Otter v. Brevoort Petroleum Co.

By the Court, Leonard, P. J. The defendants authorized Geo. H. White, their president, and Wm. H. Lee, a trustee, to sell 4000 shares of the stock of the company for $2.50 per share ; the par value being $10. White received from the plaintiff $1750 on the 23d of August, 1864, and signed a receipt for that sum from the plaintiff “in full for 700 shares of the capital'stock” of the company; the receipt to be exchanged for certificates of stock, on presentation to the secretary. White signed the receipt “ for J. G. Williams, treasurer.” This is a valid contract, on the face of it, binding the company to deliver the stock for which the plaintiff’s money was received. It is said that public policy will not permit an incorporated company to sell its own shares for less than par. The facts are not before the court to raise the question mentioned. It has not been made to appear how the com [256] pany acquired the stock. It may have been issued for property, and acquired subsequently by the company. Or it may have been forfeited stock for the non-payment of the subscription price. It cannot be inferred, in favor of the defendants, that the stock had not been fully paid up and afterwards acquired by the company. If it were otherwise, I am unable to perceive any rule of public policy that requires the court to relieve the defendants from a contract otherwise without objection, binding it to the delivery of shares in its capital for a price below the par value. The contest .in this case relates to the non-delivery of 200 shares, a portion of the number mentioned in the contract. The company delivered to the plaintiff certificates for 500 shares, admitting the validity of the contract only to that extent. When the receipt was signed by the president of the company, the plaintiff stated that he had agreed with Mr. Lee to take 200 shares from him (Lee) in. addition to the 500, which had agreed before that time verbally with the president to take and pay for at the price named. He stated to White that Lee had agreed that he should have 200 shares of the stock- which the company were offering to dispose of through the agency of White and Lee. It appeared that Lee was absent from the city of Hew York, when the business was transacted, and White, relying upon the truth of this statement, received the money of the plaintiff and signed the obligation of August 23, binding the company to deliver the additional 200 shares claimed by the plaintiff. Lee was a witness on the trial, as well as the plaintiff, and testified that he had not made any agreement to sell the 200 shares to the plaintiff. Upon his return, he had informed the officers of the company that he had not made any such agreement as had been claimed by the plaintiff, and insisted that the shares so claimed had been taken by and belonged to him, the said Lee. The defendants accepted his version of the matter, and issued the shares in controversy to Mr. Lee. It is quite clear, from an examination of the evidence, [257] that there was no valid contract between Lee, (either in his individual capacity, or acting as the trustee and agent of the company,) and the plaintiff for the purchase or sale of the shares in question. There was no contract in writing-signed by the parties, or either of them, and nothing paid or received on account. As between Lee and the plaintiff the contract was nudum pactum and in no way obligatory upon either party. The statement made by the plaintiff to White, upon which he procured the contract for the additional 200 shares, was without foundation, and ought not to have been made. It may be that there had been a conversation between Lee and the plaintiff to the effect stated by the plaintiff, and the plaintiff may not have intended a fraud upon any one, but that does not strengthen the case on his part, although it may have the effect of relieving him from the charge of misrepresentation with a fraudulent intent. The agreement was signed by White under a mistake, at least, as to the fact of a sale made by Lee; and that mistake occurred by the erroneous statement of the plaintiff. The contract, for that reason, was not binding upon the company, so far as it related to the 200 shares. The defendants were willing to rescind it, and tendered to the plaintiff the money received from- him, but he declined it. The judgment rendered is for $6948.64 damages for the non-delivery of the 200 shares at the highest market rate between the time when the plaintiff demanded certificates therefor, and the day of trial, waiving the specific delivery of the shares. This judgment for money damages instead of the shares, is claimed by the plaintiff upon the ground that the defendants, having issued certificates for .the said shares to Lee, had rendered themselves incapable of specifically performing the contract by delivering the shares to the plaintiff. The rule stated is correct, but the fact has not been shown to exist, as claimed. There is no proof that the defendants had not other shares, for which they could [258] lawfully issue certificates to the plaintiff if they were under an obligation so to do. [New York General Term, November 4, 1867. In my opinion the judgment should be reversed, and a new trial be had before the same referee, with costs to abide the event. Leonard,, Sutherland and Lechham, Justices.]