Armstrong v. Danahy — 56 N.Y. St. Rep. 743

Majority

p. 743

Charles B. Armstrong, as Receiver of the Buffalo Railway Supply Company, Pl’ff, v. James Danahy, Def't.

(Supreme Court, General Term, Fifth Department,

Filed January, 1894.)

Headnote

1. Corporations—Subscriptions.

A secret agreement of the corporation with certain subscribers to stock, whereby they are to be released from payment or to have some other advantage not common to all the subscribers, is no defense for a subscriber who was not promised the same advantages.

S. Same—Call.

In an action to recover a subscription, the order of the court that the receiver should proceed to collect the outstanding assets of the company operates as a sufficient call before the commencement of the action.

8. Same—Evidence.

In such action, an offer of evidence by defendant does not go far enough to show that alleged alterations in the subscriptions are material, where it does not include the fact as to who was responsible for it, or that it was made without his knowledge and consent.

4. Pleading—Negative pregnant.

An answer, which in its denial follows the identical language of the allegation of the complaint, is condemned by the courts.

5. Same.

Such denial, if no motion is made to make it more definite and certain, is held to put the allegations of the complaint in issue.

Motion by the defendant for a new trial upon exceptions ordered to be heard in the first instance at general term after a verdict directed for plaintiff at the circuit.

J. I. Quaclcenbush, for deft; Henry IF. Brush, for pl’ff.

This action was brought by the plaintiff, as receiver of the Buffalo Railway Supply Company, to recover of the defendant $500, his subscription to the capital stock of the company. The company was organized on the 30th day of September, 1890, as a domestic corporation under the laws of the state of New York. By an order of this court dated the 14th day of November, 1892, the corporation was dissolved and the plaintiff was duly appointed receiver, and by an order of the court dated the 18th day of November, 1892, he was directed as such receiver to enforce the collection of all the outstanding assets of the company ; and he thereupon brought this action and alleged in his complaint that the defendant subscribed for $500 of the capital stock of the company which he had failed to pay. Evidence was given tending to show that the defendant subscribed- for stock as alleged in the complaint and that many others were subscribers to the stock of the company.

The defendánt offered to show as a defense that one of the other subscribers to the stock was induced to make his subscription

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under an arrangement that paid-up stock to the amount of his subscription should be delivered to him without his paying therefor ; and that he (defendant) was induced to make his subscription for stock relying upon the genuineness of such subscription and others. The evidence was excluded. The evidence was too indefinite to avail the defendant; if such an agreement were in fact made it did not release the subscriber or affect his liability upon his subscription. “A secret agreement of the corpora-' tion with certain subscribers to stock whereby they are to be released from payment, or to have some other advantage not common to all the subscribers, is no defense for a subscriber who was not promised the same advantages. All such secret agreements are void and the subscribers receiving them are liable oh their subscriptions absolutely as though no special advantages had been promised." Cook on the Law of Stock and Stockholders, § 191, and authorities referred to in the marginal note; Thompson on Liability of Stockholders, § 124.

Defendant contends that no call was made upon him for his subscription before the action was commenced. The' order of the court that the receiver should proceed to collect the outstanding assets of the company is an answer to this contention.

The defendant was called as a witness and testified that the subscription book was brought to him for his signature in the spring of 1890, and then the following questions w'ere asked and rulings made:

“Q. Was it (the subscription book) any different from what it is now when you signed it?

“ Objected to by plaintiff’s counsel.

“ Objection sustained and exception taken.

“Q. Was this line, this interlineation ‘one hundred thousand dollars which is to be increased to,’ was that in there when you signed it ?

“ Objection sustained and exception taken."

The defendant .claims that the court erred in excluding this evidence. It does not appear upon what ground it was excluded, whether because it was not admissible because the answer failed to raise any issue, or for the reasons that the alleged alteration was not material. It was alleged in the complaint that “ In or about the month of October, 1890, this defendant subscribed for five shares of the capital stock of the said corporation at the par value of one hundred dollars each, and agreed to pay therefor the sum of five hundred dollars in the manner and at the time or times the same might be called for by the board of directors of said company." The defendant in his answer denied that he “In or about the month of October, 1890," etc., following on in the identical language of the allegation of the complaint. This was the only manner in which the allegations in the complaint referred to were put in issue. The answer might be true and every material allegation in the complaint at the same time be true.

Pomeroy, speaking of such a pleading, in his work on remedies and remedial rights, § 623, says: “ To say the least a denial in the form of a negative pregnant is such a glaring vio

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lation of logical and legal principles that it exhibits on the part of the pleader either the ignorance which does not comprehend the nature of an issue, or the astute cunning which is able to conceal the want of a defense under the appearance of a direct answer. In either instance it should be condemned by the court.” There are authorities in our state sustaining this doctrine of Pomeroy.

But it was held in Wall v. The Buffalo Water Works Com pany, 18 N. Y., 119 , that if the plaintiff go to trial with such an answer without availing himself of the remedy of a motion that it be made more definite and certain that it must be held to put the allegations of the complaint in issue. The doctrine of this case does not appear to have been overruled. This evidence was not properly excluded because the answer failed to make an issue. We are, however, of the opinion that the defendant’s evidence and offers of evidence did not go far enough to show that the alleged alterations in the subscription were material.

It appears on examination of the subscription paper printed in the record, that the words “ One hundred thousand dollars which is to be increased to ” were interlined. As first drawn it read: “We, the undersigned, do hereby subscribe for the number of shares for the capital stock of the Buffalo Railway Supply Company, a corporation formed under the laws of the state of Hew York, and having a capital stock of two hundred thousand dollars divided into two hundred shares at a par value of one hundred dollars,” etc. By the interlineation it was made to read: “ Having a capital stock of one hundred thousand dollars which is to be increased to two hundred thousand dollars,” etc. The company had not been organized at the time the defendant made his subscription. In the articles of association when filed, the stock was fixed at $100,000, with a statement that it was to be increased to $200,000. How the capital came to be fixed at $100,000 instead of the larger sum was- not made to appear upon the trial, and' nothing is stated in the answer in reference thereto. Who was responsible for the change or whether it was made with or without the knowledge or consent of the defendant was not made to appear. There was no allegation in the answer that the alteration was frauduently made, or that the defendant was in any manner injured thereby.

We see no reason for setting aside the verdict. Defendant’s exceptions should be overruled, and judgment directed for the plaintiff upon the verdict.

Dwight, P. J., Haight and Bradley, JJ., concur.