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Leitch vs. Leitch.

the farm before he took the option to which reference was frequently made during the hearing, and that she approved the sale although she knew of the large profit. The fact that she knew of this profit and made no objection is urged as evidence of mental weakness. Just why she made no objection to the sale we cannot say but it is a reasonable presumption that having given the option she did not deem it proper to question the right to make a profit.

The Court cannot control, nor can it measure, the degree of affection which may reasonably and properly be manifested by one person for another. The limit of its power under the statute is to ascertain whether the person alleged to be feeble minded or so mentally defective that he or she is unable to care for his or her property, is so in fact.

Testimony was heard in relation to the purchase of a lot and the erection of a house, not yet completed, and it is contended that the facts in relation thereto show mental incapacity. We will not extend this opinion by a recital of the facts disclosed respecting this transaction, as they are set out at length in the testimony. While we cannot say that it shows mental weakness we are fully justified in suggesting that the interests of Miss Leitch should be protected just as originally intended and that she should not be asked nor even permitted to accept a second mortgage without first being fully advised by counsel. Any inexperienced person, however sound mentally, might be misled in a transaction of this kind. No wrong may be intended by either party, and it is not intended to intimate that wrong was intended in this instance, but Miss Leitch should be fully advised by her attorney respecting the exact status of this transaction and the inadequate security which the proposed second mortgage will afford. This suggestion is made merely that cause for controversy in the future may be removed before it is too late.

We do not deem it necessary to prolong the discussion of the matter with which the Court is presently concerned. It is sufficient to say that a careful examination of the testimony fails to disclose any facts that would justify a finding against the respondent and after careful consideration of the evidence and the law applicable thereto we have reached the conclusion that the petition should be dismissed at petitioners costs.

And now, March 2nd, 1915, this matter having come on for hearing upon petition and testimony taken in open Court, and having been argued by counsel and duly considered by the Court, it is ordered that the petition be dismissed at the cost of petitioner.

White vs. First National Bank of Pittsburgh.

Injury to

Corporation
individually of stockholders.

Stockholders—Loss of stock-Right of action

A was the owner of a department store business which he desired to incorporate and for the extension of which he desired to borrow money. B, a bank, loaned him a certain amount personally with the understanding that upon the crganization of the company of A the company should be substituted as the maker of the note representing the loan in the place of A. After the organization of the company of A the loan was so substituted with A as an endorser of the note of the company and the note of A as an individual was retired. For his share in the business A took a large percentage of the stock. Subsequently B called the note and it not being paid it was protested. The company of A was thrown into bankruptcy and its assets were not sufficient to pay its creditors. A sued B in assumpsit for the loss of the value of his stock alleging that B had called the note centrary to the terms of the agreement made at the time the loan was placed and that the action of B in this regard had precipitated the bankruptcy of the company, which otherwise would not have happened. Held:

That A as a stockholder or as an endorser on the note had no right of action against B and if any existed it was in the principal debtor of the company of A. He had no damage except that which resulted to him as the owner of stock. The averment in the statement that the trustee in bankruptcy had failed to recover for the creditors and stockholders of the company of A did not change the situation. The plaintiff had no right of action because he failed to show any injury in himself apart from the injury to the corporation.

Demurrer to plaintiff's statement. Allegheny County.

No. 1493 January Term, 1915. C. P.

Reed, Smith, Shaw & Beal and Chas. H. Sachs, for plaintiff.
McKee, Mitchell & Alter, for defendant.

SWEARINGEN, J., March 12, 1915.-B. White brought this action of assumpsit against the First National Bank of Pittsburgh, a corporation organized under the laws of the United States, to recover damages for the breach of a contract. To the plaintiff's Statement of Demand the defendant has filed a Demurrer; and upon the disposition thereof all his material averments of fact are, of course, to be taken as true.

For a long time prior to February 10th, 1911, the plaintiff had been engaged in the furniture and carpet business in the City of Pittsburgh, North Side. Desiring to conduct a general department store, he erected an eightstory building upon his lot at the corner of Sandusky and Ohio Streets. He planned the organization of a corporation to be called the B. White Company, to which he intended to transfer his said lot, building and business, and the issue of preferred stock of this corporation in the sum of $500,000, which was to be sold for the purpose of acquiring additional capital for said business. About February 1st, 1911, the plaintiff applied to the defendant for a loan of $25,000, and during the course of the negotiations, he informed it of his said plans, and of his having obtained subscriptions for part of the preferred stock, upon which some money had already been paid. The cashier, F. H. Richards, suggested that the best time to sell the preferred stock was after the corporation had been organized and the business was in full operation, and he proposed that the plaintiff borrow $60,000, which should stand as a loan until at least six months after the store had been entirely completed and the business started. An opportunity would thus be given for the sale of said preferred stock. This period of six months was to begin at the opening of the store, which was to be not later than September, 1911. The plaintiff declined to make a loan of $60,000, but it was finally agreed that he would borrow $50,000, upon the terms, inter alia, that he would keep on deposit in said bank 20% of the loan,, or of the amount to which it might be later reduced; that he would give his promissory note for the loan, which was to be renewed from time to time during said period; and that, when the corporation should be organized and had taken over the business, its note should be substituted for his and he would endorse the same.

White vs. First National Bank of Pittsburgh.

Pursuant to said agreement, the plaintiff gave his note for $50,000 to the defendant, dated February 10th, 1911, opened an account and kept on deposit 20% of the loan. The B. White Company was duly incorporated and organized, and the plaintiff transferred to it his said business and property, the same having at that time a net value of more than $518,000, for which he received common stock in that amount. When the note above mentioned fell due, on June 10th, 1911, the note of the B. White Company was substituted therefor and the plaintiff endorsed it, and the deposits were continued as had been stipulated. The said department store was formally opened on September 14th, 1911.

On October 5th, 1911, Oscar L. Telling, the president of the defendant bank, gave notice that the payment of said note would be demanded at its maturity, to-wit, October 10th, 1911, and said "if it was not then paid he would push the corporation to the wall." Thereafter, it was agreed that, if there should be paid $10,000 on account of said note, at its maturity, and a new note given for $40,000, upon which $1,000 should be paid each week until the whole should be discharged, the defendant would not demand payment of the entire loan of $50,000. At that time the B. White Company had on deposit with the defendant $16,226.18. In consequence, the B. White Company continued its deposits with the defendant, was ready and willing to pay the sum of $10,000 and give a demand note for the balance, which the plaintiff would have endorsed, and to pay $1,000 each week thereafter; and both the plaintiff and the B. White Company, on October 10th, 1911, offered to consummate the agreement last above recited. Nevertheless, the defendant refused to comply with the same, demanded payment of the entire loan, refused the plaintiff's offer to waive protest, but did protest the note and credited thereon the aforesaid deposit of $16,288.18. Immediately afterwards the defendant inquired of creditors of the B. White Company as to its promptness in payment, and communicated the fact of the protest of said note. The defendant also threatened the B. White Company with legal process, and other creditors were frightened into doing the same thing, and the financial credit of the B. White Company, which was of the best char-acter, was thereby destroyed, and it was forced into bankruptcy. The assets were sold, the good will of the business was destroyed, and there was not sufficient realized to pay the debts. The plaintiff averred that, prior to the protesting of said note, the assets of the B. White Company exceeded its liabilities more than $400,000 and that, if they had been converted in the usual course of business, such an amount would have been realized.

The Trustee in Bankruptcy of the B. White Company has filed its account, the assets have been distributed, and the Trustee has been discharged. The Trustee did not pursue any claim against the defendant on behalf of the B. White Company on account of the grievances aforesaid, but has abandoned the same.

The plaintiff, "having shown that he has sustained loss and damage through the said unauthorized and illegal acts of the said defendant, in the sum of $400,000 and upwards," brought this suit to recover the same. He did not aver that he had suffered any damage, except what resulted from the aforesaid destruction of the value of his stock, substantially all of it, in the B. White Company.

As before stated, the defendant filed a Demurrer to the plaintiff's statement of demand. In the view we take of the case, it is not necessary to consider any of the assignments, except the First and Fifth, which we regard as decisive. They are as follows:

"(1). The said Statement of Demand discloses no right of action in this plaintiff. Such right, if any, would be in the B. White Company.

"(5). The alleged breach of contract upon the part of the defendant does not appear to have been the proximate cause of the damage alleged to have been sustained."

White vs. First National Bank of Pittsburgh.

The original contract between these parties may be briefly stated as follows:

B. White agreed to borrow from the defendant, and it agreed to lend him, $50,000, upon his note, which should stand as a loan until six months after September, 1911; during this period, the note was to be renewed from time to time; he was to keep on deposit in the defendant bank 20% of the loan, or of the amount to which it might be reduced; when the B. White Company, a corporation then in contemplation of the parties, should be organized, its note was to be substituted for his, which was to be endorsed by him.

This was a contract, not only for the loan of money upon collateral during a specified period, but also for the substitution of a new contract and of another debtor later. It was likewise a contract for the benefit of the B. White Company, when that corporation should come into existence. The plaintiff was its promoter. The contract was one which the corporation could have assumed, and the subsequent transactions are conclusive that this did occur. What the parties thereafter did, the plaintiff, the defendant and the B. White Company, distinctly shows that their interpretation was the same as we have indicated. The B. White Company was organized and the plaintiff transferred his property to it. When his note fell due, the B. White Company gave its note endorsed by him to the defendant, which was accepted, and deposited its money in place of his deposit, and this was also accepted. These transactions must be regarded as in the nature of a Novation which arises, either when a new debtor is substituted for a former one, or when a new contract takes the place of a former one, with the consent of all parties. In either event, the prior obligation is extinguished.

After the consummation of this new agreement, on June 10th, 1911, what obligation under the original contract remained as between the plaintiff and the defendant? None whatever that we can perceive. The defendant could no longer have maintained an action upon the plaintiff's note, because that of the B. White Company had been substituted. The defendant could no longer have demanded a deposit from him, because the deposit of the B. White Company had taken its place. The plaintiff could no longer have demanded a renewal of his note, because the note of the B. White Company was the only one thereafter to be renewed. Clearly, the new contract was substituted for the old one, the B. White Company took the plaintiff's place as the debtor, and all three parties consented. It follows that the original contract was extinguished and was merged into the one made June 10th, 1911; and this was exactly what the plaintiff and the defendant had stipulated should occur. If, therefore, no obligation of the original contract remained, it is plain that no action whatever can be founded thereon. Hence we must look elsewhere for the basis of this suit.

What, then, were the respective positions of these parties, relative to this substituted contract? Undoubtedly the defendant and the B. White Company were the principals. They were the sole parties between whom direct contractual obligations were thereby established. It is equally undoubted that the only relation in which the plaintiff stood was that of endorser upon the note of the B. White Company. He assumed no other responsibility. The defendant never could have pursued him except in that capacity. If this be true, what right of action has he, the endorser of the note, against the defendant for the latter's breach of its agreement to extend the loan? We know of none. Such an action might be maintained by the principal debtor, but surely not by a mere endorser. It might be that, if the defendant sued him upon his endorsement, he could plead its violation of the agreement, whereby he became endorser, and his consequent release. Upon that proposition we express no opinion, because the question is not involved here. But there is no averment that he has been pursued; none that he ever has been or ever will be compelled to pay anything by reason of his endorse

ment.

White vs. First National Bank of Pittsburgh.

Nor can we discover that the plaintiff's position was changed in any respect, by the new arrangement made in October, 1911. At that time, about October 5th, 1911, it was agreed that the B. White Company would pay $10,000 upon its note, would give its demand note for the balance of $40,000, which the plaintiff would endorse, would pay $1,000 per week thereafter upon the loan, and would maintain the said deposit. This was an agreement between the defendant and the B. White Company. They were the principals. The defendant was to be the endorser of the note of the B. White Company-nothing more. Clearly, the above stated modification of the agreement made no change in the respective contractual relations of the parties.

There is, therefore, no contract pleaded in the Statement of Demand, upon which this action of Assumpsit can be maintained by the plaintiff against the defendant. The original was merged into the new one on June 10th 1911. To this, he was not a party principal. Neither was he to the modification thereof in October 1911. Hence he cannot base this action upon any of these agreements; and he has alleged no other.

But, when the acts of the defendant of which the plaintiff complains are considered, it is certain that the view we have taken is correct. All of them related to the B. White Company alone. The defendant refused to continue the loan of the B. White Company, not that of the plaintiff; its note, not the plaintiff's, was wrongfully protested; its deposit, not the plaintiff's, was illegally appropriated; and the destruction of the credit and the sacrifice of the property of the B. White Company resulted. Every one of these wrongs was an injury to the B. White Company, for which it alone is entitled to sue and recover, if anybody can. If, then, the right of action is in it, how can the plaintiff also maintain an action for the same cause? If he can, the defendant will be compelled to pay twice for the same injury. There must be something wrong with a proposition which leads to such a result.

The plaintiff has attempted to evade this difficulty by averments, that the Receiver in Bankruptcy of the B. White Company has abandoned any claim, which it might have against the defendant, and that the Receiver has been discharged. But the bankruptcy of that corporation did not work its dissolution: Collier on Bankruptcy, 72. There is no averment in the Statement of Demand that the B. White Company has been dissolved. It must, therefore, be regarded as still in existence, at least for the purpose of redressing any wrongs it has suffered. In any event, the plaintiff is but a stockholder of the B. White Company. As such, he does not represent it and cannot sue for its demands, even though he owns substantially all of the stock, as he does.

But the plaintiff is not endeavoring in this action to recover on behalf of the B. White Company. He is seeking a personal judgment against the defendant. He has laid no damages, except those which resulted to him by reason of the destruction of the value of his stock in the B. White Company. How, then, can he succeed in this action? It was argued that the question of the measure of damages cannot be raised upon a Demurrer. This is true as a general proposition. But the plaintiff has averred no injury to himself, except the indirect one above stated. These damages, as we have shown, he cannot recover because the right thereto is in the corporation, if in anybody. He cannot recover nominal damages, because, as we have shown, there was no contractual obligation binding the defendant to him, which was broken.

We have examined the cases cited by the plaintiff, including the two upon which he specially relies. These two are Bank of Commerce vs. Bright, 77 Fed. Rep. 949, and Ritchie vs. McMullen, 79 Fed. Rep. 522. We do not think that either of these cases is at variance with the conclusions reached. There can, of course, be no doubt that a stockholder can maintain an action, where the act of which complaint is made is not only a wrong against the corporation, but is also in violation of duties arising from

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