Simons v. Vulcan Oil and Mining Co.

• Decision Date: 11 May 1869
• Citation: 61 Pa. 202
• Parties: Simons <I>et al. versus</I> The Vulcan Oil and Mining Company.
• Court: Pennsylvania Supreme Court

Page 202

61 Pa. 202

Simons et al. versus The Vulcan Oil and Mining Company.

Supreme Court of Pennsylvania.

February 25 and 26, 1869.

May 11, 1869.

February 25th and 26th 1869.

Before THOMPSON, C. J., READ, AGNEW, SHARSWOOD and WILLIAMS, JJ.

Error to the District Court of Philadelphia: No. 53, to January Term 1869.

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A. M. Burton and T. Cuyler, for plaintiffs in error.—As to 4th to 8th specifications, cited Acts of 27th March 1854, § 8, Pamph. L. 216; July 18th 1863; Gerhard v. Bates, 2 E. & B. 476; Burns v. Pennell, 2 H. L. 497. As to 9th, 1 Greenlf. on Ev. § 53; Chitty on Contracts 81; Selden v. Williams, 9 Watts 9; Ellmaker v. Ellmaker, 4 Id. 89; Hart v. Hamett, 18 Vt. 127; Eaton v. Smith, 20 Pick. 150.

As to the charge: To make a resulting trust the money must have been paid before or at the purchase by the cestui que trust: Hill on Trustees 97; Magee v. Magee, 1 Barr 405; Freeman v. Kelly, 1 Hoffman's Ch. R. 90; Jackson v. Moore, 6 Cow. 726; Batsford v. Burr, 2 Johns. Ch. 409; Conner v. Lewis, 16 Maine 274; Pinnock v. Clough, 16 Vt. 506; Edwards v. Edwards, 3 Wright 378. Promoters of a company are not agents for the company: Lindley on Partn'p. 25, 27, 319; Shrewsbury v. N. S. Railway Co., Law Rep. 1 Eq. 614. The prospectus, the articles of association and the certificate, as recorded, form the basis of the contract between the company and the subscribers to its stock: L. Brown on Companies Act 2, 3; Wordsworth on Joint Stock Companies 199, 200, 235, 246; Fox v. Clifton, 6 Bing. 776; Lindley on Part'p. 25, 497; Bank v. Tyrell, 5 Jurist N. S. 924; Great Luxemburg Railway, 4 Id. 839. Without actual fraud shocking inadequacy of price does not render a sale void: Davidson v. Little, 10 Harris 245; Hill on Trustees 152; Kerr v. Kitchen, 7 Barr 486; Dorsey v. Jackman, 1 S. & R. 52. The policy of the law in Pennsylvania is not opposed to a person being at the same time a partner in two firms: Act of April 14th 1838, Pamph. L., § 1, Purd. 776, pl. The means of knowledge were open to all the parties; the plaintiffs slept on their rights till the property had declined in value and they should not recover: Piarsoll v. Chapin, 8 Wright 9; Rockafellow v. Baker, 5 Id. 319.

E. S. Miller, for defendants in error.—As to Amon's competency: Fell v. McHenry, 6 Wright 41; Gillespie v. Miller, 1 Id. 250; Grove v. McCalla, 1 Am. Law Reg. 251. The specifications from 14 to 22 are not according to the rule: Criswell v. Altemus, 8 Harris 124; Hutchinson v. Campbell, 1 Casey 273; Rice v. Farmers' and Drovers' Bank, 10 Harris 119. Money had and received lies wherever ex æquo et bono money in the defendant's hands should be received by the plaintiff: Hunter v. Welsh, 1 Stark. 224 (178); Powell v. Reese, 7 Ad. & E. 426; Roscoe's Ev. 413; Hill v. Perrott, 3 Taunt. 274; Smith v. Jameson, 5 T. R. 601; Marsh v. Keating, 1 Bing. N. C. 216; Stone v. Marsh, 6 B. & C. 565; Eastwick v. Hugg, 1 Dall. 223; Morris v. Tarin, Id. 147; D'Utricht v. Melchor, Id. 428; Rapalje v. Emory, 2 Id. 54; Dorsey v. Jackman, 1 S. & R. 61; Bogart v. Nevins, 6 Id. 368; Irvine v. Hanlin, 10 Id. 219; Mathers v. Pearson, 13 Id. 258; Hinkle v. Eichelberger, 2 Barr 484. As to the joint liability of the defendants: Ex parte Shakeshaft, 3 Brown's Ch. C. 197; Story's Eq. Jur. §§ 1225, 1282; Fellows v. Mitchell, 1 P. Wms. 83; S. C. 2 Vern. 504-415; 2 Fonbl. Eq. b. 2, ch. 7, § 5; Clark v. Clark, 8 Paige 152; Williams v. Nixon, 2 Beav. 472; Hill on Trustees 520, 814; Gilchrist v. Stevenson, 9 Barb. 16; Lewin on Trustees 767, 768; Lindley on Part. 250, 300; Sleech's Case, 1 Mer. 563; Baring's Case, Id. 614; Sadler v. Lee, 6 Beav. 324; Brydges v. Branfil, 12 Sim. 369; Blair v. Bromley, 2 Ph. 359; Wilson v. Moore, 1 M. & K. 127, 337; The Attorney-General v. Wilson, 1 Craig & Phil. 1; Munch v. Cockerell, 8 Sim. 219; Walker v. Symonds, 3 Swanston 1; Lyle v. Kingdom, 1 Collyer's Ch. Rep. 184; Wilson v. Moore, 1 Myl. & K. 127; Vandebende v. Livingston, 3 Swanst. 625; Perry v. Knot, 4 Beav. 176; Marsh v. Keating, 1 Bing. N. C. 216; Stone v. Marsh, 6 B. & C. 565; Smith v. Jameson, 5 T. R. 601; Holmes v. Higgins, 1 B. & C. 74; Lucas v. Beach, 1 M. & G. 417; Story on Part. §§ 166, 167; Story on Agency, § 232. Conspirators are jointly liable: Hinchman v. Richie, Brightly's Rep. 143; Shaple & Warner v. Page & Page, 12 Verm. 519; 2 Hilliard on Torts 454; Kimmell v. Stoner, 6 Harris 156; Kimmell v. Greeting, 2 Grant's Cases 125; Colt v. Woolaston, 2 P. Wms. 154; Hichens v. Congreve, 4 Russell 562: Green v. Barrett, 1 Sim. 45; Blain v. Agar, 2 Sim. 289; Cridland v. De Mauley, De G. & S. 459; Beechey v. Lloyd, 3 Drew. 227; Aycinena v. Peries, 6 W. & S. 243; Martzell v. Stauffer, 3 Pa. 393; Haldane v. Fisher, 1 Yeates 121; Nockels v. Crosby, 3 B. & C. 814; Wontner v. Shairp, 4 Com. B. 404; Jarrett v. Kennedy, 6 Id. 319; Walstab v. Spottiswoode, 15 M. & W. 501; Watson v. The Earl of Charlemont, 12 Q. B. 856; Smith v. Jamieson, 5 Term R. 601; Dundas v. Muhlenberg, 11 Casey 351; Heudebourck v. Langton, 3 Carr. & P. 566.

The opinion of the court was delivered, May 11th 1869, by THOMPSON, C. J.

A great point of contest on the trial below was as to the capacity in which the defendants acted in acquiring the territory on which operations in mining for oil were to be inaugurated and carried on by a company intended to be formed; and whether they professed to their associates and the public that they had purchased it for the company and were conveying it to the company at original cost, content like other shareholders to take their chance of profits out of the stock to be issued. There was much testimony on the point, tending to prove these to have been their representations. Besides the deeds from their vendors, which exhibited on their face as considerations paid, sums greatly in excess of those actually paid, prospectuses were issued by them in connection with their associates for circulation and publication in newspapers, representing that the lands acquired were obtained at first cost from the vendors. All the testimony on this point received by the court, was submitted to the jury with full and explicit instructions, by the learned judge trying the case. In these instructions was contained the principle accurately announced, that if the defendants in fact acted as agents of the company in acquiring the property, they could not charge a profit as against their principal. Nor was their position any better if they assumed so to act without precedent authority, if their doings were accepted as the acts of agents by the association or company. If in order to get up a company they represented themselves as having acted for the association to be formed, and proposed to sell at the same prices they paid, and their purchases were taken on these representations, and stockholders invested in a reliance upon them, it would be a fraud on the company, and all others interested, to allow them to retain the large profits paid them by the company in ignorance of the true sums actually advanced.

On the facts as submitted, the jury found against the defendants, and we are now to see whether there was any error in the law as laid down by the court.

In Lindley on Part. 497, the principles arising on facts like those referred to, are very succinctly stated. The language of the learned author, after stating the rule that neither partners nor directors of a company are at liberty to make individual profits out of the business of the concern without the knowledge and assent of associates, says: "The rule under consideration is peculiarly applicable to transactions which precede the formation of a company or partnership. Judging from recent events and disclosures, nothing seems more common than for a person in getting up a company to obtain for the company property of which it is in want, and try and make the company pay him more than he gave for it. Such a transaction can never stand. There may undoubtedly be a valid sale to a company by persons engaged in getting it up; but once let it be shown that the alleged vendor obtained the property when it was his duty to obtain it for the company, and it immediately follows that he cannot, without the fullest disclosure on his part, charge the company with more than he actually gave." To the same effect also is the opinion of Sir J. Romilly, M. R., in The Bank of London v. Tyrrell, 5 Jurist, N. S. 924. See also the same principle in the Great Luxembourg R. R. Co. v. Magney, 25 Beav. 586.

The principle is undoubtedly the same where parties profess to have acted for a company and their purchases have been accepted on representations that they were made for it. In one or the other of these attitudes, namely, as agents of a company to be gotten up, or as having professed so to have acted, the jury must have found they stood. In either, it seems clear, they could not legally retain the advance price on the property which they received.

To ascertain whether the result arrived at through the finding of the jury is to stand, we will consider first the exceptions to the ruling of the court on points of evidence:

1. The exception to the exclusion of a portion of W. L. Humphrey's deposition, was not much insisted on in argument, nor could it well have been, and we dismiss it without further notice.

2. The 2d and 3d exceptions relate to reception in evidence of the prospectuses of the Vulcan Oil Company, published on the 27th November and the 17th December 1864. We think they were admissible, without doubt, in the circumstances of the case. Notwithstanding the action was in form ex contractu, yet it could only be successfully maintained by showing...