Kelsey v. Northern Light Oil Co.

Peckham, J. In my opinion the judgment should be reversed. Apart from any other question, there was one proposition submitted to the jury, by the learned judge, which I think cannot be maintained, and upon which the verdict may well have been based. He charged that “ If upon this paper (the prospectus) the plaintiff had the right to believe that it was reasonably certain that the company would acquire this property, and that the company was organized with a view to ownership of these pieces of property, then, if they did not obtain it, he would be entitled to recover.” Upon this charge the jury must necessarily have found for the plaintiff. It will be marked, here, that no misrepresentation or fraud is the basis of this verdict; none is within this charge. Here was a corporation about to be formed, with a capital of one million. Certain named property was expected to constitute its invested capital. Its business was to deal in and develop oil in oil lands. After its organization, it was to purchase the several pieces of oil property mentioned in the prospectus. It succeeds in obtaining all, except one piece, called the “ Hammond well,” or the piece upon which said well was sunk. As to this piece there was some defect of title, and the consideration money therefor, $75,000, was paid to or left in the treasury of the company. The good faith of the company, or of its agent, is not questioned. Thus, if this action can be maintained, every other subscriber to the stock, or every stockholder, may sue the [116] company. This plaintiff has no other or greater rights than any other stockholder. It follows that if a company fail to obtain all the property it expected and intended, or its stockholders expected and intended to obtain, when the stock was subscribed for, no matter for what cause, the whole scheme is dead, and the company ended. There is no such doctrine as this, and there never was. The cases cited by counsel have no application to subscribers to a company about to be organized and incorporated. Ho such case can be found, I think. The cases cited, Hutcheon v. Johnson, (33 Barb. 392;) Bennett v. Judson, (21 N. Y. Rep. 238;) Rosevelt v. Fulton, (2 Cowen, 129;) Smith v. Countryman, (30 N. Y. Rep. 655;) and 27 Id. 558, I have examined, and they do not aid the plaintiff. The plaintiff can scarcely be said to have been disappointed as to this “ Hammond well.” He had never seen or examined any of this property prior to his subscription. When examined thereafter, the Hammond well had ceased to flow. There is no pretense that it had not flowed before, and it was a characteristic of these wells that they would stop when they chose. Its stopping should have surprised no one. But having stopped and become comparatively worthless, as the plaintiff seems to insist, there would seem to be very small excuse for him to repudiate his subscription on the ground that the company was about $75,000 better offj in that respect, than it would have been had it obtained this now worthless Hammond well. It is very difficult to discover the principle upon which this action can be claimed to lie. It seems to me it cannot be sustained, unless the objects and purposes of the company have so entirely failed that the company may be said to be virtually dissolved. That cannot be pretended, here. At most there is a failure only as to about three fourths of one tenth of the property intended to be owned by the company, and the money to buy that was in the company’s treasury. Only the title was defective, and it could not [117] be purchased. I do not deem this any ground for dissolving the company. Very few companies in this country could be upheld if any such ground would dissolve them. But even if this should be held to be proper ground for dissolving the company, it by no means follows that one of the subscribers to its stock could maintain an action • against it for the money subscription. Assuming the property now to be of comparatively small value, upon what principle of equity should this plaintiff sue and get his money back, while his co-subscribers should be compelled to take the reduced property for their shares ? The judgment should be reversed, and a new trial granted; costs to abide the event. J. F. Barnard, J., concurred.