Opinion
Argued April 26th
Decided May 23d 1871
William Henry Arnoux, for the appellant.
James C. Carter, for the respondent.
The court erred in refusing to charge the jury as requested by defendant's counsel, that the plaintiff could not recover, if the jury believed that Mr. Avis, in employing Mr. Lockwood to dispose of stock in the company, or to procure subscriptions therefor, was acting, not as the agent of the company, but for the purpose of disposing of stock in the company which he, Mr. Avis, had agreed to take, at or about the time of the formation of the company. Upon this question the testimony was conflicting. There was no question but that Lockwood, who procured the subscription of the plaintiff for stock, was employed for this purpose by Avis, and derived all his authority for this purpose from him. On the part of the plaintiff, evidence was given tending to show that Avis was employed by the company to procure subscriptions to and effect sales of stock belonging to the company, for its benefit, as its agent. On the part of the defendant, evidence was given tending to prove that the projectors of the company had severally agreed to take portions of the stock, in the aggregate amounting to the entire stock of the company; that Avis was one of these projectors, and that he agreed to take five thousand shares at ten dollars each; that he was never in any way employed by the company, as its agent or otherwise, to procure subscriptions to or otherwise to dispose of its stock; that he employed Lockwood, on his own account, to dispose of stock which he had agreed to take for himself or for his firm. There was no such preponderance in the testimony as to authorize the judge to take the question from the jury, or to direct a verdict for the plaintiff. The question should, therefore, have been submitted to the jury. It is obvious that the plaintiff could not maintain an action against the company for the recovery of the money paid for the stock, if Avis was his vendor, upon the ground claimed, viz., that he had rescinded the contract on the ground of misrepresentation of the property owned by the company. This error would require an affirmance of the order appealed from, but as the case presents another question which may affect the rights and liabilities of the defendant, it is proper that the court should consider and pass upon that also. The defendant's counsel excepted to the following portion of the charge: "You will determine, therefore, in the first place, gentlemen, whether the prospectus was simply a declaration of intention or design to accomplish these results if they could. If upon this paper the plaintiff had the right to believe that it was reasonably certain that the company would acquire the property, and that the company was organized with a view to the ownership of these pieces of property, then, if they did not obtain it, he would be entitled to recover." The verdict for the plaintiff may have been rendered solely upon this portion of the charge. To determine its correctness, we must not only examine the prospectus itself, but also the extrinsic facts in reference to which it was prepared, and, so far as these facts were known to the parties, in the light of which it must be construed, together with the extent of the failure of the company to obtain title to all the property specified in the prospectus. It may be remarked that there was no conflict in the testimony as to any fact bearing upon the construction, except as to whether the defendant was incorporated before or after the plaintiff subscribed for the stock. The paper in question was headed: "Prospectus of the Northern Light Oil Company of New York; Lands of the Company all on Oil creek, Venango county, Pennsylvania," and proceeds as follows: "George A. Boyce, Avis, Plummer Co., of New York, and associates, propose to organize a company under the general mining laws of the State of New York, with a capital of $1,000,000, consisting of 100,000 shares of the par value of ten dollars, to purchase and work the following petroleum oil lands and interests." Then follows a specific location and description of ten different pieces of property, each containing either a quantity of land or an interest in some existing oil well, or both. Then follows a recapitulation, in which the statement is as follows: The company's property now comprises about 270 acres in fee and lease-hold interests, and about 200 acres in fee simple, adding a statement of the number of wells thereon in process of drilling, and those completed and either pumping or flowing wells, with the quantity of oil obtained therefrom, and the price of the oil and the dividends that could be paid upon the stock of the company, and then proceeds as follows: Whereas, George A. Boyce Avis, Plummer Co., of 63 Pearl street, New York city, and their associates, propose to organize a company under the general mining and manufacturing laws of the State of New York, to be known as the Northern Light Oil Company, with a capital of $1,000,000, consisting of 100,000 shares at the par value of ten dollars per share, whereas, said company intended to purchase certain oil and mineral lands situated in the township of Alleghany and Cornplanter, county of Venango, and State of Pennsylvania, and issue in payment therefor, 100,000 shares of the capital stock of said company; now, therefore, we, the undersigned, hereby subscribe, each for himself, the amount or number of shares set opposite our respective names, toward purchasing the annexed schedules of property at $1,000,000. And it is hereby agreed and understood, that all moneys so subscribed shall be paid to a party or trustees, elected by the subscribers, after the whole amount of stock shall have been taken. Then follows a statement specifying the installments for payment of the stock subscribed for, and the times when payable.
This was the prospectus signed by the plaintiff in reference to which the charge excepted to was made. The statement in the recapitulation of what the property of the company consisted, must be construed in reference to the preceding and succeeding clauses of the paper so construed. No one could understand that the company, if then incorporated, actually had the title to any of the real estate specified in the prospectus. The object of the subscription as stated, was to enable the company to purchase the property specified for $1,000,000. There was no assurance that the company had already acquired title, but only of an intention to purchase and operate it for oil purposes. There was no question made as to the entire good faith of the defendant. The company was incorporated and proceeded to acquire title to the property, and did obtain title to eight parcels of the property. It failed to obtain title to two of the parcels, for the reason that they were so situated that a satisfactory title thereto could not be obtained. The company purchased other land which it believed of equal value for oil purposes in the place of one of the parcels it failed to procure. It retained in its treasury $75,000 in cash, which was the price of the remaining parcel, title to which could not be obtained. To hold, that after all this had been done by the company in good faith, the plaintiff had the right to rescind his contract for taking stock in the company, and recover from it the money paid therefor, in case a jury should find he had the right to believe that it was reasonably certain that the company would acquire each and every parcel of the property, and that the company was organized with a view to ownership of these pieces of property, would operate as a great hardship upon the other stockholders. The money of all has been, by the company invested in real estate, pursuant to the intention upon which the company was organized. Doubtless all believed that the company would be able to purchase all the property specified in the prospectus, but each must have known that this was more or less contingent, depending upon the willingness of the then owners to sell and their ability to give a good title. As to two of the parcels, the case shows that a good title could not be obtained by the company. This risk each stockholder assumed for himself to the extent of his interest in the company. The corporation, when organized, became the owner of all money that had been paid for its stock, and it had the right in good faith to proceed in the execution of the objects for which it was created. This it did by appropriating, so far as it appears, in good faith, its funds to the purchase of the property which it was designed it should acquire, so far as such lands could be purchased and a satisfactory title obtained. The unforseen obstacle which prevented the purchase of two of the intended parcels was a misfortune which should be shared by all the stockholders, and if a loss was thereby sustained, such loss should be shared by all in common. The effect of the charge was to relieve the plaintiff entirely at the expense of some or of all the others. The error of this portion of the charge was not obviated by the further instruction that they must further find that it was material to the plaintiff that the company should own every parcel. If this was material to the plaintiff, it was equally so to the other stockholders. Had the plaintiff commenced an action for a distribution of the assets of the company before any purchase had been made, upon the ground that it had become impossible to carry its objects into effect, the case would have been different. Then equal justice could have been done to all. Now, none can be relieved, except at the expense of others equally innocent of intentional wrong as the plaintiff. Gerhard v. Bates (75 Eng. Com. Law, 475); Biddle v. Levy (2 id., 202); Greenman v. Low (4 Bos., 337), cited by the learned judge below in his dissenting opinion, were all cases of fraud, and have no application to the facts of this case. I have not referred to the other papers shown to the plaintiff to induce him to subscribe, for the reason that they have no bearing upon the question presented by the exception to the charge. The order of the General Term reversing the judgment for plaintiff and directing a new trial, must be affirmed, and judgment final given for the defendant, with costs upon the stipulation.
All concurring except PECKHAM, J., not voting. Judgment reversed.