Opinion
February, 1913.
Alvin Summers (Adolphus D. Pape, of counsel), for appellant.
Maurice Nagler, for respondent.
Plaintiff sues to recover money due to him pursuant to the terms of certain contracts entered into between the plaintiff and the defendant. The defendant is a corporation organized under the laws of the state of New York. It does business in the city of New York, and it is capitalized for $1,000,000. Its preferred stock aggregates $500,000, and its common stock $500,000. The par value of each share is ten dollars. Under the contracts entered into between the plaintiff and the defendant, the plaintiff is designated as the purchaser, and agrees to purchase a certain number of shares of stock of the defendant, which is designated in the contract as the company. The company agrees to sell the shares of stock to the plaintiff upon certain "conditions and privileges" which are set forth on the back of the contract. In these "conditions and privileges" the purchaser agrees to make payments of certain installments until an amount specified has been fully paid. The purchaser is also permitted "to hasten the maturity of this contract" by paying off monthly installments in consecutive order beginning with the last installment to fall due under the contract. The contract also provided that "after two full years' payments shall have been made, the Company will, upon six months' written notice, return all payments made hereon with interest at the rate of four per centum per annum." The plaintiff under the contract sued upon paid $350 to the defendant, which sum represented two full years' payments under the contract, and the plaintiff gave the six months' written notice required and asked the return of the payments made under the clause of the contract quoted above. The defendant now resists payment on the ground that the contract is an agreement "to purchase its own stock," and claims that such an agreement is prohibited by section 664 of the Penal Law. This section of the Penal Law makes it a misdemeanor for a director of a stock corporation to concur in a vote to apply the funds of a corporation, except surplus profits, to the purchase of shares of its own stock. Strictly speaking, I do not think that these contracts fall within this particular provision of the Penal Law. Richards v. Wiener Co., 207 N.Y. 59. I do not think that the defendant agreed to commit the particular crime which its counsel claims it agreed to commit. The agreement to refund the money which the plaintiff paid was not an agreement to purchase shares of its own stock. The stock had, in fact, never been actually sold to the plaintiff. All that the plaintiff did was to pay money to the defendant on the assurance given by the contract that the defendant would, when the amount specified was fully paid, sell the stock to the plaintiff. The plaintiff, under the clause of the contract quoted above, had the right to demand the repayment of the amount advanced. We are satisfied that the defendant has established no defense to this action. It is also clear to us from the character of the contract, and from the nature of the alleged defense, that the business being carried on by the defendant should be investigated by those charged with responsibility for enforcing the criminal law.
LEHMAN and PAGE, J.J., concur.
Judgment affirmed with costs.