Heidler v. Werner & Co.

• Citation: 128 A. 237
• Decision Date: 16 March 1925
• Docket Number: No. 115.,115.
• Parties: HEIDLER v. WERNER & CO.
• Court: United States State Supreme Court (New Jersey)

128 A. 237

HEIDLER

v. WERNER & CO.

No. 115.

Court of Errors and Appeals of New Jersey.

March 16, 1925.

(Syllabus by the Court.)

Appeal from Court of Chancery.

Suit by Ernest Heidler against Werner & Co. From decree for complainant (95 N. J. Eq. 374, 124 A. 49), defendant appeals. Affirmed.

William O. Mickel, of Paterson, for appellant.

Joseph J. Weinberger and Irving L. Werksman, both of Passaic, for respondent.

PARKER, J. This is a suit to foreclose a mortgage given by defendant to complainant. Complainant was the owner of 195 shares out of a total authorized capital of 250 shares in the defendant corporation. Five of the 195 shares stood in the name of complainant's son, the rest in his own name. He desired to sell out, and after some negotiations with one Rose, an outsider, it was agreed that Rose should take over the 195 shares for $15,000. Rose did not have the cash. After further negotiation it was agreed that the defendant corporation should make a mortgage to complainant for $15,000, and this mortgage was to be the consideration for the transfer of the 195 shares of stock. This arrangement was carried out, the stock was transferred, complainant's interest in the company ceased, and thereafter the mortgage was executed in due form. The present suit is to foreclose this mortgage.

The first defense set up in the answer was that complainant had agreed to loan the $15,000 to the defendant, but never did so. This was not even mentioned at the hearing. The second defense was that complainant induced Rose to take over the stock by false representations as to its value. This was expressly waived at the hearing;

The third defense was that the complainant had agreed to pay for the remaining 55 shares treasury stock, which in fact were issued to one Werner, his original associate in the enterprise, and that he did not pay for them, so that the consideration for the mortgage failed to that extent. This is not borne out by the evidence. Whatever was done in this regard had to do with the original formation of the company, and not with the mortgage, as will presently appear.

The fourth defense is that, when the company was formed, complainant acquired the stock interest held by him by putting in real estate consisting of a machine shop and contents, and a small house adjoining, at an excessive and fictitious valuation. If this is relevant to the present issue, it is not supported by the evidence. It seems to be true that complainant received more in face value of stock for the property than it had cost him in cash a short time previously, but there is little or nothing to show that it was not worth fully what the corporation paid for it, and it is undeniable that at the time of the hearing in October, 1923, it was worth at least double what had been paid for it in 1918.

The precise arrangement at the time of organization, looking to the taking over of property and issue of stock therefor, is a little difficult of ascertainment. We have the usual resolution in' that regard, unanimously adopted by the directors. This places a value of $19,500 on the property and authorizes issue of capital stock to that amount for the same. Then follows...