Case ID: ad_111/html/0706-01.html
Source: Caselaw Access Project
Author: {"author": "Nash, J.:", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Geneva Mineral Springs Company, Limited, Appellant, v. Charles A. Steele and Others, Respondents, Impleaded with Mary E. Coursey, Appellant, and Others, Defendants.
    Fourth Department,
    March 7, 1906.
    Corporations — action to determine ownership of stock—findings unwarranted by evidence—Written declarations in claimant’s own behalf • inadmissible — stock certificate book not made evidence by statute.
    Action by a corporation to determine the ownership of certain shares of its cor- ' porate stock and to call in certain alleged' certificates, to declare certain, , certificates void, and to determine the rights of claimants, to stock,
    
      A judgment in favor of certain stockholders is reversed and a new trial granted because of the following erroneous findings and rulings by the referee:
    
      .First, when the by-laws provide that no director shall receive compensation for performing any special services except by a two-thirds vote, and that no debt beyond the current expenses of the company shall be contracted by the directors without the assent of a majority of t.he stockholders, a finding that certain stock issued to a director by mutual consent of the directors, but without formal resolution and without being countersigned by the legally elected treasurer, as required by the by-laws, was the property of said director is error. Evidence for and against the authority to issue said stock, considered.
    
      Second, when certain stock vras assigned by the holder in consideration of a note by the assignee expressly providing for a reassignment if the note should not be paid, and the-assignee never paid the note, and the assignor thereupon assigned all his interest in the note and the stock to another person, it is error, to find a title in the first assignee and to refuse to determine the title of the second assignee. All parties being before the court, their respective rights should have been determined.
    
      Third, when conflicting evidence as to the title of certain shares of stock has been received, and there is no specific finding as to whom said shares belong, a new trial is necessary.
    
      Fourth, it is error to admit statements indorsed on original canceled certificates made by the claimant himself which show his title to the stock issued therefor. Such declarations in the claimant’s own behalf are inadmissible, and a stock certificate book is not, like a stock transfer book, made competent evidence by Laws of 1875, chapter 611, section 17. .
    Appeal by the plaintiff, Geneva Mineral Spriiigs Company, Limited, and by the defendant, Mary E. Coursey, from a judgment of the Supreme Court in favor of certain of the defendants, entered in' the office of the clerk of the county of Ontario on the 11th day of March, 1905, upon the report of a referee.
    
      John Gillette and Myron D. Short, for the plaintiff, appellant.
    
      Charles A. Hawley, for the appellant Mary E. Coursey.
    
      William S. Moore, for the respondents Steele and others.
   Nash, J.:

The action is brought to determine the ownership of the capital stock of the plaintiff corporation; to call in certain certificates purporting to be certificates of its capital stock; to declare certain of SUeh certificates void, and that the respective rights of all persons who have or claim to have any of the shares of the capital stock of the plaintiff he determined.

The recital' of the history of the corporation and its affairs' is. required to show the necessity for and the particular purpose of the action.

In' 1885 Stephen Ooursey, Andrew J-. Eshenour and Charles A. Steele entered into an agreement by which Ooursey leased to himself, Eshenour and Steele a parcel of land in Geneva, known as Coursey’s mill lot, for the purpose of. boring for oil, gas or other mineral. A subscription was opened and money raised thereby to drill a well. The whole amount subscribed and paid in was $2,425. A contract was made with A. D. Branch (who- was on the subscription for $100) to drill the well. They did not find oil or gas, but struck a vein of mineral water. The plaintiff was organized in the year 1886. The certificate of incorporation provided for a capital stock of $3,000; 120 shares of $25 each. Upon the organization no money was paid, but each subscriber to the well was allowed one share of stock for each $25 subscribed to the drilling of the well. The object and nature of the' business of the corporation was the bottling and selling' and otherwise disposing of the water froin the well. - The plaintiff upon completing its incorporation took posses"sion of the lands and premises upon which the well was located ; made improvements thereon and engaged in the business for which the company was organized, managed by Steele as president and Ooursey as treasurer of the company. The business not being successful was .abandoned by the company. From December 1, 1886, for some eight years, no meetings of the directors of the company were held. The business during that time was conducted by Steele and Ooursey, -by Steele at first, who was in possession of the property, claiming it and the business as his own ; afterward by Ooursey who ousted Steele. After ousting Steele, Ooursey and his brother Thomas Ooursey, the owner of one-sixth of the fee of the premises, leased the property, with the privileges and appurtenances, include ing the spring, spring house and bath house, to Brooklyn parties at a yearly rental of ■ $6,000.

In the year 1894 a meeting of the stockholders of the plaintiff corporation was held and an election of officers- had, and an action was commenced by the company against the Oonrgeyg and. tMi lessees to have it adjudged that the plaintiff owned the original lease of 1885, Coursey to Coursey) Eshenour and Steele, and that the lease for $6,000 per annum inured to the plaintiff, and for an accounting by Stephen Coursey for the rents received, in which action the plaintiff had an interlocutory judgment for an accounting by Coursey and for a receiver to take the rents. The judgment was affirmed and an accounting was had, which resulted in a judgment against Coursey, the amount of which was reduced and the judgment finally affirmed by the Court of Appeals in the year 1902. (Geneva Mineral Springs Co. v. Coursey, 45 App. Div. 268; 57 id. 620; 171 N. Y. 664.)

After the determination of that action, in which the existence of the plaintiff as a corporation and its rights in the property were adjudged, this action was commenced to determine for the company who its stockholders really are so that it will be in a position to divide the moneys on hand and to accrue under the lease.

At the first meeting of the stockholders of the corporation held October 6, 1886, by-laws were adopted and Andrew J. Eshenour, Charles A. Steele, Stephen Coursey, Sidney S. Mallory and Mitchell H. Picot were duly elected as the five directors of the company, the number authorized by the by-laws. On the eleventh of October following the directors met, organized as a board of directors and elected Charles A. Steele, president; Andrew J. . Eshenour, treasurer, and Mitchell H. Picot, secretary of the company.

The b^-laws provided that 'certificates of stock should be signed by the president and countersigned by the treasurer. Mo certificates of stock were issued until May, 1887, when certificates of stock were issued signed by Charles A. Steele, president, and Stephen Coursey as treasurer, upon the request of Steele. Coursey was not treasurer of the company.

The referee finds:

Fourth. * • * *. It was determined by the subscribers and incorporators that all the shares of the plaintiff’s capital stock should be issued to the persons who had contributed' to the expense of drilling said well in proportion to their contributions, except $500.00 thereof, which it was determined should be sold for the purpose of reimbursing the defendant Coursey for expenses incurred-by him in addition to the amount of his subscription.
“Fifth. That accordingly plaintiff’s directors and officers 'by mutual consent, but without the adoption of any formal resolution to that effect by the board of directors, procured a stock certificate book and. a stock transfer book, and on or about the 9th day of May, 1887, the defendant Charles A., Steele, who was the duly elected president of tlie company, and the defendant Stephen Coursey, who was . the acting, though not the legally .elected treasurer of the company, made'and delivered to the persons who had contributed to the expense of drilling the well or their transferees, certificates of-stock in the plaintiff company in proportion to the amount of which each had contributed, except that they made, and executed to the defendant, Charles A. Steele, certificate Mo. 29, for 20 shares. That these certificates were all dated October 15, 1886, and no seal was affixed to the certificates, the company having no seal at that time.
“ Sixth. That said cértificate Mo. 29 for 20 shares, was issued to the said defendant Charles A. Steele, after an unsuccessful attempt to sell the same had been made for the purpose of using the proceeds to reimburse the defendant Coursey, for said expenses incurred by him in drilling the well, over and above the amount of his subscription, by the consent of a majority of 'the directors, and on the agreement of the said Charles A. Steele to pay to said Coursey $300.00 of the moneys so expended by said Coursey, and said Coqrsey’s consent to accept that sum, and that said Chañes. A. Steele did pay said $300.00 to said Coursey.”

These findings, so far as they relate to certificate Mo. 29 for twenty shares, issued to the defendant Steele, are challenged by the plaintiff corporation as wholly unsupported by the evidence, and ■ that the Conclusion of law therefrom, that tlie defendant Steele thereby became the lawful owner of said certificate Mo. 29 and of the twenty shares of stock, is erroneous.

The contention of counsel for the plaintiff is that, according to Steele’s testimony, his title to these twenty shares depends upon a. private arrangement between Messrs. Steele, Coursey anil Eshenour, whereby lie (Steele) was to pay $300- to cover expenditures made by him previous to incorporation and to receive. credit for $200 upon , his own-services. The plaintiff did not assume any obligation to Coursey by vote of the stockholders or directors. Meither was Steele allowed any compensation by vote of stockholders or directors. The former could be done only by vote of a majority of all the stockholders, and the latter by a vote only oí two-thirds of the directors, exclusive of Steele.

Mr. Steele, examined as a witness in his own behalf, was permitted to testify that in addition to what appears in the minutes of the meeting at which the officers of the company were elected by the directors on October 11, 1886, Mr. Coursey came before the meeting and stated that a twelve per cent assessment which had been made did not cover all the money- expended on the spring, and that “ there was a resolution offered there to increase the capital stock from $2,500 to $3,000 and make each share $25, issue and sell $500x more stock" to pay Mr. Coursey for moneys he had advanced —■ he said that the 12 per cent assessment did not cover it—something like three or four hundred dollars. The resolution was passed.”

It may be observed that the original certificate for the formation of the-corporation signed by Steele, Eshenour, Coursey, Mallory and Picot previously made, and which was filed September eighteenth, provided for a corporation with a capital of $3,000, with 120 shares of $25 each. Steele further says: “ I don’t think that there was any resolution passed about it. It was general talk. * * *

They all said they wanted me to sell this stock. * * * The matter was brought up or discussed at a directors’ meeting November 1st, 1886. * * * I reported at this meeting that I had been unable to sell any portion of this stock. Mr. Coursey brought up the .matter of wanting money. I reported that I had made'every effort that I knew how to dispose of this stock and could not get rid of any of it at any price; I said'I would pay Mr. Coursey $300 cash if I could raise the money for this stock and apply the balance on moneys I had paid out and work I had done, which was worth more than $200. Mr. Coursey and Mr. Eshenour were the only ones present besides myself, that is, November first * * * Mr. Coursey said and Mr. Eshenour said they wanted me to have this stock. JMr. Coursey said he would be very glad to have his money, and Mr. Eshenour said he would be very glad to have him paid, or words to that effect. * * * November 18, I borrowed the money and paid Mr. Coursey $300, and took a receipt. I have not that receipt. * * * Q. What was said at that meeting—in addition to what appears in the minutes of the meeting? * * * A. I told Mr. Eshenour that I had paid Mr. Coursey for this stock $300,. as proposed Movember first, and that I thought we ought to get out our stock certificate book — and both Mr. Coursey and Mr. Eshenour told me to have the certificates printed, to get out the book — that a good many 'people wanted their stock. * * * I was directed to get a stock book printed by Mr. Eshenour and Mr. Coursey. They were present at that meeting.; there was no one else present that I know of.”

The objections of the plaintiff to the awarding of these shares t® the defendant Steele are that the by-laws provided that no director1 should receive compensation for performing any special service for, .which compensation might be allowed, except by a two-thirds vote of the. directors, not including his own vote, and that no debt or liability beyond the current expenses of the company should be contracted -by the board of directors or any officer of the company without the assent of a majority of the stockholders. Furthermore, that it" Was not shown that Coursey had advanced moneys not covered by the. twelve per cent assessment to the amount of $300 or $40.0 or any other amount, or that Steele had paid out moneys and had done work for the company worth $20.0. v There were statements merely to that effect made,' as Steele says, at a. meeting when only three of the directors, including Steele and Coursey, were present, The testimony of Coursey is to the effect that the company was not indebted to him for the $300. His. testimony is that Steele paid him the $300 to apply upon an indebtedness of $447 of Steele to Coursey for borrowed moneys, the balance of which, $147, was included in a note given by Steele to Coursey, upon which the latter brought a suit against Steele, in which a recovery was had by Coursey. '

We think the objections of the plaintiff to the* judgment awarding these twenty shares of stock to the defendant Steele are well taken.

The appellant Mary E. Coursey contends that the third conclusion of law-of the learned referee .is erroneous, both for what it - I ? decides and for what it expressly fails to decide. The finding is as follows:

TM/rd. That the original transfer by Thomas Dunn (of) certificate Mo.. 12 for 2 shares, and by Charles A. Baldwin of certificate Mo. 21 for 2 shares, to Charles A. Steele, were sufficient to vest in said Steele the title to such shares, but whether a right exists in subsequent transferees from said Dunn and Baldwin to recover said shares for failure of said Steele to perform the contract of purchase, is not determined.”

Dunn held certificate Mo. 12 for two shares. On May 27, 1887, he assigned it to Steele, and received from Steele a paper, of which the following is a copy:

“ Geneva, May 25¿/i, 1887.
“ $50. One year from date I promise to pay T. Dunn or bearer, • Fifty dollars with use, for his interest in the Geneva Mineral Springs Co., which he has assigned to me, or (refund) the assignment to him with the added improvemeñts, without cost to him.
“G A. STEELE,”

Steele never paid the fifty dollars. Dunn indorsed upon the foregoing paper the following:

“For value received I assign all my interest and title to,Stephen Ooursey in this note and in the spring.
“THOS. DUMM.”

He also gave to Courséy the following paper:

“ Fifty Dollars. October 14, 1890.
“ For value received I hereby sell and assign all my right, title and interest in the Geneva Mineral Spring to Stephen Ooursey of Geneva, M. Y.
“THOS. DUMM.’-’

These papers were delivered to Ooursey.

The Baldwin case is precisely similar. He had two shares. Steele gave him a similar paper, which was transferred to Ooursey.

It would seem that, although, as the referee finds, the conditional transfers of these shares by Dunn and Baldwin were sufficient to vest the title in Steele, it went back in default of payment and passed by assignment to Ooursey.

In the eleventh finding of fact the Dunn shares are included in the schedule of shares stated to have been transferred to, and now owned and held by the defendant Charles- A. Steele, and the two • Baldwin shares are stated in the seventeenth finding to have been transferred to and are now owned and held by the defendant . Daniel E. Moore. How the latter acquired such -ownership does, not appear.' The judgment follows the conclusion of law as to both the Dunn and Baldwin shares, and as to those, ‘‘whether a right, exists in subsequent transferees from said Dunn and Baldwin to recover said shares for failure of said Steele to perform the contract of purchase, is not determined.”

The parties being all before-■ the court,-, their rights as to such shares should have- been adjudged. The omission is-a mistrial as to those shares. 1

A. D. Branch, the contractor, who drilled the well, subscribed $100 and paid his subscription., He was, therefore, a stockholder, entitled to four shares.

There is no specific finding in the report as to the four Branch shares1. He had disappeared at the time the corporation was. organized. Branch became indebted -to Coursey,"who sued in Justice's Court, got an attachment, levied On the stock, and it 'was sold;. Coursey bought it; he assigned all' of-his stock' to "his wife,. Mary E. Coursey. The Branch shares are claimed by the defendant Steele^ upon evidence given by himself. • . -

He testified: “ 1 bought two of those original Branch shares, and now hold them, I guess. I bought two from Stephen Coursey.How I know that I bought the two Branch shares is because I bought half, of Coursey’s subscription, it was not shares, it.was subscription. Of those subscriptions which Coursey and I got out, Mr. Coursey had one, Mr. Eshenour had one, and I .had two, representing Branch’s subscription to the "well. That is, when Coursey and I got ou’t these certificates, I. got out a certificate of six shares to Charles A. Steele, two of which represented the Branch subscription to the well. * * * I bought these two from Mi". Stephen' CourSey. The evidence I had of Stephen Coursey’s right or title to the Branch subscription, or any part of it, was that he made a levy on his property, and included that, and it was sold to me, and I paid for it.” • ' '

Mr. Steele also testified as follows regarding the Branch shares : “ Mr-. Coursey bought Mr. Marshall’s certificate of stock for two shares and subscription, and levied on A. D. Branch’s property and subscription;, he - sold Mr. Branch’s subscription, two shares to. me, one to Mr. Eshenour and kep fc one himself. He was an original subscriber for four shares, and the two shares he bought of Mr. Marshall early in 1886 and the one from Mr. Branch, made him seven shares.”

The case shows that Mr. Coursey put in $75 in addition to his original well subscription of $100, which entitled him to the original seven shares of stock represented by his original certificate of stock, g.nd, therefore, could not have included any of the Branch stock.

There is no specific finding in the report from which it can be determined to whom the Branch shares have been allotted by the judgment. '

The appellant Mary E. Coursey contends that twenty-six shares of stock, the title to which she claims by assignment from her husband, Stephen Coursey, were erroneously allotted to the defendant Steele as assignee of Coursey.' Coursey claimed that these twenty-six shares had never been assigned to Steele. Steele claimed them by a lost assignment. .

The question involves five certificates originally issued as follows: Ho. 8, to Phillips & Clark, four shares; Ho. 17, to E. J. Rogers, one share; Ho: 26, to A. J. Eshenour, eight shares; Ho. 27, to Coursey, seven shares; Ho. 33, to IT. M. Picot, six shares.

These certificates, returned for cancellation and new certificates, were pasted to the stubs in a stock certificate book, each of which is regularly assigned by writteP assignment signed,by the original holder, indorsed on ‘the back to Stephen Coursey, except the certificate originally issued .to Coursey for seven shares, on'which no assignment is indorsed.

The company’s stock transfer book had been lost and a new one made by Steele from his recollection of the contents of the other. This was offered in evidence and excluded.

On the back of each of the. originals of these five certificates in question, returned'and pasted in .the stock certificate book, there appears a written statement in the handwriting of Steele, to the effect that the certificate is one of twenty-six shares of stock assigned by Coursey to Steele.

On certificate Ho. 27 to Coursey, seven shares, on which there is no assignment indorsed, this writing of Steele is as follows:

' “This stock, represented by the within certificate No. 27 for seven shares, is included in the 26. shares stock sold and delivered and transferred to C. A. Steele on October 8tli,. 188.7,..by Stephen Coursey,, on stock transfer book No. I.
“C. A. STEELE.”

On certificate No. 26, to A. J. Eshenour, there is a transfer, to Coursey, as follows: , .

“Eor value received, I do heróby constitute- and appoint ’ S. Coursey, true and lawful Attorney for me and in my name to transfer to Stephen Coursey eight shares of the capital stock of the Geneva Mineral Spring Co., 'Limited. _,
“ Done at Geneva this the 26th day óf May, A. D. 1887.)
“A, J. ESHENOUR." ' [Seal].?’

Steele’s memorandum:

“This stock, represented by the" within certificate No. 26 for eight shares, is included in the 26 shares stock, sold and delivered and transferred to C. A. Steele on October 8th, 1887, by Stephen Coursey-on stock transfer book No: I.
“ C.. A. STEELE.”

And to the same effect are the memoranda indorsed on the certificates No. 33,.to H. M. Picot, six-shares p No. 17, to E. J. Rogers, one share ; No. 8, to Phillips & Clark, four shares.

The stock transfer book designated by Steele in-these memoranda as “stock transfer book No. I” refers to the lost stock transfer book.

Notations were' also made in .the handwriting of Steele on the stubs to which the certificates were, pasted of the assignments of the several certificates by Coursey to Steele.

This book of returned original certificates, including the statements indorsed upon- the certificates by Steele, and the notations or. the stubs, the entire book, was offered in evidence in Steele’s behalf, to which objection was made by counsel in behalf of Mrs. Coursey, and also by counsel in .behalf of the plaintiff. The ruling, and exceptions were as follows-: By the Referee: “The legal effect of any indorsement which Mr. Steele may have made in his own behalf will be received for disposition at the proper time. Book and all memoranda received. Exceptions taken.”

The record does not show any further disposition of the question as to the admission in evidence of the writings of Steele on the •certificates or on the stubs. They stand as evidence in the case.

The stock certificate book cannot be regarded as a stock transfer book, such as.was required by the statute under which the plaintiff was incorporated to be kept, and which was made presumptive evidence of the facts therein stated in favor of the plaintiff in any-suit or proceeding against a stockholder. (Laws of 1875, chap. 611, § 17.) Especially, the statement on the back of the several certificates : “ This stock, (Eskenour) represented by the within certificate Ho. 26 for eight shares, is included in the 26 shares stock sold and delivered and transferred to O. A. Steele on October 8th, 1887, by Stejihen Coursey on stock transfer book Ho. I. O. A. Steele.”

These writings, indorsed by Steele upon the returned certificates, must be regarded as having been made by him for his own benefit, not in the performance of his duties as an officer of the company, wholly self-serving, and, therefore, incompetent as evidence in the case for any purpose. The evidence was of the greatest importance upon the question at issue.

It is suggested that objéction was not specifically made to these indorsements upon the certificates. The entire certificate book was offered and objected to. The book contained the. objectionable statements upon the certificates and was," therefore, as a.whole, incompetent. Upon objection being made the offer should have been limited to the portions of the book deemed competent. If the objection had been sustained a specific offer would have been required to make it effective.- The book was' an official record only of the certificates returned and canceled. The memoranda upon the stubs formed no.part of a stock transfer book, required to be kept by the statute.- That book had been lost, and the new one made by Steele from memory, offered in evidence, was excluded. These memoranda upon the stubs were not competent as evidence. They were not made so by the statute. The notations of transfers on the 'stubs of the certificates were unnecessary. The stubs of the new certificates would show to whom the new certificates were issued.

We" conclude that a new trial should be granted upon the grounds appearing in the discussion which has been had, without passing upon other questions in the case discussed by counsel, which may not arise upon a new trial.

The granting of a new trial makes it unnecessary to discuss ■ the. question raised by the appeal of the plaintiff from the order of .the' Special Term denying the motion to vacate £he judgment.

All concurred.

Judgment reversed and new trial ordered, with costs against defendant Charles A. Steele to the appellants plaintiff corporation and Mary E. Coursey to abide the event upon -questions of law and fact. '