Carraher v. Mulligan , 8 N.Y.S. 42 ( 1889 )

Merwin, J.

Ho request was made by defendants to submit the case to the jury; and it is now claimed that by reason thereof the objection cannot now be taken that there were questions of fact that should have been submitted. The cases cited on the part of plaintiff to this point do not apply to this case. On the other hand, the case of Trustees v. Kirk, 68 N. Y. 464, is authority for the proposition, as applicable to this case, that if it was error to take the case from the jury the objection-is available under the general exception, and a particular request to the court to send the case to the jury was not necessary. The defendants had done nothing to waive their right, if they had one, to go to the jury. The same rule was substantially held in Bank v. Dana, 79 N. Y. 108.

The question, then, is, was the verdict properly directed for the plaintiff? The evidence tended to show an agreement between the plaintiff and the defendants, substantially as alleged in the first portion of the answer. The plaintiff was a subscriber to the original articles to the amount of $2,000 of the stock. The scrip was issued to other parties; but he was interested and active in the management, advising and assisting the defendants, who in name were the trustees. The business was not prosperous. The company was in debt, and apparently could not borrow on the credit of the company. The defendants and the plaintiff owned or controlled the whole stock. The proposition was then made for each to advance to the amount of stock they held or represented, and wait until the profits from the sales of the product of the factory would pay it back. This they all assented to. The giving of notes was discussed. The plaintiff said he wanted something to show how much money he put in. This idea was adopted, and notes of the company, in the ordinary form, were thereupon given to each for their respective advances. There was no writing, except the notes. It is urged by the plaintiff that the paroi arrangement as to the manner or condition of payment varies the legal effect of the notes, and is therefore not available to the defendants. It may be that as against the corporation the condition as to the manner of payment would not be admissible. That, however, is not exactly the question here. It is competent to prove by paroi the relation of the parties, and any extrinsic facts affecting the equities. Wells v. Miller, 66 N. Y. 255. If the original agreement was verbal and entire, and only part reduced to writing, the whole may be shown. Chapin v. Dobson, 78 N. Y. 74. And in Juilliard v. Chaffee, 92 N. Y. 535, it is said, generally, that any agreement may be shown that makes the enforcement of the instrument inequitable. The point here is whether there was any arrangement, not between the plaintiff and the corporation, but between the plaintiff and these defendants, that should preclude the plaintiff from taking the benefit of the statutory provision in favor of creditors. The giving of the notes to plaintiff was but one part of the transaction. The defendants also advanced money and received similar notes, none of which have been paid. Both parties advanced their money and received notes in pursuance of an agreement, verbal it is true, by which each agreed with the other, upon certain limitation, as to the enforcement against the corporation. It was competent for these parties to make such an arrangement; and, it having been executed, the defendants presumptively having advanced their money in consideration and upon the faith of such arrangement, the plaintiff cannot now' repudiate it, though it was verbal. His debt or claim, as between him and defendants, is impressed with the character he agreed it should have. Its enforcement here would not be equitable. Juilliard v. Chaffee, 92 N. Y. 529, 535. There is room for saying upon the evidence that the advances were to be treated as so much additional capital,—an informal increase of stock.

But it may be said that plaintiff’s cause of action is based on something that afterwards occurred, to-wit, the default of the defendants in regard to their report. The moneys raised through the advances of the several parties at the time of the giving of the notes were designed to be, and apparently were, sufficient to pay all the debts. The company, however, stopped business in April, 1883, and never resumed. It has been held that when the condition of a company is such that the end and object for which it was formed are destroyed, and there is neither an ability nor an intention on its part at any time to further prosecute its business, it is no longer required to make the report called for by the statute. Kirkland v. Kille, 99 N. Y. 395. If, as it may from the evidence be found, the defendants, knowing that the debts were provided for, and that the claim of plaintiff, as well as their own, was not, under the arrangement, a debt of the corporation, and, in reliance on this-agreement, concluded there was no necessity for making the statutory report, such default would be one that the plaintiff could not equitably take advantage of. Besides, the matter of filing reports seems to have been discussed at the time of the arrangement about advances, and, as it might be found, it was concluded by all that it was not necessary, and that it need not be done. There is evidence that all understood the requirements of the law; that defendants were ready to perform them; that plaintiff discountenanced it, upon the idea that, as all the debts were to be paid by the money they were raising, it was not important, and there was no need to publish a report. One witness testifies that plaintiff said: “No reports are needed to be published; no need to publish a report.” Another witness testifies that the plaintiff, speaking of a report then present, said: “What is the use of having this published? It would be of no use to anybody. We are going to raise money to pay our debts, and it would not make a very good appearance for the company, ”— and the witness added that what plaintiff said was the rule. The secretary of the company testified that it was stated there, and agreed, that he was not to publish a notice. These conversations or understanding had more particular reference, no doubt, to what should be then done in January, 1883. Still, they were to some extent of a general character, and might well be deemed to have an important bearing on the future action of the trustees. It is not shown that anything afterwards occurred between the parties on this subject. If the defendants omitted in 1883 and the subsequent years to publish the statutory report by reason of the understanding between the plaintiff and the defendants that it should not be done, then the plaintiff would be estopped from taking advantage of such omission. He cannot claim what is deemed a penalty against the defendants for their not doing what he agreed expressly or by implication that they need not do. Whether upon the evidence there was such an understanding or agreement was a question of fact, for the jury. The foregoing considerations lead to the conclusion that judgment should not have been directed for plaintiff. Judgment reversed on the exceptions, and a new trial ordered; costs to abide the event. All concur.