# Hager v. Homson

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United States Supreme Court
66 U.S. 80
Hager v. Homson
John D. Hager brought his bill in the Circuit Court for the district of New Jersey against John R. Thomson, Edwin A. Stevens, James Neilson, and the said John R. Thomson, Edwin A. Stevens, James Neilson, Robert F. Stockton and Richard Stockton, trustees of the New Brunswick Steamboat and Canal Transportation Company. The material averments of the bill are substantially as follows:
The complainant was the owner of seven and two-thirds shares of the capital stock of the New Brunswick Steamboat and Canal Transportation Company, a corporation of the State of New Jersey, created by law in the year 1831; and as a stockholder in the corporation he filed his bill in the Court of Chancery of the State of New Jersey against Thomson, Stevens and Neilson, three of the present defendants, charging them with divers breaches of trust and frauds in the management of the company's business, and praying for an account and other relief. The bill was answered and a replication filed. But before all the witnesses were examined the defendants proposed to compromise, and it was agreed through R. F. Stockton, who was the agent of the company and of the defendants, that the suit should be settled. At that time the defendant was the owner not only of the seven and two-thirds shares of stock which he had had from the beginning of the company's existence, but of one third of four other shares which he had purchased after the commencement of the suit. The company, from the time of its organization in 1831, had been engaged in transporting passengers and freight between New Brunswick and New York, and in the year 1835 carried goods, coal, &c., between New York and Philadelphia by way of the Camden and Amboy railroad and the Delaware and Raritan canal. Abraham S. Nelson, of New Brunswick, was the treasurer, but kept no account of any business except that which was done by the company between New Brunswick and New York. The defendants, after the bill was filed in the Chancery Court of New Jersey, presented an abstract account of the business of the company, which they represented as containing a true and just account of all the business of the company, its receipts and expenditures. The complainant with his counsel attended at the office of the treasurer, Mr. Nelson, at New Brunswick, and examined certain books of account for about six hours without being able to ascertain the correctness of the abstract. The original books of entry were not present. The company have a set of books kept in Philadelphia by one Gatzner and others, and another in New York, kept by one Anderson, from which, and from the manifests, way-bills, receipts and vouchers, the monthly and other settlements were made out and carried to the books kept by Gatzner in Philadelphia. No books except those of Anderson were submitted to the complainant, and they were false, fraudulent, and intended to deceive the stockholders. R. F. Stockton, on the 2d of September, 1847, agreed with the complainant that the company and the defendants in the Chancery suit should purchase the complainant's stock for such price as, upon a fair examination of the assets, it should be found that the stock was worth, and on the 13th of January, 1848, Mr. Stockton met the complainant at Princeton Basin to carry out the agreement of compromise, Anderson and Gatzner being present. The partial examination by the complainant of Anderson's books, and the assurances of Stockton, Anderson, and Gatzner, induced the complainant to believe that the abstract from the books of Anderson was correct, and contained a fair statement and just and honest account of the receipts and disbursements of the company. But the books of the company kept in Philadelphia were not produced, nor did not complainant know at that time that there were any such books, or in what manner the books kept by Anderson were made up. He assumed that the abstract was right and did not question its correctness, because he believed at the time that he was dealing with men of integrity. Acting upon this belief, he agreed that the balance of profits (forty-two thousand one hundred and fifty-six dollars and sixty cents) was the correct balance. A valuation was then agreed upon by the complainant and Stockton of the property, real and personal, belonging to the corporation, which being added to the net earnings, made the assets about two hundred and eighty-nine thousand dollars. The complainant's proportion or part of the last mentioned sum was paid to him, and he transferred his stock to the company. After this compromise was made the complainant discovered that the abstract account upon which he had based his agreement was false and fraudulent in a great many particulars. The bill set forth specifically the false credits and fraudulent charges, and prays that a just and accurate account be taken of the company's business, profits and property, and the defendants decreed to pay him such additional sum as it shall be ascertained that his stock was worth.
The answer denies the allegation that there was any important error in the accounts or abstracts of accounts or books submitted to the complainant, or that any assurance was falsely given by the defendants of their correctness, or that there was any fraudulent or deceptive means used to procure the plaintiff's assent to the compromise.
The statements in the answer do not materially vary from that contained in the bill concerning the terms and conditions upon which the purchase of the complainant's stock was made by R. F. Stockton for the company. The contract was that the complainant should be paid such price as, upon a fair examination into the condition of the company, it might be found to be worth.
A large number of witnesses were called-more than twenty; but their testimony needs not to be stated here, since the effect of it upon the case can be seen in the opinion of Mr. Justice Clifford.

## Notes

This work is in the public domain in the United States because it is a work of the United States federal government (see 17 U.S.C. 105).
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