon which much stress was laid in directing the settlement to be corrected, was the feeble condition of the complainant’s mental faculties,' when the accounts upon which the settlement was based were presented to him. In the judgment of the Court, he did not and could not understand them. The same motive which induced the Court to look with an indulgent eye upon the acts and conduct of the complainant in regard to the settlement, cannot be without its influence when the transferring his stock, the result of the settlement, is under consideration. They were contemporaneous acts, performed by a party whose intellect, to a great extent, had sunk before the force of physical disease, and therefore present a case in which it is the duty of the Court to do him full and complete justice, taking care always to do no injustice to the other side. If the money actually due the defendant is paid, it is all it can be entitled to, and all, of course, it can reasonably ask for.
It is not, in my opinion, easy to draw a substantial distinction in principle between this case and the case of Boyd vs. Dunlap, 1 Johns. Ch. Rep., 478, where it was held that though a deed fraudulent in fact is absolutely void, and is not permitted to stand as a security for any purpose of reimbursement or indemnity, yet it is otherwise with a deed obtained under suspicious circumstances, or which is Only constructively fraudulent. For, in that case, which was a bill filed by the creditors of the grantor to vacate a deed made by their debtor to his
The opinion of Chancellor Kent in that case is not only supported by the authorities cited by him, but meets full confirmation in the ease of Wood vs. Abrey, 3 Madd., 216, where a deed made for an inadequate consideration by vendors who were in great distress, and without professional assistance, was set aside upon the plaintiff’s repaying the amount of the purchase-money, and by what was said by the Master of the Rolls in Daubeny vs. Cockburn, 1 Merivale, 643, “ that in ordinary cases of fraud the whole transaction is undone, but if a partially valuable consideration is given, its return is secured as the condition on which equity relieves.”
I am of opinion, therefore, that under the circumstances of this case, the complainant has an equity to have his stock returned to him, upon his paying to the Savage Manufacturing Company the amount of his indebtedness to it, as ascertained by the last report of the Auditor.
The counsel, therefore, may prepare a decree ratifying and confirming the Report of the 12th of November last, and directing the defendant to issue to the complainant, of the capital stock of the said Manufacturing Company an interest representing the sum of $9,632 82, provided the said complainant shall, by a certain day to be limited by and named in the decree, pay or tender to the defendant the sum ascertained by the said report to be due from the said complainant to the defendant. And in that case neither party shall recover costs against the other. And by the decree power must be reserved to the Court to pass such further order or decree as may be necessary, in case the complainant shall make default in paying or tendering to the defendant the amount ascertained as aforesaid to be due to the defendant by the said Report.