author: Green, Y. C.

text:
    “Scarlett & Scarlett, Incorporated under the Laws of the State of New Jersey,” v. Frederic W. Ward and The Newark Land and Improvement Company.
    In a suit to compel a transfer of a share of stock, it appeared that after the individuals comprising the firm of Scarlett & Scarlett had organized a corporation under the name of “ Scarlett & Scarlett, Incorporated,” to carry on the firm business, J., one of the incorporators, and a member of the' late firm, on April 11th, 1892, bought, in the name of Scarlett & Scarlett, stock of the Newark Land and Improvement Company, and gave notes in payment therefor. At that time he had no authority to buy stock for “ Scarlett & Scarlett, Incorporated.” On April 23d, defendant agreed to become a director of the Newark Land and Improvement Company on condition that he should become the absolute owner of at least one share of stock. It was then agreed to sell to defendant a share of stock owned by W. Thereupon, J. surrendered a certificate which he had taken in the name of Scarlett & Scarlett, caused it to be canceled, and a certificate of the share in suit to be issued in the name of, and delivered to, defendant. Defendant did not see the certificate which had been surrendered, and knew nothing about the ownership of it. Immediate payment of the price of the share was waived, but defendant became liable for it, and afterwards tendered it. On April 30th, J. reported, at a meeting of the directors of “Scarlett & Scarlett, Incorporated,” that he had purchased for that company the stock which he had taken in the name of Scarlett & Scarlett, and the purchase was ratified. — Held, that the ratification did not affect defendant’s title to the share in suit, as against “ Scarlett & Scarlett, Incorporated,” as defendant was a bona fide purchaser before the ratification.
    On bill, answer, replication and proofs in open court.

      Messrs. Colie & Swa/yze, for the complainants.

      Mr. Frederic W. Sevens, for the defendants.
   Green, Y. C.

“ The Newark Land and Improvement Company ” was incorporated under the provisions of the act of this state entitled “An act to encourage the improvement of real property in this state/7 approved March 27th, 1874, and the several supplements thereto. Its authorized capital stock is $100,000. The certificate declares that the amount with which the company will commence business is $10,000. The capital stock originally issued consisted of two hundred shares, of the par value of $50 each, held as follows: J. Miller Roe, ninety-eight shares; Charles Selvage, ninety-eight shares; William Scarlett, one share; John B. Scarlett, one share; George O. Scheerer, one share, and Isaac F. Roe, one share.

Charles Selvage sold twenty-four of his ninety-eight shares to William Scarlett and twenty-four to John B. Scarlett, for which they paid no cash, but each hypothecated his twenty-five shares with Charles Selvage, as security for the purchase-price. William and George O. Scheerer had acquired forty-nine of the Roe shares. This left the stock of the company distributed equally between Charles Selvage and the Scarletts on one side, and the Roes and Scheerers on the other.

On the 6th of April, 1892, Charles Selvage and John B. Scarlett negotiated for the purchase of the Scheerer and Roe stock, and agreed, finally, to take the same at $120 a share, Charles Selvage buying out Mr. Roe’s interest and John B. Scarlett buying out the Scheerer interest for Scarlett & Scarlett, both being fifty shares each.

The deal was consummated on the 11th of April, 1892, and the consideration, $12,000, was arranged to be paid, as to one-half, by Charles Selvage, by his six several notes of $1,000 each, falling due every three months, payable to the order of Scarlett & Scarlett, endorsed by John B. Scarlett, “ Scarlett & Scarlett ” (four of these notes, with evidences of payment, were produced on the trial), and as to the other half of said consideration, by John B. Scarlett, by six other notes, said to be similar to the first-named in date, time and amount, but signed by John B. Scarlett, “ Scarlett & Scarlett,” payable to the order of Charles Selvage and by him endorsed. The form in which these notes were drawn is uncertain, as none were put in evidence.

Until September, 1891, William Scarlett and John B. Scarlett were partners, under the name of Scarlett & Scarlett, carrying on the business of surveyors, making maps &c., in the city of Newark. At the date named they, in connection with their father, Augustus Scarlett, formed a corporation under the name, as stated in the certificate of organization, of “ Scarlett & Scarlett, Incorporated under the Laws of New Jersey.” The objects of the corporation, as indicated by the certificate, were practically to continue the business of the copartnership as well as the purchase and sale of real estate, stocks and bonds. The capital of $50,000 was divided into five hundred shares, of $100 par value; the company to commence business on thirty-one shares, of which fifteen were issued to William Scarlett and fifteen to John B. Scarlett for the business and property of the firm of Scarlett & Scarlett, purchased for $3,100 in stock, one share thereof being issued to Augustus Scarlett for services rendered the partnership. Afterwards one share of preferred stock was issued to Mr. Smyth and to Mr. Hope respectively, for debts due them from the firm, the par value of which was to be charged to William and John B. Scarlett on account of salary, and one share was issued to Sarah B. Scarlett for cash actually paid. Augustus Scarlett, William Scarlett and John B. Scarlett were the directors, Augustus being president, William the vice president and John B. secretary and treasurer. The business and assets of the copartnership were thereupon turned over to the corporation and the copartnership dissolved, notice of such dissolution being published in the newspapers.

■ The corporation was, therefore, but the evolution of the partnership. The name of the latter became the distinguishing feature of that of the former. The assets were transferred and the business continued at the same place, the old style and letterheads being used. The two brothers were, in interest, practically the company, together controlling all corporate action, as they constituted a majority of the directors, and under the by-laws each was clothed with absolute power, in the absence of the president, their father, and he was, in fact, absent from every meeting from October 3d, 1891, to September 19th, 1892.

In the transaction of the purchase of the shares of the land company and the signing and endorsing of the notes, so far as appears, there was no mention made of the corporation nor of the partnership, but Charles Selvage states distinctly that he endorsed the notes with the understanding at the time that he was going security for William Scarlett and John B. Scarlett.

Walter Selvage became a stockholder of the Newark Land and Improvement Company by the transfer to him by Charles Selvage of a portion of his stock, and the two Selvages and two Scarletts were made directors, leaving one vacancy in the board of directors.

Walter Selvage was elected president, Charles Selvage, treasurer, and John B. Scarlett, secretary of the company.

On the 11th of April, 1892, the certificates of the Scheerer and Roe stock were surrendered, and certificates No. 15 for tweuty-four shares, No. 16 for one share, No. 17 for twenty-four shares, were issued in the name of “ Scarlett & Scarlett,” the receipt-of which is acknowledged on the respective stubs by John B. Scarlett. These certificates were afterwards returned to the land company, and are marked “ canceled ” on their face, in the handwriting of John B. Scarlett, and certificates No. 25 for twenty-four shares, No. 26 for one share, No. 27 for twenty-four shares, were issued in the name of “Scarlett & Scarlett,” the receipt of which is acknowledged by John B. Scarlett. There was another share of the Scheerer and Roe stock which was not traced by the evidence, but the stock at this time was equally divided between the Scarlett interest on the one hand and the Selvage interest on the other, each having fifty shares. I have thus stated the stock transitions and conditions in detail, because they indicate the true object of this suit and demonstrate that it is not what it purports to be, a contest for one share of the stock, but is for the control of the corporation.

As the result of an invitation, Mr. Frederic W. Ward, on April 23d, 1892, attended at the office of the land company, which was also the office of “ Scarlett & Scarlett, Incorporated,” &c.

All the directors of the land company, namely, the two Scarletts and the two Selvages, were present, and an informal meeting was held in which the appointment to fill the vacancy in the board was discussed. There is a conflict in the testimony as to the details of what took place at that meeting.

Without going into an analysis of the evidence or giving in detail my reasons for such conclusions, I am satisfied, from the manner of the witnesses, the probabilities of their stories, corroboration and other considerations, that the true history of the transaction of that evening is as follows:

On the 16th of April, 1892, a resolution was passed by the directors that the president be requested to have Frederic W. Ward attend the next meeting of the boárd, on April 23d, 1892, to ascertain how the charter could be amended, with general legal advice, which request was communicated to Mr. Ward by Walter Selvage, the president, and in response thereto he.attended the meeting of April 23d, 1892. An informal meeting was first held, and the subject of Ward’s being elected a director was brought up. He expressed to them his willingness to act, but stated that it would be necessary for him to become a stockholder in order to be legally qualified to act as such director; that some one suggested to issue to him a share of stock, to which Ward replied that that could not be done legally, and further, that he would not act as a director unless he was the absolute owner of at least one share of stock.

There was then a discussion as to which one of the parties should sell Ward a share. Charles Selvage objected to parting with any more of his, as he had already disposed of some, and 'John B. Scarlett also objected to part with any of his on the same ground, and it was then said by some one that either Walter Selvage or William Scarlett must let Ward have a share. This was assented to, and, in order to determine which of the two should do so, it was proposed that a cent should be tossed up. John B. Scarlett then tossed the cent, and picked it up and said to his brother William, “You have lost,” to which William Scarlett expressed no dissent. There was then talk with reference to the price to be paid for this share, Ward desiring to know what was to be the price. Charles Selvage said that it ought not to be less than $120, as that was the rate which they had paid for the Scheerer and Roe stock. Ward remarked that he thought $120 was a good deal to pay for a $50 share of stock, but finally said, “All right, I will take it.”

John B. Scarlett and Charles Selvage then, in the presence of the others, went over to the safe and took therefrom the stock-book. John B. Scarlett thereupon wrote the name of “ Scarlett & Scarlett ” to the blank power of attorney on the back of certificate No. 26 and surrendered the same, and drew a new certificate No. 29 for one share to Frederic W. Ward. On this being handed by John B. Scarlett to Charles Selvage, for signature as treasurer, the latter noticed that certificate No. 26 did not stand in the name of William Scarlett, but in the name of Scarlett & Scarlett, and said in an undertone, and not in Ward’s hearing, to John B. Scarlett, “This is not right; it was one of William’s shares that was to be sold.” John B. Scarlett then asked Charles Selvage if he had any of those certificate with him. (It is to be here remembered that all the stock standing in the individual names of William or John B. Scarlett was held in hypothecation by Charles Selvage.) Charles Selvage told John B. Scarlett that he did not have them with him. Thereupon John B. Scarlett said,“ That is all right,” and the new certificate No. 29 was signed by the president and treasurer, and certificate No. 26 marked “ canceled ” and retained,

Mr. Ward took no part whatever in this proceeding, did not hear the conversation and did not have certificate No. 26 in his possession. The new certificate No. 29, issued in his name, was then taken over to where he was and delivered to him.

After certificate No. 29 had been delivered to Mr. Ward, he said, “ I haven’t the money with me, nor my check-book; I will have to pay you some other time,” and William Scarlett said, “All right, any time will do.” Ward was then elected a director and acted as such at that meeting.

He afterwards attended every other meeting of the directors and acted as such, either William or John B. Scarlett, or both of them, being always present. This continued without objection until a meeting held October 28th, 1892, when Ward, having discovered that $3,000 had been paid out of the company’s funds to meet notes, one given by Scarlett & Scarlett and two by Selvage, the checks for which were signed by John B. Scarlett alone, without any apparent authority, said he would not consent to that transaction, and that the matter must be straightened up or he would resign his office and have nothing more to do with the company.

At this meeting a proposition was made by John B. Scarlett to approve of the payment by him, from the company’s funds, of one note of Charles Selvage and one of Scarlett & Scarlett, of $1,000 each, and to “ charge the amount to Charles Selvage and Scarlett as dividends.” This was opposed by Ward and lost, and then a resolution was offered by John B. Scarlett that “ Charles Selvage and Scarlett & Scarlett be and are hereby demanded of to return to the company the money which belonged to the company, and was used to pay the personal notes of Charles Selvage and the note of Scarlett,” setting out two notes of Charles Selvage and one of Scarlett & Scarlett, each for $1,000, “and that the directors hereby declare a dividend of forty per cent., payable immediately on the receipt of the money advanced to Charles Selvage and Scarlett & Scarlett.” Ward objected to this resolution and offered an amendment, leaving out the part referring to a dividend, but instructing the treasurer to take proceedings for the return of the money at once, and the resolution in that shape was passed, John B. Scarlett alone voting against it.

John B. Scarlett then offered a second resolution to the same purport, declaring a dividend. Ward still refused to favor it, when Scarlett turned to him and said that he desired that he should vote in favor of it, to which Ward replied that he would never vote for a dividend when the money was not there to pay it, and after some further proceedings John B. Scarlett challenged Ward’s right to vote, or to act as a director, on the ground that lie was not a stockholder, and insisted that he should not vote. Ward, however, continued to act, the result being this suit, which is brought to restrain Ward from acting as director of the land company, and for a retransfer of the stock held by him.

The claim of the complainant corporation is, that, the one share in dispute was, at the time it was transferred to the defendant Ward, the property of the corporation, and that John B. Scarlett had no authority to surrender or dispose of it. It was one of the shares of stock which John B. Scarlett had purchased from William Scheerer on the 11th of April, 1892, paying therefor, as part of the said purchase, the notes signed by John B. Scarlett “ Scarlett & Scarlett,” to the order of Charles Selvage and endorsed by him.

There is nothing in the case to impeach the entire good faith of Ward in the transaction. He stated to them all that he would not consent to serve as a director unless he was the absolute owner of stock. The transaction by which he was to acquire this stock was therefore carried on with full notice to all that it was to be no similated or temporary transfer, but an actual sale; the price was not nominal, but at the premium of $70 on a $50' share of stock. He did not hear the conversation between John B. Scarlett and Charles Selvage as to certificate No. 26, and did not have it in his possession, nor was he informed* nor did he know in whose name it stood bn the books of the company. He took the new certificate and assumed the liability to pay the-agreed price, and accepted the position of director of the land company and immediately entered on the discharge of his duties.. He has, as director, faithfully devoted his time, experience and knowledge to the interests of the company.

At the time of the purchase of the stock by John B. Scarlett, April 11th, 1892, so far as the minutes of the board of directors-of “ Scarlett & Scarlett, Incorporated,” show, John B. Scarlett had not been authorized by the corporation to make such purchase for it; and he testifies that prior to a meeting held on the 30th of April, 1892, he had no authority to negotiate a sale or purchase of the shares of stock of the Newark Land and Improvement Company on behalf of thet company of “ Scarlett & Scarlett, Incorporated; ” that he acted entirely without authority in that regard from the company. He reiterated again and again that he had no authority to act for the company in the premises on April 11th, 1892. If this is so, when, if ever, did this company acquire these shares of stock ?

The legal title was not in the complainants, for the certificate was not issued in the corporate name of the company, nor docs it, by its name, appear as a stockholder upon the books of the land company. Neither does it appear by satisfactory proof that it had the equitable title. As no part of the consideration was paid in cash, an equitable title could only arise in favor of the complainant by its being at the time absolutely liable for the purchase-price. The corporate name of the complainant does not appear on the notes as maker or endorser. Throughout the whole transaction John B. Scarlett used the old partnership name of Scarlett & Scarlett. He had no authority to bind the company in the purchase, and none whatever to execute a note which was obligatory upon the company. Whether he attempted •so to do is not clear." It is true that he gave an affirmative reply to a question, as follows:

“The shares, then, were purchased wholly on the credit of the corporation •of Scarlett & Scarlett and on the credit of Charles Selvage, and the purchase-money was wholly represented by the notes that were given?”

But this is a mixed question of law and of fact, depending on whether the notes were drawn in proper form to impose an •obligation upon the company, and next, whether they were executed by one having authority to that end.

The complainants failed to produce a single one of these notes. Their contents, which would have been conclusive upon the question as to whether they were in form of binding force upon the company, could only be properly proved by their being put in evidence. It was a material point for complainant to prove, for the right of the complainants to an equitable title depended upon the company’s liability being satisfactorily established, and not having proved it by the production of the notes, the conclusion must be that these notes were, in form, as the whole drift •of the evidence tends to show, only the obligations of Scarlett & •Scarlett, and not made in the corporate name of the-complainants.

Again, the probabilities all indicate that the complainant corporation was not a party to this purchase. The deal involved the amount of $12,000, for one-half of which Scarlett & Scarlett were to be principal debtors and security for the other half. There is no pretence that any mention of a corporation was made .at the time, and it is not likely a corporation with an actual capital of only $5,500 would have been accepted as debtor and endorser for $12,000. The fair presumption, I think, is that the vendors supposed they were dealing with the individuals William and John B. Scarlett. It is certain Charles Selvage so understood when lib became endorser. While the old copartnership may have been dissolved, John, who alone had anything to do with the transaction (William being at the time in the west), could have acted in the name of Scarlett & Scarlett on the assumption that his brother would join him, on his return, in the purchase as a joint venture; and that John so regarded it is clearly shown by his directions to Ward, as late as September, 1892, for drawing an agreement with reference to the stock, he then representing to Ward that it belonged to the brothers as copartners.

But if John B. Scarlett, when he signed “Scarlett & Scarlett” to the notes, really intended the corporation as the maker, and if we assume the corporation could be made liable on the notes signed in that way, yet if John B. Scarlett had no authority in the premises, the company were not bound by the notes signed by him until it adopted them as its own act.

On the 30th of April a meeting of the directors of “ Scarlett & Scarlett, Incorporated,” was held, at which William Scarlett and John B. Scarlett alone were present, and at which, according to the minutes, John B. Scarlett reported the purchase for the corporation of Scarlett & Scarlett of $2,500, par value, of the stock of the Newark Land and Improvement Company for the sum of $6,000, and it was moved to accept the action of John B. Scarlett, treasurer, as the act of Scarlett & Scarlett, and confirm the same,

“with a distinct understanding that in future the treasurer he requested to make no contract .outside of the regular business of the company where the company assumes any liability beyond $500,”

which was carried. Until this action by the company the unauthorized act of John B. Scarlett had imposed no liability on the corporation and it had acquired no rights from such act.

What is the effect of this resolution ? It ratified and adopted the unauthorized action of John B. Scarlett, in respect of the purchase by him, in the name of Scarlett & Scarlett, of the stock from the Scheerers and the giving of notes for $6,000, and transferred to it all title which John B. Scarlett at that time controlled over the stock thus purchased, and its title thus acquired undoubtedly related back to the time of the purchase, with reference to so much of the stock he was in a position, on the 30th of April, to deliver to it; but it acquired no more of that stock than so much thereof as John B. Scarlett was in a position then to transfer to the company. The ratification of the purchase could not- affect any portion thereof which he had actually disposed of. If, without notice to the company that he had sold part, he induced it to assume a responsibility to pay for stock, all of which he could not deliver, his act to that extent was a fraud upon the company, for which they would have had their remedy against him, but cannot affect the title to that previously disposed of. But the only two directors present at the meeting at which the act of John B. Scarlett was ratified were himself and his brother William, both of whom had full notice of, and were parties to, the transfer to Ward, and this brings up the inquiry as to the legal effect of the transaction by which Mr. Ward acquired the share in dispute.

At the time of the transfer, John B. Scarlett having no authority whatever from the company for his action with reference to this stock, its purchase by him until adopted by the company was his personal transaction. Although the certificates stood in the name of Scarlett & Scarlett, John individually had possession of them — surrendered them by his personal act and endorsement, had new certificates issued which he also receipted for and of which he had possession and control on April 23d, when one was transferred to Ward. It is true that it was supposed that Ward was purchasing a share of stock from William Scarlett, but if John B. Scarlett was willing to carry into effect such understanding by a transfer of his • own stock, no one can raise any objection to his doing so. It was frankly admitted by counsel on the argument, in answer to a question from the court, that if John B. Scarlett had disposed of this stock or any portion of it, prior to the passage of the resolution on April 30th, 1892, to a person who had paid the cash therefor, the company would have acquired no title by the subsequent ratification of the purchase by John B. Scarlett. But it is claimed that such rule would be adopted to protect a bona fide purchaser for value paid, and that Mr. Ward has not parted with anything of value for his share. Ward has not, in fact, paid for the stock, although he did at one time offer his check, which was declined, but not on the ground that such was not a legal tender, and by his answer he tenders himself ready and willing at any time to pay the purchase-price agreed, besides he has on the faith of this transfer materially changed his position — he accepted the office of director, acted as such, giving his time, attention, knowledge, and services to the corporation from that time to this.

But I do not understand that the rule of a bona -fide purchaser for value is to be applied in this case. If the company had, in fact, title, either legal or equitable, which by apparent authority had, in fraud of its rights or other wrong, come into the possession of another, the rule of a purchaser for value would be invoked with success, but in the case suggested the stock is sold before the company acquires any title, and its power to get it by subsequent action is gone. The conclusiveness of the transfer by the assumed agent prior to ratification, depends on whether such party had the right of disposal, and whether the formalities of the transaction were sufficient to pass the title. The giving of an unauthorized note for the stock to Scheerer gave him a right of action against John B. Scarlett, but, as stated, it gave the company no right to the stock until it ratified Scarlett’s act. Until that time the company was not liable for the purchase-money and could suffer no loss, and, so far as the company was concerned, the stock was John B. Scarlett’s individually and to which he could give title. Did he do so ?

As stated, Ward never had the original certificate issued to Scarlett & Scarlett, in the possession of John B. Scarlett. He had no knowledge to whom that original certificate had been issued or notice that it stood in the name of Scarlett & Scarlett. The land company accepted the surrender as properly made by John B. Scarlett, and issued a new certificate to Frederic W. Ward. What lie- .got was a certificate of the company, regularly issued, that he was entitled to one share of the capital stock. The general rule, as stated in Cook Stock. § 369, is that the rights and equities of all holders of stock back of the registry and issue of the certificates in existence are not allowed to affect the stockholdersbip or rights of purchasers of these new certificates, citing Buffalo G. A. Co. v. Alberger, 22 Hun 349; Mandelbaum v. N. A. M. Co., 4 Mich. 465. It is true, he further says (at § 413), with reference to certificates which have been stolen or misappropriated and the endorsement forged, that the person who obtains registry first, after the illegal act has been done, is not protected ” by the rule stated. This exception, I take it, is founded on the fact that the person who so obtains registry has had possession of the certificate and forged endorsement, and has thus been put on inquiry as to whether it is genuine, and has used it without such inquiry, and still holds the fruit of the fraud effected by the forgery. Here, however, there was no notice brought to Ward — he did not obtain the registry, he had not even constructive notice. Nothing is shown to attack his good faith or his character as a bona fide purchaser. Besides, this is not a case of a stolen certificate or one transferred in breach of trust. It has been shown that John B. Scarlett must be considered as having at the time the right to dispose of it, and the •only question is, did he dispose of the stock in such manner as to transfer the title ? A certificate for the one share of the stock was surrendered by him, accepted by the land company, and a new one issued to Ward in his own name in proper form, under the seal of the corporation, signed by the officers, was actually delivered to Ward, for which he agreed to pay the sum of $120, and the material payment of which money was waived at the time, and credit for its payment in the future was personally given to him. In 1 Shep. Touch. 224, it is said :

“ But if one sell me a horse or any other thing for money or any other valuable consideration, and the same thing is to be delivered to me at a day certain, and by our agreement a day is set for the payment of the money; or all or part of the money is paid in hand; or I give earnest-money (although it - be but a penny) to the seller; or I take the thing bought by agreement into my possession, where no money is paid, earnest given or doty set for the payment; in all these cases there is a good bargain and sale of the thing to alter the property thereof.”

And Mr. Benjamin, in his work on Sales, quoting this passage at § 315, says: This rule given by this ancient author remains substantially the law of England to the present time.”

■ The transaction on the part of John B. Scarlett was executed, the stock was transferred and the new certificate delivered; the day of payment was, by consent, left indefinite. By all rules of law the title to the thing sold passed to the vendee and the stock became the property of Mr. Ward. This being the case, all that the complainant acquired by its ratification on the 30th of April was to forty-nine shares of the stock which John B. Scarlett had purchased from the Scheerers — he had disposed of the remaining share beyond his recall. He must answer to the company for his inability to deliver to his company the whole amount.

But I fail to see how the complainant has any legal or equitable claim which can be enforced upon the particular certificate issued to Mi’. Ward.

This bill seeks to have this court decree a retransfer of the stock to the complainant, and that the certificate issued therefor to Frederick W. Ward be declared null and void, and that Ward he required to deliver the-same up to the complainant to be canceled ; that Ward and the company be enjoined from disposing of or transferring the stock and Ward from acting as a director, and that he give complainants a proxy to vote thereon and for other relief.

The complainant’s right, if any, is to certificate No. 26, which was issued in the name of Scarlett & Scarlett. If it, being its property, was surrendered without authority and unlawfully to the land company, and has been now canceled, its remedy is to follow that certificate, either at law to recover its value or possession of the thing itself, or in this court to efface its cancellation and rehabilitate it as a valid certificate. I see no principle by which it is entitled to this particular certificate held by the defendant Ward. These views render unnecessary any consideration of the other points which have been raised, and I advise that the bill be dismissed.


source: Caselaw Access Project

license: Public Domain

text:
    Herbert W. Edmunds v. Isaac H. Smith et al.
    1. A decree was rendered awarding costs of suit to complainant, and directing execution therefor. For a consideration of $25 complainant gave S., one-of the two defendants, a receipt reciting that S. was released from all liability for costs. — Held, to release S. only, and that his codefendant’s property washable for the balance of the costs.
    2. A conveyance to S. by such codefendant of property owned by him at the time the decree was entered, before the decree is docketed in the supreme-court, does not release the property from the lien of the decree for costs, the Chancery act (§ 56) providing that all decrees and orders of the court of chancery, whereby any sum of money shall be ordered to be paid by one person to-another, shall have the effect of a judgment at law in the supreme court from the time of the actual entry of such judgment, and the chancellor may order execution thereon as in other cases.
    On petition after decree.

      Mr. Thomas E. French, for the motion.

      Mr. Herbert W. Edmunds, pro se.

   Green, Y. C.

A bill was filed in this court by Herbert W. Edmunds against Isaac H. Smith, Benjamin Obekiah and Hester Obekiah, his wife, to restrain them in the use of a closet on premises in the city of Cape May, belonging to Isaac H. Smith, and occupied by the other defendants, on the ground that the same was a nuisance.

A-decree pro confesso was entered, testimony taken and final decree, dated October 24th, 1891, was entered October 27th, 1891.

This decree perpetually enjoined the defendants from the use-of the closet as a sink &c., and further orders

that the complainant recover against the defendants his costs and charges by him in this behalf sustained, and that an execution do issue therefor in accordance with the rules of this court.”

The costs were taxed on November 2d, 1891, at $74.99.

After some arrangement between Smith and the complainant, Smith paid him $25 and took from him this receipt:

“Received, Cape May, N. J., August 22d, 1892, of Isaac H. Smith, twenty-five dollars cash, in consideration of which I hereby release the said Smith for all liabilities and further payment of any sum or sums of money incurred for costs or otherwise in the suit in chancery heretofore existing between said Smith and myself. [Signed] Heebebt W. Edmunds.”

The Obekiahs were the owners of a lot, in another part of the city of Cape May at the time the decree was entered in the cause, which they conveyed to Isaac H. Smith by deed dated and acknowledged October 4th, 1892, and recorded in the Cape May county clerk’s office October 5th, 1892.

On the 9th of October, 1892, the decree was docketed in the supreme court.

July 25th, 1893, a copy of the final decree and taxed costs was served on Benjamin Obekiah and his wife, and on the 7th of August, 1893, an order was made in the cause that a writ of fieri facias issue to the sheriff of Cape May county directing him to make the amount of costs remaining due out of the goods and chattels, lands and tenements of the defendants Benjamin Obekiah and Esther Obekiah, in pursuance of which a writ of fieri facias was issued directing the sheriff to make the amount, if necessary, out of the lands and real estate whereof Benjamin Obekiah and Esther Obekiah were seized on the 24th day of October, 1891, the date of the decree.

Isaac H. Smith, by petition, applies to vacate the order for execution, the execution and proceedings had thereon, so far as he and the lands conveyed to him are concerned, and to restrain the sheriff from selling said lands by virtue of the execution, on the ground that the payment of $25 was a discharge of the costs, and next, that at the time of the conveyance to him by the Obekiahs no decree had been docketed in the supreme court.

When Smith made the payment to Edmunds of $25 he took from him the paper which is a receipt and release. It must be considered as fully expressing the contract of the parties. At the time it was given, Smith and the Obekiahs were each of them liable to the complainant for the whole amount of costs. After payment by Smith of $25 to the complainant, the latter released Smith from all liability for costs. This release did not discharge Obekiah nor Obekiah’s property, which was liable for the balance; of the bill for costs.

By the fifty-sixth section of the Chancery act it is provided

that the decree of the court of chancery shall, from the time of its being-signed, have the force, operation and effect of a judgment at law in the supreme court from the time of the actual entry of such judgment, and all decrees and orders of the court of chancery whereby any sum of money shall be ordered lo be paid- by one person to another, shall have the force, operation and effect of a judgment at law in the supreme court from the time of the actual entry of such judgment, and the chancellor may order such execution thereon as in other cases.”

The final decree awarding costs and execution tberefor to the complainant, the same being thereafter taxed, became, by virtue of this provision, a lien upon the lands of Smith and of the twoObekiahs on the 27th day of' October, 1891, the time of the actual entry of such judgment.

The release to Smith relieved his property from the effect of the decree, but left the property of the Obekiahs still subject thereto. If the Obekiahs had conveyed their property to any other person than Smith, such grantee would have been protected by the proviso of the fifty-sixth section of the Chancery act, as follows:

That no decree of the court of chancery, hereafter to be made, shall, as against any person not a party thereto, become a lien upon or bind any lands, tenements, hereditaments or real estate other than those specifically mentioned and described in such decree or in the bill of complaint on which the same is founded, until the parties interested in such decree, or some or one of them, shall have filed in the office of the clerk of the supreme court a statement or abstract of such decree, containing the names of all the parties thereto, designating, particularly, those against whom it is rendered” &c.

But Isaac H. Smith was a party defendant to the suit, and so this proviso does not apply to him, and it would seem that an execution levied upon this property cannot be avoided by a conveyance made to him prior to the docketing of the decree.

Eule discharged.


author: Green, V. C.

text:
    Burton v. Burton.
    1. Refusal of a husband, to live with his wife is not extreme cruelty, in the absence of proof that it has had, or tends to have, a serious effect on her health.
    2. A divorce on the ground of the husband’s alleged cruelty will not be granted where it appears that the parties lived together for many years after the acts of cruelty were charged to have been committed, and they were of such a nature that, owing to the age of the parties, there is little probability, or even possibility, that they would be committed again, as it is a preventive remedy to protect the life and health of the wife, and not to punish the husband.
    Bill for divorce a mensa et thoro and alimony.

      Mr. Franh G. Willeox, for the complainant.

      Mr. Alexander Grant, for the defendant.
   Green, V. C.

The parties to this action were married in 1855. In 1874 they removed from Jersey City and went to live at 190 Lafayette street, in Brooklyn. In 1876 the defendant told his daughter, who was living with them, to occupy the room with her mother, and he took the daughter’s room. From that time to the present he has not occupied his wife’s bed. He gives as an excuse for this that his wife, having inherited some $16,000, speculated in Wall street, and was frequenting brokers’ offices; that he remonstrated with her, when she told him she would associate with those she liked better than she did him; that she also' refused what he considered reasonable requests. She complains that from that time on he did not speak to her, but addressed any remark he intended for her ears to a third person. They continued keeping house until 1884. There is much dispute as to which one paid the rent and expenses of the family, which I think immaterial to this controversy. They also differ as to who was to ■blame for breaking up housekeeping, he saying it was her wish, she, that it was his determination. He continued to support his wife and daughter until 1886. In this year he sold a property in Clinton avenue, Brooklyn, which he had purchased in 1867. He says that he paid the whole purchase-price of this property, but she claims that she paid one-half thereof. At all events, she would not sign the deed until he paid her $2,050, half the money he received on the sale. They were at this time living in separate homes. He says that he then told her he would not continue her support until she had- expended the difference between what her dower right would have been worth and the one-half she exacted. Be it as it may, he stopped his contributions, and ■she had him arrested in Brooklyn for non-support, and he was •ordered to pay his wife $10 a week. He gave bond for this payment for one year, and did pay it, as well as giving his daughter $40 a month and sometimes more. He continued these payments to his wife for two years after the time named in the bond, and to the daughter after her marriage and until her husband was in fair circumstances. He also gave his daughter money at the time of her marriage and at times when she applied for it. As I understand the evidence, he continued ¡paying $10 a week for his wife’s support until 1891. In the ■early part of that year he rented a house in Newark. He had previously purchased a property in Belleville, the title of which •stood in the names of himself and son, and had commenced building a house thereon. He was very desirous of placing a mortgage upon this property, but his wife refused to join in it. He subsequently secured the whole title. In May, 1891, he addressed the following letter to his wife:

“ New Yobk, May 26th, 1891.
Mrs. O. F. Burton :
“ Madam — Declining health has caused me to change my residence from the city of Brooklyn to the country. I have, therefore, rented a house, No. 889 Washington Ave., North Newark, N. J., where you are welcome to bed and board on and after June 5th, 1891; and after the said date, I shall cease to pay to the Brooklyn Board of Charities the allowance awarded by the court for your support.
“For any further arrangement for a separate maintenance, I hereby refer you to my attorneys, Messrs. De Witt & Prevost, No. 445 Broad St., Newark, N. J. Their card enclosed.
“O. F. Burton.”

The complainant went to the office of Mr. De Witt, where she met her husband and asked him what provision he intended to make for her, and he replied by saying to De Witt, “You have my terms.” He says that he wrote this letter because he thought it would make her sign the mortgage. In July, 1891, she had him arrested in Newark for non-support. She had him arrested in Brooklyn a second time, but it is not clear if this was before or after the* Newark arrest. The latter, defendant says, was on a very hot day; that the justice refused to take his own recognizance, and that he-was .locked up in a noisome cell and kept there until he could get Mr. Sandford to come from Belleville and bail him out. He admits that he has addressed no conversation to his wife since she had him arrested and incarcerated in Brooklyn in 1887, and gives as his excuse her persecutions, as he terms her conduct, both as to ai’resting and imprisoning him and crossing his wishes in reference to property which he had bought. He was discharged both in the proceedings in Brooklyn and in Newark. The complainant then brought this suit. I do not stop to examine whether the excuse he gives for separating himself from his wife’s bed, and subsequently from the house in which she lived, viz., that she persisted, against his remonstrances, in frequenting brokers’ offices in Wall street, refused her co-operation in improving his property, thwarted his plans of realizing on it, are established by the evidence, or are, if true, coupled with his repeated arrests, a justification, because I do not think that such separation from bed and home is extreme cruelty, as used by the statute, in the absence of evidence that it has had, or tends to have, serious effect upon the health of the wife. There is no such evidence in this case. But she also testifies that he has been guilty of acts of personal violence towards her. She, however, only specifies two occasions. One in Jersey City, in 1874, when she says he insisted on her doing some sewing for him on Sunday, and on her refusal, took her by the throat and choked her. She says that as she regained her upright position her head struck his face and blackened his eyes • that the children were at the time at Sunday-school.

The other occasion, she says, was in 1869, when he struck her in the presence of Mrs. Fountain. There is no evidence by anyone who has known or lived with her or near these parties during their home life, from 1855 to 1887, a period of thirty-two years, who is produced as a witness to a single act of personal indignity or violence. The daughter, who has always been with her mother, says she never knew her father to use violence to her mother. He emphatically denies both statements. They were condoned if they ever occurred. She is explicit in her statement that the occurrence in 1874 was the last act of cruelty on her person. They lived after that in the same home, either keeping house or boarding, although not occupying the same room, until 1887, or thirteen years and more, and he, so far as the evidence shows, never attempted to do her bodily injury, except that she says in 1884 he attempted to poison her and did produce abortion. Her grounds for the first accusation are so unsubstantial that the charge gives rise to the suspicion that she is under some hallucination with reference to her husband, or, at least, is ready or eager to believe him capable of anything, no matter how criminal or outrageous.

As to the other charge, she testifies that, after the birth of her daughter in 1859, he performed on her, while enciente, a criminal operation with an instrument made of whalebone, and thereby produced a premature birth, and that he thus produced on her person abortion no less than ten different times. Defendant denies all these charges. There is no corroboration whatever. Of course it would be difficult to find corroborative evidence of the specific act. Cruelty by husband to wife, either by beating or poison or abortion, would almost invariably be done in secret. But there are always some attendant circumstances or résulting conditions that afford some means of verification. As to the incident of violence she swears to, in 1874, in Jersey City, she says her husband’s eyes were' blackened. Her son 'was then eighteen years of age and the daughter fifteen,, and they would undoubtedly have remembered such a fact, but they fail to substantiate the statement. There is no evidence on the point, but I suppose it may be taken as true that an abortion produced by instruments would result in serious illness, and its repeated production would have left its victim a physical wreck instead of the (to all appearances) well-preserved matron who tells the story. I confess that I am unable to believe these accusations which the complainant makes of these attempts upon her health and life. They are at war with the whole life and character of defendant, and with the fact of their continued life together for many years. But if true, each and every of these acts was subsequently condoned. He is now seventy years of age and she is sixty-seven years of age. They have not lived in the same house together since 1884. There is little probability, if possibility, that any such offence would again be committed. Divorce on. the ground of extreme cruelty is a preventive remedy to protect the life and health of the wife and not for the punishment of the husband.

In my opinion, the facts do not justify a decree of divorce from bed and board, and I will advise that the bill be dismissed.


text:
    Plaquemines Tropical Fruit Company v. Charles C. Buck et al.
    1. B. agreed to purchase of W. a tract of land of about twenty-eight thousand acres, in the State of Louisiana, for $25,000, to be paid $5,000 in cash, $10,000 in three months, and $10,000 in stock at par of a company to be formed for tlie development of tlie lands. B. then issued a prospectus, over his own name, for the incorporation of such company and secured the promise of the necessary number of persons and means to comply with the contract. W. then refused to carry out the agreement. B. thereupon organized the company under the laws of New Jersey, and, although not an incorporator, was elected a director and president of the company. A resolution was passed, at the first meeting, to purchase the property for $150,000, to be paid for $120,000 in stock at par, $10,000 in cash, and the balance, $20,000, in notes secured by a mortgage. Certificates for twelve thousand shares in blank were issued and delivered to B. to effect the purchase. B. commenced suit against W. for the specific performance of the contract, which led to an agreement by which W. was to convey four thousand more acres, reserving, for one year, the right to cut willows and to clear the land, and to receive $27,000 instead of $25,000. This agreement was carried out by W. conveying to L., the attorney of B., who gave the notes secured on the property, and L. then conveyed to the company subject to the encumbrances. B. paid W. $5,000 in cash and seven hundred shares of stock. L. gave W. three notes — two for $5,000 each, and one for $10,000. W. gave up one of the $5,000 notes to B., who turned it over to a party who had assisted him in making the bargain. The balance of the twelve thousand shares of stock B. retained and distributed part to the other defendants.
    2. The evidence showed that B. alone got up the company, secured the shareholders and selected the incorporators and officers; that he attended the meeting for organization and the first meeting of directors (his presence being necessary for a quorum) at which the purchase was authorized, and the weight of evidence is that he did not, in the hearing of all, disclose his interest in or relation to the property.
    3. On a motion to restrain B. and the other defendants from parting with such stock and from voting thereon — Held, (1) no rights, legal or equitable, arise in favor of a corporation in respect of transactions, whether complete or inchoate, merely because entered into in contemplation of the creation of such corporation; (2) that it was open to B. to buy the property on his own account, for any price he could, with the intention, or in the hope of selling it, at a higher price, to a company to be formed, and, dealing independently, to sell it for such higher price to such company, so long as he did so fairly; (3) under the facts, as shown by the affidavits, B. must be considered as having made the original contract, not for himself, but on account of the company, and cannot be permitted to retain any increase in the price; (4) that even if the original contract had been made by B. on his own account, the actual purchase or second agreement was made by B. when he was, in fact, the agent of the company and its trustee, and as such liable to account for any profit made by him; (5) that B. was the sole promoter of the company, and as such it was incumbent on him, if he wished to sell to it property of his own, to make full and fair disclosure of his interest and position with respect to that property, and to furnish it with a board of directors capable of forming a competent and impartial judgment as to the wisdom of the purchase and the price to be paid, and not laving done so he cannot retain any profit which he has made out of the company; (6) that an injunction should issue to restrain defendants from parting with stock issued to them or voting thereon, until the final hearing of the.,cause.
    On order to show cause.

      Mr. Edward A. Armstrong and Mr. J. S. Lemon (of the Baltimore bar), for the complainant.

      Mr. Charles V. D. Joline and Mr. Thomas E. French, for the defendants.
   Green, V. C.

This bill is filed by the complainant, a corporation organized under the laws of this state, to compel the surrender, for cancellation, of certain shares of its capital stock, alleged to have been improperly issued to and held by the defendants, and to restrain the defendants as stockholders, representing such stock, from holding a stockholders’ meeting and voting upon said shares, and for an account by the defendant Buck.

On filing the bill and affidavits, an order to show cause why an injunction should not issue, in accordance with the prayer of the bill, was granted, with an ad interim order restraining the defendant Buck from transferring any of said shares standing in his name, or voting upon the same at any meeting, except to adjourn the meeting from time to time, and restraining the other defendants from transferring any of the shares in their names until the further order of the court.

On the hearing of the order to show cause, defendants presented their answer and affidavits, and an order was made under the one hundred and twenty-second rule for taking additional affidavits, which were taken on notice.

The question now involved is whether the defendants shall be restrained from transferring the stock standing in their names, or voting on said stock, until the final hearing of the cause.

According to the answer of Charles C. Buck, he was introduced, in June, 1891, by Mrs. Annie E. Diffenderfer, to Abner H. Jones, as an agent of Robert M. White, who claimed to be the owner of lands in Louisiana.

It appears by Jones’ affidavit annexed to the answer, that previous to July 11th, 1891, he had been employed by White to sell the tract of land said to contain twenty-eight thousand acres; that having found a purchaser therefor, White made some changes in the purchase-price; that he (Jones) attached the land for the difference between the price at which White had agreed to sell to him and the price at which he had found a purchaser; that White afterwards put the property in his (Jones’) hands to sell again, with the understanding that no one else should attempt to sell the property, and on this agreement he (Jones) released the attachment. Under these circumstances he made an agreement, July 11th, 1891, with Buck, authorizing Buck to make the purchase direct from White, at such price as he could, and that Buck should pay Jones, for this privilege, the sum of $20,000 — $10,000 in stock at par, $5,000 in cash at six months and $5,000 in eight months.

On the same day an agreement was made between White and Buck, by which White, claiming to be seized and possessed of certain lands in Plaquemines parish, Louisiana, described therein, agreed to sell the same to Buck upon the payment of $5,000 in cash and the issue of $10,000 par value of the stock in a.company to be formed for the development of said lands, and a further payment of $10,000 three months after the date of the transfer by good and sufficient title, White, warranting that he would execute such full and complete transfers of the property as would secure to Buck or his assigns peaceable and quiet possession of the same, with this provision :

“ Said party of the first part [White] further agrees to make such statement of the consideration in the deed of transfer as shall he deemed necessary by the party of the second part for the proper formation of the company,”

which agreement was signed by the parties and attested by A. H. Jones and J. A. Jones.

After making this agreement with White, Buck returned to. Baltimore and then agreed to transfer to Mrs. Annie E. Diffenderfer, who had introduced him to Jones, $5,000 par value of the stock of the company to be formed, and thereupon set about securing parties to join him in the incorporation of a company. He issued a prospectus of the Plaquemines Tropical Eruit Company, to be organized under the laws of Maryland, with a capital stock of $250,000, divided into twenty-five thousand shares, of the par value of $10, stating the objects of the corporation substantially fo be the purchase of a large tract of land in Louisiana and its cultivation and improvement, describing the situation of the property and the fertility and productiveness of the soil. To the said prospectus maps were annexed, on which were delineated the proposed purchase of the Plaquemines Tropical Eruit Co.” It states that the» title to the tract is incontestable; that as late as November, 1890, the supreme court of Louisiana had affirmed that the only title to the land was vested in the grantor in the sale to the company. Having secured the promises of a sufficient number of incorporators, with the requisite capital, Buck returned to New Orleans and requested White to convey the land to him. White refused to do so on the terms named and Buck returned to Baltimore. He then resumed his effort to organize a company, which was consummated under the laws of this state by the incorporation of the Plaquemines Tropical Eruit Company, the complainant herein. The certificate of organization is dated October 30th, 1891; the capital stock is $250,000, divided into twenty-five thousand shares, of the par value of $10; the amount with which the company would commence business is fixed at $1,000. The names and residences of the stockholders and the number of shares held by each are stated to be as follows :

James Lynah, Baltimore, Maryland......................50 shares.
R. E. Diffenderfer, “ “ ......................10 “
E. D. Morrison, “ “ .......................40 “

the certificate being signed by those gentlemen.

A meeting was held to organize the company at 119 Market street, Camden, October 31st, l’891. A waiver of notice of the first meeting, signed by Messrs. Lynah, Diffenderfer and Morrison, was presented and ordered spread upon the minutes. The meet-, ing was organized by the appointment of R. E. Diffenderfer as chairman and James Lynah as secretary pro tempore. Messrs. Lynah and Morrison were appointed a committee to prepare by-laws. It was determined that the number of directors should be seven. The polls were opened and the following persons were elected directors : James Lynah, Charles Collins Buck, R. E. Diffenderfer, James D. Mason, W. P. Clotworthy and F. D. Morrison, each having received a vote of all the stock, namely, one hundred shares.

At this point there is no little confusion as to what was really done. The book of minutes produced is signed by E. D. Morrison, secretary, but Mr. George Reynolds, an attorney in Camden, practicing law in Mr. Voorhees’ office, where the meeting was held on the 31st of October, 1891, testified that he acted as secretary of the first meeting — that is, he took the notes of the proceedings. He identifies three papers shown to him as the original drafts of resolutions and minutes, and says, further, that he was the only person who did any writing at that meeting.

Mr. Morrison says that, before they left Mr. Voorhees’ office, he put the notes of the meeting made by Reynolds in his pocket and took them home, and for some time did not attempt to write them out. He afterwards had the minutes transcribed by a lady, in an old book which was in his office, intending to have them recopied afterwards in another book, and put the originals in his safe, in an envelope, and afterwards gave them to Mr. Clotworthy.

At this meeting on October 31st, 1891, a resolution was passed which will be hereafter set out. According to Mr. Reynolds’ original draft of the proceedings, this resolution to purchase land is entered in the meeting of the stockholders and prior to the adjournment.

In the book of minutes it appears as passed at the directors’ meeting, and not as having been passed at the stockholders’ meeting. It contains a clause that the board of directors are ordered to carry it into effect, both in the original draft as made by Mr. Reynolds, and in the minutes of the directors as it appears in the book. It is just possible that it was passed at both meetings, as testified by Dr. Buck, although there is no minute of it in Mr. Reynolds’ memorandum of the directors’ meeting. The resolution, as it appears by the original draft, identified by Mr. Reynolds, originally read as follows:

“Resolved, That the Co. purchase from Bobert M. White 28,000 A. of land more or less, situate at the Jump on the Mississippi, La. for the sum of §150,000’ and that the same be paid for in 12,000 shares of stock of Co. ten thousand ini cash and balance by three promissory notes of Co. to be secured by a mort. on property of Co., said stock so issued to be marked ‘issued for property purchased’ and be non-assessable and that the Bd. of Directors are hereby ordered to carry this resolution into effect.”

As it now appears, the name of Robert M. White has been erased and the words “ Dr. Buck ” written over it, the original and correction being all in pencil. Mr. Reynolds has no recollection of how this alteration was made, and cannot tell in whose handwriting the words “Dr. Buck” are. He says that on a cursory examination it does not appear to be his, although there may be some similarity in some of the letters.

This resolution, as transcribed in the book of minutes, appears to have been originally copied “ that the company purchase from C. C. Buck ” &c. The words “ from C. C. Buck ” were, however, erased by Mr. Morrison, who made the note at the bottom of the page, “ This is an error.”

A directors’ meeting was held immediately after the stockholders’ meeting, at which there were present Messrs. Lynah, Buck, Diffenderfer and Morrison, and Charles Collins Buck was elected president, James Lynah, treasurer, and E. D. Morrison, secretary.

It does not appear by the minutes, no.r by the testimony, when or how, prior to this, Buck, Mason or Clotworthy became stockholders ; the whole amount of stock, namely, one hundred shares, having been voted at the stockholders’ meeting at which Lynah, Diffenderfer and Morrison, the original shareholders, were present. Ho one was present at the directors’ meeting except the incorporators and Buck and George Reynolds.

At the meeting of the directors Dr. Buck was appointed manager of the company, and the secretary was directed to sign, seal and deliver to Charles C. Buck blank certificates for twelve thousand shares of the capital stock of the company. These certificates were afterwards issued in blank by the secretary •■signing the same and delivering them to Buck all stamped '“issued for property purchased.” These certificates varied in ¡amount from eight thousand shares to ten shares, and were complete with the exception of the name of the stockholder and the ¡signature of the president, Dr. Buck, to whom they were delivered, as was the seal of the company. He took them to New Orleans.

It will be remembered that White had refused to carry out his agreement with Buck, and the latter, on his return to New Orleans, commenced suit to enforce the performance of the contract. To prosecute this he employed Charles Louque, Esq., as attorney, agreeing to pay him $500 for his services, $100 in cash and the balance in forty shares of stock. This suit was commenced in the United States circuit court, and subsequently White agreed to convey on Buck’s consenting to certain terms; these are called, in Dr. Buck’s affidavit, modifications of the agreement. He says that by the new arrangement, White was to convey four thousand acres more of land. The purchase-price was changed from $25,000 to $27,000, and White was to have the right to cut willows for one year. On these terms White agreed to convey on Buck paying the costs of suit. On November 27th, 1891, the agreement was consummated, a settlement of the suit being entered into before a notary public, and the transfer of the title made from White to Charles Louque and by Charles Louque to the company, the conveyances also being dated November 27th, 1891. That from White is for the express consideration of $30,000, therein recited to have been paid as follows : $10,000 cash in United Slates currency, three promissory notes dated November 27th, 1891, one for $5,000 (marked No. 1), payable three months after date; one for $5,000 (marked No. 2), payable eight months after date, and one for $10,000 (marked No. 3), payable twelve months after date, with interest at six per cent, from maturity on the first and second, and on the last from date, with this clause:

“It is hereby distinctly agreed and understood that note No. 2 yields priority of mortgage and takes second rank in favor of note No. 1 for §5,000 and No. 3 for §10,000; it being expressly declared that in order to secure the payment of these notes at maturity the parties agree that the vendor’s lien or privilege is retained on the property sold, and that the same remain specially mortgaged and hypothecated in favor of the vendor and of the future holder of the note.”

This instrument, having been signed by Robert M. White and Charles Louque before a notary, and certified by him under his official seal, was recorded in the parish of Plaquemines as a conveyance and as a mortgage. The conveyance from Louque to the company is dated November 27th, 1891, and is expressed to be in consideration of the sum of $150,000, to be paid as follows : $10,000 cash, $20,000 by the purchaser assuming to pay, to the discharge of the vendor, three promissory notes, dated November 27th, 1891, drawn by Charles Louque to his own order and by him endorsed, being the three notes referred to in the former conveyance;

“and for the balance of the purchase-price, §120,000, the purchaser has furnished the like sum of shares-of stock, at par, of the Plaquemines Tropical Fruit Co., and the present vendor acknowledges to have presently received from the present purchaser 12,000 shares of the capital stock of said company, for which receipt is hereby granted.”

By the settlement of the suit, it appears that White surrendered to Buck the note No. 2, for $5,000 at eight months, and it was afterwards turned over by Buck to Jones.

By a declaration made by Robert M. White, attested before a notary public, May 23d, 1893, and annexed to the bill, it appears that the actual price paid by Buck for the property was $27,000, paid as follows: seven hundred shares of stock of the par value of $10, taken as $7,000; $5,000 in cash on the day of sale (which was paid); $5,000 three months after date, without interest (which is note No. 1), and $10,000 twelve months after date, with interest (which is note No. 3). He says that all the cash money that has been paid for this property was the $5,000 cash payment on the day of sale. He says the title reads differently from the above facts, and was thus made to suit Mr. Buck, and that the $5,000 and $10,000 notes of deferred payment were still unpaid at the date of his declaration.

On the same day, November 27th, 1891, the agreement between Buck and Jones was modified so that Jones agreed to accept five hundred shares of the stock of the Plaquemines Tropical Eruit Company, par value $10 each, in lieu of the note payable in eight months from the date of signing the deed, for $5,000, and Buck agreed to sell this said five hundred shares of stock at par within one year from the date of signing the deed.

Certificate No. 6, for five hundred shares, and certificates Nos, 10 and 11, for one hundred shares each, were filled in by Buck,, with the name of R. M. White. Certificate No. 1, for eight thousand shares, was filled in with the name of Louque, and by him the same day endorsed in blank by way of assignment, and handed back to Buck, who retained possession of it until November 22d, 1892, when he caused the same to be reissued in smaller certificates, of which he took seven thousand seven hundred shares in his own name, and three hundred shares in the name of F. D. Morrison, who was his brother-in-law and a director and secretary. Certificate No. 2 was filled in as of November 3d, 1891, in the name of Morrison, for forty shares. Certificates Nos. 3, 4 and 5, for five hundred shares each, were filled in with the name of A. H. Jones, and were by Jones assigned back to Buck, and in January and February, 1892, canceled and reissued in Buck’s own name. Certificate No. 7 was filled in with the name of Annie E. Diffenderfer. Certificates Nos. 8, 9 and 12 were filled in with the name of Charles Louque and by him assigned and delivered to Buck. Certificate No, 13 for one hundred shares, No. 14 for fifty shares, No. 15 for one hundred shares, No. 16 for five hundred shares, No. 17 for fifty shares, Nos. 18, 19, 20, 21 and 22 each for ten shares, No. 25 for thirty-five shares, were each filled in by Buck with his own name, and certificate No. 25 for twenty-five shares reissued to Morrison, No. 26 for fifteen shares to E. A. Clark. The twelve thousand shares stood on the books of the company, at the time of the filing of the bill, as follows:

“In the name of Charles C. Buck....................................9,615
“ “ Charles Louque.................................... 300
“ “ F. D. Morrison..................................... 435
“ “ R. M. White........................................ 700
“ , Annie E. Diffenderfer............................. 500 '
, “ ' “ W. P. Clotworthy.................................. 300
“ “ Sarah E. Cowles.................................... 20
“ “ E. A. Clark.......................................... 15
“ “ A. H. Jones......................................... 100
“ “ H.W. Horner....................................... 15”

The $5,000 note (No. 2) of Louque to White, given by Buck to Jones, was afterwards taken up by the company, by the payment of $2,500 in cash and $2,500 in stock.

A number of persons afterwards subscribed to the stock of the company and paid for the same,, and money was borrowed on the credit of the company and the endorsement of some of the directors, some $45,000 being thus put into the treasury by persons other than Buck, the most of which was entrusted to Buck, as manager, for disbursement.

Suit was afterwards brought against the company by the State of Louisiana to recover possession of the property, and judgment in favor of the state was rendered, from which an appeal was taken to the appellate court, where it still remains unsettled.

The affairs of the company proceeded under the management of Buck until October, 1892, when a meeting of the other stockholders was held, of which Buck claims no proper notice was given, at which another board of directors was elected and Buck retired from the presidency.

He, however, continued as manager until, some further change being contemplated, Buck and his friends, claiming that the election of October, 1892, was irregular and void, issued a call for another meeting of the stockholders, to elect directors, and this bill is filed partly for the purpose of preventing Buck and the other defendants from voting at such meeting upon the stock which they hold, which is a part of the original twelve thousand shares issued as aforesaid.

I take the Jaw, applicable to this case, to be that no rights, legal or equitable, arise in favor of a corporation in respect of transactions, whether complete or inchoate, merely because entered into in contemplation of the creation of such corporation,” and that it was open to Dr. Buck to buy the property on his own account, for any price he could, with the intention or in the hope of selling it at a higher price to a company to be formed, and, dealing independently, to sell it for such higher price to such company so long as he obtained his higher price fairly. That would be clearly unobjectionable; But if he, at the time of his original agreement with White, entered into it on behalf of the future company, under such circumstances that the company, when formed, could say that the purchase made by him was made for the company, or if, at the time the actual purchase was made from White, Dr. Buck was a trustee, officer or agent of the company, he cannot be permitted to make any profit from the sale to the company. Buck, as the promoter of the corporation, stood in a fiduciary relation to the company as soon as it was organized. As such promoter, it was open to him to sell property which he owned, to the company, on making full and fair disclosure of his interest and position with respect to that property. Not only was such disclosure necessary, but it was incumbent on him, as sole promoter of the company, formed to purchase this specific property, controlling and moulding its organization, to furnish it with an executive or board of directors capable of forming competent and impartial judgment as to the wisdom of the purchase and the price to be paid; and if he, as such promoter, procured the company to be formed and to be managed in such a way as to transfer from the moneys of the company to himself a certain sum without informing the company of that fact, or, what is the same thing, if he took without such disclosure, to his own use, stock of the company issued for the purchase of property, ostensibly to or for another, he cannot retain the same.

Lord-Chancellor Cairns, in Erlanger v. New Sombrero Phosphate Co., 3 App. Cas. 1218 (at p. 1236), says: “ In the whole of this proceeding up to this time, the syndicate, or the house of Erlanger, as representing the syndicate, were the promoters of the company, and it is now necessary that I should state to your lordships in what position I understand the promoters to be placed with reference to the company which they proposed to form. They stand, in my opinion, undoubtedly in a fiduciary position. They have in their hands the creation and moulding of the company; they have the power of defining how and when, and in what shape and under what supervision it shall start into existence and begin to act as a trading corporation. If they are doing all this in order that the company may, as soon as it starts into life, become, through its mauaging directors, the purchaser of the property of themselves, the promoters, it is, in my opinion, incumbent upon the promoters to take care that, in forming the company, they provide it with an executive —that is to say, a board of directors — who shall both be aware that the property which they are asked to buy is the property of the promoters, and who shall be competent and impartial judges as to whether the purchase ought or ought not to be made. I do not say that the owner of property might not promote and form a joint stock company and then sell his property to it, but I do say that if he does he is bound to take care that he sells it to the company through the medium of a board of directors, who. can and do exercise an independent and intelligent judgment on the transaction, and who are not left under the belief that the property belongs, not to the promoters, but to some other persons.”

Lord-Justice Lindley, in Lydney & W. Iron Ore Co. v. Bird, 33 Ch. Div. 85 (at p. 93), says: “In the present case, James Bird procured the company to be formed and to be managed in such a way as to transfer from the moneys of the company to himself the sum of £10,800 without informing the company of that fact. The company were told that they had to pay £100,000 for the property, but they did not know that of that sum, £10,800 was to go into the pocket of the man who had got the company up and who has, in fact, increased the purchase-money in order to get that £10,800. Under these circumstances, he cannot retain the sum so got. Although not an agent of the company nor a trustee for it before its formation, the old familiar principles of the law of agency and of trusteeship have been extended, and very properly extended, to meet such cases; and, using the word 'promoter’ to describe a person acting as James Bird did, it is perfectly well settled that a promoter of a company is accountable to it for all moneys secretly obtained by him from it, just as if the relationship of principal and agent, or of trustee and cestui que trust, had really existed between them and the company when the money was so obtained. Nor, in such a case, is it necessary for the company to rescind the whole transaction of which the payment by the company of the money in question is found to be part.”

Lord-Justice James, in New Sombrero Phosphate Co. v. Erlanger, 5 Ch. Div. 73 (at p. 118), says: " Now, I adhere entirely to what I said in the Govers Case — that is to say, that it is quite open to a man to buy any property, at any price he likes, with the view or in hope of selling that property to any company that he can get to buy it, if that is the mode in which he intends to dispose of it. A man, may buy at any price, and may sell at any price that he can fairly get for it. But that has nothing whatever, as it appears to me, to do with this case, which is whether a man who has bought at a low price has obtained a higher price fairly and properly, in accordance with the view which the court of equity takes of such transactions. Now, in this case it appears to me that the decree follows almost necessarily from two or three propositions. A promoter is, according to my view of the case, in a fiduciary relation to the company which he promotes or causes to come into existence. If that promoter has a property which he desires to sell to the company, it is quite open to him to do so, but upon him, as upon any other person in a fiduciary position, it is incumbent to make a full and fair disclosure of his interest and position with respect to that property.”

Sir George Jessel, M. R., in In re British Seamless Paper Box Co., 17 Ch. Div. 467 (at p. 471), says : " I quite agree to this, that if promoters make an arrangement to get a profit for themselves out of what is apparently paid to the vendors, it is immaterial whether the contract with the vendors is approved of by the directors of the company, who are the promoters, just before the allotment or just after; in both cases it is' intended to cheat the future shareholders; and of course it makes no difference whatever that the persons who, at the time the allotment was made, were in fact the promoters or their nominees, knew of the fraud. You can defraud future allottees as well as present allottees.”

See, also, Green Br. U. V. (2d ed.) 596. (The clause in the latter part of the proposition “or with the intention that the corporation shall subsequently acquire the subject of the transaction,” with reference to which a doubt is expressed on page 598, is, I think, rejected by the cases decided since the publication, if not by those mentioned by the author.) Govers’ Case, L. R. 20 Eq. 114; S. C. on appeal, 1 Ch. 182; Bagnall v. Carlton, 6 Ch. Div. 371; Emma Silver Mining Co. v. Grant, 11 Ch. Div. 918; In re Cape Breton Co., 26 Ch. Div. 221; S. C. on appeal, 29 Ch. Div. 795; Ladywell Mining Co. v. Brooks, 34 Ch. Div. 398; S. C. on appeal, 35 Ch. Div. 400; McElhenney’s Appeal, 61 Pa. St. 188; Simons v. Vulcan Oil Co., 61 Pa. St. 202; Densmore Oil Co. v. Densmore, 64 Pa. St. 43; Hoffman S. C. Co. v. Cumberland C. & I. Co., 16 Md. 456; Beck v. Kantorowicz, 3 Kay & J. 230; Atwool v. Merryweather, 37 L. J. Ch. 35; Hichens v. Congreve, 1 Russ. & M. 150; Phosphate Sewage Co. v. Hartmont, 5 Ch. Div. 395; Pittsburg Mining Co. v. Spooner, 24 Am. & Eng. Corp. Cas. 1 and note; 16 Am. L. Rev. 671; 1 Morawetz Corp. § 546; Thomp. Corp. Off. 220; Cook Stock. (2d ed.) § 651 and note.

In July, 1891, when Dr. Buck made his agreement with Mr. White, no company was incorporated to carry out the agreement, and he cannot properly be said to have occupied, at that time, the position of a trustee or agent of the company. But is the company, from the circumstances attending that agreement and the subsequent acts of Dr. Buck, now in a position to say, “ While we were not incorporated at the time, the contract you made was made for us ? ” This is the test mentioned by Lord-Justice Cotton, in Ladywell Mining Co. v. Brooks, supra. There can be no question raised as to Buck’s having been the promoter of the company. He issued the prospectus which is subscribed by himself, and he secured the co-operation of the persons who became the incorporators and the first shareholders, and was present and took part in the organization, although he does not appear as one of the incorporators. He dealt with the stock, contemplated to be issued, as one who assumed to have authority to dispose of it. Not only does he agree to pay Jones in shares of the stock of the company to be formed, but in his agreement with White he stipulates that $10,000 of the purchase-money is to be paid in the stock, at par, of the company to be formed for the development of said land. The fact that part of the consideration is to be paid in the stock of a company, cannot be considered as conclusive evidence that the purchase is made for such corporation, for if the original purchaser intended to sell to a company to be formed, as he might lawfully do, and take stock of said company as part payment, he could, of course, agree with his vendor to pay him partly in such stock. Govers’ Case, supra, is an authority for this. It is true that some of the positions taken in that case were at one time seriously criticised, but, as explained by Lord-Justice James, in the Erlanger Case, 5 Ch. Div. (at p. 118), it must, I think, be taken as, recognized and adopted by the later decisions. While it is true that it is not conclusive on the point, it has nevertheless been, and in my judgment should be, taken as a very important consideration in determining the question as to whether the purchase was made for the company. Lord-Justice Cotton, in the Ladywell Mining Co. Case, supra, recognized this, and states, as one of the reasons why the actor in that case should not be held to accountability, that “ no part of that purchase-money [of the mine] was to be provided for out of the funds of the company, or to consist of shares of the company.” And Mr. Justice Sterling, in the same case, 34 Ch. Div. (at p. 407), says: “ It is not immaterial to mention that that agreement [for the purchase of the mine] was carried out and the purchase-money was paid by them out of their own pockets.” Vice-Chancellor Bacon, in Craig v. Phillips, 3 Ch. Div. 722 (at p. 735), lays stress on the fact that the defendant, before any prospectus had been issued, on his own responsibility and with his own moneys, purchased the property for £16,000. So, also, does Vice-Chancellor Malins, in the Erlanger Case, 5 Ch. Div. (at p. 94.)

Dr. Buck, in his negotiations, both with the agent and with White, and afterwards with Mrs. Diffenderfer, seems to have avoided any personal liability except so far as it was necessary for the incorporation of the company and the payment of the small amount of cash to White. If he had relied on outside parties to organize the corporation, and then had dealt with it as such independent company, his disposal of the stock might have been of little significance. But he became and was the life and spirit of.the corporation. Every step taken in its formation was either by him or by his procurement. The prospectus issued by him over his own signature is of a company to be organized, as described in his agreement with White, for the development of said lands. The two maps forming a part of said prospectus each contain a tract delineated thereon, the first with the explanatory note, as follows: “ Inside black lines show proposed purchase of the Plaquemines Tropical Fruit Co.,” and the other, “The proposed purchase of the Plaquemines Tropical" Fruit Co.” It is true that this prospectus is for a corporation of that name to be organized under the laws of the State of Maryland, but it abundantly appears by the affidavit of Dr. Buck that the complainant corporation is the same company referred to, its organization under the laws of this state instead of under the laws of Maryland having been subsequently determined on.

This prospectus, after a description of the property, a statement of its fertility and the prospect of the financial success of the company, referring to the title to the land, says:

“It is incontestable; it was part of the great Louisiana purchase from France and was deeded to Louisiana by the United States. Sold and patented by Louisiana to O. O. Packard in 1868, and by his assignees in bankruptcy deeded to the present owner in 1879. * * * And even as late as November, 1890, the supreme court of this state, in settling a dispute between the owner of one of the small tracts specified as excepted in the deed and a squatter, affirmed that the only title to the land was vested in the assignee of Patent 526, State of La., who is the grantor in. the sale to this company,”

The chain of title, as stated in the deed from White to Louque, is as follows :

“Being the same lands which were acquired by the present vendor, Bobert M. White, by purchase from E. E. Morton, assignee in bankruptcy of C. C. Packard, on the fourth day of April, 1879. And the said C. C. Packard acquired the same by letters-patent from the said State of Louisiana by Patent 526, dated the thiz’tieth day of September, 1869.”

The statement of the prospectus, in view of these facts, can only mean that Robert M. White was to be the grantor to the company.

It is true that Dr. Buck says he claimed, at the meeting to organize the company, that he held the option of purchase in his own right, and that he proposed to be the vendor to the company. He says that he. made the offer of sale in writing, and that he called the attention of those present to the fact that he, and not White, was the vendor, when the resolution was first read at the meeting. This proposal in writing is not produced, although each side called on the other for it, both denying its possession.

The persons at that meeting besides Dr. Buck were Mr. Lynah, Mr. Diffenderfer, Mr. Morrison and Mr. Reynolds. Mr. Lynah says: I don't think there was anything said about Dr. Buck having an option; I understood that the property belonged to Robert M. White and that Dr. Buck was authorized to purchase it from Robert M. White for the company, the consideration being $10,000 in cash money and the balance afterwards, $30,000 in money and $120,000 in stock, making $150,000 for the propertythat he understood that from the statements made by Dr. Buck; that an issue of $120,000 in stock was ordered, that was to be given to Dr. Buck in blank for the purchase of the property, in addition to the cash payment of $10,000 which was to be made; that the stock was to be given to Mr. White for the property by Dr. Buck, and that he understood that Dr. Buck was to take the stock to New Orleans and tender it in purchase of that property.

Mr. Diffenderfer does say, at the end of the meeting (not when the resolution was originally read), when the minutes were read, Dr. Buck called attention to the fact that Robert M. White’s name was mentioned as the seller of the property instead of himself, saying that it was a mistake, and that he was selling the land, and not White; but neither Mr. Morrison nor Mr. Lynah make any mention of any such occurrence.

The rough minutes of this meeting were kept by Mr. George Reynolds, a member of the bar, and are produced. Mr. Reynolds had no knowledge of this transaction except such as he had gained from what transpired at the meeting. The original resolution, drawn in Mr. Reynolds’ own handwriting, reads: “ Resolved that the company purchase from Robert M. White 28,000 acres of land more or less ” &c.

This could only have been so written by Mr. Reynolds from instructions which he received or from the impressions which he derived at that meeting. It is true that this has been altered by drawing a pencil mark through the name of Robert M. White and writing “Dr. Buck” over it. Mr. Reynolds is under the impression that Dr. Buck’s name is not in his handwriting. Mr. Diffenderfer and Dr. Buck are the only persons who seem to have any recollection of the alteration having been made at that time, and the conclusion seems irresistible that Dr. Buck’s remark was made so that Mr. Diffenderfer alone heard it. All these facts, in my judgment, give the company the right to say that the purchase, originally made, was made for it.

But if Dr. Buck is not to be considered as having originally purchased this property for the company, does he stand in any better position ?

At the first meeting for organization it was decided that the board of directors should consist of seven members, and he was elected one of them. At the meeting of the directors, immediately subsequent, there were present Dr. Buck, Messrs. Lynah, Diffenderfer and Morrison, Dr. Buck being necessary to the quorum of seven. In the regular book of minutes it appears that the resolution to purchase the property was passed at the meeting of the directors. In Mr. Reynolds’ rough notes of the proceedings, however, it appears that this resolution was the last business transacted at the stockholders’ meeting following the election of directors. The last clause of the resolution is, “ and that the board of directors are hereby ordered to carry this resolution into effect,” which would indicate that it was a stockholders’ resolution. Dr. Buck, in his affidavit, states that this resolution was passed at both meetings. If we assume that this resolution was only passed at the directors’ meeting, as shown by the book of minutes, and that Dr. Buck was the owner of the property, there can be no question but that he stood in a fiduciary relation to the company at the time, and was bound, under all principles of equity, to make full disclosure as to his relations to the property and his interests therein; and, being necessary to a quorum, the purchase of the property from him by the board of directors, so constituted, would give the company, under the circumstances, the right to rescind the contract.

If the resolution was originally passed at the stockholders’ meeting, he, as a promoter of the company, at that time stood in a fiduciary relation to it and was bound to disclose his interests in and relation to the property. I think the weight of evidence is as stated — that he made no such disclosure at the meeting of the stockholders, and only, if at all, at the end of the directors’ meeting, and then only in the hearing of Mr. Diffenderfer.

The resolution of the stockholders can only be considered as advisory and as giving their consent. The function of this meeting of incorporating shareholders was for organization in the first place, the adoption of by-laws and the election of directors afterwards. It may sometimes become necessary in the transaction of some kind of business of a corporation, to have the consent of all the stockholders, or of a certain proportion of them, and resolutions giving such consent or advice have the effect of empowering the directors to act. But the board of directors is the legal executive, recognized as such not only in practice and on principle, but by the statute. The sixteenth section of the Corporation act provides that the business of every such company shall be managed and conducted by the directors thereof. I regard the passage of this resolution by the stockholders as simply advisory, and that the corporate act which, in law, made the company a party to the purchase was the resolution of the directors, of which Dr. Buck was a member and present and necessary to the quorum at the time it was passed.

But whether this is so or not, when Dr. Buck reached New Orleans, having in his possession the stock of the company to make a payment to Mr. White, the latter gentleman refused to carry out the agreement, and Dr. Buck thereupon instituted, in the United States circuit court, an action for the specific performance thereof. While this suit was pending, an understanding was arrived at by the parties, by which Mr. White agreed to convey the lands under certain conditions. Dr. Buck calls the changes modifications of the original agreement, and probably that is a proper characterization. He says in his affidavit that by this arrangement Mr. White was to convey four thousand acres more of land than contemplated originally. White was to receive $27,000 in place of $25,000, and he was to have the right to cut willows on the tract and to clear all. the land for agricultural purposes for one year. He was to pay eleven-twelfths of its tax for the current year, and Buck was to pay the costs of the suit. While, as between White and Buck, this might properly be called a modification of the original agreement, it is nevertheless, so far as the company was concerned, a new contract. There is no evidence to show what value is to be attached to the right'to cut willows upon this tract of thirty-two thousand acres for one year, but it does appear that such wood is useful there for jetty work, nor what the right to clear all the land was worth, but these rights were in fact a burden upon the land and were incorporated in the deed.

The company, up to the time of that subsequent contract, had not become a party to any such agreement. It had not agreed to purchase that amount of land or to encumber its purchase with such conditions or privileges. It only did so become a party thereto on the theory that Dr. Buck entered into the contract as agent of the company. This, of course, would give the company a right to adopt it or riot, but it puts Dr. Buck, at this time, in making this contract, in the position of acting, not on his own behalf, but as agent and trustee of the company; and if so, under all the authorities, he cannot be permitted to make any profit out of it.

Again, in organizing the company Dr. Buck selected as incorporators and first officers his brother-in-law, Mr. Morrison, to whom he promised a bonus of one hundred shares; Mr. Clotworthy, to whom he promised a bonus of five hundred shares; Mr. Mason, to whom he promised a bonus of one hundred and fifty shares ; Mr. Diffenderfer, the husband of the lady to whom Dr. Buck promised five hundred shares because she had introduced him to Mr. Jones; Mr. Lynah, who says he became interested from the fact that he had sold Dr. Buck some houses, for which he took $1,000 in stock of the company and the balance in cash and a note — he appears as a subscriber for the one hundred shares of stock in their original certificate of incorporation — and says that he got his stock in January, 1892, from Dr. Buck. Of these gentlemen elected directors, only Mr. Lynah, Mr. Morrison and Mr. Diffenderfer were present at the meeting either of the incorporators or of the directors at which this purchase was resolved. A moment’s consideration shows that all these parties were pecuniarily interested in Dr. Buck’s carrying out his scheme, and that "they could not be considered as competent and impartial judges of the wisdom of making the purchase, nor of the value of the land to be conveyed nor of the price to be paid therefor. It would be difficult, in my judgment, to imagine a case more clearly within the lines of the case of New Sombrero Phosphate Co. v. Erlanger, 3 App. Cas. 1218.

It is unnecessary to consider the extent of the relief to which the complainant corporation is entitled. But there can be no doubt as to the duty of the court to retain, until final hearing, the injunction to prevent the defendants from disposing of their stock and voting upon it at the meeting of the board of directors, and I will advise that the rule to show cause be made absolute and that an injunction issue to the end suggested.


text:
    Christian Lutz v. Louisa Lutz.
    Where condonation is interposed as a defence to an action for divorce on the ground of adultery, petitioner may file a supplemental petition charging-defendant -with acts of adultery subsequent to the alleged condonation, andJ subsequent to the commencement of the action.
    On application for leave to file supplemental petition.

      Mr. Abner Kalisch, for the petitioner.

      Mr. Rutherford Coleman, for the defendant.
   Green, V. C.

Application is made by the solicitor of petitioner for leave to file a supplemental petition, for the purpose of charging adultery committed by the defendant subsequent to the alleged condonation, by the petitioner, of the previously charged act of adultery, and subsequent to the commencement of the suit.

It is undoubtedly the rule, in general, that leave will not be granted to file a supplemental bill or petition setting up subsequent acts of adultery (Milner v. Milner, 2 Edw. Ch. 114), and this proceeds on the ground that the acts charged, each of them, constitute a cause of action, and that there is no dependence of one upon the other. This rule, however, does not apply in this case, for there is a direct connection between the original cause of action and that contemplated by this application. Condonation is conditional forgiveness of a matrimonial offence, which may be destroyed by the commission of another matrimonial offence, even of a lesser degree; the condition is that the one forgiven will treat the injured one with conjugal affection and kindness, and any violation of this condition will revive the cause of action which was before forgiven. When condonation is interposed as a defence, it is an answer to this, that the condition inherent in the condonation has been broken by the commission of a subsequent matrimonial offence, and so there is a .direct connection between the two alleged offences.

1 If not pleaded it might be justly objected to on the ground 'of surprise.

If it had happened before the commencement of the suit, it might be incorporated by amendment, but if after, can be introduced by a supplemental bill or petition.

The motion should be granted.