Majority
p. 157John La Farge, Respondent, v. The Exchange Fire Insurance Company of the City of N. Y., Appellants. (Before Woodruff and Pierrepont, J. J.) Heard, March 11; decided, June 12, 1858.
Headnote
1. Since the act of 1857, which allows parties to an action to testify in their own behalf, a plaintiff or defendant is not incompetent as a witness in his own favor, merely because the adverse party is a corporation.2. This result is not affected by the facts that the person who was secretary of the corporation at the time of the transaction in question died before the trial, and that none of its officers at the time of its incorporation, were such when the cause was tried.
3. In an action to recover of a corporation the value of property transferred to it; it is not error to admit evidence of negotiations had, and of an agreement made, relative to the terms of such transfer, prior to the actual incorporation, with persons who soon after that and when it was incorporated, became officers of such corporation and with whom as such officers the transaction was completed; when the question is whether the transfer was made as security for a loan which the company was to make, or was made to be paid for, by issuing an agreed amount of its capital stock.
This is an appeal by the defendants from a judgment entered on the report of Henry Nicoll, Esq., as referee.
The action was brought in December, 1854, to recover from the defendants $5,600 (and interest), being the amount due upon a bond and mortgage which the plaintiff had assigned to them, and for which he alleged they were to issue to him shares of their capital stock to that amount, and which stock they refused to issue. When it was commenced, the defendants’ corporate name was “The La Earge Eire Insurance Company.”
The complaint states that: First. The defendants are an incorporated insurance company. It was agreed between them, subsequent to the organization of the company, and the plaintiff, that the latter should assign to them a bond and mortgage made by one Orr and Wife for $7,500, on which $1,000 had been paid on which $6,500 was due, which amount was secured by a mortgage on property worth double that sum, and which bond and mortgage were fully worth that sum: [and the defendants in payment therefor, agreed to issue $6,500 of their capital stock as follows: $2,000 to Chas. E. Appleby, $450 to Eggleson and
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$450 to McCarty, and the balance to the plaintiff.] Said bond and mortgage bore date the 15th of July, 1852, and was payable on demand with interest semi-annually at 7 per cent.
Second. The plaintiff in pursuance of said agreement, by an assignment dated the 14th of July, 1853, assigned said bond and mortgage to the defendants, and they still retain and claim to own the same absolutely, and have collected the interest which accrued subsequent to the assignment, and retained the.same to their own use.
Third. The defendants thereupon issued stock to Eggleson & McCarty, to the amount of $450 each, but have failed and refused to issue any to Appleby or to the plaintiff, or to restore the bond and mortgage, or compensate the plaintiff for the same; and have issued to others their entire capital stock without the plaintiff’s consent, wherefore he prays judgment for $5,600 and interest thereon from the 14th of July, 1853.
The answer admits all the allegations of the complaint except that: Eirst, it denies that the bond and mortgage were assigned on any such agreement as the plaintiff alleges.
Second. It admits that ten shares of $50 each were issued to Eggleson & McCarty, severally, but denies that they were issued on any such agreement as is alleged.
Third. It alleges that the bond and mortgage were assigned on plaintiff’s application for a loan of $6,500; that defendants accepted the application and paid him in full for said bond and mortgage.
The referee found, specially, all the facts stated in the complaint, to be as therein stated, and on the 1st of December, 1857, ordered judgment in favor of the plaintiff for the amount claimed.
On the trial, evidence was given of all the circumstances and negotiations connected with the assignment of the bond and mortgage, some of which occurred before the defendants were organized as a corporation, and were had with persons who became officers of it, at the time it was organized. Testimony as to negotiations before the defendants were incorporated, was objected to and admitted, and the defendants excepted to the decision.
The plaintiff was admitted as a witness in his own behalf against these objections taken by the defendants, viz.;
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“ 1. That the testimony of one party cannot be admitted in his own behalf, when the other party is a corporation.
“ 2. That such testimony cannot be received when the opposite party is a corporation, and the person or persons who were officer or officers of such corporation at the time of the transactions concerning which the party is called to give evidence, is or are not living.
“ 8. That it was not the intent of the statute to give either party greater rights or privileges, than such party enjoyed before such statute, unless the same or similar rights or privileges are granted to the other party. The referee overruled the objections; to which ruling and decision of the referee the counsel for the defendants then and there excepted.”
Before the testimony was concluded, it was shown that the first secretary of the company was dead, and that none of the persons who were its officers at the time of the transaction in question, were such officers when this suit was commenced, or when it was tried. When this evidence had been given, the counsel for the defendants moved to strike out the testimony of John Tin, Earge on the grounds, that it was now clearly proved that none of the officers of the company at the time of the transaction between the plaintiff and defendants were such officers either at the time of the commencement of this action or at the present time; and that the secretary of the company at that time was now dead. The referee denied the motion; to which ruling and decision of the referee the counsel for the defendants then and there excepted.
No evidence was given tending to show that the bond and mortgage were assigned to the defendants on an application for a loan, or that anything had been paid for or ah account of the transfer, except that the assignment contained a clause acknowledging payment of $6,500; and excepting also the testimony given by the plaintiff tending to show, that the stock issued to Eggleson and to McOarty, to the extent of $450 to each, was issued in part payment therefor.
Some other exceptions were taken, to which no reference is here made, as they are not alluded to in the opinion of the Court delivered on affirming the judgment.
p. 160The referee erred in admitting any testimony of transactions occurring prior to the incorporation of the defendants, because: 1. The allegation of the complaint is, that the agreement on which the action is based was made subsequent to the organization of the company, and this allegation is denied by the answer. This was one of the issues to be tried. 2. Prior to the incorporation, there could be no person authorized to act for a company which did not exist." There could be no delegated power where there was no principal to make such delegation. 3. The action or agreement of persons about to form a corporation, could no't in any way be binding upon that corporation after it acquired a legal existence. 4. A corporation, formed under the general laws of the state, cannot exist until certain forms and requisites are complied with, and it is such compliance that creates it; among others, the payment for its capital stock. (Laws of 1849, ch. 308, p. 441.) He also contended, that the referee erred in admitting the testimony of the plaintiff in his own behalf, because: 1. The adverse party being a corporation, is not a party or person in interest “living,” within the meaning of the statute. (Code, § 399.) 2. The subsequent portion of the section shows that it is the intent that the adverse party may have the opportunity of being examined in his own behalf. 3. A corporation cannot be so examined. 4. The fact that the officers of a corporation can be examined, does not bring a corporation within the provision of the statute. They are mere clerks of the corporation, and are to be regarded in the same manner as clerks of an individual. 5. The statute did not intend to give any new rights to one party which were not given to another.
It appeared that the defendants were incorporated on the 9th of May, 1853, as an Insurance Company, under the act entitled “ An act to provide for the Incorporation of Insurance Companies,” passed April 10, 1849.
J. M. Mason, for appellants.
p. 1616. This statute would not allow a corporation, to introduce its own books as evidence in its own behalf. 7. But if the statute has force from the fact that the officers of the corporation can be examined, then it can only be enforced where the officers cognizant of the transaction are still officers. In this case, Westervelt, the president, had left the company in 1854, and Carroll, the secretary, left the company in December,' 1858, and died about a year before the trial.
He also argued, that the action cannot be sustained on the ground, that the defendants have not shown affirmatively that they have paid for the bond and mortgage. This they were not called upon to do, as the complaint is not framed upon this basis. The action is simply a claim for money upon a failure to fulfill an agreement to issue stock.
The judgment should be reversed with costs, and judgment ordered for defendants.
A. %T. Willard, for respondent.
By the Court.
—Before the recent statute, which enables parties to testify in their own causes, each member of a corporation could, (since the Code was enacted,) be a witness when the corporation was a party, and so the law now stands. '
Though a corporation, as such, cannot be examined, yet each member and each officer of it can be examined.
We think there was no error in admitting'the plaintiff. The plaintiff states that he assigned the bond and mortgage mentioned (upon which the amount due was $6,500), to the defendants, and that the mortgage was good, and that the defendants agreed to give that amount in the stock of the company; that he has received no consideration except the sum of $900, and that the defendants refuse to issue stock or to pay the balance of the $6,500. The plaintiff’s evidence is positive upon this point, and the referee has so found, and we see no evidence to warrant us in disturbing that finding.
Evidence was offered relating to negotiations about this mortgage, prior to the incorporation of the defendants; such evidence does not of itself prove a contract with the corporation; but as these negotiations were made with the persons who soon after
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composed the active managers of the corporation, the evidence was proper to explain the subsequent acts of the defendants relating to the same matter. Such prior negotiations, amounting to an agreement with the plaintiff, being adopted by the officers of the corporation as such, became in fact the contract of the corporation, and constituted the terms and conditions, upon which the bond and mortgage were assigned by the plaintiff.
La Farge testifies that he assigned the mortgage to the defendants ; that with the exception of $450 of stock issued to Mr. Eggleson, and $450 issued to Mr. McCarty, amounting in all to $900, he has received no other consideration whatever.
Upon this evidence we think the finding of the referee was correct.
Judgment affirmed with costs.