Lohman v. New York & Erie Rail Road — 4 N.Y. Super. Ct. 39

Majority

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Lohman v. The New York and Erie Rail Road Company.

Headnote

Where the charter of a corporation, after providing for a subscription to the capital stock on a public notice, authorized the directors, if the whole were not then taken, from time to time to cause the books for the subscriptions of stock to be opened until a sufficient sum was subscribed; the further subscriptions so authorized, may be made without any public notice of opening the books; and the power to receive the same may be delegated to officers or agents of the corporation.

The object of-a subscription in filling the stock of a corporation, is to furnish evidence of the subscriber’s liability to pay up his shares, and to identify the persons who have become shareholders.

No particular form of subscription is necessary; and when the shares are paid up at the time of their being first taken, the stock certificate issued, and the party’s receipt for the shares, constitute a sufficient subscription.

A corporation having power to issue further capital stock, may issue the same in exchange for an equal amount of its indebtedness.

Where there was express authority from the directors to the principal officers of a corporation, to issue stock in exchange for three distinct classes of indebtedness, and those officers for a considerable period, had been in the habit of thus issuing stock, in exchange for those, and for a fourth class not embraced in the express authority ; and their acts had never been disclaimed or questioned by the directors, or the corporation ; it was held, that their issue of stock in exchange for such fourth class of indebtedness, was valid and binding upon the corporation, and equally binding upon the creditor who accepted such stock.

One who exchanges his debt against a corporation, for capital stock issued tiy its principal officers, without inquiring as to their authority, is not at liberty to annul the contract, because their authority was not express, but was a full implied authority derived from the course of business, and from similar acts affirmed or acquiesced in.

Where the stock of a company was usually transferred on two distinct books, to the stock transferred on one of which share brokers attached a greater value than to that on the other; and a creditor agreed to exchange his debt for stock, on the officers stating that such stock could be transferred on the former ; and after completing such exchange, the officers refused to allow a transfer of it to be entered on such book ; it was held, the creditor could not for that cause rescind the exchange, but that his remedy was in an action for damages.

May 26, 27 ;

July 8, 1848.

Motion by the plaintiff for a new trial, on a case. The action was trover, brought to recover certain certificates of in

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debtedness issued by the defendants, commonly called bonds, which the plaintiff owned on the second day of January, 1846.

Upon the trial of the cause, the following matters appeared in evidence. The defendants were incorporated by an act of the legislature, passed April 24, 1832, with a capital of ten millions of dollars, in shares of one hundred dollars each, (which were to be deemed personal property, and transferable as its by-laws should direct,) with power to construct and maintain a railway, with one, two, or three tracks, from the city of New York, or its vicinity, to Lake Erie, through the southern tier of counties in this state. By the fourth section of the act, a large number of persons were designated as commissioners, and it was made their duty to open books to receive subscriptions to the capital stock of the company, giving twenty days notice thereof, by advertisement in the newspapers, and to keep the books open three days. As soon as the stock was subscribed, directors were to be elected, under the inspection of the commissioners. By the fifth section, if there were an excess of subscription to the stock, the commissioners were to apportion the stock among the subscribers; “And if the full amount of capital be not subscribed within three days as aforesaid, then it shall be the duty of the commissioners to open the subscription books from time to time until the whole amount shall have been subscribed: the commissioners shall receive no subscriptions, unless five dollars on each share subscribed be paid at the time of subscription.” By the sixteenth section, the directors were authorized to require payment of the sums to be subscribed to the capital stock, at such times, in such proportions, and on such conditions, as they should deem fit; giving public notice of the calls respectively. (Laws of 1832, ch. 224, p. 402.)

The charter was amended on the nineteenth day of April, 1833, by an act which directed the commissioners to open the books on the second Tuesday of July ensuing. If in three days the whole amount of the capital were not subscribed, the commissioners were to ascertain how much had been applied for. If one million should have been subscribed, or as soon

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thereafter as a million should be subscribed, the commissioners were to proceed and organize the company. The third section was as follows:

“ If the directors shall be chosen, and the company organized by virtue of the preceding section, it shall be the duty of the directors so chosen, or their successors, from time to time, to cause the books' for the subscriptions of stock to be opened until a sum sufficient to complete the work from Hudson River to Lake Erie shall be subscribed, but the time for the completion of said road shall not be deemed to be extended by this act.” (Laws of 1833, ch. 182, p. 229.)

Under this act, the requisite amount of stock was subscribed, and the company was organized by the choice of a board of directors, the usual officers were appointed, and the rail road was commenced. Various acts of the legislature were subsequently passed, in aid of the corporation, and. recognizing its proceedings in different forms.

On the 10th of May, 1843, the board of directors adopted a series of resolutions, authorizing the executive committee to settle with creditors of the company, and' pay them in the general stock of the corporation; also, to issue certificates of indebtedness of the company to the amount of $300,000, at not less than five years, bearing interest at six per cent, per annum, and chargeable on the revenues of the eastern division of the rail road ; and to issue a further amount of certificates to the extent of $300,000, at not less than five years, and bearing interest at seven per cent., which should be receivable at par in payment of subscriptions to the capital stock.

On the 8th of November, 1844, a statement-was made and a resolution adopted by the board of directors, in these words, viz. :•—•

“ The president stated propositions had been made by holders of the certificates of the company which fall due on the 1st of January, 1849, to exchange the same, with the addition of interest to the time of maturity, for the stock of the’company.

“ Mr. Griswold moved that all such propositions' be accepted,

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and that the treasurer and secretary be authorized to carry the same into effect, which motion was adopted.”

On the 7th day of October, 1845, the directors adopted a resolution, referring the subject of receiving the seven per cent, certificates of the company in payment of its full stock, to the president and treasurer with power.

The minutes of the board of directors, exhibit the following proceeding as having occurred on the 1st day of December, 1845, viz.:—•

“ On motion of Mr. Brown, the following resolution was adopted:

“ Resolved, that the resolution passed the 8th day of November, 1844, authorizing the secretary and treasurer to receive the certificates of the company in payment for stock, with the addition of five years interest to the same, be, and is hereby, repealed.”

Mr. Brown, who offered this resolution, was also the treasurer of the corporation, and he testified as a witness on the trial, that its object was to repeal no part of the resolution of November 8th, 1844, except that which allowed stock to be issued for the unearned interest on the certificates of indebtedness. He also testified, that for two years and a half prior to January, 1846, the officers of the company had been in the practice of issuing stock for the corporation, both the president and treasurer, and also the treasurer and secretary. They had thus issued from five hundred to seven hundred shares. . The treasurer had the principal management of the issues of stock, and made the agreements with the creditors in New York to issue stock for ■ debts, and the agent made like agreements with the creditors on the line of the road. In eight instances, the issue of stock had been arranged by agents of the executive committee, and by the officers of the company. The president and secretary signed all the certificates of capital stock, and all were regularly entered on the books of the company. Between the first of December, 1845, and the second day of January, 1846, there' were several instances of stock issued for indebtedness.

It further appeared on the trial, that by an act in relation to

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The New York and Erie Rail Road Company, passed May 14th, 1845, a fresh subscription of stock, to the amount of three millions of dollars, one-fourth payable on subscribing, was directed to be made, on which being done, the state of New York, by the terms of the act, would relinquish to the like extent its lien on the road, for a loan made to the corporation in 1838; but the old stockholders were not to participate in the benefits of the provisions made by this act, unless they would surrender to the company their stock certificates, and receive therefor for every two shares of stock theretofore issued, one share of stock to be thereupon issued. (Laws of 1845, ch. 325, p. 352.)

Under this act, $3,400,000 of new stock was subscribed in October and November, 1845. The stock issued pursuant to the act of 1845, for the outstanding shares surrendered, was denominated in the company’s office, and was known among share-brokers and dealers, as “ consolidated" stock.

The company kept a transfer book in which were entered the transfers of the consolidated stock; and another old transfer book, on which werey entered fractional shares. In issuing stock for indebtedness after the passage of the act of 1845, the transfer clerk usually wrote across the face of the scrip the words, “ equal to consolidated,” and the transfers of such stock were made on the transfer book of consolidated stock, although the certificates issued to the transferee were marked f< equal to consolidated,” like those surrendered. The object of this, was to distinguish the stock so issued for debt, from the old consolidated stock.

The plaintiff was the holder of twenty-three certificates of indebtedness of the defendants, issued November 1st, 1843, and January 1st, 1844, bearing interest at six per cent.; payable half-yearly, and the principal payable January 1,1849 ; amounting in the aggregate, to $6000. Six of these bonds of the earlier date, and amounting to three thousand dollars, were signed by the president and treasurer. Nine of the same date, signed by the treasurer and an agent, amounted to about $2575. The residue were signed by the officers last named, and were dated January 1st, 1844.

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On the 2d day of January, 1846, the plaintiff applied to the treasurer of the company to exchange them for stock. While at the office negotiating, he asked the transfer clerk, if the stock he should take, could be transferred on the transfer book of consolidated stock, and was informed it could be so transferred. He told the clerk he wanted to sell it, and transfer it on that book. Thereupon the exchange was made, the certificates of indebtedness surrendered to the company, and the plaintiff received a certificate for sixty shares of the capital stock of the company, in the usual form, signed by the president and secretary. Across its face was written “ equal to consolidated stock,” with the secretary’s signature. The plaintiff signed a receipt for the stock, in the margin of the scrip book. The negotiation and arrangement were made by the treasurer and secretary of the company. The bargain was for stock, “ equal to consolidated.” The plaintiff stipulated for the privilege of rescinding his contract, at or before two o’clock of the succeeding day. The treasurer assented to this, and the stipulation was reduced to writing, and signed by the transfer clerk, in these words:—

11N. Y. and Erie R. R. Office,

“ New Yor/c, January 2, 1846.

“ Mr. Chas. Lohman having this day exchanged with the N. Y. and Erie R. R. Co. six per cent, certificates to the amount of six thousand dollars, for the same amount of stock of the company 1 equal to consolidatedit is hereby understood and agreed, that in case he should wish to re-exchange the same, he. has the privilege of doing so any time previous to 2 o’clock Saturday, 3d January, 1846.”

At this time, there was a great excitement among the dealers in stocks,' growing out of what they technically termed, “a corner” in the stock of this company ; large contracts to deliver the,stock on time, maturing on the 3d day of January, and the quantity deliverable not being procurable in the market. A large amount of the company’s certificates of indebtedness was offered to the company in exchange for stock on the 2d of January, after the issue to the plaintiff; so large, that the officers at first hesitated to issue the stock, but finally they issued it

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the next day. Mean time, and early in the morning of the 3d day of January, the president instructed the transfer cleric, to permit no more stock “ equal to consolidated,” to be transferred on the book of consolidated stock, but to enter the transfers in the old stock book, used for fractions, &c.; still marking it, “ equal to consolidated.” The stock brokers refused to receive the stock so transferred, on contracts for stock of the company, and on the afternoon of January 2d, they designated it as “ converted stock.” During that afternoon, the “ converted stock” sold at the board of brokers at 55 per cent., and the “ consolidated” at 85 per cent. In the morning, sales of the latter were made at par. The prices on the 3d day of January, were about the same as in the afternoon of the second. After the 2d of January, the stock previously issued for debt, and marked “ equal to consolidated,” was all called by the brokers “ converted stock.”

The plaintiff might have sold his stock at par on the 2d of January, if it had been of the scrip transferable on the consolidated book. He did not, however, make any contract for its sale, nor apply to transfer it. On the 3d day of January, but not till after 3 o’clock, P. M., the plaintiff called at the office of the company, and demanded a return of his certificates of indebtedness, and offered to deliver up his certificate of stock. The officers declined to re-exchange, because it was after the time stipulated in the agreement for that purpose. The plaintiff thereupon brought this suit.

At the trial, he contended, and requested the judge to charge, that the directors of the company had no authority to issue the capital stock, and take pay therefor in the certificates delivered to them by the plaintiff. That the treasurer and secretary had not, on the 2d day of January, 1846, authority to issue the stock to the plaintiff in exchange for the six per cent, certificates ; and when the plaintiff demanded them back, and offered to give up the stock, the agreement for the exchange was not binding on the corporation, and the latter had the right to dissent from it; and as it was not binding on the corporation, no valid contract existed. That on the 3d of January, the directors had the right to disavow and repudiate the agreement made

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by those officers with the plaintiff, and therefore the latter could tender back the stock and demand the bonds at any time before the corporation had adopted the contract. That if the contract was made under a belief by those officers, that they had the authority to issue the stock and make it transferable on the consolidated book, when in fact they had no such authority, then the agreement being founded on mutual mistake, was voidable, and the plaintiff had the right to demand a return of his bonds. If he acted under such mistake, and the officers knew it, and knew they had no authority to bind the corporation without the assent of the directors, then it was a fraud on the plaintiff, and he could rescind the contract.

That if the agreement for the exchange was that the stock was to be transferable on the regular consolidated transfer book, and the plaintiff would not have entered into it except on that understanding ; and if on the morning of January 3d, the transfer clerk was ordered not to allow the stock issued to the plaintiff to be transferred on that book; 'then the corporation had not ratified the agreement made by the treasurer and secretary, and the plaintiff on discovering that fact, had the right to demand back his bonds and return the stock. The not recognizing and the repudiation of that part of the agreement, authorized the plaintiff to treat the whole contract as at an end. That if the plaintiff, on learning of the orders not to permit a transfer on the consolidated book, would have returned the stock and taken his bonds before 2 o’clock, P. M., of January 3d, then it was the defendants duty to have notified him of those orders; and he had a right, whenever he ascertained them, though after that hour, to rescind the contract. And that he had the same right, if it were a material inducement without which he would not have contracted, that the stock to be issued to him should be transferable on that book; and if on the morning of January 3d, the company determined not to permit the stock to be transferred on that book. Also, that under the circumstances last supposed, and those given in evidence, the plaintiff had the right to rescind, whenever he discovered that the corporation had determined not to allow his stock to be transferred on the regular transfer book of consolidated stock.

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And that if the jury found that the agreement between the plaintiff and the treasurer and secretary, was made by the former on the faith of representations made by those two officers, which were untrue ; he had the right to demand back his bonds, whether they made such representations fraudulently or ignorantly.

The defendants asked the court to instruct the jury, that the defendants had authority on the 2d January, 1846, to take new subscriptions to their stock, and in such form and' manner as their board of directors should think proper. That their officers, viz.: their president, secretary and treasurer, being their general agents, and charged with the taking of additional subscriptions to the stock, were authorized on that day to take the plaintiff’s subscription for sixty shares, and take pay for them in the bonds of the defendants. That there has been no conversion of the bonds of the plaintiffs. Time being the essence of the contract, and no offer to re-exchange until after the time specified in the contract, the cancelling and retaining of the bonds by the defendants were legal and right. If the plaintiff had any claim against the defendants, having given him a certificate unauthorized by law, and on that account of no value, his remedy is not in trover, as he voluntarily parted with his title, and without any fraud or fault on the part of the defendants. That the conversation and engagement, if any, respecting transferring the plaintiff’s stock in the book for transferring consolidated stock, was anterior to the completion of the arrangement to exchange the bonds for stock, and that agreement being reduced to writing, the writing is the sole and only evidence of' the agreement between the parties. That the transfer clerk had no authority to negotiate for or agree upon terms for the exchange of the bonds for stock, and the defendants are not bound for any thing he said on that subject, or relating to it. That the book on which the transfer of the stock was to be made, was not one of the conditions or terms of the purchase ; all those are embraced in the written agreement. If any thing, the arrangement on that subject is collateral to the exchange, and a breach of it only furnishes ground for an action for damages.

The judge charged the jury, that under the circumstances

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proved, and the acts relative to the defendants, the stock issued to the plaintiff was valid as against the company. That if it were a part of the agreement between the plaintiff and the company, that the stock was to be transferable on the consolidated transfer book, (and such appears to be the evidence,) and the company next day directed that a transfer on that book should not be permitted ; then the refusal of the company to allow such a transfer, was a violation of the agreement, and entitled the plaintiff to sue for damages. He has not, however, brought a suit for a breach of contract, but has brought one founded upon the position that the contract was rescinded. Instead of claiming damages, he repudiates the whole agreement, and demands a return of the bonds.

To sustain this suit, a violation of the agreement by the company, is not sufficient. The plaintiff must prove that the contract was not fair on their part, and that there was a deceptive and fraudulent intent in making it. It is not enough that there may have been mistake or misapprehension on his part. A deception must have been practised upon him.

Though by determining not to permit a transfer of this stock on the consolidated transfer book, and omitting to notify the plaintiff thereof before two o’clock on the 3d of January; the defendants may have exposed themselves to an action for damages; yet as matter of law, they did not thereby rescind the whole agreement, so as to entitle the plaintiff to maintain this suit. The whole, therefore, results in this, that unless the jury find that an intention to defraud him existed at the time the conti'act was made, the plaintiff cannot recover.

The plaintiff excepted to the judge’s charge, and to his omission to charge as requested. The jury found a verdict for the defendants.

F. B. Cutting, for the plaintiff.

S. A. Foot, for the defendants.

The plaintiff contends, that the contract made with him for exchanging his bonds for the

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stock of the company, never was binding upon the latter, and. therefore his title to the bonds was unaffected by the exchange. His first point in support of this position, is that the directors of the company had no authority to issue capital stock, and receive in payment the bonds or indebtedness of the company. On this subject, we entertain no doubt of the authority of the directors, to issue the unsubscribed stock, whenever and as often as opportunities were presented. The act of 1833, contains an express grant of power to this effect, without restriction as to time, place, previous notice, or the form of the subscription. The directors were entrusted with the duty of forwarding the construction of this rail road, which, as the course of legislation respecting it shows, has been deemed by the state government, a highly important public enterprise. And to enable them to accomplish it, the statutes relative to this corporation, instead of the usual pre-requisite in stock corporations, of a full subscription of the capital, authorized it to proceed when one-tenth part of its intended capital was taken, and to obtain further subscriptions from time to time, until a sufficient sum should be procured to complete the work. Indeed, it seems the commissioners appointed to open the books, by the original charter, were unrestricted as to the time and manner of obtaining subscriptions, after offering the stock to the public for three days, under an advertisement.

As to the form of the subscription, no particular form is necessary. The object of a subscription being, to furnish evidence of the liability of the subscriber to pay up his shares, and also to show who have become the shareholders of a corporation ; it becomes a mere ceremony, where the new stockholder on receiving his shares, pays them up in full, and takes his certificate, which has been-previously entered in the stock ledger. This may not, perhaps, dispense with the observance of the ceremony, although it be useless; but in this case, there was a subscription, sufficiently formal, in the plaintiff’s receipt for the shares, written in the margin of the scrip book.

The mode of payment for the stock in question, is also made an objection to the authority of the directors ; but as we think, without any good cause. We doubt the propriety of the plain

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tiff’s finding fault with his shares, because he paid for them in the debt of the company, instead of paying cash. Nor do we assent to the argument, that the company, under a new direction, could have repudiated the shares, whatever might have been its remedy against the plaintiff for the amount payable to make them full shares, assuming that payment in bonds was unauthorized.

But to return to the transaction before us, we think it entirely free from objection. The plaintiff was the holder of the company’s bonds, and entitled to receive payment of their full amount, in cash, when they matured. If the company had procured some other person to subscribe for sixty shares of stock, and to pay them up in full; the six thousand dollars thus obtained, could do no more than pay the plaintiff’s bonds. Thus, it made no possible difference to the company, or to the prior stockholders, whether the plaintiff took the shares and cancelled the bonds, or whether another party took the same shares, paid the amount, and the company with that sum, discharged the bonds. On the assumption that the stock had some value, and the debts would be paid, it was all one to the company; and if the stock were worth nothing, no one but the plaintiff could be injured by the exchange. It is to be observed, that the bonds in question were not issued to the plaintiff, on an agreement to receive them for stock, or for an amount or consideration enhanced by the circumstance that they would be paid in stock, and not in money.

We are satisfied that the exchange of the stock for the bonds, was valid, so far as it is to be deemed the act of the directors of the company.

But the plaintiff next insists, that the directors could not delegate the power to receive subscriptions to the capital stock; that they never authorized the exchange in question; and that the treasurer and secretary had no authority from them to make the exchange; which therefore, was an invalid contract, not binding on either party, when the plaintiff demanded back his bonds.

First, as to the delegation of authority. The directors could not always be in session, either as a board or by committees.

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They necessarily acted by agents,, and we perceive no good reason why the power to receive subscriptions to the capital stock, could not be conferred on one or more agents, with as much propriety as the far more important power of contracting for labor, materials, and the like, in the construction of the road.

Then, as to the authority conferred on the treasurer and secretary. We have no doubt that the resolution of November 8th, 1844, authorized those officers to issue stock for such bonds as the plaintiff held. The spirit of the resolution, and the object in view, are sufficient to show that the resolution was not limited in its effect to propositions which had already been made. But there is a difficulty in sustaining this exchange under the resolution of November, 1844, in consequence of the repealing resolution of December 1st, 1845. We are unable to read the latter, so as to restrict its operation to the mere allowance of interest not yet earned on the certificates of the company. It is in its plain terms, a repeal of the entire resolution of November 8th, 1844. At the same time, there is no room on the facts, to doubt that the intention of the directors was simply to prohibit the issue of stock for the unearned interest on the bonds. In addition to the positive testimony of the treasurer who brought in the repealing resolution, and the practice of the company in accordance with his statement; there is the circumstance that the conversion of the company’s actual debt into stock, remained as important and desirable as it ever had been; andlhe recent cash subscription of over three millions under the act of 1845, would account for the change intended to be accomplished by the resolution of December 1st, 1845, as it would not be just to those new stockholders to issue stock for debts with the addition of three years of unearned interest. Nevertheless, we feel great difficulty in construing the repealing resolution by clear proof its object and intention, when its language is as clearly the other way; and we will waive the point.

The testimony shows, that for at least three distinct classes of indebtedness, stock had been issued for periods of from one year to two years and a half, by several officers of tb company,

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under express authority from the directors. Such authority existed in the treasurer and secretary, as to the class to which the bonds in question belonged, from November 8th, 1844, to December 1st, 1845, if no longer. Those two officers had for two years and a half, been in the practice of issuing stock, in the manner that was pursued in this instance, without any express power, so far as it appeared, except the resolution of November 8th, 1844; and the treasurer had in like manner from time to time, made agreements with the-New York creditors to issue stock for their debts. In this respect, the treasurer seems to have exercised the authority which was conferred on the executive committee by the directors in May, 1843.

These issues of stock for indebtedness, by the treasurer and secretary, had extended to about six hundred shares. The president and treasurer were also expressly authorized in respect of a class of seven per cent, certificates, by a resolution of October 7th, 1845. The president, treasurer, and secretary, were the principal officers, and in their respective spheres, the agents of the company. The acts of these several officers in thus issuing stock for indebtedness, had never been disclaimed, or questioned, by the directors or the company. They had proceeded so long, and to so great an extent, that ignorance on the part of the company could not be asserted, and silence and acquiescence had ripened into indisputable authority.

Under such circumstances, the exchange in question was negotiated and' agreed upon, between the plaintiff on the one hand, and the treasurer and secretary, acting in behalf of the company, on the other, and was approved by the president; the contract was executed, and the plaintiff received scrip for his shares, with the regular signatures and authentication of the president and secretary, and the proper entries in the company’s books.

We are convinced, that the company could never have set aside this transaction, on any pretence of want of authority in these their three principal officers. The facts we have stated, would be perfectly conclusive against any such attempt on the part of the company. The implied authority, from the course of business, and from similar acts done without challenge or

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disaffirmance, is as potent as an express resolution of the board of directors. The contract was, therefore, valid and binding upon the company. Was it any less valid against the plaintiff? It is contended, that he was not bound, because there was no express authority given to those officers, and the plaintiff cannot be held, upon one implied from previous acts, which were not authorized at the time, and which could at any time have been repudiated. That the company cannot bind him upon an apparent authority in its officers to contract, when in fact there was no real authority.

We think there is no difficulty on this subject. The practical good sense of the matter is this. The plaintiff dealt with the three principal officers of the company, without inquiring into their powers; willing to act, and acting, on their apparent authority to issue stock for debts. If he had inquired into their authority, and found it to be implied from usage and acquiescence merply, and had chosen to proceed with the exchange, he could have held the company bound. He cannot now, because he omitted to inquire, withdraw from the contract, on finding that they had such implied authority, and no other. In any contested point of authority on the part of the company, it would be incumbent on him to prove its existence; and proving a power implied from acts, would be as effective as the most positive authority in writing. The same proof must be valid against him; with no difference, save that more ■ full proof would be required from the company than from him, to establish the implied power. The contract for the exchange of the bonds for the stock, was therefore valid, and bound both parties.

The next questions arise upon the transfer book of consolidated stock, and the plaintiff claims that the contract was rescinded by the company’s direction on the morning of January 3d, not to permit transfers of this species of stock on the consolidated transfer book.

This was claimed at the trial, upon the ground, among others, that the defendants had been guilty of a constructive fraud in the .transaction. The question of fraud was submitted to the jury, and they have negatived it by their verdict. As to the misrepresentations said to have been made by the officers of the

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company, in ignorance, and not with any fraudulent intent 5 they relate first, to their authority to issue the stock, and second, to their assurance that it might be transferred on the book of consolidated stock. As to the first, we have stated our conclusion that they had authority. The assurance as to the transfer book, was not made by either of the officers having any authority, real or apparent, or with any one who contracted with the plaintiff. But if it had been made by the latter, there was no misrepresentation. When the statement was made, such stock was permitted to be transferred on the consolidated book. If the plaintiff had any right to rely upon their promise that it should continue to be so transferable, it at most, formed part of the contract between the parties, for a breach of which the defendants would be liable in damages. Their omission to apprise him of their determination to use another transfer book for this species of stock, may also have been the ground of an action; if it prevented him from re-exchanging his stock for the bonds, within the time stipulated for that purpose. We do not undertake to decide whether the change in the transfer book made any difference in the value of the stock.

In every aspect of the case, we are bound to say, that the contract for the exchange, was a valid, executed contract, on the second day of January; unaffected by any fraud, actual or constructive. When the defendants issued and delivered to the plaintiff scrip for sixty shares of stock, they performed it, so far as it was then capable of execution. If the defendants failed to fulfil such of its obligations as were to be subsequently performed, the plaintiff should have sued them for the breach. If they so conducted, that they prevented him from availing himself of the provision for a re-exchange, and he was thereby injured, he had his appropriate remedy, in an action on the case for damages. But neither of these events avoided the original contract, or warranted the plaintiff in treating it as rescinded.

We have discussed these points, as if the understanding relative to the transfer book, were to be deemed a valid and subsisting portion of the agreement. The defendants insist, that as the agreement was reduced to writing in the issue of the shares

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and the stipulation for re-exchange, no evidence of the alleged understanding is admissible. We do not intend by our decision, to sanction the introduction of the testimony, or to pass upon the question.

Upon.the whole, we are satisfied that the ruling of the judge at the trial, was correct, and that the action cannot be maintained.

Motion for a new trial denied.