Schuetz v. German-American Real Estate Co.

Goodrich, P, J.: The action was brought to restrain the defendant from forfeiting certain shares of stock of -the defendant corporation, owned by the plaintiff, which the defendant threatened to forfeit for non-payment of an assessment called in May, 1893, and for an accounting and judgment for such sum as .might appear to be due from defendant to plaintiff. The answer denied that any sum was due. the plaintiff, claiming that the plaintiff owed the defendant $825.13 on account of such assessment, but did not allege that no ground' for equitable relief was shown, nor that the court had no jurisdiction as in equity.' The issues were referred to a referee, who found that the defendant was indebted to the plaintiff in the sum of $622.50, and that the plaintiff was entitled to judgment restraining action on the part of the defendant to forfeit the plaintiff’s stock. From the judgment entered upon this report the defendant appeals. It appears from the evidence that the plaintiff was one of the originators of the scheme for' which the defendant was incorporated, [164] and for some time acted as its president. He purchased the Starke farm for $45,000, paying $10,000 in cash and giving a mortgage of $35,000 for the balance nf the purchase money. He* expended about $1,000 in organizing the company and paying certain of its • expenses. He then sold the farm to the defendant for $46,000.' The defendant assumed the purchase-money mortgage and credited the plaintiff with $11,000. Subsequently the plaintiff' contracted to purchase- the Wheatly farm, and this contract was assigned to the defendant. . ' - The company was organized in 1892 for purchasing, holding and selling real estate, with a capital stock of $50,000, divided into 500 - • shares of $100 each. The . by-laws provided that one-half of the subscriptions to the stock should be paid into the treasury within one year of the date of the incorporation,, and the remaining half within one year thereafter, or sooner, in such intervals as the board of directors might prescribe, and that any failure to pay installments, as required by the board, should work a forfeiture of the delinquent’s shares. Chapter 688, Laws of 1892, article 3, section 43, confers upon the corporation the. right to declare subscribers’ stock forfeited incase of failure to meet assessments after due notice. A large part of the testimony relates to' the condition of the accounts between the plaintiff and the defendant.- It is somewhat confused and involved, but. after a careful examination we see no reason to differ with the report of the learned referee who, after excluding certain sums claimed by each party, has found that the defendant was indebted to the plaintiff at the time of the commencement of the action in the amount already stated. Mr'. Grosse, who, in 1893, succeeded the plaintiff as president, admits that after the assessment in question was laid, and at a meeting in- May, 1893, it was arranged or understood that if the plaintiff did not pay the assessment the board of directors would have to procure the forfeiture of his' shares. There is no specific finding- of fact by the referee that any such threat was made, but there is a finding as to the call for assessments. -It is evident that if the contention of the defendant, that the plaintiff-was indebted to it in the sum of $825.13, wére true it would have had the right to declare the plaintiff’s shares forfeited, while, if plaintiff’s contention were true, [165] that the defendant was indebted to him in the sum found by the referee, $622.50, no such right would exist. I think the plaintiff was justified in bringing his action in equity for. an accounting, as the books were much confused and were kept .partly during his term of office and partly during Grosse’s term of office as president; and if there were doubt upon the subject, the defendant waived the objection by failing to set it up in its answer (Le Roy v. Platt, 4 Paige, 77), and that the court having obtained jurisdiction of the action is called upon to administer justice'according to the rights of the respective parties. (Taylor v. Taylor, 43 N. Y. 578.) The stock of this corporation is'not shown to have a market value, and it would be difficult for the plaintiff to prove his damages if he were compelled passively to await the illegal sale of his stock and then bring his action for such damages as he might have sustained thereby. If nothing was due upon the assessments levied upon him as. a stockholder, his right to hold the stock without interference was clear and unquestionable, and he is entitled to the protection of the court to restrain the forfeiture. Under these circumstances, the judgment should be affirmed, with costs. ' '■ All concurred. Judgment affirmed, with costs.