Case Name: Edward V. Strodl, Appellant, v. The Farish-Stafford Company, Respondent
Court: New York Supreme Court, Appellate Division
Jurisdiction: New York
Decision Date: 1911-06-09
Citations: 145 A.D. 406
Docket Number: 
Parties: Edward V. Strodl, Appellant, v. The Farish-Stafford Company, Respondent.
Judges: Ingraham, P. j., McLaughlin, Miller and Dowling, JJ., concurred.
Reporter: Appellate Division Reports
Volume: 145
Pages: 406–409

Head Matter:
Edward V. Strodl, Appellant, v. The Farish-Stafford Company, Respondent.
First Department,
June 9, 1911.
Contract — foreign corporation — purchase of stock by employee —• agreement to repurehasé — pleadingsaffirmative defenses.
A contract whereby a foreign corporation, in consideration of an employee’s subscription for stock, agreed that if the employee at any time of for any reason should leave its employ it would buy back the stock at par; is not necessarily void as contravening public policy, nor is it void at common law.
The court cannot take judicial notice of a statute of another State.
If there be any statute in the State where defendant is ■ incorporated which renders the contract ultra vires and void, or if it be unenforeible on the ground that the defendant has no surplus with which to repurchase the. stock, defendant should plead and prove these matters as affirmative defenses. •
Where plaintiff proves the execution of the contract and. its breach by defendant and offers to show that defendant has surplus profits with which the stock might lawfully be repurchased, it is error to dismiss the complaint at the close of the case.
Appeal by the plaintiff, Edward V. Strodl, from a judgment of the Supreme Court in favor of the defendant, entered in the office of the clerk of the county of New York on the 30th day of December, 1910, upon the dismissal of the complaint by direction of the court at the close of the plaintiff ’s case on a trial at the New York Trial Term, and also from an order entered in said clerk’s office on the 30th day of June, 1910, denying the plaintiff’s motion for a new trial made upon the minutes.
Edward Kellogg Baird, for the appellant.
Elbridge L. Adams, for the respondent..

Opinion:
Laughlin, J.:
In the month of January, 1903, the plaintiff was in the employ of the Eárrish-Stafford Company, a corporation organ-' ized under the laws of North Carolina. This action is based on a contract in writing with respect to the purchase of capital stock of the company which' he made with it at that time. That corporation was succeeded by the defendant, which is a corporation organized under the laws of Connecticut in the year 1905; and in consideration of the transfer to it of the assets and stock of the North Carolina corporation, the defendant assumed all of the contract obligations of its predecessor. This included the agreement between plaintiff and said North Carolina corporation. The plaintiff continued in the employ of the defendant until about the' 1st day of February, 1908, at which time' his connection with the corporation was severed. At that time the plaintiff held twenty-eight shares of the stock of the par value of $100 per share which he thereupon tendered back to the defendant and demanded that it accept the same and pay to him the sum of $1,400, being the balance owing to him after deducting from the par value of the stock a note for $1,400 held by the defendant; but the defendant refused the tender and demand. It does not appear whether the stock issued to the plaintiff pursuant to the terms of- the agreement was an original issue of stock or was treasury stock. It was shown that at least fifteen shares were issued to him by the defendant pursuant to the agreement upon which the action is based, which is as follows:
" That for and in consideration of the covenants and promises contained in said Strodl's subscription for said stock, dated January 10th, 1903, the said company hereby accepts said subscription, and has caused certificate to be issued accordingly, and for and in'consideration of the payment of one dollar, the receipt whereof is hereby acknowledged, the said Strodl hereby agrees' that, if at any time or for any reason, he should'leave the employ of the company, he agrees to sell to said company at its par value, any and all stock he may hold in said company, upon the company's tendering-payment therefor as above, and the said- company further agrees to buy back said stock at its par value should the contingency herein provided for arise."
• The subscription referred to in the agreement was not proved nor. was it clearly shown that the particular stock which the plaintiff held at the time he severed his connection with the company was the stock which he purchased from the company pursuant to the agreement; but perhaps that may be inferred and no point is made that there is any defect in the proof with respect thereto. The plaintiff alleged and offered to show — hut at the suggestion of the court that it was immaterial did' not press the point or except — that the defendant at the.date of said tender and at the time of the trial had surplus profits with which the stock might he repurchased in accordance with the agreement. Neither the statutes of North Carolina nor of Connecticut with respect to the authority of a corporation to sell its capital stock — either the original issue or treasury stock — conditionally or to repurchase the same, were proved. Manifestly the statutory law of this State hearing on the subject is not controlling. The validity of the contract and its enforci-hility against the defendant depend either on foreign statutes or on common-law principles.
We cannot take judicial notice of the- statutory law of another State, and since it has not been pleaded and proved the dismissal of the complaint can only he sustained' upon the theory that the contract is void at common law, which could only he on the theory that it is against public policy, for the defense of ultra vires can only be adjudicated on proof of the actual powers and authority of the corporation. That such a contract is not necessarily void as .contravening public policy in any and all circumstances was long since decided by our Court of Appeals. (City Bank of Columbus v. Bruce & Fox, 17 N. Y. 507, and numerous other decisions to sustain that doctrine; Vail v. Hamilton, 85 N. Y. 453; Booth v. Dodge, 60 App. Div. 23; Joseph v. Raff, 82 id. 17; affd., 170 N. Y. 611; Moses v. Soule, 63 Misc. Rep. 203; Matter of Castle Braid Co., 145 Fed. Rep. 224.) In these circumstances, if there be any statutory law which rendered the contract ultra vires and void, or if it be unenforcible on the ground that the defendant had no surplus profits with which to repurchase the stock, then I think these were matters of defense to be pleaded and proved by the defendant. The question as to whether the- contract was fully executed by plaintiff and whether the defendant would be estopped from interposing the defense of ultra vires are not presented for decision on this appeal and no opinion is expressed thereon:
I a.m; therefore, of opinion that the plaintiff established a prima facie cause of action and that the court erred in dismissing the complaint.
It follows, therefore, that the judgment and order should he reversed and a new trial granted, with costs to appellant to abide the event.
Ingraham, P. j., McLaughlin, Miller and Dowling, JJ., concurred.
Judgment 'and order reversed, new trial ordered, costs to appellant to abide event.