Union Land Co. v. Gwynn

Headnote

Union Land Co. v. Gwynn, 158 App. Div. 839 , affirmed.

Appeal from a judgment of the Appellate Division of the Supreme Court in the first judicial department, entered November 21, 1913, affirming a judgment in favor of defendant entered upon the report of a referee in an action to recover upon an underwriting agreement. The plaintiff alleges that defendant is one of sixteen underwriters of a bond issue of the Texas Railways Company, a New Jersey corporation organized in September, 1906, as a holding company, by Jester & Co., a New York banking firm, to take over the securities of a bankrupt Texas railroad which Jester & Co. tried to reorganize. Jester & Co. obtained underwriting contracts from defendant and fifteen others. . The underwriters authorized Jester & Co. to guarantee a note given in payment for bonds of the Texas railroad. Jester & Co. caused the New Jersey holding company to buy from E. M. Hubbell, plaintiff’s assignor, bonds of the Texas railroad and to give a note in payment. Jester & Co. used the under-writings to guarantee the note. The scheme failed, the note was not paid, and plaintiff is suing to enforce the guaranty. The answer contains a general denial. It is also claimed that the underwriting never became effective, and that if it did, Jester & Co. had no authority to use it to guarantee the note in question. The answer also alleges fraud, and demands as affirmative relief that the underwriting be surrendered to defendant.