Burbank v. Farnham
| Decision Date | 01 April 1915 |
| Citation | 220 Mass. 514,108 N.E. 492 |
| Parties | BURBANK v. FARNHAM et al. |
| Court | United States State Supreme Judicial Court of Massachusetts Supreme Court |
Lee M Friedman and Swift, Friedman & Atherton, all of Boston, for appellants.
Jasper N. Johnson, of Boston, for appellee.
DE COURCY, J.
One W H. Dennis induced the defendants Farnham and Nelson individually to join with him in forming a company to be known as the Maine Products Company. Dennis employed the Corporation Security Company to incorporate the Products Company under the laws of Maine. An organization meeting was held in Biddeford, Me.; and on December 18, 1912, at a meeting held in Boston, Dennis was elected president, the defendant Farnham treasurer, and the defendant Nelson secretary. By vote of the directors Dennis was given full power to sell stock of the Maine Products Company, and to indorse checks, which were later to be turned over to the treasurer. For some unexplained reason the company did not in fact receive a charter from the state of Maine.
The plaintiff entered into negotiations with Dennis in relation to the new company, and as a result gave him (Dennis) a check for $450, dated April 10, 1913, and payable to the order of Maine Products Company; and he received a certificate for 5,000 shares of the capital stock of the Maine Products Company. All the plaintiff's dealings and arrangements were with Dennis, who was the only person he knew in connection with the company, until he made a demand on the defendants in August.
The plaintiff's check was brought by Dennis to the office of Farnham and Nelson and was cashed by them at its request--$200 being paid to Dennis at the time and the balance later, on his order. The stock certificate given to the plaintiff was one of a number that Farnham had given to Dennis, signed in blank. It appeared that the defendants had no experience with corporation matters, that they believed a charter had been issued and the corporation legally organized, and that they paid out more than was received from this, the only sale of stock.
The plaintiff's grievance is that he contracted to buy stock in a Maine corporation, and that what he received was not stock in a corporation. Assuming in his favor, without so deciding, that the Maine Products Company was not a de facto corporation, and that he is not estopped to impeach the legality of its organization, it is to be noted that he is not seeking the repayment of his money from Dennis, who is alleged to have practiced the fraud upon him. This action is brought against Farnham and Nelson as copartners. It is settled that the plaintiff cannot rescind the contract of purchase and recover against the others associated with the attempted incorporation on the ground that the members of the invalid organization became partners. Perry v. Hale, 143 Mass. 540, 10 N.E. 174. As to the firm of Farnham & Nelson, the only connection they had with the sale to the plaintiff was...
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