Harlæm Canal Co. v. Seixas — 2 N.Y. Super. Ct. 504

Majority

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The Harlæm Canal Company versus Moses B. Seixas.

Headnote

A subscriber to the stock of an incorporated company, has, by the act of subscribing, such an interest in the stock of the company, as will furnish a sufficient consideration to support a promise on his part, to pay the amount of his subscription, And the remedy of the company for the'non-payment of the instalments, duly called for, according to the terms of the subscription, is not confined to a forfeiture of the shares,—but they may maintain an action of assumpsit, upon the promise contained in the subscription, for the amount of the instalments.

The subscriber, who pays the amount of his subscription, can compel the company to furnish him with a proper certificate of his stock; and where, by the terms of subscription, the first instalment was not to become payable, until a certain amount of stock was subscribed for, a call for the first instalment, was deemed tantamount to a notice to the subscriber, that the requisite amount had been taken up.

Assumpsit to recover of the defendant the amount of his subscription to the capital stock of the Harlaam Canal Company.

The declaration contained five counts. The first set forth the act incorporating the plaintiffs, [ Vol. 7, L. N. Y. 370 c.,] for the purpose of constructing a canal in the twelfth Ward of the city of New-York, at any point between 95th and 135th streets, so as to open a water communication, across the island, between Harlsem Creek and the North River. That a share in the capital stock of said company was to be fifty dollars; and that the defendant, on the 17th day of September, 1827, “ for the purpose of becoming “ a member of the said company, and interested in the stock “ thereof, promised and agreed, to and with the plaintiffs, to take “ a large number, to wit, sixteen shares of the capital stock of the “ said company, and then and there subscribed for said sixteen “ shares, and agreed to pay for the same at the time and in the “ manner following, that is to say, that as soon as a sufficient “ amount of stock should have been subscribed, to justify the com

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- mencement of the work,” ten per cent. “ of the amount shoul d be paid into the hands of Henry Post, Sylvanus Miller, and “ William Kent, Esquires, as trustees, to be by them paid over; “ on account of the land and expenditures of the canal, from time “ to time, as the work should progress, and as the same might be “ required, but in such manner that the contractors” “ should be “ constantly in advance to the company, in expenditures for land “ and on the canal, to the amount of at least 20,000 dollars, until “ the work should be finished ; the balance of subscriptions, with “ interest, should become due as follows: viz. ten per cent, in two “ months, ten per cent, in four months, ten per cent, in six months, “ ten per cent, in eight months, and ten per cent, in ten months, “ from the time the first instalments were called for; the balance of “ forty per cent, when the canal should be finished.”

The declaration then averred, that “ afterwards, to wit, on the 17th day of November, in the year 1827,” an amount of stock, sufficient to justify thé commencement of the work, to wit, 8000 shares, amounting to the sum of 400,000 dollars, having been subscribed for, the first instalment of ten per cent, was called for by the said plaintiffs, and directed to be paid on the 4th day of December, then next, into the hands of the said trustees, pursuant to the said terms of subscription, “ of which the defendant after-wards, to wit, on the said 4th day of December, had notice;” by means whereof, and in pursuance of the said agreement and promise, the said defendant became liable to pay for the said shares of stock as follows: to wit, ten per cent, on the said 4th day of December, and five other instalments of ten per cent, each, with interest from the said 4th day of December, in two, four, six, eight, and ten months thereafter. And being so liable, the defendant, in consideration thereof, promised the plaintiffs to pay the said several instalments in the manner above specified. Nevertheless, the defendant, although often requested, &c., had not paid the said several instalments, or any or either of them, or any part thereof, to the said Henry Post, Sylvanus Miller, and William Kent, or either of them, or to the plaintiffs, but to pay the same, had refused, &c.

The second count set forth, that the defendant, “ in consideration that the plaintiffs would allow him to subscribe for and take

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“ other sixteen shares in the capital stock of the said company, and to be entitled to the privileges, advantages, and emoluments “ to be derived therefrom,” promised and agreed to pay the plaintiffs 50 dollars for each of the said shares so subscribed for by him, at the times and in the manner specified in the terms of subscription. That the plaintiffs, at the time aforesaid, did allow the defendant “ to subscribe for the said sixteen shares of stock, and to “ become entitled to the privileges, advantages, and emoluments “ arising therefrom, and the said defendant did then and there “ subscribe for the said sixteen shares, in a certain book or paper “ called a subscription book; and by that subscription,” promised to pay the plaintiffs for the said shares, at the times and in the manner specified. The count then alleged, that a sufficient amount of stock having been subscribed for, to justify the commencement of the work, the first instalment was called for by the plaintiffs, and the defendant was required to pay the same to the trustees on the 4th day of December, 1827; but there was no direct averment of notice to the defendant, that an amount of stock had been subscribed for, sufficient to justify the commencement of the canal. In other particulars, the second count did not differ essentially from the first.

To these two counts, the defendant interposed separate general demurrers.

[By the 5th section of the act incorporating the Harleem Canal Company, it is provided, that “ it shall be lawful for the directors “ to call and demand from the stockholders respectively, all such “ sums of money by them subscribed, at such times, and in such “ proportion as they shall see fit, under pain of forfeiture of their re- “ spective shares, and all previous payments made thereon, if such “ payments be neglected for the space of ten days after the same “ ought to have been made, and thirty days previous notice of “ said call and demand shall have been given,” agreeably to the provisions of the act.]

The cause was argued by Mr. Judah and J. B. Tallmadge, Esq. for the defendant, and by Mr. J. L. Mason and Mr. Anthon, for the plaintiffs.

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To the first count, it was objected, I. That it shows no consideration for the defendant’s promise. [14 John. R. 238. 9 Ib. 217. 1 Caine’s Cas. 86. Chit. on Bills, 70. 85. 5 Term R. 482. 7 Ib. 350.]

II. That the plaintiffs have no remedy by suit for the recovery of money due upon subscriptions for shares of their stock. By the 5th section of the act, their power over this subject is restricted to forfeiture. If the plaintiffs have a remedy by suit, it can only be by a special action on the case,for a non-compliance with the terms of subscription. All the cases which have been decided in our courts, upon this subject, are cases relating to turnpike companies, which have the express privilege, by statute, of suing their stockholders. [1 R. L. 229.]

III. The declaration contains no averment of a compliance, on the part of the plaintiffs, with the conditions upon which the defendant’s promise rested. These were all conditions precedent, and as the act incorporating the plaintiffs, is a public act, the court may take judicial notice of its requirements. 1. It does not appear that the assent of the Corporation of the city of New-York to a commencement of the work, on the part of the plaintiffs, has ever been obtained. This is made a condition precedent by the 4th section of the act. 2. It does not appear that the work was begun within the time limited by the act of incorporation, nor that it ever has been begun at all. 3. It does not appear that the contractors have been in advance, as prescribed in the agreement.

IV. There is no mutuality in the contract, and the claim of the plaintiffs cannot, therefore, be enforced. In addition to this, it does not appear that the defendant possessed the shares subscribed for, nor is there any thing in the agreement, upon which an assumpsit can be raised.

With regard to the second count, the same exceptions were taken, and the want of an averment of notice, was especially urged as an objection. And it was contended that these various defects were the proper subjects of general demurrer. 5 Bos.

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and Pul. 367. Com. Dig. tit. Pleader, c. 73. 1 Chit. Plead. 320. 322.]

For the plaintiffs it was urged, I. That the interest acquired by the act of subscribing to the shares, in the stock of the company, was a sufficient consideration to uphold the defendant’s promise to pay for them, and that such consideration was sufficiently expressed in the declaration. [1 Caine’s Ca. 86, and the cases cited by the defendant. 1 Binn. R. 70. 8 Mass. R. 138 . The Bed. & Bridg. Turn. Co. v. J. Q. Adams.] The character of the transaction, under a public act, (which fully appears on the face of the declaration,) would, for the purpose of fixing a liability on the defendant, be a sufficient consideration to support his promise. But the principle, upon which the objection as to the consideration rests, has already been settled, by adjudications in our own courts as well as those of other states, and it can hardly be considered as open to discussion here.

II. The remedy of the plaintiffs, is not confined to a forfeiture of the defendant’s shares. The company may waive the forfeiture, and rely upon the promise, and their remedies are cumulative.

By the very terms of the subscription, money is to be paid before the work is commenced, and this objection to the remedy, would deprive the company of all power to collect the first instalments. The objection, however, is not a new one. It has come up, upon other occasions, and has been disposed of by judicial tribunals. [ 5 Mass. R. 80 . Worchester Turn. Co. v. Willard.]

III. As to the conditions precedent, there were none by the terms of the subscription, except that a sufficient number of ^shares should be subscribed, to justify a commencement of the work, and a compliance with that condition is expressly averred.

IV. As to the other objections to the declaration, they are not the subjects of general demurrer. If the plaintiffs have neglected their

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duties, and any defence to this action arise from that source, it should have been pleaded. [1 Chit. P. 229. Com. Dig. Plead. C. 81.] Notice to the defendant is sufficiently alleged; but if not, the want of it, is not the subject of a general demurrer.

[After an abstract of the pleadings.] The principal objection made to the first count of the declaration, is, that it does not set forth a sufficient consideration for the defendant’s promise.

The plaintiffs being a body corporate, with power to create a stock for the purposes contemplated by the act of incorporation, had a right to open a subscription for such stock, on any terms they thought proper to prescribe, not inconsistent with the provisions of the said act. The defendant by the act of subscribing, became interested in the stock of the company, and on paying the amount of his subscription, could at any time, compel the company to give him a proper certificate for the same. It is now the doctrine of the Supreme Court, as I understand it, that the interest thus acquired by the subscription, is a good consideration to support the promise to pay, and that an action may be maintained on such subscription, though the corporation may possess the power of forfeiting the stock for default of payment. [ Goshen Turnpike v. Hurtin, 9 J. R. 217. The Dutchess Cotton Manufactory v. Davis, 14 J. R. 238.]

The averments in the declaration, seem to me, to bring the present case within this principle. They are somewhat informal, but they set forth the agreement of the defendant to take the stock, and the fact of his subscribing for it. His interest in the company is thereby shown, and that will support his promise to pay the instalments, according to the terms of the subscription.

The second count of the declaration sets forth the consideration of the defendant’s promise, in a formal manner, and is clearly within the principles of the cases above referred to. It is objected, however, to this count, that notice to the defendant is not averred, that an amount of stock had been subscribed for, sufficient to justify the commencement of the canal. By the terms

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of the subscription, the first instalment did not become payable until such an amount of stock was subscribed, and the other instalments were to become due at stated periods, after the first should be called for. It is averred, that such a call was made, and that the defendant was required to pay, &c. If any notice of the amount of the stock subscribed was necessary, I am inclined to think, that the call for the first instalment was a sufficient notice. That call could be made, only on the event of the subscription of the requisite amount of stock, and the defendant having notice of the call, was thereby necessarily apprized of the fact, of a sufficient subscription having been made. The demurrer must be overruled.

Judgment for the plaintiffs on the demurrer, with leave to the defendant, &c.

[J. L. Mason, Att’y for the plffs. Judah, Att’y for the deft.]