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"would yield large profits” and that “it was a good paying business.” The court said:

"The representations were promissory and matter of opinion, and had respect to the developments of the future. There was nothing in them on which to found an action ex delicto."

I think the same may be said of the representations under consideration. The dividends which the corporation would be able to pay depended upon the future prosperity of the company, and plaintiff must have recognized that fact. Not only this, but the words “flourishing financial condition” convey no definite information, since the meaning depends largely upon the history and policy of the business to which they apply, as well as to the judgment or opinion of the person using them. Indeed, there is nothing here to indicate that the statement was not made by the defendant in the utmost good faith. The last crop of coffee had been the largest one that the Cafetal plantation had ever produced, and the plantation itself was being constantly improved. The plaintiff knew, at this time, that the preferred stock was to be issued for the purpose of acquiring additional capital to improve the property, as well as to retire the outstanding bonds. The defendant's statements, even though they may have misled and deceived the plaintiff, did not justify the maintenance of this action. Van Slochem v. Villard, 207 N. Y. 587, 101 N. E. 467; People v. Majorana, 155 App. Div. 432, 140 N. Y. Supp. 8.

[2] But, even if the representations of the defendant were sufficient to sustain an action for deceit, the judgment, nevertheless, must be reversed. At the close of the trial, counsel for the defendant requested the court to charge that the measure of damages, in the event that the jury rendered a verdict in favor of the plaintiff, was the difference between the value of the stock which the plaintiff received, or was entitled to receive, and what it would have been worth, had the representations been true. Under the facts presented, the request embodied a correct statement of the law, and the refusal to so charge was error. The defendant personally did not contract with the plaintiff. The agreement for the exchange of bonds for stock was between her and the corporation. The liability of the defendant, if any, he not being a party to the contract, was solely for damages suffered by reason of his deception. The question has been considered in numerous authorities, and one where the facts were quite similar to these here involved is Nash v. Minnesota Title Co., 163 Mass. 574, 40 N. E. 1039, 28 L. R. A. 753, 47 Am. St. Rep. 489, cited and approved in Heckscher v. Edenborn, 203 N. Y. 210, 96 N..E. 441. In the Nash Case the court said:

“The next exception relates to the rule of damages. The presiding justice ruled that, on a rescission of the contract for fraud, the plaintiffs could recover back from this defendant the whole consideration paid for the bonds. That is the rule where the suit is between the original contracting parties.

But the defendant in this case is a stranger to the consideration, and his relation to the contracting parties is not such as to make this reason applicable. The rule of damages in an action against a tort-feasor is that the plaintiff shall recover an amount commensurate with the wrong done him. In a suit for a fraud in a sale of personal property the measure of damages in common cases is the difference between the actual value of the goods and their value as it would have been if the representation had been true."

The plaintiff, it must be borne in mind, did not elect to treat the contract void for deceit, for in that case her action would have been against the corporation, with which she contracted, to recover from it either her bonds or their value. Having brought the action against the defendant, a third party, who did not receive the bonds, it was for damage and nothing else. The court should have instructed the jury as requested.

The judgment and order appealed from are therefore reversed, and a new trial ordered, with costs to appellant to abide event. All concur.

SANDERS v. BARNABY. (No. 6834.)

(Supreme Court, Appellate Division, First Department. February 5, 1915.)

1. CORPORATIONS (8 79*) SUBSCRIPTION TO STOCK CORPORATION TO BE

FORMED-VALIDITY.

Where plaintiff and another contracted with defendant to organize a corporation, the three incorporators to take various proportions of the stock, the defendant alone to furnish money by subscribing and paying for $19,000 worth of stock or such portion thereof as might be necessary to establish the corporation as a going concern, thore was a valid contract between the parties, and the corporation when formed, or the plaintiff as its assignee, may recover the amount of the defendant's subscription.

[Ed. Note.--For other cases, see Corporations, Cent. Dig. $8 186-193;

Dec. Dig. $ 79.*] 2. CORPORATIONS (876*)-STOCK SUBSCRIPTION-INDEFINITENESS.

A contract to subscribe and pay for $19,000 worth of stock in a corporation to be formed, “or such portion thereof as may be necessary to provide the said corporation with working funds and capital as a going concern,” is not too indefinite to be capable of enforcement.

[Ed. Note.- For other cases, see Corporations, Cent. Dig. $S 197-209, 213-218; Dec. Dig. § 76.*]

Appeal from Special Term, New York County.

Action by Thomas Sanders, Jr., against Kenneth T. Barnaby. From an order vacating an attachment, plaintiff appeals. Reversed.

Argued before INGRAHAM, P. J., and McLAUGHLIN, SCOTT, DOWLING, and HOTCHKISS, JJ.

Dix W. Noel, of New York City, for appellant.
George Edwin Joseph, of New York City, for respondent.

SCOTT, J. The principal ground upon which the attachment herein has been attacked is that the complaint fails to state a cause of action.

The action is upon an agreement signed by defendant in which he agreed to "subscribe and pay for” stock in the plaintiff corporation. The agreement was made between Thomas Sanders, Jr., and William Wilson, Jr., as parties of the first part, and defendant, as party of the second part. It recited that the parties of the first part had acquired the sole selling and distributing rights, in a number of specified states, for a certain patented device; that they had agreed to give such time as * F'or other cases see same topic & $ NUMBER in Dec. & Am. Digs. 1907 to date, & Rep'r Iudexes

may be necessary to the business of selling and distributing said patented device; that defendant had agreed to furnish certain funds or sums of money necessary for carrying on and conducting the aforesaid business in the aforesaid territory; that it was deemed wise and expedient to form a corporation for the purpose of conducting the said business.

Thereupon it was agreed that the parties should organize a corporation under the laws of the state of New York, with a capital stock of $25,000, of which $20,000 should be 7 per cent. cumulative preferred stock, to be divided into two classes, to wit, class A and class B; that class A should consist of $1.000 par value and should have the usual voting power, and class B should consist of $19,000 par value, having no voting power, but with the privilege of retirement at any time within five years at $125 per share; that the common stock should consist of $5,000 par value, with the usual voting power. It was then agreed that the parties to the agreement should be the incorporators of the corporation and its officers and members of the board of directors for the first year. Sanders and Wilson agreed to assign to the corporation their contract for the sale and distribution of the patented device aforesaid, and to accept therefor, in full payment and satisfaction, the common stock of the par value of $5,000 and the class A preferred stock of the par value of $1,000.

Defendant's undertaking read as follows:

“It is understood and agreed and it is hereby agreed that the said Kenneth T. Barnaby will subscribe and pay for the class B of the preferred stock of the said corporation or such portion thereof as may be necessary to provide the said corporation with working funds and capital as a going concern."

In consideration of defendant's stock subscription, Sanders and Wilson agreed to give him $2,000 of the common stock and the $1,000 of class A preferred stock. It was further agreed that none of the stock should be sold or offered for sale without the consent of all of the parties to the agreement, unless said stock shall first have been offered to and refused by the other parties.

The complaint sets forth the agreement, alleges the incorporation of a corporation under the name of Sanders, Wilson, Barnaby, Incorporated (hereafter called the corporation), as provided for therein, the assignment by Wilson and Sanders to the corporation of their contract, and the issue to them of the stipulated amount of common and preferred stock, and their tender to defendant of the common and preferred stock they had agreed to deliver to him, also their assignment to thie corporation of their interest in the preliminary agreement with defendant. It is then alleged that, although Sarders and Wilson had fully performed the aforesaid contract on their part, defendant had failed to subscribe and pay for $19,000 par value of the preferred stock of said corporation, or any portion thereof, except that defendant had provided working funds or capital to the extent of $2,700, and had given certain collateral security to the corporation fund when Sanders and Wilson had received a contract for the sale of the patented device. It is further alleged that the whole and even more than the sum of $19,000 was necessary for the corporation for working funds and for capital.

Plaintiff sues as assignee of the corporation for the sum of $16,300 balance of the sum which defendant agreed to subscribe.

Defendant contends t'iat the contract above recited is unenforceable because, in the words of his brief:

"It is not an agreement of subscription but an agreement to subscribe to the stock of a corporation to be formed, thereby contemplating the execution of a subsequent subscription agreement in conformity with the statute.”

It is quite true that a distinction, such as the defendant relies upon, has frequently been pointed out, but that distinction does not rest wholly upon the use of the present, as distinguished from the future, tense. Even if a person, in anticipation of the organization of a corporation, agrees in the present tense to subscribe for stock therein, there is still something left for him to do after organization to complete a subscription according to statute. The distinguishing feature of the case at bar is that the parties to the contract undertook themselves to form a corporation, to which each agreed to contribute. The importance of this feature of the case has frequently been pointed out. Thus in Yonkers Gazette Co. v. Taylor, 30 App. Div. 334, 51 N. Y. Supp. 969, Mr. Justice Hatch said:

"The law is fairly well settled that where parties propose to form a corporation and become shareholders therein, and such parties intend to become such shareholders without further act upon their part, upon the incorporation of the company, and the agreement remains open and is unrevoked, and the corporation is formed in pursuance of it, and thereafter acts upon it, by accepting the same, such agreement is valid and binding as a subscription to the capital stock of such corporation.

There are agreements of a somewhat similar character which do not admit of enforcement and are not binding as a common-law agreement. It is quite easy to confuse the two classes, although there is a clear distinction between them. In the first class it is to be noticed that the agreement is to form a corporation and subscribe to the stock. The latter class are mutual agreements to subscribe for stock in a corporation thereafter to be formed. In the first the agreeinent is unconditional and absolute to form a corporation and take the stock, and, when acted upon by the corporation, is binding, as that is all that is needful to make the contract of force.”

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Later, in Avon Springs Sanitarium Co. v. Weed, 119 App. Div. 560, 104 N. Y. Supp. 58, Presiding Justice McLennan, whose opinion was adopted by the Court of Appeals (189 N. Y. 557, 82 N. E. 1123), says:

"It is well settled that if two or more persons mutually agree to organize a corporation, and each subscribes for stock therein to be paid for after its incorporation, such agreement is valid and may be enforced by any of the parties thereto or by the corporation after its formation. In such case the corporation represents and acts for the parties to the agreement, as their agent. But, we think, it has never been held by the courts of this state that a subscription to the stock of a corporation could be enforced where there was no agreement to incorporate and where there were no parties between whom mutuality of agreement existed.

It is to be concluded that, in order to make a present subscription for stock in a corporation thereafter to be formed valid, there must be an agreement between two or more parties to form such a corporation, and that only after its formation by such parties, or by some one authorized to act for them in that regard, can their subscriptions to the capital stock be enforced by such corporation."

[1] The opinion last quoted cited, and in part quoted, the rule as stated in Morawetz on Corporations, $ 47. See, also, White on Corporations, note to section 50 at page 289. In Cook on Corporations (7th Ed.) vol. 1, p. 76, it is laid down as an axiom that:

“The distinction between a present subscription and an agreement to subscribe to the stock of a corporation thereafter to be created is unsound in principle and disappears as mere dicta upon a thorough sifting of the cases."

The rule for which the author contends is that which we deem to be applicable to this case that, where the agreement is to form a corporation and to take stock in it when formed, such an agreement becomes binding when the corporation has been formed in conformity to the agreement, and the amount agreed to be subscribed may be recovered by the corporation. The whole agreement, in such a case, is considered as binding and enforceable when one party to it has done all that he agreed to do.

[2] It is said, however, that the agreement is too indefinite for enforcement because what defendant agreed to subscribe was not a certain, definite sum, but $19,000 or such portion thereof as may be necessary to provide the said corporation with working funds and capital as a going concern. I see no fatal indefiniteness here. How much will be necessary for the purpose indicated is a matter of fact which should not be difficult of ascertainment. Prima facie it is the amount the parties fixed on in their agreement in fixing the amount of capital stock to be issued. Defendant cannot be called upon to pay more than that; he may be able to show that he should not be called upon to pay so much.

In my opinion the contract sued upon is a valid and enforceable one, and the complaint states a sufficient cause of action.

The order appealed from should be reversed, with $10 costs and disbursements, and the motion denied, with $10 costs. All concur.

BREIDBART et al. v. EMPIRE CITY SUBWAY CO. (Supreme Court, Appellate Term, First Department. February 4, 1915.) TRIAL ($ 143*)— JURY QUESTION.

Where the evidence presented disputed question of fact, the matter should be submitted to the jury.

[Ed. Note.-For other cases, see Trial, Cent. Dig. 88 342, 343; Dec. Dig. § 143.*] Appeal from City Court of New York, Trial Term.

Action by Isidor Breidbart, Henry Breidbart, and Samuel Breidbart, copartners, doing business as I. Breidbart & Co., against the Empire City Subway Company. From a judgment for defendant, plaintiffs appeal. Reversed and remanded.

Argued January term, 1915, before GUY, BIJUR, and GAVEGAN, JJ.

I. Gainsburg, of New York City, for appellants.

Charles T. Russell, of New York City (Arnold W. Sherman and Benj. F. Briggs, both of New York City, of counsel), for respondent. *For other cases see same topic & S NUMBER in Dec. & Am. Digs. 1907 to date, & Rep'r Indexes

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