Bolz v. Ridder

Larremore, J.

[After stating the facts as above.]— The certificate of January 17th, 1880, is in the precise form of section 2 chapter 333 of the Laws of 1853, which requires that stock issued in payment for property necessary for the business of the company shall not be stated as issued for cash paid in, but shall be reported in this respect according to the fact. This was done if the certificate be true ; and the only question left for consideration is whether or not the difference between the value of the patent and the stock issued for its purchase was so grossly inadequate as to raise the presumption of guilty knowledge and fraudulent intent on the part of the defendant. The learned judge at the trial coincided with this view of the case, but he excluded, under exception, an offer to show what value the defendant put upon the patent.

It is shown by the testimony that the capital stock of the Enoch & Ridder Co. was $1,000; that Enoch sold his half interest in the patent for $500 ; that he was to buy one half of the stock and become half owner in the Enoch & Ridder Co., and that the defendant, the other member of the company, paid $500 for his half of the stock.

This astonishing leap in the value of the patent—which constituted the entire property of the company —from $1,000 to $100,000 should have been explained. I think the language employed by the Court of Appeals in Lake Superior Iron Co. v. Drexel (90 N. Y. 94), is pertinent and decisive. “ Whether the form the transaction took was a mere sham, intended as an evasion of the statute, was a question of fact for the determination of the jury. It may be said that the statute may thus easily be circumvented and evaded; but the policy of the law will be preserved and enforced if all the questions of fact in such cases be left to the jury.”

The judge should have followed his first impressions and submitted this case to the jury.

The judgment should be reversed and a new trial ordered, with costs to abide event of suit.

Charles P. Daly, Ch. J., concurred.

J. F. Daly, J.

It is contended that the certificate was not false in the statement that the whole of the capital stock had been paid up in full by purchase of a patent sewing machine attachment, because the fact was that the whole capital stock had been issued for such patent. But the act (L. 1853 c. 333) permits property to be purchased and stock issued in payment to the amount of the value of said property, and requires the report or statement of the company to be “ according to the fact.” If the stock had been issued to a greater amount than the actual value of the property, a certificate which states that the whole capital stock has been paid up in full by the purchase of the property is not according to the fact, and is false, if the property be not worth the amount of the stock. The question of value of the property is therefore material.

The judgment should be reversed and a new trial ordered.

Judgment reversed and new trial ordered, with costs to abide event of action.