CASES

ARGUED AND DETERMINED

IN

THE SUPERIOR
SUPERIOR COURT

OF THE

CITY OF NEW YORK

AT GENERAL TERM,

D. A. BUTTERFIELD, Plaintiff and Appellant, v. SPENCER, President of U. S. Express Co., et al., Respondents.

When a written agreement has been duly made by and between two joint stock Express Companies (which they were competent to make) for the consolidation of the two companies and the merging of one of them in the other, by which agreement the one to be merged agrees to buy 2000 shares of the increased stock of the other, and which stock such other agrees to issue and sell for $200,000, and by which the stockholders of the one to be merged are to have the right, inter alia, of becoming purchasers of such 2000 shares, in proportion to the amount of stock they hold in the company to be so merged, or to relinquish their stock to the company of which they are members and receive therefor such sum as they have paid on account of their subscription for the same and ten per cent. in addition thereto; and the company to be merged, on the making of such agreement, through S., its President, notified all of its stockholders of such agreement and of its provisions, and in such notice offered to each of them, his election of either of the several provisions made, by such agreement, for the benefit of such stockholders, and E., one of such stockholders, on the receipt of such notice and offer, wrote a letter to S. as such President, inclosing in it E.'s certificate of stock (being the only evidence he had of any right to stock in such company), and by such letter declared that he declined to become a purchaser of any part of said 2000 shares, and that he elected to take the amount he had paid on his subscription for such stock, and ten per cent. in addition thereto, held, that, the election tendered to E., by S., on behalf of the company of which he was such President, and the letter sent by E. to S. with the declaration of his election thereby communicated, was an offer by S. (on behalf of said company) to receive back E.'s certificate and pay him therefor, which, on being accepted by E. (by declaring his election to surrender his stock-certificate, and receive the sum so offered to be paid), became

Butterfield v. Spencer.

a binding contract, irrevocable, except by the mutual assent of E. and of the said company, as the parties to such contract.

Held also, that, G., to whom S., as such President, on the day of, and after the receipt of E.'s said letter, sold the stock which E. so declared his election to surrender (G. having bought and paid for the same in good faith), acquired a valid title to such stock as between himself and E. and as between himself and the plaintiff, who, subsequent to G.'s said purchase, took from E. an assignment of said stock-certificate and of E.'s rights as a stockholder in the said company. It was also held, that, the fact that S., after offering to sell such stock to G., returned said stock-certificate to E., with a request that he would sign an endorsement written by S. thereupon, in these words, viz.: "I authorize and require Charles C. Backus, Treasurer of the U. S. Express Company" (the Company to be merged), "to cancel the within receipt, and to issue, in its place, a new receipt for the same to such persons as Hamilton Spencer may direct"-, and then return it to S., did not give and could not be regarded as having been intended to give, to E. a right to renounce the election he had made, or to treat the matter as opened for further negotiation:

Held also, that, S. having, under such circumstances, sold the stock to G., and the latter having paid for it, to the company of which S. was President, and the company having adopted the sale, and continuing to insist upon its validity, it did not lie with E., or the plaintiff as his assignee subsequent to such sale, to deny the authority of S. to make it.

Also held, that, although the consolidation agreement required S., within 24 hours after being notified by any stockholder of the company to be merged, of his election to surrender his stock, and that he declined to be a purchaser of any of the said 2000 shares, to give the like notice, in writing, to the trustees of the other company (who were named), and who agreed that, on that being done, they would take and pay for the stock of such declining stockholder, yet, whether S. neglected his duty, in not giving notice to said Trustees, in the manner and within the time prescribed by said agreement, of E.'s said election, is a question between such trustees and S. or the company of which he was President, and that its just determination did not affect the rights or liabilities of E., growing out of his acceptance of the offer made to him by the company of which he was such stockholder.

Held also, that, after such sale to G. of, and payment by the latter for, such stock as aforesaid, E. could not retract his said election and hold the stock, even though it was satisfactorily proved that a conversation was subsequently had between E. and S. at Rochester, in which E. avowed a purpose to retain the stock, and S. expressed his gratification thereat, saying at the same time that the condition of the stock had not been changed since E. had declared his said election, and could not be, until S. returned to New York; and hence, also held, that it was of no importance that the statement of the facts found by the judge who tried the cause, did not show whether he concluded such conversation to be what E. swore it was, or what S. swore it was; (their testimony in relation to it being in conflict.) It was also held, that the plaintiff who purchased from E. the stock-certificate he held and his rights as a stockholder, after the transaction between S. and G. had been fully concluded, stands in no better situation than E. would have done, and did not thereby acquire any rights superior to those which E. possessed, at the time of such purchase by the plaintiff.

Butterfield v. Spencer.

Held also, that the plaintiff by inquiring of E., at the time of such purchase, why the unsigned endorsement, or power of attorney, was written on the back of said stock-certificate, and by being informed by E., in answer to such inquiry, "in substance of the reason why it was there," acquired a knowledge of facts, and of acts of E., which concluded E., and divested him of the power to reclaim the stock, and consequently that the plaintiff, as such purchaser, acquired no right to become a purchaser of any of said 2000 shares of stock, or to have any of it issued to him.

(Before BOSWORTH, HOFFMAN, and WOODRUFF, J.J.)

Heard January 25. Decided May 17, 1856.

THIS action was brought by David A. Butterfield, plaintiff, against Hamilton Spencer, individually and as President of the United States Express Company, and Alexander Holland, Treasurer of the American Express Company, and Henry Dwight, Jr., defendants.

It was tried before Mr. Justice Bosworth, without a jury, in April, 1856, who decided that the plaintiff was not entitled to the relief sought, and that the complaint should be dismissed with costs. From the judgment entered on the 3d of October, 1856, on such decision, the plaintiff appealed to the General Term. The complaint stated in substance, that shortly prior to February, 1853, a joint-stock company was formed, called the "United States Express Company," to carry money, packages, and property, and transact the general express business, and its principal office was in the city of New York. It consisted of over seven associates; its capital stock amounted, nominally, to $500,000, divided into 5,000 shares of $100 each. Receipts, for instalments called in and paid on each share, had been issued to the several stockholders, in the form of that issued to George Ely, one of the associates and the plaintiff's assignor, and which reads as follows:

"United States Express Company. "Received of George Ely, Esq., One thousand dollars, being twenty per cent., the first instalment, upon fifty shares of the capital stock of the United States Express Company held by him, for which stock, scrip will be issued upon the surrender of this receipt.

"Dated, 4th February, 1853.

"C. C. BACKUS, Treasurer."

Butterfield v. Spencer.

In 1850, a joint-stock company, called the "American Express Company," was formed, consisting of more than seven associates, and Alexander Holland is its treasurer, and its principal office is in the city of New York.

The defendant Spencer, at the time of the transactions subsequently detailed, was and is the President of the United States Express Company; Henry Dwight, Jr., was and is one of its directors; and the management of its business was committed to a board of directors.

The business of the two companies being the same, it was deemed for the interest of both that, they should be consolidated, and the United States Express Company merged in the American Express Company. To carry out that object, an agreement, (the validity of which was not called in question,) was entered into between the two companies, bearing date the 7th of March, 1853, which was executed "by John Butterfield” and six others, "trustees of the American Express Company, of the first part, and the defendants, Henry Dwight, Jr., and Hamilton Spencer, on behalf of the United States Express Company, of the second part."

By this agreement the United States Express Company was to buy, and the American Express Company was to issue, on or before the 30th of April, 1853, to the parties of the second part, for the stockholders of the United States Express Company, full scrip for 2,000 shares of the capital stock of the American Express Company, in such sums and for such persons as the parties of the second part should direct. The parties of the second part agreed to pay for said shares, on delivery of the scrip, $200,000, of which $100,000 was to be divided among those being stockholders of the American Express Company at the time of issuing said 2,000 shares of stock, ratably in proportion to the stock they then held. The other $100,000 was to be held for the benefit of the then stockholders of the American Express Company, and such as should come in under said agreement. The parties of the second part agreed that, on the fulfilment of said agreement, the United States Express Company should be deemed merged in the American Express Company, and its separate organization given up; and that all the stockholders of the United States Express Company, who so desired,

Butterfield v. Spencer.

might become purchasers of said 2,000 shares, in the proportion in which they might own stock in the United States Express Company on the 30th of April, 1853. That if any of them should decline to become such purchasers, "and should, within thirty days thereafter, give notice to said Spencer, who should, within twenty-four hours, notify the parties of the first part that they so declined," then the said parties of the first part agreed to become subscribers for the said stock, to an amount not exceeding $100,000, held by the parties so declining, and repay to each the sum paid on each share of stock, being $20, with ten per cent. on such sum so paid, and the stock in the American Express Company, which such persons so declining would have been entitled to under said agreement, should be issued to said parties of the first part, on their paying the balance, if any remaining to be paid, on the subscription to the stock of the United States Express Company. The stock to be issued under said agreement was to be of the increased stock of the American Express Company. Within thirty days after the 30th of April, 1853, a stock dividend of $99,500 was to be made as follows: $49,500 among those being stockholders of the American Express Company at the date of said agreement, and $50,000 among those who might become stockholders under it.

The American Express Company, as thereby constituted, assumed all the property of the United States Express Company, and its value, at a sum agreed upon, was allowed as part payment of the undisposed $100,000, of the purchase-money for the stock in the American Express Company. It was also alleged that the agreement contained other provisions which need not be stated. The complaint averred that both companies approved and ratified the agreement, and on the 30th of April, 1853, the $100,000 which was to be divided among the stockholders of the American Express Company, was paid. That when the said agreement was made, $20 had been called in and paid on each share of the stock of the United States Express Company; and to carry out said agreement, and pay certain general expenses already incurred, a further call of $24 per share was made on its stockholders, payable on the 25th of April, 1853.

It also averred that the residue of said $200,000 had been paid by the United States Express Company, and that the