Fletcher v. Newark Tel. Co.

• Decision Date: 19 November 1896
• Citation: 35 A. 903,55 N.J.E. 47
• Parties: FLETCHER v. NEWARK TELEPHONE CO.
• Court: New Jersey Court of Chancery

35 A. 903

55 N.J.E. 47

FLETCHER

v. NEWARK TELEPHONE CO.

Court of Chancery of New Jersey.

Nov. 19, 1896.

(Syllabus by the Court.)

Bill by Catherine Fletcher against the Newark Telephone Company for specific performance. On demurrer to bill. Overruled.

George Biller, for demurrant.

William P. Martin, for complainant.

PITNEY, V. C. The bill, though inartistically drawn and framed, states with sufficient clearness and precision the following facts: That the complainant is the holder of 730 shares in the capital stock of the Newark Mutual Telephone Company, which was organized in the year 1895, and became possessed of certain contracts, franchises, and properties, and that later on, owing to some doubt as to the strict legality of the organization of that company, the defendant, the Newark Telephone Company, was organized for the purpose of carrying on the same business which had been within the grasp of the Mutual Company, and entered into "a certain agreement with the Newark Mutual Telephone Company, and with the stockholders thereof," whereby the defendant agreed to take and absorb the entire business of the Mutual Telephone Company and its contracts with its subscribers for telephone service, and assume all of its contracts for such service, and its other contracts, franchises, properties, etc., and also agreed "to pay and deliver therefor, to the stockholders of the said Mutual Telephone Company, the stock of the Newark Telephone Company, share for share, and issue the same to the stockholders of the said Mutual Telephone Company upon surrender of their certificates of stock in the said Newark Mutual Telephone Company to the defendant." Though this language indicates a contract made by the defendant "with the stockholders" of the Mutual Telephone Company jointly or as a body, yet I construe it to mean, not a joint contract, but a contract with each one of the stockholders of the old company severally in their individual capacity. The contract was to issue stock to the stockholders of the old company, share for share, upon the surrender of their certificates of stock, which I construe to mean their certificates of stock severally. The contract could not well be made with the stockholders collectively or jointly for the exchange of certificates of stock with each individually. Such was the construction put upon the language of the contract by counsel for demurrant in his argument. The bill alleges, further, that the old company transferred, assigned, granted, and set over unto the defendant all of its properties, contracts, rights, choses in action, and other assets, and fully performed the agreement before mentioned; and that the defendant company has issued and exchanged its stock (which I construe to mean certificates of its capital stock) to and with the stockholders of the old company, share for share, with the exception of the 730 shares held' by the complainant, and about 1,000 in addition. The total number of shares of capital stock issued is not stated, nor the names of any other stockholders given. It alleges a tender of the certificate of stock held by the complainant to the defendant, and a demand of the issue of stock to her prior to the filing of the bill. The prayer is that the defendant may specifically perform its contract by issuing the certificate of stock to the complain ant.

The demurrer is, generally, for want of equity, and, specially, for want of parties. The ground of want of equity was not pressed at the argument, but reliance was bad entirely upon the want of parties. The contention was that all the stockholders of the old company must be made parties, either complainants or defendants, or that the complainant must sue on behalf of herself and all other stockholders who choose to come in. I think that the point is not well taken, and not supported by the authorities cited. The bill has only a faint resemblance to one where a suit is brought by creditors for a distribution of a fund held by defendant, either in trust or otherwise, for their benefit. In such case it is usually necessary to ascertain, first, the amount of the fund, and, next, the total amount due the creditors or other cestuis que trustent among whom it is to be divided. Hence such a suit must be brought for the benefit of all the creditors. That was the case in Wetherbee v. Baker, 35 N. J. Eq. 501, which was a suit by a creditor of a corporation against its stockholders to compel them to pay their subscriptions to its capital stock, in order to create a fund out of which the complainant could be paid his debt. Clearly, the complainant could get no preference by bringing his suit, but must share with all the creditors, and the amount to be contributed by the defendants was limited to the amount necessary to pay the outstanding debts, not exceeding, however, the amount of their unpaid subscriptions; so that it was necessary to determine the amount of outstanding debts, and take an account of the other assets of the corporation, in order to ascertain how much should be contributed by the stockholders, and what percentage should be paid to each creditor if the resultant fund should prove insufficient to pay in full. The language used by the learned judge on pages 506 and 507 clearly does not reach and cover the case here in hand. In Cutler v. Turtle, 19 N. J. Eq. 549, Mr. Cutler bought property in trust for certain persons, to be ascertained, and the complainant, Miss Tattle, sued him, claiming that she was entitled to the whole of the property, because she had furnished the whole of the purchase money. On the other hand, Daniel L. Turtle claimed that he was entitled to an interest in it, and was one of the cestuis que trustent. It was held that Daniel L. Tuttle should have been made a party, because his rights were liable to be affected by the decree. The language used (page 555) is this: "In the decision of the question upon which the suit must hinge, Daniel L. Tuttle's rights are involved, and must be passed upon by the court. His interests, to a certain extent, are also liable to be affected by the decree made in this suit." And in view of those facts, the learned judge used the general expression that "the rule requiring all persons interested in the subject of the controversy to be made parties to the suit grows out of the constitution of a court of equity," etc. The statement of the Interest which Daniel L....