Baker Et Al Assignees v. White

• Decision Date: 01 October 1875
• Citation: 92 U.S. 176,23 L.Ed. 480
• Parties: BAKER ET AL., ASSIGNEES, v. WHITE
• Court: U.S. Supreme Court

92 U.S. 176

23 L.Ed. 480

BAKER ET AL., ASSIGNEES, v. WHITE.

October Term, 1875

ERROR to the Circuit Court of the United States for the District of Connecticut.

Mr. Charles E. Perkins for the plaintiff in error.

Mr. A. P. Hyde, contra.

MR. JUSTICE MILLER delivered the opinion of the court.

The Odorless Rubber Company, being in an embarrassed condition, undertook to relieve itself by obtaining additional subscriptions to its capital stock. It was conceived, that, in order to do this, it was necessary that those holding the existing stock should submit to a reduction of its par value, as it was not really worth par at that time; and new subscribers could not be expected to take a stock which they knew to be below the value they were to pay for it. Accordingly, on the 10th June, 1872, at a meeting of the stockholders, 'on motion of S. L. Warner, it was voted, that whereas the capital stock of this company now issued, and the assets of the same, have become impaired to the extent of thirty per cent on the whole amount of said stock,—to wit, the sum of $72,000.50,—therefore voted, that stock to the amount of $72,112.50 be called in and cancelled upon the books of this company.'

At a former meeting it had been resolved that the capital stock of the company be increased to $200,000, or eight thousand shares.

The defendant, after these resolutions had been adopted, signed the following instrument, and set opposite his name two hundred and forty, as the number of new shares for which he subscribed:——

'We, the undersigned, hereby agree to take the number of shares of the capital stock of the Odorless Rubber Company placed opposite our respective names, and pay for the same as follows; to wit, $6.25 per share whenever cash subscriptions to the amount of $118,000 shall have been made, and the balance in equal monthly instalments of ten per cent each from the date of June 1, A.D. 1872. Said stock to be fully paid whenever eighty-five per cent of the par value shall have been paid into the treasury of the company; it being understood that none of said subscriptions shall be valid or obligatory until at least said amount of $118,000 of stock shall have been subscribed as aforesaid, and that thirty per cent deduction is made on the old stock of this company, as per vote of stockholders June 10, 1872.

'Dated at Middletown, this tenth day of June, 1872.'

He was elected a director, and acted as such for a short time, and paid his instalments regularly until he had paid $2,700. He then refused to pay any more; and, the corporation having been adjudged bankrupt, the plaintiffs, as assignees, brought the present suit to recover the unpaid instalments, amounting to $3,300.

Two defences were relied on by defendant: 1. That one of the conditions on which he agreed to pay was that thirty per cent of the old stock was to be deducted or extinguished, and this had not been done. 2. That the subscriptions had been obtained by fraudulent representations as to the condition of the company; that the whole proceeding was a fraudulent design to relieve the old stockholders of a broken corporation at the expense of the new subscribers; and that, as soon as he had learned enough of the condition of the company to become aware of this fraud, he abandoned the concern, and repudiated the contract.

This suit was brought in the District Court; and the judge of that court refused to charge the jury, when requested, that in the true construction of the subscription-paper, above quoted in full, the subscription was not obligatory until the thirty per...