Barnes v. Brown

• Decision Date: 20 January 1892
• Citation: Barnes v. Brown, 130 N.Y. 372, 29 N.E. 760 (N.Y. 1892)
• Court: New York Court of Appeals Court of Appeals
• Parties: OLIVER W. BARNES, Respondent and Appellant, v. GEORGE W. BROWN, Appellant, et al., Respondents.

130 N.Y. 372

29 N.E. 760

BARNES

v.BROWN et al.

Court of Appeals of New York, Second Division.

Jan. 20, 1892.

Appeal from supreme court, general term, first department.

Action by Oliver W. Barnes against George H. Brown, and James Seligman, Jesse Seligman, and David Seligman, as executors of Joseph Seligman. The general term dismissed the complaint as to the executors, and reversed the referee's decision, which awarded only nominal damages against Brown. Plaintiff and Brown appeal. Affirmed as to the executors, and reversed as to Brown.

The other facts fully appear in the following statement by BRADLEY, J.:

The action was brought to recover damages for the alleged breach of contract of which the following is a copy, towit: ‘Oliver W. Barnes having, by instruments bearing even date herewith, assigned and transferred to us, George H. Brown and Joseph Seligman, all claims and demands against the New York City Central Underground Railway Company, and his title to certain subscriptions to the capital stock of said company, and also any interest he may have in a certain alleged contract made with the said company by Francis P. Byrne, and having also transferred sixty shares of stock in said company: Now, we, George H. Brown and Joseph Seligman, do hereby, in consideration of the premised and of one dollar to us paid by the said Oliver W. Barnes, agree that we will, upon certain amendments to the charter of the said New York City Central Underground Railway Company, now pending before the legislature of the state of New York, becoming a law, pay, or cause to be paid, to the said Oliver W. Barnes, his representatives and assigns, the sum of twenty-seven thousand five hundred dollars in currency of the United States, being the amount of certain advances made and services rendered by the said Barnes to the said railway company; and also that we will cause to be delivered to the said Barnes or his assigns at the time of the payment of the said money two thousand shares of the capital stock of the said railway company, which said stock is to be full-paid stock. And we further agree with the said Oliver W. Rarnes, his representatives and assigns, that, in the event of the said amendments not becoming a law at the present session of the legislature, we will either cause said money to be paid, and said two thousand shares of stock delivered to the said Barnes or his assigns, or have reassigned to the said Barnes or his assigns the claims, demands, and rights so assigned to us, and transfer to him or his assigns the said sixty shares of stock so transferred to us the next day after the close of the present session of the legislature of New York. And we further agree that not more than one hundred additional shares of the stock of said company shall be issued until the said payment be made and stock delivered without the consent of the said Barnes, and that so much of said one hundred shares as shall be issued shall be transferred to the said Barnes, if we do not exercise our option of paying said twenty-seven thousand five hundred dollars, and delivering said two thousand shares on the failure of the said amendents to become a law at the present session. And we further agree that no contract for the construction of the railway of the company shall be entered into without the consent of the said Barnes until the said money shall be paid and the stock delivered. In witness whereof we have hereunto set our hands and seals this twenty-sixth day of March, in the year one thousand eight hundred and seventy-two. GEORGE H. BROWN. [L. S.] JOSEPH SELIGMAN. [L. S.]’ When, in 1882, this action was commenced, Joseph Seligment had died, and executors of his will werejoined as defendants with Brown. The alleged default was in the failure or refusal to deliver to the plaintiff the 2,000 shares of the stock of the railway company, as Brown and Seligman had undertaken by the contract. The plaintiff sought to recover $200,000 and interest. The referee found that the stock had no value, and directed judgment against Brown for nominal or six cents damages; and as to the defendants (executors) the referee directed judgment of dismissal of complaint. The general term affirmed the latter, and reversed the judgment for nominal damages, and as to the defendant Brown granted a new trial.

Edward C. James and Ira Leo Bamberger, for plaintiff.

Hamilton Odell,John E. Parsons and George W. Seligman, for defendants.

BRADLEY, J., ( after stating the facts.)

The main controversy has relation to the rule or measure of damages applicable to the breach of the contract upon which this action was founded. While the plaintiff claims that damages cannot be less than $200,000 and interest, it is insisted on the part of the defense that they were only nominal. Before proceeding to the consideration of the question in that respect, reference may properly be made to the facts out of which the alleged claim arose. The New York City Central Under-ground Railway Company was organized under an act incorporating it, and authorizing the company to construct and operate an under-ground railway in the city of New York, passed in 1868, and amended in 1869. The authorized capital stock of the company was $10,000,000. At the time the contract of March 26, 1872, was made, the plaintiff was president of the company. He then had some claims against it, and only 117 shares of capital stock had been issued, of which he held 63 shares. By the transfer of the 60 shares to Brown and Seligman, they took the control of the organization of the company. The amendments to the charter then pending in the legislature did not become a law, and consequently it was optional with them to either retain their purchase and pay, or surrender what they had received, and put an end to the contract. They, however, concluded to treat it as effectual, and assumed the undertaking to perform, and afterwards did pay to the plaintiff the $27,500, and did deliver to the plaintiff certificates of 2,000 shares of the capital stock of the company. This was apparently full performance. But in fact was not, because that so delivered was not paid stock; and when this was discovered by the plaintiff he offered to return the certificates, and demanded such as he was entitled to. Further performance was refused, and this action followed. The only question as against the defendant Brown was one of damages; and the referee found that at the time when he and Seligman undertook to deliver the stock to plaintiff it had no actual or market value, and determined that he was entitled to recover nominal damages only. The stock certainly had no market value. None was in the market. This finding and conclusion were challenged by the plaintiff's exceptions. By reference to the condition of the company, it is seen that the total amount of money received by it on account of subscriptions to its stock was $5,700, and that was received in 1869 and 1871. The other credits to the capital stock account were in demand loans and special services rendered the company. The various efforts prior to 1872 were unsuccessfully made to raise money for the purpose of construction of the railway, and the reason why the bonds of the company could not be negotiated was that it had been unable to obtain subscriptions to its capital stock to pay for right of way. The land and consequential damages incident to the construction of the railway were estimated at $5,000,000; and the expenditures by the company for work done towards construction and for land and land damages did not exceed $4,000. The indebtedness of the company was about $350,000. This was, in general terms, the situation of the company when the contract of March 26, 1872, was made; and it was known as well to Brown and Seligman as to the plaintiff. Whatever of value they took by the contract was in the franchise of the company, and was dependent upon the use which could be made of it by way of the construction and operation of an under-ground railway. While the futility of the enterprise tended to show that it never had any actual value, there evidently was hope and expectation of success entertained by Brown and Seligman when they elected to retain the benefit of the contract, and it is in that view insisted by the plaintiff that the stock then had a value which to him may at that time have been available, although later it turned out to have had none, and therefore he lost whatever he may have realized by its conversion, if it had in due time been delivered to him. There is apparently some force in this suggestion, but it is entirely speculative, assuming that the stock then in fact had no actual value as well as no market value. There was some conflict in the expert evidence upon the subject, founded upon the situation of the company. While that on the part of the defendants was that the stock had no value, that of the witnesses called by the plaintiff was to the effect that it was, as the situation then appeared, worth par. It may be observed that the plaintiff held the stock represented by the certificates so delivered to him until about September 1, 1874, upon the assumption that it was full-paid stock, before his discovery that it was otherwise.

The finding of the referee that the stock had neither actual nor market value was supported by evidence, and for the purposes of this review must be deemed conclusive. But it is insisted by the elarned counsel for the plaintiff that the plaintiff should nevertheless have received the $200,000 and interest upon it because he was entitled to the stock or to a...