text:
    Morris Boney v. John H. Williams et al.
    1. An agreement that payments of part of the amount of subscriptions to the -capital stock of a corporation shall be secured by mortgage, is void as against the creditors of the corporation, and cannot be the basis for relief on a cross-bill seeking to enforce the agreement.
    2. Where a person has loaned money to a mortgagor, and claims an equitable right to share in the security of the mortgage to which he is not a party, .he must establish, by the weight of the evidence, that all the persons interested :as mortgagors and mortgagees agreed that he also should be secured by the mortgage.
    3. This agreement must precede or coincide in point of time with the advancement of the money loaned. A promise made to the lender, after he has .advanced the money, that he may share in the security of the mortgage, is voluntary and without consideration, and cannot be enforced.

      On bill to foreclose.
    This is a bill to foreclose a mortgage made by the defendant-John H. Williams to John J. O’Neil and George PI. Becker, to-secure the payment of a bond made by Williams to O’Neil and Becker, conditioned for the payment of $35,000 within five years from the date thereof, with interest payable half yearly at the rate of six per cent, per annum. The mortgage was given-on a lot of ground and hotel thereon erected, situated in the borough of Sea Isle City, Cape May county, New Jersey. The mortgage is dated September 6th, 1888, and was recorded September 8th, 1888, in the Cape May county clerk’s office.
    On December 1st, 1892, O’Neil and Becker’s administratrix (Becker having in the meanwhile died intestate) assigned the bond and mortgage to the complainant, Morris Boney. After-awards, on June 29th, 1893, Boney assigned the mortgage to the Sea Isle City Lot and Building Association, No. 3, a corporation of the State of New Jersey. Afterwards, on June 30th,. 1893, the Sea Isle City Lot and Building Association, No. 3, assigned the mortgage to the complainant as collateral security for the payment of eight promissory notes, each for the payment of $1,522.50, making in all $12,180. The notes were from time to time renewed, the bond and mortgage still standing as security for their payment, and on the 2d day of July, 1894, they still remained unpaid, and the sum of $12,180 was due on them with interest thereon from the-last-named date.
    On September 6th, 1888, Williams executed a mortgage on the mortgaged premises to James P. McGuigan, for $8,740, which the complainant admits to be prior to his mortgage, b.ut which he claims has been reduced by payments on account made to McGuigan or to other persons for him.
    The complainant also makes defendants certain named judgment creditors, whose rights in the premises have been concluded by a decree in this suit.
    The bill further states that the defendant Charles K. Landis recovered a judgment on July 10th, 1893, against the Sea Isle City Hotel Company, in the Cape May circuit court, ánd issued thereon an execution, and levied upon the rights of the Sea Isle City Hotel Company in the mortgaged premises, which he caused to be sold, and himself became the purchaser, by a deed from the sheriff of the county of Cape May, dated May 16th, 1896 ; that under this deed Landis claims some lien or estate in the mortgaged premises which the complainant charges is subject to the lien of the complainant’s mortgage.
    The bill further states that Williams is reputed, to have made a declaration of trust, that he holds the title in .trust for the Sea Isle City Hotel Company, and it charges that if. he has made any such declaration, it was executed subsequently to the complainant’s mortgage, and is subject to its charge and lien. The prayer of the bill is for answer without oath, and for foreclosure and sale of the mortgaged premises.
    The defendant Landis is the only contestant in the case. He files an answer admitting the allegations of the bill to be true. He also files his cross-bill alleging that the Sea Isle Lot and Building Association, No. 2, was the owner of the mortgaged premises, and entered into an agreement to sell the same to the Sea Isle City Hotel Company; that the hotel company entered into possession of the premises and built a large hotel thereon at a cost of $60,000, and has continued in possession until the complainant recently entered under his mortgage; that the hotel company, being in need of money, solicited a loan from the defendant Landis, and “ upon its promise to secure his repayment by mortgage the same as third syndicate ” (a phrase indicating the Sea Isle City Lot and Building Association, No. 3), Landis paid to the Sea Isle City Hotel Company in cash on July 3d, 1888,’ $1,536.87;, July 3.1st, . 1888, $1,505.41; .August 27th, 18.88, $1,410.30; that this indebtedness was the basis upon which the defendant. Landis obtained his judgment at law in the Cape May county circuit court, set forth in the bill, and caused the hotel property in question to be sold, which he purchased at the sheriff’s sale as above stated.
    The defendant, in his cross-bill, further states that the Sea Isle City Lot and Building Association, No. 2, about September fith, conveyed its lands to the defendant John H. Williams, and thereupon executed the mortgage to James P. McG-uigan set-forth in the bill, in trust for the Sea Isle City Lot and Building Association, No. 2, which mortgage the defendant states was given to secure the price for the purchase of the land by the said Sea Isle City Hotel Company, Williams acting in the transaction as a trustee and having no interest in it whatever; that Williams thereupon executed to Becker and O’Neil the mortgage set forth in the bill of complaint now held by the complainant. The defendant, in his cross-bill, then sets forth his equity as follows:
    “The whole consideration of the bond it [the mortgage to Becker and O’Neil] was so given to secure, also mentioned and described in the said bill of complaint, being the debt of the said Sea Isle City Hotel Company to this defendant for the said moneys loaned by him as aforesaid, and to the said third syndicate for moneys loaned and which they might thereafter ban to the said company, the said John IT. Williams, John J. O’Neil and George JET. Becker acting in the transaction as trustees and having no other right or interest therein; that the said complainant and the said Sea Isle City Lot and Building Association, Number Three, at the several times when the said deed of mortgage was-assigned, transferred and set over to them respectively as stated in the said bill of complaint, and at all times since the said mortgage was made and executed as aforesaid, each well knew the premises and all the matters and things thereinabove set forth, and accepted the said deed of mortgage by the said assignments, transfers and settings over, and particularly the said complainant,, by the said assignment, transfer and setting over of the same by virtue of which he seeks relief in this suit, took, received and accepted the said deed of mortgage, with full and particular knowledge and notice of the same, of the rights and equities of this defendant, in the said deed of mortgage, and of the trust for this defendant, with which the same was charged when it came to his hands.”
    By special replication the complainant, Boney, admits that Mr. Landis made the loans claimed to have been made by him, but it denies that these moneys advanced by Mr. Landis formed any part of the consideration of the mortgage now being foreclosed, and denies that the holders of that mortgage were trustees for Mr. Landis. He further denies that the Sea Isle City Lot and Building Association, No. 3, had any knowledge of Landis’ claim, denies that he (Boney) had any knowledge, and denies that Landis ever had any right or equity in the mortgage.

      Mr. Charles K. Landis, Jr., for C. K. Landis, the complainant in the cross-bill.

      Mr. J. Willard Morgan and Mr. Samuel W. Beldon, for Morris Boney, the defendant in the cross-bill.
   Grey, V. C.

It will be observed that the defendant Landis, who is the complainant in the cross-bill, admits all of the allegations set forth in the original bill of complaint. He sets up, by his cross-bill, his claim to an equitable right to share in the security of the mortgage which is being foreclosed. This equity he alleges he has because his loans and those of the association or Syndicate Ho. 3, made or to be made, formed the whole consideration of the bond which the mortgage was given to secure. That Mr. Landis did make the loans, and that he made them to the Sea Isle City Hotel Company, and that they amounted to the sums before named, and were made at dates mentioned, is not disputed. The sole question in dispute between the parties arises from the assertion on the part of Mr. Landis of his right to share in the security of this mortgage, and its denial on the part of Mr. Boney, the complainant in the original bill.

The burden is, therefore, upon Mr. Landis affirmatively to establish his right by the proofs. There is no evidence in writing which expresses any contract or agreement on the part even of the Sea Isle City Hotel Company, that Mr. Landis should share in the benefits of the security of this specific mortgage. The only writing which indicates in any way that Mr. Landis was to be secured at all consists of three receipts given to him at the time when he made the loan, which are in these words:

“Office of Sea Isle City Hotel Company, \ “116 North Third Street, Philadelphia, July 3, 1888. J
“Received of Mr. Charles K. Landis, $1,536.87, being part of the amount for stock subscribed to the Sea Isle City Hotel Company, to be secured by mortgage upon same terms as Third Syndicate.
“S. W. Goodman,
Secretary.”
“Office of Sea Isle City Hotel Company,
“402 Locust Street, Philadelphia, July 31, 1888. j
“Received of Charles K. Landis, §1,505.41, being part of amount for stock subscription to the Sea Isle City Hotel Company, to be secured by mortgage «pon same terms as Third Syndicate.
“§1,505.41. S. W. Goodman,
“Secretary.”
“ Philadelphia, August 27, 1888.
“Received of Mr. Charles K. Landis, the sum of §1,410.30, being part of amount for stock subscribed to the Sea Isle City Company, to be secured by mortgage upon same terms as Third Syndicate.
“ S. W. Goodman,
“Secretary.”

Interpreting these receipts by the words used, they indicate that the party receiving the money declares that the payments made were parts of the amount subscribed for stock of the Sea Isle City Hotel Company, and that the money paid was to be secured by mortgage upon the same terms as were given to the third syndicate. The phrase providing that the amount paid was to be secured upon the same terms,” does not state that Mr. Landis should, on his subscription for stock, have the same security as the Syndicate Fo. 3 had for money loaned. The payments would not in such case “be secured by mortgage on the same’ terms,” because Mr. Landis would thereby have not •only the stock for which he- subscribed, but also the security of a mortgage for the repayment of his subscription, while the Syndicate Fo. 3 would have only the mortgage without the stock. Mr. Landis would thus be secured for his payments not on the same,- but on much more favorable terms than the third syndicate. To secure them by mortgage upon the same terms, the declaration must be construed to mean that the terms to each should be the same — that is, that Mr. Landis and Syndicate Fo. 3, for their subscriptions to the stock of the hotel company, would be secured by mortgage to be given, which should equally secure both. Fo particular mortgage is indicated. The mortgage in foreclosure in this suit has been undisputedly shown tq have been given, so far as Syndicate Fo. 3 is concerned, solely to secure moneys loaned, none of which were paid as subscriptions to stock. It is quite evident, therefore, if these receipts are to be deemed to mean what they say, and to point to the giving to Landis a mortgage securing his payments “ upon the same terms” as the third syndicate, then this mortgage given .solely to secure moneys loaned by the third syndicate and not .subscribed for stock is not the one in which Mr. Landis was to share. Mr. Landis, however, does not accept the receipts as •expressing with precision the terms upon which he claims to share in the security of the complainant’s mortgage. ' He testifies that the agreement of loan gave him an assurance of security in the mortgage, and the relation which the payments had to the stock was not that of a subscription, but of an option to receive stock if he chose to exercise it, and that there was no ..specified time when he should exercise it. An examination of the circumstances preceding the giving and acceptance of these receipts will, I think, throw some light upon their intended meaning.

The Sea Isle City Hotel Company was a corporation of the State of New Jersey. In the spring and summer of 1888 it was engaged in the construction of its hotel at Sea Isle City. The hotel company was short of funds. Mr. Landis, before any of the loans were made by him, was a subscriber for shares of the stock of the hotel company. In May, 1888, as appears by the deposition of the secretary of the company,- thé secretary was instructed to communicate with Mr. Landis as to his promise to subscribe for two hundred'additional shares of stock. In the-minutes the entry appeared' in these words, under date- of the meeting of May 7th, 1888 :

“ The secretary was instructed to communicate with Mr. Landis as to the promise made by him to subscribe to two hundred additional shares of stock.”

The secretary testifies that he acted in accordance with the instructions of the minute, and that it was some time after this that the loans were made on which the receipts were given to Mr. Landis. The first loan was- made by Mr. Landis ón July 3d, 1888. The memorandum in the minutes and the testimony of the secretary certainly justified the inference that in May, 1888, the hotel company understood that Mr. Landis had promised to subscribe for two hundred additional shares of its stock,, and that it had notified Mr. Landis of this understanding. Mr. Landis, when examined in this case after this testimony was before the court, gave neither denial of such a promise nor of the notice from the secretary, though he testified as to both the secretary’s statements and the minutes upon other points.

I think I am bound to believe that, in .May, 1888, Mr. Landis knew that the hotel company understood that he had promised to subscribe for two hundred additional shares of its stock. Shortly after this notice, to carry into effect his promise to subscribe, Mr. Landis, in July and August, 1888, paid these moneys, and accepted without protest these separate receipts, each of which stated that he had made partial payments for stock subscribed to the hotel company. Nothing on the face of these receipts indicates an option and nothing is proven, except by the testimony of Mr. Landis, as to any mention of an option, and by him only in the most general terms, without statement of the time when, place where, or person with whom he agreed for an option.

The secretary, Mr. Goodman, swears that as he understood it at the time the receipts were given, the words “ being part of amount for stock subscribed” &c. accurately stated the fact. Mr. Landis has himself, so late as December, 1892, indicated the same view of the contract on which he advanced these moneys. In his letter to the hotel company of that date, he states that he paid the money “ under conditions mentioned in-the receipts for the same as a subscription to certain stock ” of the hotel company. He thus, four years after the event, joins Mr. Goodman in asserting the accuracy of the definition of the nature of the payments as stated in the receipts. These three separate written memoranda made at the time the moneys were paid, the statements of the witness who drew two and signed all of them, and the letter of the man who paid the money and without objection accepted all three of the receipts, all agree that the receipts were given for part of the subscription to stock. On the other side is indefinite and unsupported testimony given nine years after the transactions happened, vitally changing the expressed declaration from a payment of subscription to an agreement for an option to subscribe. I think the weight of the testimony shows that the receipts, when taken, meant what they expressed, and that Mr. Landis paid these moneys as part of subscription for hotel stock, on the understanding that he waste be secured by mortgage upon the same terms as the third syndicate.

The counsel for the defendant, on the assumption that the evidence establishes the fact that the payments were loans with an option to subscribe for stock, cites the cases of Totten v. Tisen, 54 Ga. 139, and Burt v. Rattle, 31 Ohio St. 116, as authority that a corporation may borrow money and guarantee its payment, with an option to the lender to become a stockholder. In both these cases the transactions passed upon depended upon the construction of statutes peculiar to those states, so that the decisions are of little value in the case under consideration. In each case, however, the court held that the transaction between the corporation and the other party was a loan and not a subscription te stock, while in the case in hand the proven payment was made on account of a subscription to stock, with a provision that the payment should be secured by mortgage.

There has been no showing of any authority in the hotel company to issue even preferred stock, with the statutory privileges allowed by our Corporation act, and, of course, no authority can be claimed for the proposition that a payment on account of the capital stock of a corporation can be secured by the mortgage of its property to the subscriber. By such a method all subscriptions to capital stock might be secured and the creditor of the corporation who can, under ordinary circumstances, look only te the capital stock, would be deprived of all remedy. No evidence has been submitted to show under what statute of New Jersey the hotel company was incorporated, but no statute justifies such an inequitable procedure.

It is clearly such a diversion of the capital of the corporation as is in derogation of the rights of the creditors of the corporation of which the third syndicate was one. See principles laid down in Wilkinson v. Bauerle, 14 Stew. Eq. 644. This illegal course is, by the weight of the evidence, shown to have been taken, and the affirmative'relief sought by the cross-bill should, on this ground, be refused.

If there were any doubt of the illegality of the transaction sought to be enforced, I cannot find that Mr. Landis has so carried the burden of proof of his case that his right to share in the complainant’s mortgage has been established. He nowhere, e'ven in his1 own testimony, shows that the hotel company agreed that he should share in this particular mortgage. That is left to be inferred from the fact that the receipts stated that his payments were to be secured by mortgage on the same terms, as the third syndicate, and, as this mortgage was given to third syndicate, it is insisted that this security must .be that intended/ . No action to hind the hotel company is shown, save.by the receipts, and, as it- is claimed,, by conversations between Mr. Landis and “ some of. the stockholders of the hotel,” who came to him and explained its financial embarrassments. “I was informed,” he says, ,

7 that there was a committee appointed of five, and that, the other people would take just exactly ihe same as myself. I don’t know how the committee was appointed, whether it was from the third syndicate exactly or from the hotel company, but I told them I would be willing to advance enough to lay .the floor and do the plumbing, as my share, with the understanding . that the other parties would take care of the furnishings, and I would take a receipt which-would explain'the matter and secure me in the way of a loan. I was told that this committee consisted ’of George H. Becker, Michael J. Kelly, Mr. Boney, Mr. Class and Mr. Foederer, making some five people.” • ■■

Mr, Landis further;testifies that.he had conversations with Mr. Boney touching the matter of the security to be. given, but ■he was unable to name any time of place; when or where any such conversations occurred. • He testifies he could not recall particularly' what the conversations were, save- that he had asked Mr. Boney what he thought the security would be, and Mr; Boney said it.would be ample, and said it would be the-same as the other.. 'He did not designate them by name, but that was understood, by Boney, and himself. The witness was unable to identify this conversation, or to relate it to any particular occasion. The nearest that I can find from the testimony of Mr. Landis that he.defines his claim, is his statement—

“ When I loaned that money, Mr. Boney and every one of these men gave me a great deal of encouragement to loan it, and I was to be thoroughly well Secured the same as the third syndicate.”

On the other hand, Mr. Boney, in his testimony, denies that he had any such conversations with Mr. Landis, and denies that he ever had any information that Mr. Landis claimed to have any interest or right to participate in the security of the mortgage. No proof is offered of any corporate action by the board of directors or stockholders of the hotel company. The nearest is the reply of the secretary, made over eight years after the event happened, who, when asked by whom it was likely he was instructed to draw the receipts, answered, “No doubt by its president or members of the board.” The evidence is too uncertain to establish as a fact that the hotel company itself ever arranged to secure Mr. Landis by allowing him to share in the security of the complainant’s mortgage.

But if this is doubtful, there is an entire lack of proof that the third syndicate ever agreed to share their security with Mr. Landis. • It was necessary, in order' that he should have-this benefit, that all three of the parties — Mr. Landis, the hotel company and the'third syndicate — ^should agree. No one or two of them could bind the other. Mr. Landis and the hotel company could not contract that the third syndicate should allow Landis to share in the mortgage security, unless the syndicate joined in the contract, and this assent of the third syndicate must have been a part of the original agreement on which Landis parted with his money, for a consent by the third syndicate that Landis should share in the mortgage given after both had made their payments, would have been a mere naked promise to confer a benefit not capable of enfprcement.

There is no evidence, even of Mr. Landis himself, which proves that the third syndicate agreed to allow him to have the benefit of their security, and thus subject itself to the'risk that the mortgaged premises might not be sufficient to pay its own. •claim, and to the acceptance of a compulsory pro rata dividend, with Mr. Landis, of the insufficient proceeds. The latter testifies that he conversed with individuals and with a committee, ■but he does not show that either had, or claimed to have, authority from the third syndicate to agree that he should share in this mortgage, nor, as I understand his testimony, does he declare that the third syndicate ever did so agree. While on the stand, •under cross-examination, Mr. Landis was quite restive when it was sought to induce him to define the times and places when lie had the conversations upon which he bases his claim, and at one point his counsel interrupted to say:

“The witness don’t state that he had any particular conversation with anybody in particular which induced him to give the money which he did on the receipts. There were operations conducted by a number of gentlemen, and tfliere were conversations with all of them.”

This exposition of the testimony of this witness is a fair summary of the evidence which he gave. The obligation sought to be imposed upon the holders of the complainant’s mortgage is •not defined to have arisen upon any agreement entered into by •the owners of the mortgage, or by persons shown to have been .at the time authorized to act for those interested, but general ■conversations on the general subject, held at various unnamed times and places, with various persons, some of whom held, at .some undefined time, offices in the corporation interested, are .appealed to for the purpose of establishing a right to share in this particular security. The conversations related, even if unexplained, do not support so definite and violent a conclusion. ■So the claim that the mortgage was made for the sum of $35,000, which is in excess of the sum actually advanced by the third .syndicate, in order to secure Mr. Landis, is fully met by the ■proof that it was expected, when the mortgage was drawn, that the third syndicate would advance the whole amount, and the ■cessation of its payments, when it had advanced $19,200, is also 'explained by the fact that, at that stage of the payments, the -doubts as to the priority of the mortgage over the hostile claims •of lienholders alarmed the third syndicate and prevented the making of further advances. Mr. Gorman, who directed the drawing of the mortgage, and Mr. Kohn, who had been a •member of the association, or Syndicate No. 3, almost from its ■origin, are explicit in their testimony that the mortgage was made to secure the third syndicate only, and that Mr. Landis’ loans were not to be secured by it. Mr. Gorman explains that •the mortgage was made to Messrs. Becker and O’Neil and not •direct to the third syndicate, because of the embarrassments threatened by the claims of the lienholders which have since been settled. It was given on the demand of Syndicate No. 3.

The issue presented by the cross-bill is whether the consideration of the bond which this mortgage was given to secure, was, in part, Mr. Landis’ advances. He does not set up any equity •claiming a right to share in the mortgage, because he was induced to loan his money, in that expectation, with the knowledge of the parties interested in the mortgage. He asserts by his cross-bill that this mortgage was made to secure him and others, ■and that they now refuse him his rights. Mr. Landis, as above shown, has not only failed to sustain the issue made by his ■cross-bill, but he has not succeeded in presenting such a case as ■satisfies me that the association or third syndicate knew of the general assurances given to Mr. Landis, and with such knowledge permitted him to make the advancements, relying on the .security promised by the hotel company’s receipts, without warning him that he could not have it. Such knowledge, to establish an equity in favor of Mr. Landis, must have been brought home to the association before or at the time Mr. Landis acted, for if the latter, without knowledge of the association, relying on the assurance of the hotel company’s officers, paid out his money, and these facts afterwards came to the knowledge of the association, they would, as above stated, create no equity in favor of Mr. Landis. The essence of such an equity is that the party to be charged knew of the reliance of the party wronged at or before the time when the payment was made or the position changed, .and so then knowing gave no denial of the right to rely. It is in such a case that the trite maxim applies — “Having been silent when they should have spoken, they may not now speak when they should be silent.” The “ when ” and the “ now ” are the potent factors in the maxim.

But nowhere in the testimony is there any proof of such knowledge on the part of the third syndicate at the time Mr. Landis acted, and its standing by, permitting him without warning to act in reliance on sharing in the association’s security. Some years after the mortgage had been made, an application was made by Mr. Gorman to the association (No. 3) that Mr. Landis be permitted to participate in the mortgage.

Mr. Holm testifies—

“The answer of the association was that when we made the loan to the hotel company there was no such question asked, and why should we at a later date allow anyone else to participate in that mortgage which we .received for due consideration?”

He further says the mortgage was given on the demand of his association (No. 3), and that the association’s attorney had it in his custody, and the association several times assigned it and used it as its own property. ■ •

Mr. Gorman, in his testimony, when asked, “When did you first know Mr. Landis’ claim to be entitled to. participate in that mortgáge?” answered, “'It was some time after the preparation of the mortgage and its recording, my best recollection would be; maybe it was a year or two afterward.”

Mr. Gorman further states that the purpose of the bond and mortgage was “ to secure $35,000’ which the No. 3 had agreed to-loan to the hotel company.”

Mr. Boney states that, up to the time of the filing of the cross-bill in this suit, which wras in 1896, he had no information that Mr. Landis claimed any interest in, or right to participate in,, the mortgage. In view of the merely suggestive character of the evidence submitted by Mr. Landis, and explicit denials of any knowledge of his claim by the third syndicate by the testimony of those who acted for it, I must hold that he has not shown any equitable claim to share in the complainant’s mortgage.

I will advise a decree that the complainant in the, original bill is entitled to the relief prayed for, and that the cross-bill should be dismissed, with costs.


source: Caselaw Access Project

author: Grey, V. C.

license: Public Domain

text:
    William T. Morse et al. v. Mary A. Nicholson and John H. Cook.
    A bill seeking relief against a sale obtained to be made by a fraud is not demurrable, because there is an adequate remedy at law, where it appears that the procedure in equity can afford the complainant more efficient modes of relief than are attainable at law.
    On bill and demurrer.

      Mr. Frank P. MeDermott, for the complainants.

      Messrs. Haiokins & Durand, for the demurrants.
   Grey, V. C.

The bill shows that the complainants were New York merchants. The defendant Nicholson kept a store at Asbury Park, New Jersey. On September 30th, 1895, she requested them to sell her a bill of goods on credit. In response to their requirement she gave them a statement of her assets and liabilities, showing assets — stock on hand, $4,500; real estate, $5,000, and an indebtedness, not yet due,- of but $1,300 for merchandise, and no other liabilities whatsoever. She further certified that she had concealed no fact which would impair her credit &e. On the faith of these statements, the complainants sold and delivered goods to her on credit, to amount of $330.60. The complainants have since found that this statement on which she obtained credit was false; that the value of her stock was not above $2,000, and her interest in real estate not over $1,000; that she owed on merchandise account over $2,000, and on notes &c. about $1,500. The complainants aver that because of these false and fraudulent statements whereby these goods were obtained, they are entitled to and they do disaffirm the sale and declare it to be void, although the goods were delivered to the defendant Nicholson. The complainants also allege that the defendant John H. Cook actively aided the defendant Nicholson in perpetrating this fraud, and, to further it, on December 9th, 1895, took from her a chattel mortgage on all the goods in her store at Asbury Park, to secure the payment of $2,872.60 in installments. This chattel mortgage was recorded on the day of its date. This mortgage the complainants charge to have been given in bad faith, and without valuable consideration; to have been accepted by Cook to oblige the defendant Nicholson and aid in defrauding her creditors. On December 19th, 1895, the complainants brought replevin in the Monmouth circuit court, and the goods were thus delivered to them, but the defendants Nicholson and Cook have made a defence and claim that the goods belong to the defendant Nicholson. The complainants pray that the sale and delivery of the goods may be decreed to be void because of the recited fraud, and that the goods may be decreed to be the property of the complainants; that the chattel mortgage may be annulled as to the goods sold by the complainants and decreed to be no lien thereon, and for further relief &c.

The defendants jointly demur to the bill, and state as their sole ground of demurrer that the complainants have a completer remedy at law in the replevin suit.

By their joint demurrer the defendants admit the fraud in obtaining the goods, and rest their sole defence upon the claim that the pending replevin suit affords a complete remedy for the wrong done. The jurisdiction of a court of equity over cases of fraud is not challenged, but it is insisted that the bill shows that the complainants have a full remedy at law which they have elected to pursue, and that this court will not, in such a case, entertain another suit.

If the remedy at law is as full and adequate as that attainable in this court, it would appear to be merely vexatious to permit the complainants, having selected a court of law as the forum in which they desired to prosecute their claim, to begin another suit for the same claim in this court. The jurisdiction of the courts of law and of equity, for the redress of such frauds as those ad•mitted by this demurrer, is concurrent. Where the jurisdiction is concurrent, and the action of a court .of law has been invoked, if the same remedial justice can be administered in each court, a court of equity will decline to entertain the suit. 2 Story Eq. Jur. 599. But if adequate relief cannot be obtained in the existing action at law, the court of equity should entertain the cause and determine it upon its merits. Sweeny v. Williams, 9 Stew. Eq. 627.

In the suit at law pending in this matter, there has been a delivery of the goods in question by the sheriff to the complainants, but the defendants deny the fraud and aré defending the .suit, claiming the ownership of the goods. If the complainants are successful in the replevin suit, in so showing the fraud that the sale is declared to be void, they will retain the possession of the goods delivered to them by the sheriff; if, however, they are •unsuccessful, they have obligated themselves by their bond to return the goods to the defendants.

The defence in the suit at law may show that the title to the goods is rightfully in the defendant Nicholson, by reason that the sale to her was obtained to be made without fraud, or they may show, if the pleadings raise the issue (or by amended pleadings if the present files do not raise that issue), that although the sale may have been obtained to be made to the defendant Nicholson by fraud, yet the chattel mortgage taken by the defendant Cook was received by him, bona fide, in ignorance of the fraud, and for a valuable presently passing consideration, and that as against him, being a bona fide mortgagee in possession of the goods sold, there should be no recovery.

In this court the complainants seek a decree declaring the sale .and chattel mortgage to be void, which is, in effect, the same relief attainable in the suit at law, but their incidental remedies in this court are much more applicable and complete than those which can be afforded in the law court. The complainants, if they establish their case in this court, as to the fraudulent sale and the connivance of the chattel mortgagee, may have the list •of goods fraudulently mortgaged stricken from the mortgage, and the record of the fraudulent mortgage adjudged to be a nullity as to those goods. They may have a restraint against the transfer of the mortgage until the decree is obeyed. If they succeed in showing the fraud on the part of the defendant Nicholson, but fail in proving the participation or knowledge of the mortgagee Cook, they may still require the mortgagee to make his money in the first place, if possible, from the goods mortgaged to him, other than those which the mortgagor fraudulently obtained from them. They may, if the circumstances justify it, have a receiver appointed to carry such a decree into effect. The wide reach of these various modes of procedure' affords to the complainants in this court opportunities for relief in the premises which the more rigid rules of the courts of law cannot give.

I think the complainants are entitled to the benefit of the more adjustable and complete remedies which the exercise of the jurisdiction of this court affords them, and I will, therefore, advise that the demurrer should be overruled, with costs.


text:
    Frank Lynwood Garrison v. Technic Electrical Works et al.
    A contract for the purchase of shares of the unissued capital stock of a corporation was obtained to be made with the company by the fraudulent statements of its president, secretary and treasurer, in the conduct of the company’s business. On this contract the company issued the stock and received the purchase-money. On bill filed by the purchaser against the officers and the company to abrogate the contract because of the fraud and for the restoration of the price paid, the company cannot retain the money paid and defend by denying that it authorized or knew of the fraudulent statements. To do full equity, it must also return the money obtained by the fraud.
    On bill and demurrer.
    This bill is filed by Frank Lynwood Garrison, complainant, against George M. Sinclair, John J. Zimmele and the Technic Electrical Works, defendants. The complainant states that the Technic Electrical Works was duly incorporated under the laws of New Jersey, on July 14th, 1893; that the object of the incorporation was the manufacture and repair of electrical and other machinery. The company commenced business in the month of September, 1895. In February 1895, the defendant Sinclair had been secretary and treasurer of the company for a month, and the defendant Zimmele was at the same time a stockholder and president and manager of the corporation. Sinclair requested the complainant to purchase of him fifty shares of the stock at $40 per share, and twenty shares of the treasury stock of the corporation; and it was represented to the complainant by Sinclair and Zimmele, principally the former, that the company was in a solvent condition, and that its collectible assets were in excess of its liabilities, counting the capital stock issued as part of the liabilities. They exhibited to the complainant a balance sheet of the condition of the company, which they stated was true; and they further stated that the receipts from sales of its manufactured commodity were in excess of its expenditures ; that it was then doing a profitable business, and with a small additional capital and attention, such as the complainant could give, it would make money and become prosperous; and that if the complainant would purchase the stock, he should be elected an officer of the company and receive a salary of $25 per week for his services as such officer.
    Relying on these statements, the complainant agreed to purchase fifty shares of the capital stock of the company, belonging to Sinclair, for $2,000, and twenty shares of the treasury stock of the company for $1,000 cash, to be at once paid to the treasurer of the company. The $2,000 to be paid to Sinclair to be one-half cash and one-half by due-bill of the complainant.
    On March 2d, 1896, Sinclair and Zimmele gave the complainant a memorandum of the agreement, which, however, contained no mention of the office and salaries to be bestowed as above stated, and, by the memorandum of agreement, Sinclair and Zimmele pledged their word that the assets and liabilities of the corporation, as stated in trial-balance sheet of February 1st, 1896, submitted to the complainant at that time, and their statement as to the solvency, credit and condition of the corporation were true, as the memorandum, a copy of which is annexed to the bill, will show.
    On March 5th, 1896, the complainant paid Sinclair, under the agreement, $1,000 in cash, and gave him a due-bill for $1,000, and on the same day he paid into the treasury of the company $1,000. The complainant received by transfer from Sinclair fifty shares of stock, and from the company twenty shares of stock, and from Zimmele twenty additional shares of stock, making in all ninety shares, and was thereupon elected president of the company in place of Zimmele, and placed in the management of its affairs and business, and given power to control the disbursements of the company by regulation that all the checks of the treasurer should be countersigned by the complainant as president. Zimmele was made secretary and treasurer of the corporation, in the place and stead of Sinclair.
    There are one hundred and thirty-seven shares of the stock of the company held by other persons than the complainant, the principal part of which was held by Sinclair and Zimmele, although the complainant is the largest individual holder of the stock, and Sinclair is the next largest holder. The company does not own any real estate. Its manufactory and works are rented in the city of Philadelphia.
    The complainant states, in his bill of complaint, that shortly after he took charge he ascertained that the balance sheet of February 1st, 1896, was inaccurate in several particulars. Bills payable, to the amount of over $400, were admitted by Sinclair to have been omitted from that item on the balance sheet. The inventory of the plant and tools, stated as assets, had been made up over a year prior to that time, and no allowance had been made for depreciation. . The item “accounts receivable” had been represented to the complainant to be collectible to the extent of two-thirds, but the complainant found that less than one-half was collectible. The balance sheet was in every respect incorrect and misleading. About the end of March the complainant was paid three weeks’ salary at the rate of $25 per week, and the complainant ascertained that notwithstanding the additional capital which had come into the treasury by reason of Sinclair taking stock for a part of the account which he held against the company, the company was yet in financial difficulties. The complainant then made a thorough examination of the financial condition of the company, and ascertained that its assets then were, and for over two years prior thereto had been, insufficient to pay its debts and continue its business; that its expenditures for the previous five months had been in excess of its receipts, without any corresponding increase in the assets; that its business for the previous five months had been unprofitable; that the company had been for over two months, and at the time of the statement made to the complainant, was, insolvent, and unable to pay its liabilities without suspending its business.
    The complainant charges that the mistake, in fact, made by him as to the condition of the company, which led him to invest his $1,000 in the company, was entirely due to the misstatements, misrepresentations and concealment of the condition of the company made by Sinclair and Zimmele; that it arose from no want of care or omission of legal duty on the part of the complainant. The complainant refused to pay the due-bill of $1,000, which fell due on the 1st of April, 1896, and proposed to Zimmele that the company should go into liquidation, and Zimmele at first acceded. The complainant made an application to the circuit court of the United States, in the district of New Jersey, for a decree of insolvency and the appointment of a receiver. The complainant having failed in that application, abandoned his suit and dismissed the bill. Since the futile proceedings in insolvency, the control of the business has been interfered with and the complainant ousted therefrom, the combination of the safe has been changed to prevent his access thereto, and by-laws have been adopted containing provisions for a vice-president, and giving him power to countersign the treasurer’s checks, which power theretofore was held exclusively by the president.
    Pending the application of insolvency in the United States' •court, the company’s business was practically suspended and not carried on in a way to be substantially effective, owing to the financial condition of the company. Since that time the business has been carried on by borrowing large sums of money, increasing its liabilities without adding to its assets, and Zimmele and Sinclair are carrying on the business at a heavy loss, consuming the assets of the company, and, in fraud of the complainant, making his stock daily less valuable. The complainant further charges that the company is doing business at a loss, consuming its assets and increasing its liabilities in the regular course of business, and that if it did pay its liabilities there would not be over $1,000 of assets left to be divided among its stockholders, holding capital stock to the amount of $11,350, less the stock held by complainant; and the complainant states if the company is allowed to proceed with its business, these remaining assets will be consumed and nothing left for its stockholders. He further, states that since he knew of the insolvency of the company, he took measures to rescind his contract by which he paid $1,000 into the treasury of the company, and is now ready to return to the treasurer of the company and to return to Zimmele the stock that he received from them when he paid $1,000 to the company.
    The bill prays answer without oath, and that the defendant may be decreed to pay to the complainant the $1,000 paid by the complainant to the company with interest, upon the complainant delivering up to the company and to Zimmele the forty shares of stock received by him from them, and that on failure-a receiver may be appointed to take the assets of the company and sell or dispose of the same for so much as it may be necessary to pay the complainant his said sum of $1,000 and interest, or, if it be more equitable, that the receiver may first pay all other debts of the company than the capital stock and the claim of the complainant, his said sum of $1,000 with interest, provided they be sufficient, and, if they be insufficient therefor, that the balance of the $1,000 be paid by Sinclair and Zimmele or one of them; that an injunction be issued to the company, and Siuclair and Zimmele be restrained from further carrying on the business of the company and disposing of or meddling with the same &c.
    To this bill the defendants, the Technic Electrical Works, Sinclair and Zimmele, demur by joint and several demurrer. They state as the causes of their demurrer—

      First. That the bill does not contain any statement that the defendant, the Technic Electrical Works, has become insolvent or suspended its business for want of funds to carry on the same, so as to entitle the complainant to a.receiver and injunction as prayed for in the bill.

      Second. That the statement in the bill contained, as to the alleged misrepresentations made by Sinclair and Zimmele as to the financial condition of the company and its prospects, does not show a case to entitle the complainant to any discovery or relief.

      Third. That even if the representations alleged to have been made were false and fraudulent, they were beyond the scope of the power of the defendants Sinclair and Zimmele as officers of the company, and cannot bind it.

      Fourth. That if the conduct of the business set out in the bill was the cause of loss, yet that such management and conduct was nothing more than a mistake in judgment on the part of the officers of the company, and does not show a case which entitled the complainant to relief.

      Fifth. That the complainant has not, by his bill, stated a case which entitled him to either discovery or relief.

      Mr. James H. Carpenter and Mr. Herbert A. Drake, for the complainant.

      Mr. Edwin Robert Walker and Mr. Garret D. W. Vroom, for the demurrants.
   Grey, V. C.

The first ground of demurrer is that the bill does not contain any statement that the defendant corporation has become insolvent, or suspended business for want of funds &c., so as to entitle the complainant to a receiver and injunction &c. On the argument it was assumed that the bill as framed is a proceeding-seeking to have the defendant company declared insolvent and this court to appoint a receiver to wind up its affairs. Bills for such a purpose must undoubtedly set-out facts which indicate-that the financial condition of the company is such that it is,, because thereof, compelled to suspend its business. Stopping of its works is not necessarily a suspension “ of its ordinary business for want of funds to carry on the same.” There are many occasions when the stoppage of production is not only advisable-but necessary, and without insolvency. Nor does carrying on business at a loss, or borrowing money, necessarily indicate a condition of insolvency. That the company is able to do these-things and still proceed with its business, is rather an indication that its financial credit is good. The bill under consideration, while alleging the company to be insolvent, as a part of the-complainant’s case to show that its financial standing was misrepresented to him, and with some surplusage, stating subsequent details of its business, does not attack the defendant company in order to declare its insolvency, appoint a receiver and wind up its aifairs. No decree that the company is insolvent is prayed for. What the complainant asks is a decree for the return of his money, and a receivership for the purpose of applying the assets of the company to the payment which he seeks; not a preliminary decree of insolvency and a receivership for the purpose of administration, but a receivership, as a final mode of relief, to procure the payment of his own claim. The prayer for injunction to restrain the further conduct of the business of the company, contained in the bill, is evidently also sought as an ultimate remedy in aid of any decree the complainant may obtain for the payment of his claim. Inasmuch as the bill is not one for the administration of the defendant company’s assets, because of its insolvency, I think the first ground of demurrer, which criticises it for the lack of the fullness of statement required in such a bill, cannot be sustained.

The second ground of demurrer is that the misrepresentation &c., charged in the bill, as to the financial condition of the com-, pany and its prospects, do not show a case to entitle the. complainant to discovery or relief. In examining this objection, misrepresentations, so far as they relate to matters of opinion and judgment as to the happening of future events, as that the company with a small addition of capital and attention, such as the complainant could give, would make money and become prosperous,” cannot be regarded, as it is well settled that such statements, even if false, do not constitute a fraud, if there be no relation of trust or confidence between the parties. Wise v. Fuller, 2 Stew. Eq. 257; Conlan v. Roemmer, 23 Vr. 53. Allegations of such statements afford no ground for relief, and are not to be regarded as well pleaded, nor can they be taken as admitted to be true by the demurrer. But representations made by an owner or his agent to an intending purchaser, at the time of the bargain, descriptive of the existing condition, of the subject-matter of the proposed sale, as to its kind, quality or quantity, stand on a different basis, and, if falsely made to mislead the buyer, they may be the basis for a recovery. A statement that income from a property is greater than it is, is a fraud for which an action will be supported. Wise v. Fuller, ubi supra; Crossland v. Hall, 6 Stew. Eq. 11. So, also, a statement that a property rented for more than in fact it did rent for, was held to avoid a contract of sale. Dimmock. v. Hallett, 2 Ch. App. 28. The allegations of this character, which the defendants admit by their demurrer, are that Sinclair requested the complainant to purchase shares of stock from him individually, and also from the defendant company; that Sinclair and Zimmele, during the negotiations for the sale of this stock, exhibited to him a balance sheet which they said was true, and stated that the collective assets were in excess of the company’s liabilities, taking capital stock to be a liability; that the receipts from sales of its products were in excess of its expenditures; that it was then doing a profitable business. They gave to the complainant a written memorandum, pledging their word that the assets and liabilities of the corporation, stated in the trial-balance sheet of February 1st, 1896, submitted to the complainant, and all their verbal statements as to the solvency, credit and condition of the corporation, were correct and true. Sinclair was at this time the secretary and treasurer of the company, and Zimmele was its president. They were, therefore, so related to the company that they knew its financial condition. Relying on the truth of these statements made by these men, whom he knew to be officers of the company, the complainant agreed to purchase fifty shares from Sinclair and twenty from the company, and paid $1,000 in cash to Sinclair and gave his note for the balance, on which Sinclair transferred to him the fifty shares, and the complainant also paid $1,000 to the company for its twenty shares, and accepted the issue of them from the treasury of the company. It is these twenty shares received directly from the company which the complainant now offers to return, and the payment for which he seeks to have refunded to him. Upon the sale of the stock to the complainant being concluded, he was elected president of the company, and then discovered that the balance sheet was not true; that $400 of bills payable had been omitted; that the inventory of plant and tools was made more than a year before, and that no allowance had been made for depreciation; that the item “bills collectible,” represented to be collectible to amount of two-thirds value, was, in fact, less than one-half of it collectible ; that for over two years prior thereto the assets of the company had been insufficient to pay its debts and continue its business; that its expenditures for the previous five months had been in excess of its receipts, and its business for the same time had been unprofitable, and that the company had been insolvent for over two months and unable to pay its liabilities without suspending its business.

These allegations show that the actual condition of the company varies in substantial particulars, and in matters of existing fact then within the knowledge of the defendants, from the representations alleged to have been made by them which induced the complainant to make the purchase of the company’s stock. If true, and on this issue they must be taken to be true, they show that Sinclair and Zimmele, the executive officers of the defendant company and its largest stockholders, being interested to have additional capital put into the company, and knowing its true financial condition, while they were conducting the company’s business in obtaining purchasers of its stock, made false statements indicating a much more favorable financial situation of the company to be the fact than then actually existed, for the purpose of inducing, and thereby actually induced, the complainant to purchase the twenty shares of the treasury stock. In such cases, courts of equity afford relief by canceling the contract, and thus relieving the party injured from its obligation if it be executory, or compelling a restoration of the property obtained by fraud, if it be executed. Pom. Eq. Jur. 872 et seq.

I think the second ground of demurrer cannot be sustained.

The third ground of demurrer is that the misrepresentations of Sinclair and Zimmele were beyond the scope of their power as officers of the company, and cannot bind it.

The complainant’s allegations in this respect charge that Sinclair, who was the secretary and treasurer, and Zimmele, who was the president of the defendant company, by false and fraudulent representations, induced him to purchase from the company twenty shares of its stock; that the company issued this stock to him and received his money, under this contract into which he was thus induced to enter; that he now finds the statements made to him to have been false, and the value of the stock by reason thereof to have been worthless or nearly so, and he therefore tenders a return of the stock, and asks a decree that the company refund the money. He does not seek to make the company respond in damages for the unauthorized false statements of its affairs, but only to restore the money which the company has received by fraud. The contention of the demur-rants amounts to this, that the company may recognize and ratify the acts of its officers whereby it obtained the complainant’s money, but that it has no responsibility for the fraudulent misrepresentations which they made to secure it, because it did not expressly authorize the false statements to be made. This contention has had support, in England, in a number of cases arising on subscriptions to stock, and in Ayres’ Case, 25 Beav. 513, it was declared that misrepresentations by the manager and secretary of a company, by which subscriptions to its stock were obtained, were not chargeable against the company to relieve from the subscription because not authorized by the company, the master of the rolls holding that “.any false statement made by an agent of a company, not sanctioned by the company, would not bind it.”

The necessary effect of such a declaration is that a corporation may retain the beneficial results of a fraud perpetrated by its officers in the conduct of its business, unless the fraudulent acts are expressly authorized.

In the house of lords, however, the responsibility of a corpo.ration for the fraudulent contrivance of its agents was put upon broader ground. Lord Cranworth declared that the objects of a corporation can only be accomplished through the agency of individuals, and that there could be no doubt that if the agents employed act fraudulently, so that if they had been acting for private employers, the person for whom they were acting would have been affected by their fraud, the same principles must prevail where the principal, under whom the agent acts, is a corporation. Ranger v. Great Western Railroad Co., 5 H. L. Cas. 85.

As to the validity of contracts of subscription for stock of a corporation, obtained by misrepresentations made by its officers, though there has been considerable conflict in the English cases, the true doctrine on this point is declared to be that, where the person who has been deceived institutes a suit to rescind the contract to purchase shares, the misrepresentations are imputable to the company, and the purchaser cannot be held to his contract. Western Bank of Scotland v. Addie, 1 L. R. App. Cas. (Scotch) 145; Oakes v. Turquand, 2 L. R. H. L. Cas. 325.

It is .unquestioned law that a corporation must respond for the acts of its agents in the conduct of its business, which are injurious to others, though they may be wholly unauthorized by the corporation, indeed forbidden by it, as in the cases of railroad train operatives, who, while driving trains, injure passengers or travelers of highways, in breach of the company’s rules, and the many negligence cases which arise in the conduct of the business of railway, steamboat, ferry and other corporations. These acts are done, perhaps, by day laborers, and are not beneficial to the company or in any way ratified or approved by it, The company answers for these wrongdoings, because it has put the wrongdoers in its place to do its business, and it must respond for the wrong so done to other persons in the course of its business. I can see no reason why the corporation should not respond, at least, to the extent of restoration, in cases where the officers and agents of the company perpetrate a fraud in the conduct of its business, and thereby induce the making of a contract which the company accepts and executes, and of which it retains the benefit.

The American cases on the liability of corporations for the frauds of their agents committed while in the conduct of their business, assert a jurisdiction quite as extensive for the correction of such wrongs.

If the corporation has clothed the agent with the power to act in its behalf, and receives and accepts the benefits resulting from his agency, then the parties injured by the fraud may resort for redress to the principal. But it is no answer to say the corporation could not authorize an agent to perpetrate a fraud, because if this were so no corporation could be held liable for any acts of its authorized agents, however great the injury to others. Fogg v. Griffin et al., 2 Allen 6. This liability of the company is stated to attach not on the ground of express authority given by the corporation to its agent to make the statement, but because •the corporation cannot act save through its agents, and as to the particular matter the agent stands in the place of the principal, and whatever he does or says about that matter is the act or saying of the principal. Sharp v. Mayor &c. of New York, 40 Barb. 273. The execution by the corporation of the resulting contract and the retention of its benefits after knowledge of the fraud, is not only a ratification of the contract itself, but also an adoption of the statements of the company’s agents whereby the-■contract was obtained. It is unconscionable that the corporation principal should be permitted to keep the results of a fraud by merely denying the authority of its agents to perpetrate it. Story Eq. Jur. § 193 a.

In the case in hand, whatever may have been the lack of authority of the president, secretary and treasurer of the defendant company to make the misrepresentations which led to the sale, or even to bargain for or issue its stocks, the fact is admitted that the company, on the bargain made by these officers (who probably comprise all the executive officers), accepted the payment and issued the stock. The company thereby ratified their action and conduct. When the company took the benefits of the fraud, it took with those benefits the responsibility for the fraud which procured them, at least to the extent of an obligation of restoration to the party defrauded. It is no answer to say it did not know of or authorize the fraudulent statements. It knows of them now, and by retaining the money with knowledge, it ratifies their acts and the statements by which the money was obtained. If it disavows the fraud, it has not done full equity until it restores to the injured party the benefits which it received by reason of the fraud. It cannot, in a court 'of equity, in a case where the superior rights of the creditors of the company do not intervene, retain the profit resulting from a fraud done in its behalf, and refuse restoration upon an allegation of its ignorance of the fraudulent acts, or the lack of authority of its officers who acted for it in the conduct of its business in perpetrating the fraud.

In this state, in just such a casé, the rule is stated in the broadest terms. If such contracts are induced by fraud, they create no obligation, and the injured party has a right to have them abrogated. Vreeland v. New Jersey Stone Co., 2 Stew. Eq. 189. In that case the fraud by which the subscription was-obtained consisted of a false representation made by a single-director in the presence of other directors, at a directors’ meeting, but upon which no corporate action whatever was taken. The complainant was held to be entitled to have his contract' of subscription abrogated, and a decree for the return of his money not only against the company but also against all the directors who were present, and the court of errors and appeals-(2 Stew. Eq. 651) unanimously approved the decree. The third ground of demurrer cannot be sustained.

The fourth ground of demurrer is that even if the conduct of the business set out in the bill was the cause of loss and financial-embarrassment to the company, yet that such conduct was only a mistake in judgment on the part of the defendants as officers of the company, and is no ground for the relief prayed for.

This ground of demurrer seems to be based upon the supposition that the complainant seeks to charge the defendants because they mismanaged the company’s affairs and thereby caused him a loss. I have already shown that the bill, though not free from surplusage, sufficiently indicates that the ground of complaint is that the defendants, by false statements made to him to the effect that the company’s financial condition was of a certain favorable character in details named, induced the complainant to take the company’s stock, and he now asks that this contract be abrogated, and that the definite sum of money he paid for the stock be restored to him. The complainant does not ask any remedy against the defendants Sinclair and Zimmele, because of their mismanagement of the general business of the company, though the bill does set out some acts of the defendants which were alleged to have been to the disadvantage of the company. These allegations are surplusage and do not effect the substantial relief sought by the bill. As no relief is sought because of this conduct, it is of no significance whether it arose from mistakes in judgment, or gross negligence, or willful fraud.

The defendants have all demurred generally to the whole bill. The demurrer must be effective as against the bill in all its parts, or it must be overruled. The bill, taking its well-pleaded allegations to be true, exhibits a ease where the complainant was induced by false representations to purchase shares of stock which he tenders himself to be ready to return, and prays that the defendants who made the false representations, or received and accepted the benefit of them, may be decreed to refund the money. That the complainant also asks relief by specific methods not applicable in the same suit for the enforcement of such decrees, will not deprive him of his rightful remedy. There is in the bill an exhibition of a right to equitable relief and a prayer for a decree accordingly, and a general demurrer will not be sustained because relief may not be given in one or more special modes which-are suggested in the prayer of the bill.. In such cases a general demurrer is too broad and must be overruled. Banta v. Moore, 2 McCart. 97; Durling v. Hammer, 5 Stew. Eq. 228.

I will advise that the demurrer be overruled, with costs.