Case ID: misc_79/html/0439-01.html
Source: Caselaw Access Project
Author: {"author": "Seabury, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Nathan E. Hyman, Respondent, v. The New York Urban Real Estate Company, Appellant.
    (Supreme Court, Appellate Term, First Department,
    February, 1913.)
    Penal Law, § 664 — contract with corporation to sell a certain amount of its stock on conditions —■ agreement to refund payment — appeal.
    Under certain contracts with defendant, a domestic corporation, plaintiff agreed to purchase a certain amount of its stock, which it agreed to sell on certain conditions and privileges, by which plaintiff agreed to make payments of certain monthly installments until a specified amount had been paid with permission to hasten the maturity of the contract by payment of the installments in consecutive order beginning with the last. In an action to recover an amount representing two full years’ payment under the contract, pursuant to a provision thereof that defendant would upon a six months’ written notice return all such payments with interest, the defense was that the contract was an agreement by defendant to purchase its own stock and prohibited by section 664 of the Penal Law. On appeal from a judgment in plaintiff’s favor, held, in affirmance of said judgment, that the agreement to refund the payments made by plaintiff was not an agreement by defendant to purchase its own stock which had never, in fact, been sold to plaintiff, and that all he did was to pay money to defendant on the assurance that on payment of a' specified amount defendant would sell its stock to plaintiff.
    Appeal by the defendant from a judgment of the Municipal Court of the city of Hew York, borough of Manhattan, fifth district, rendered in favor of the plaintiff.
    Alvin Summers (Adolphus D. Pape, of counsel), for appellant.
    Maurice Hagler, for respondent.
   Seabury, J.

Plaintiff sues to recover money due to him pursuant to the terms of certain contracts entered into 6e-tween the plaintiff and the defendant. The defendant is a corporation organized under the laws of the state of Hew York. It does business in the city of Hew York, and it is capitalized for $1,00-0,000. Its preferred stock aggregates $500,000, and its common stock $500,000.. The par value of each share is ten dollars. Under the contracts entered into between the plaintiff and the defendant, the plaintiff is designated as the purchaser, and agrees to purchase a certain number of shares of stock of the defendant, which is designated in the contract as the company. The company agrees to sell the shares of stock to the plaintiff upon certain “ conditions and privileges ” which are set forth on the back of the contract. In these conditions and privileges ” the purchaser agrees to make payments of certain installments until an amount specified has been fully paid. The purchaser is also permitted “ to hasten the maturity of this contract ” by paying off monthly installments in consecutive order beginning with the last installment to fall due under the contract. The contract also provided that after two full years’ payments shall have been made, the Company will, upon six months’ written notice, return all payments made hereon with interest at the rate of four per centum per annum.” The plaintiff under the contract sued upon paid $350 to the defendant, which sum represented two full years’ payments under the contract, and the plaintiff gave the six months’ written notice required and asked the return of the payments made under the clause of the contract quoted above. The defendant now resists payment on the ground that the contract is an agreement “ to purchase its own stock,” and claims that such an agreement is prohibited by section 664 of the Penal Law. This section of the Penal Law makes it a misdemeanor for a director of a stock cor-poration to concur in a vote to apply the funds of a corporation, except surplus profits, to the purchase of shares of its own stock. Strictly speaking, I do not think that these contracts fall within this particular provision of the Penal Law. Richards v. Wiener Co., 207 N. Y. 59. I do not think that the defendant agreed to commit the particular crime which its counsel claims it agreed to commit. The agreement to refund the money which the plaintiff paid was not an agreement to purchase shares of its own stock. The stock had, in fact, never been actually sold to the plaintiff. All that the plaintiff did was to pay money to the defendant on the assurance given by the contract that the defendant would, when the amount specified was fully paid, sell the stock to the plaintiff. The plaintiff, under the clause of the contract quoted above, had the right to demand the repayment of the amount advanced. We are satisfied that the defend.ant has established no defense to this action. It is also clear- to us from the character of the contract, and from the nature of the alleged defense, that, the business being carried on by the defendant should be investigated by those charged with responsibility for enforcing the criminal law.

Lehman and Page, J. J., concur.

Judgment affirmed with costs.