Collins v. Suau — 30 N.Y. Super. Ct. 623

Majority

p. 623

Joseph N. Collins, plaintiff, vs. Henry A. Suau, defendant.

Headnote

1. In an action brought by creditors of a corporation, formed under the act of 1848, against a stockholder in the company, to recover the amount of their debt, the defendant, first, denied that he was a stockholder; he then admitted that he was a stockholder, but alleged that when he became such, he was induced to do so by certain promises made on behalf of the company. He did not pretend that the company made any such promises as a corporation. Held that although the defendant might have a cause of action against the persons making the promises, the sematters were wholly inter alios acta, and were irrelevant to the issues in the action.

2. Held also, that the defendant having admitted the making of certain promissory notes by the corporation, and the recovery of a judgment upon them, his allegation of want of knowledge as to their delivery by the maker to the payees, and of his ignorance whether the company was indebted on them, was immaterial.

3. An answer, in such an action, setting out a contract between third parties for the sale and purchase of lands, made before the company was incorporated or existed, and alleging that the purchase was intended to be for the company, is sham and irrelevant, as relating to matters that occurred before the company had any existence, and not constituting any defense, or any matter relating to the case.

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4. If a purchaser of lands is defrauded by misrepresentations of the vendors, he has a cause of action against them, which is personal to himself, and will not pass by his subsequent assignment of the contract. •

8. A pleading is frivolous when there is a decision in point adverse to its suffi,ciency. So if there is a judgment recovered upon promissory notes of a company in which the defendant is a stockholder, it is conclusive upon him.

(Before McCunn, J., at Special Term,

April 17, 1868.)

This is a motion to strike out parts of an answer as false, sham and irrelevant.

The complaint 'shows, that the European Petroleum Company is a corporation organized under an act of the legislature, passed April 17, 1848, entitled “ An act to authorize*the formation of corporations for manufacturing, mining, mechanical, and chemical purposes,” &c., and the amendments thereto; and was so organized and incorporated as a mining company, in or about “the month of December, 1864. That the capital stock of said company was fixed and limited at $100,000, divided into 10,000 shares, of the par value of $10 each share; and that on the 10th day of June, 1865, the defendant was a stockholder therein to the amount of 100 shares of the capital stock thereof, of the par value of $10 each share. That on said 10th day of June, 1865, the whole amount of capital stock fixed and limited by said company, and by their said charter, had not been paid in; and that on said day more than one half of said capital stock, so fixed and limited as aforesaid, had not been paid in, nor agreed to be paid in, and has not since been paid in. That on said day the said company made their thirteen promissory notes in writing, duly stamped, all of them bearing date on that day, and payable to the order of L. E. Lahens, wherein and whereby they promised to pay, by six of said notes, to the order of said L. E. Lahens, $9163.41, in the aggregate, in sixty days from the date thereof, for value received; and by the other seven of said notes they promised to pay to the order of said L. E. Lahens $9187.90, in the aggre

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gate, in ninety days from the date thereof, for value received, and delivered the same to the said payee thereof, who, for a valuable consideration, and before maturity, indorsed and delivered the said notes to Leonard B. Lindsley and Isaac B. Cottrell. That when the said notes became due, the said company made their thirteen promissory notes in wrting, duly stamped, all of them bearing date on the 12th day of August, 1865, wherein and whereby they promised to pay, by six of said notes, to the order of L. E. Lahens $9163.41, in the aggregate, in sixty days from the date thereof, for value received; and by the other seven of said notes they promised to pay to the order of L. E. Lahens $9187.90, in the aggregate, in thirty days from the date thereof, for value received, and delivered the same to the said payee thereof, who indorsed and delivered the same to said Leonard B. Lindsley and Isaac B. Cottrell, in renewal of said first mentioned notes.

And the plaintiff further ■ alleged that when the said notes became due, the said company did not pay the same, nor any part thereof; and that on the 31st day of January, 1866, the said Lindsley and Cottrell, being still the owners and holders thereof, and the said company being still indebted to them thereon in the full amount thereof, with interest, brought a suit against said company, in the Supreme Court, in the city and county of Hew York, for the recovery of their.said debt; and that said company appeared and defended said suit; and such proceedings were thereupon had that on the 22d day of January, 1867, judgment was rendered therein- in favor of said Leonard B. Lindsley and Isaac B. Cottrell, against said company, for the sum of $20,188.39, whereupon, on the same day, an execution against the property of said European Petroleum Company was issued upon said judgment to the sheriff of the city and county of Hew York, which said execution was afterwards, and on the 25th day of March,

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1867, duly returned by said sheriff into the office of the clerk of said city and county of Hew York wholly unsatisfied.

And the plaintiff further alleged that oh the 30th day of January, 1867, the said Leonard B. Lindsley and Isaac B. Cottrell, for a good and sufficient consideration, sold, assigned, transferred and set over to said plaintiff the said judgment, by writing, under seal, duly executed by them.

The answer of the defendant, Henry A. Suau—

1. Admits that the European Petroleum Company was a corporation organized under an act of the legislature, passed April 17, 1848, entitled “ An act to authorize the formation of corporations for manufacturing, mining, mechanical and chemical purposes,” &c., and the amendments thereto, and was so organized and incorporated as a mining company on or about the month of November, 1864.

2. He also admits that the capital stock of said company was fixed and limited at $100,000, divided into 10,000 shares, of the par value of $10 each share; and that on the 10th day of June, 1865, this defendant was a stockholder therein to the amount of 100' shares of the capital stock thereof, of the par .value óf $10 each share. He also admits, upon information and belief, that on said 10th day of June, 1865, the whole amount of capital stock fixed and limited by said company and by their said charter had not been paid in, nor agreed to be paid in, and has not since been paid in; but this defendant has no knowledge or information sufficient to form a belief as to the amount of said capital not subscribed for and not paid in; and he therefore leaves the plaintiff to make such proof in that behalf as he may be advised.

3. And as .to all the other allegations-in said complaint contained, and not hereinbefore specifically admitted, the defendant has no knowledge or information sufficient to

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form a belief as to such matters, and he therefore denies the same.

4. And the defendant, further answering the said complaint, and for a separate defense thereto, avers that in or about the month of Hov ember, 1864, one L. B. Lahens (the same person mentioned in the said complaint) being about to organize and form a company for the working of petroleum lands, and acting for and in behalf of said company, made and entered into a certain contract or agreement with one Leonard B. Lindsley and one Isaac B. Cottrell, which contract was in the words and figures following, to wit:

“In consideration of the purchase from us by L. E. Lahens, Esq., of the city of Hew York, of the real estate, leasehold property, and other property in the state of Pennsylvania, which is more particularly mentioned and described in the memorandum hereto annexed, signed by us, and in the further consideration of the sum of $5 to us paid by said L. E. Lahens, the receipt whereof is hereby acknowledged, the undersigned hereby sell to the said L. E. Lahens all the real estate, leasehold property and other property and effects in said memorandum mentioned and described, for the sum of $50,000 in cash, and $20,000 in stock of the company which said Lahens is about to have organized, and which company is to own and use said lands and property, said stock to be taken at its par value. The said cash to be paid as follows, namely: $25,000 on or before the 15th day of January, 1865, next, at the office of Guerber & Co., Ho, 49 Pine street, in the city of Hew York, on the titles being examined and found satisfactory and all free and clear, and on the deed or deeds of said premises being executed to the said Lahens or to his order, and deposited in escrow with Henry A. Smythe, Esq,, of Hew York. The $20,000 worth of stock

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to be delivered at the same time. The balance of the cash to be paid at the same place in two equal installments; one in thirty days, and the other in sixty days from the time of the first payment, or sooner, at the option of the purchaser; and on the last payment being made, said deed or deeds are to be delivered to the said Lahens, or to his .order. All of the said property is to be so conveyed, free and clear of any and every incumbrance, by proper deeds and conveyances with warranty, with full covenants, and possession full and absolute of said property and premises is to be delivered with said deed or deeds.

In witness whereof we have hereunto set our hands and seals this 28th day of November, 1864.

L. B. Lindsley, [l.s.]

I. B. Cottrell, [l.s.]

In presence of E. Matile, Jr. and C. Karb.

I, L. E. Lahens, hereby agree with L. B. Lindsley, Esq., above named, to buy from them the property and premises above mentioned, for the price.and on the terms above mentioned.

In witness whereof I have hereunto set my hand and seal this 28th day of November, 1864.

L. E. Lahens, [l.s.]

■ In presence of E. Matile, Jr. and C. Karb.

No. 1—Four acres of land in the Slemmer and Brothers’ lease on Giles’ farm, Crawford county; three wells on the property—one 630 feet deep, one 560 feet, and one 200 feet deep. One of these wells only has been pumped, and produced from 15 to 20 barrels of oil per day; one of the others being down to a sufficient depth has a fine show of oil. This property is on Oil and Pine creeks, about one and a half miles from Titusville. One well gives one quarter of the oil to the land, and the other two one third each.

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Ho. 2—Everett & Bissell lease, Crawford county, about two acres on the John Watson farm. One well has pumped from 30 to 40 barrels per day; one pumped and flowed 20 barrels per day, and one shallow well flowed some. Half of the oil produced on this property goes to the landlord-.

Ho. 3—In fee simple, one acre of land in the borough of Franklin, on Alleghany river, eighteen miles from Titusville. Well 450 feet deep; good show of oil; never tested.

Ho. 4—In fee simple, Keppler farm, Steuben township, Crawford county, six miles from- Titusville, ten acres of land. On the property is a hotel,, house, barn, store, &c., blacksmith shop; also one-eighth of thirty-seven acres of land adjoining.

Ho. 5—On Steele farm and Widow McClintock farm, about one acre of land, “ Geo. Perry Well,” with tubing and good tank, one-sixteenth working interest; well producing about four barrels per day; one half oil goes to land owner. This property is directly back of Hammond Well.

Ho. 6—Lease on Shafor farm, one well 400 feet deep, good show of oil, never tested; of.f of the oil.

Ho. 7—One quarter of working interest in a lease on G. W. McClintock farm, on the flat next above the Hide and Egbert farm, with its Maple Shade Well and Jersey Well, and many other good ones. The McClintock farm was sold about one year ago for $550,000, and is now considered one of the best oil farms on the creek. This lease is near the upper end of the flat, and is now being bored down. This interest is free of expense until the well is down 500 feet, then an equal share will be required. The lease is for one half of the oil. L. B. Lindsley.

I. B. Cottrell.”

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5. That shortly after the making of said contract, and after the making of the representations and warranty therein contained, this defendant, upon the faith, of said representation? and warranty, and in the full belief that the same were true, and upon the faith of the assurance that said Lindsley and Cottrell were about becoming stockholders in said company, as provided in said agreement, agreed to. take and did take the shares of stock above mentioned, viz., one hundred shares, of the par value of $1000.

6. That the said purchase having been made as aforesaid, the company mentioned and referred to in said contract was, on or about the fourth day of December, 1864, duly organized, and is the same corporation or company in the complaint mentioned and referred to; and the said contract thereupon, and on the first of December, 1864, was transferred to and became the property of the said company, for which the same was originally made, as is herein above set forth, and as was well known to the said Lindsley and Cottrell:

7. That shortly after the said .company was organized, to wit, on or about the fourth day of December, 1864, it began to make payments on account of said purchase to said Lindsley and Cottrell, which said payments were received and accepted by them. That prior to the giving of said notes, the said company paid, and the said Lindsley and Cottrell received, the sum of $26,500, on account of said lands,'leaving a balance due of about $18,000 on the price of said lands, for which sum the company made and delivered to the said Lindsley and Cottrell certain promissory notes, which the defendant is informed and believes are the same notes mentioned and described in the complaint, and which notes have .been sued on by said Lindsley and Cottrell, in certain actions heretofore; brought by them against various stockholder?, some of

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which actions were pending at the time that this action was commenced, and are still pending and undetermined.

And this defendant further alleged, that he was informed and believed the representations aforesaid were false and fraudulent, and he particularly averred that the said well above mentioned on the Giles farm had never yielded either fifteen or twenty barrels of oil per day as represented and warranted by the said Lindsley and Cottrell, and that he had been greatly injured and damaged by such false representations, and by the failure of said warranty, to wit, in the sum of $1000, which damages he claimed to set off and recover against any claim that the plaintiff may establish in this case.

And the defendant further alleged, that the suin' of $26,500 and the said 2000 shares so to be repaid and delivered to said Lindsley and Cottrell were more than equivalent to the real value of said land and property so sold as aforesaid, by said Lindsley and Cottrell, as said Lindsley and Cottrell well knew.

8. And the defendant further answering, and for a further and separate defense, averted that from the time of the organization of said company up to the commencement of this suit, the said Lindsley and Cottrell were stockholders in" said company to a larger amount than this defendant, to wit, 2000 shares, of the nominal value of $20,000 or thereabouts, and that they became and were stockholders in such company before this defendant became the holder and owner of any stock therein.

And the defendant further answering, and for a further and separate defense, alleged that the contract out of which the alleged or pretended claim of said Lindsley and Cottrell arose, was made, and the debt or pretended debt of said company accrued, before this defendant became the owner of said stock, or any stock, in said company.

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George O. Genet, for the plaintiff. ■

Goudert Bros., for the defendant.

This action is. brought by the plaintiff as the owner of a judgment recovered by Lindsley & Cottrell v. The European Company, to recover from the defendant an amount equal to the amount of capital stock held by him' in the company. The company was formed under the act of 1848, with a cash capital of $10,000, which has not been paid in, which makes him liable under the tenth section of the act.

The plaintiff asks to have struck out from the defendant’s answer, beginning at the word “ First,” in folio 1, and continuing to near the end of folio 9. • In this portion of his answer the defendant denies, to begin with, that he was a stockholder. He then admits that he was ; but says that when he became such, he was induced to do so by certain promises made on behalf of the company. He does not pretend that the company made any such promises as a corporation. It may be that he has a cause of action against the parties making the promises ; but these matters are wholly inter alios acta, and are certainly irrelevant to the issues in this suit. The plaintiff next asks; to strike out from, the'words “Paid in,” folio 10, to, “ secondly,” folio 11. The defendant admits the, making of the notes by the company, and the recovery of the judgment by Lindsley and Cottrell upon them. These allegations, of want of knowledge as to their delivery by Lahens; to Lindsley and Cottrell are immateriál, as well as his ignorance whether the company was indebted on them. He has ready means of obtaining this knowledge; being a member of the company, the fact is presumptively in his knowledge, (Shearman v. N. Y. Central Mills, 1 Abb. 187 ,)

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while, further.on, at folio 24, the defendant expressly alleges the notes were given to Lindsley and Cottrell.

A pleading is frivolous where there is a decision in point adverse to its sufficiency. ( 15 How. 193 . 4 Duer, 188 . 10 Jurist, 642.) In this case there was a judgment recovered upon notes of the company in which the defendant was a stockholder, and it is conclusive on him. (Belmont v. Coleman, 21 N. Y. Rep. 100 , 101.) The plaintiff next asks to strike out from the word “ secondly,” in folio 11, certain portions of the answer, together, ending with the word “ Cottrell,” in folio 22. This sets out a contract, with schedule and proof of execution at length, between Lindsley and Cottrell and one Lahens, and dated November 28, 1864, before the European Company was incorporated or existed,' and is clearly sham and irrelevant. This portion of the answer relates to matters that occurred before the European Company had any existence; and this,_with the allegation that follows shortly after, that it was' intended by Lahens for this company, does not constitute any defense, or any matter relative to the case.

The terms of the contract, as well as the date, showed it was a sale to Lahens on his own account. The allegation that it was transferred to them by Lahens after their incorporation, also shows it; therefore the allegation that it was intended by Lahens for that company, is a very frivolous proposition. Lahens might have changed his mind. Lindsley and Cottrell could not be bound by his intentions, nor does it better the matter if they claim that Lahens acted for the company, because no act is capable of ratifi-X cation by the principal which was not performed by the | agent, as agent, and in behalf of the principal. (1 Pars on Cont. 287; also 443, n.)

That portion from folio 23 to the words “that all,” in folio 27, is irrelevant and sham. If Lahens was defrauded by misrepresentations on the 28th of November, he hada

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cause of action against Lindsley and Cottrell on the 29th, which was personal to himself,- and did not pass by his subsequent assignment of the contract. (1 Pars, on Contracts, 200.)

Kent says, covenants not running with the land are personal covenants, and do not pass to the assignee; for if not true there is a breach as soon as executed, and they become chosés in action, not technically assignable, (see Gillespie v. Torrance, 7 Abb. 469 ; La Farge v. Halsey, 1 Bosw. 171 ,) nor can any part be assigned. The fourth defense as it.now. stands is a subterfuge-. If the defendant means that by the contract between Cottrell and Lindsley and Lahens, the defendants became stockholders in the company that bought stock, it is absurd and no defense. They agreed to take the stock in payment for property, and by the act of 1853 they are not personally liable for the debts of the company,' under section 10 of the act of 1848, under which the defendant is liable.' (Sess. Laws of 1853.) For the same reason the third defense should be made more definite, so as to show what the defendant means; as it now stands it is evasive. The fifth defense is also irrelevant; if the judgment has not been paid in full, it is no defense to the plaintiff’s right to recover against the defendant.

The motion, in all respects, should be granted.

Cases cited

La Farge v. Halsey 1 Bosw. 171 N.Y. Super. Ct. 1857-05-02 p. 634