Fougeray v. Conn

• Decision Date: 18 June 1892
• Citation: 50 N.J.E. 185,24 A. 499
• Parties: FOUGERAY v. CONN et al.
• Court: New Jersey Court of Chancery

24 A. 499

50 N.J.E. 185

FOUGERAY

v. CONN et al.

Court of Chancery of New Jersey.

June 18, 1892.

(Syllabus by the Court.)

Bill by Rene J. Fougeray against Samuel S. Cord, Charles Korb, Samuel T. Cord, the Laurel Springs Land Company, and the Laurel Springs Land & Improvement Company, to recover a share of the profits arising from the sale of land, and to set aside certain conveyances on the ground of fraud.

M. P. Grey and Charles R. Stevenson, for complainant.

V. J. Pancoast, John F. Harned, and Mr. Smithers, for defendants.

PITNEY, V. C. On the 2d day of April, 1889, the complainant and the defendants Samuel S. Cord and Charles Korb associated themselves together, and formed a corporation, and adopted the name of the "Laurel Springs Land Company." The certificate declared that the business of the company was to be conducted in the town of Laurel and in the city of Camden, and also in the city of Philadelphia. The object of the organization was "the buying, selling, and exchanging of real estate, and the improvement of the same." The capital stock was fixed at $1,500, divided into 30 shares of $50 each, and with that sum the company was to commence business; and that the 30 shares of stock were divided equally between the three incorporators. The corporation had in view the purchase of a farm of 85 1/2 acres owned by one Stafford, situate at the village of Laurel, upon which the complainant claimed to have an option of purchase at $8,550. In point of fact he had ascertained that Stafford was willing to sell at that price; that the land was near a railroad, and suitable for cutting up into building sites; and he had a verbal agreement or understanding, and no more, with Stafford that he would sell him the land at that price within a reasonable time. Having this so-called option, and being himself without funds to carry out the enterprise, he called upon S. S. Cord, and proposed to him to join him in it. S. S. Cord called in Korb, and the two—Cord and Korb—joined the complainant in the enterprise, and raised $3,050, cash payment necessary to purchase the property, and on the 30th of March, 1889, four days prior to the organization of the corporation, Stafford conveyed his farm to S. S. Cord, and he gave back a consideration money mortgage for $5,500, which, with $3,050 cash, made up the purchase money of $8,550. On the 8th of April, 1889, and after the organization of the corporation was completed, Cord conveyed the property to the corporation subject to the mortgage aforesaid. The company then organized, with the three corporators as directors, and with Cord as president, and Korb as secretary and treasurer, and proceeded to issue to each other certificates of stock, 10 shares to each, according to the apportionment contained in the certificate of incorporation, that of complainant being dated May 21, 1889, and signed by Cord as president and Korb as secretary and treasurer. No cash was paid by either for his stock, which represented nothing more than prospective profits, which, according to the preliminary agreement, was to be equally divided between the three. The corporators proceeded to have the farm laid out into streets and lots, and Cord and Korb undertook to make sales, in which they were very successful. The sales were made on the installment plan, a cash payment being made and a contract given to the purchaser for the delivery of the deed upon the payment of the balance in monthly installments. By a statement made up by Korb for the meeting of the stockholders on the 1st of April, 1890, after one year's existence, the financial situation of the corporation was shown as follows:

Gross amount of sales to date, 203 lots, at a value of.

$47,010 00

RECEIPTS.

Money received on account of lots

$10,746 58

EXPENDITURES.

For payment of mortgage, interest on mortgage, improvements, and other incidental expenses

$10,556 52

$ 190 06

ASSETS.

Amount due on lots sold

$36,263 42

Estimated value of unsold lots

20,000 00

Balance in treasury

190 06

$56,453 48

EXISTING LIABILITIES.

Commissions on sales, 20%

$9,312 00

Interest due on bonds

183 00

Bonds outstanding

3,050 00

Secretary and treasurer's salary

3,600 00

President's salary

3,600 00

$19,745 00

Estimated surplus

$36,708 48

At this annual meeting, the defendant Samuel S. Cord transferred one share of his stock to his father, S. T. Cord, and with the aid of Korb elected the said S. T. Cord a director in place of the complainant. In the statement above set forth the item of indebtedness of $19,745 is composed of outstanding bonds for $3,050 given to S. S. Cord and Korb, for the $3,050 cash payment advanced by them to the owner of the property, and the items of commissions and salary, amounting to $16,512, claimed by Cord and Korb to be duo to them for one year's services. This claim was attempted to be sustained at the hearing, on the ground that the complainant had failed to do anything towards aiding and furthering the enterprise, so that the whole burden fell on Cord and Korb, and justified them in paying themselves liberally for their services. These large charges, and dropping of the complainant from the direction, produced dissatisfaction on his part, and put a stop to anything like co-operation between him and his associates, and some litigation ensued, not important for present purposes. On the 10th of June, 1890, the two Cords,—father and son,—together with Korb, formed a new corporation called the "Laurel Springs Land & Improvement Company," similar in its provisions to those of the Laurel Springs Land Company, having a capital of $5,000, divided into 50 shares of $100 each, 48 of which were allotted to the defendant S. S. Cord, one to the defendant Korb, and one to Samuel T. Cord, the father of the defendant S. S. Cord. On the 13th of June the defendants caused to be executed by the Laurel Springs Land Company to the defendant Korb a deed of conveyance conveying the farm aforesaid, excepting the lots in the mean time actually conveyed, and two or three lots in addition thereto, in consideration of $5,000, and on the same day Korb, for the same consideration, conveyed the premises to the Laurel Springs Land & Improvement Company. The old company on the same day, under the same management, transferred to Korb all the contracts for the lots already taken, thereby denuding the old company of the greater portion of its property. These deeds of conveyance were lodged for record in the register's office of Camden county, and were each marked on their back with the words, "don't pub.," for the purpose of preventing their being given out to the newspapers for publication. These transfers were made without actual consideration paid, in pursuance of a set of resolutions adopted by the elder company as follows: "Whereas, this company heretofore, on or about the eighth day of April, 1889, purchased of Chas. Korb and Samuel S. Cord a tract of land situated at Laurel Springs, Camden county, for the sum of nine thousand five hundred and fifty dollars, a certain mortgage of five thousand five hundred dollars made by Samuel S. Cord to Montgomery Stafford forming part of the consideration, the balance of the price being secured by judgment bonds of this company to said Charles Korb and Samuel S.Cord, no cash having been paid; and whereas, this company has disposed of a large portion of said premises, the payment of much of which is to be paid for in monthly installments, and this company having collected a large number of said monthly installments and used the same in paying off said mortgage and defraying necessary expenses, whereby this company has incurred the obligation of conveying said sold portion to the purchasers thereof; and whereas, this company has been unable to pay to said Korb and Cord the money due them upon the obligation of the company; and whereas, this company is largely indebted to the said Korb and Cord for services and commissions, and has been unable, for lack of funds, to pay them the amounts due them for the purchase price of said lands or their services since rendered; and whereas, said Korb and Cord have signified their willingness to receive back the unconveyed portion of said premises, in liquidation of the original purchase price and all moneys due to them, excepting out certain lota, and to assume the contracts made by this company for the sale of a portion thereof, and have requested said conveyance to be made to Charles Korb: Now, therefore, be it resolved that this company do forthwith reconvey the unconveyed portion of said premises to Charles Korb, excepting thereout lots 5 and 6, section F, and 9, section A, in full satisfaction of the obligation and indebtedness of this company to said Charles Korb and Samuel S. Cord, he agreeing to perform all the agreements for the sale of any portions of said premises for which this company is now liable, and furnishing this company a release from Samuel S. Cord of all indebtedness. Kesolved, that all contracts for the sale of any portion of said premises be and the same are hereby assigned to Charles Korb, and the officers of the company are hereby requested to make and execute the necessary deed and assignments to carry out this resolution." The business of selling lots was conducted after these conveyances precisely in the same manner as before, the new company, under the management of Cord and Korb, recognizing and fulfilling the contracts of the old company whenever they matured, and Cord and Korb receiving payment of installments due and paid by purchasers on those contracts.

On the 23d of September, 1890, complainant, having acquired notice of these conveyances, filed his bill, with supporting affidanvits, setting forth some of the foregoing facts, and praying that he might be decreed to be entitled to the equal one-third part of the profits already derived and thereafter to be derived from the enterprise; that the conveyances by which the land was transferred from the first to...