Court Opinion

ID: 5495153
Source: CourtListenerOpinion
Date Created: 2022-01-10 02:51:10.915102+00
Date Added: 2024-06-11T08:33:47.398333
License: Public Domain

Van Brunt, P. J.
The complaint in this action states that the same was brought by the plaintiffs on behalf of themselves and all other stockholders and seripholders of the New York & Texas Land Company similarly situated. The defendants demurred upon the ground, among others, that the complaint did not state facts sufficient to constitute a cause of action in favor of the plain*910tiffs as stockholders, and that the complaint did not state facts sufficient to constitute a cause of action in favor of the plaintiffs as scripholders. It is conceded upon the part of the respondents that no cause of action in favor of the plaintiffs as stockholders is set out in the complaint. The respondents, however, claim in support of the decision of the court below overruling the demurrer generally that this action is not brought to enforce any rights of the plaintiffs as stockholders, or on behalf of any of the plaintiffs as scripholders, but that it is only brought on behalf of those who are stockholders and scrip-holders both. A consideration, however, of the language of the complaint does not bear out this construction. The action is brought on behalf of the plaintiffs and all other stockholders and scripholders Similarly situated. It is clear that this language means precisely the same as though the allegation had been of all other stockholders or scripholders. Any persons who are entitled to relief under this complaint, whether stockholders or scripholders, could have come in and claimed the benefits thereof under the form of allegation; and it seems to us that this statement that the bill was only filed on behalf of those who were both stockholders and scripholders is an afterthought. But furthermore, if the bill was filed on behalf of the scripholders, the plaintiffs have no right to restrict its benefit to only those scripholders who happen to be stockholders also. If the bill is filed on behalf of a class to enforce the rights of a class, then every member of that class has a right to come in and enjoy its benefits upon contribution to the expenses of the litigation, whether he has some other qualification or not. Having this rule in view, it is evident that it was the intention of the pleader to file his bill on behalf of all stockholders and all scripholders. As has been said, it is conceded that no cause of action on behalf of stockholders has been set out, and therefore that part of the demurrer which relates to the setting out of a cause of action in favor of any stockholder of this corporation should have been sustained.
It is claimed that the complaint states two causes of action in favor of the plaintiffs as scripholders—First, the pursuance of a policy of depreciating the scrip; and, secondly, the proposal to reissue as a dividend scrip which the defendant had purchased. It is urged upon the part of the defendant that neither of these grounds is sufficient to maintain the action. The foundation of the first cause of action seems to be an allegation that the defendants have sold land for cash, and in their contracts have inserted a clause that scrip will not be received in discharge of deferred payments. These facts constituted no breach of the rights of the plaintiffs as scripholders, namely, that the corporation would receive, in payment of 75 per cent, of the price of its land sold at its regular selling rates, this scrip, because, in the first place, there is no allegation that these cash prices were the regular selling rates of the corporation. Nor does the complaint contain any allegation that the defendants have refused to accept scrip in payment of land purchased at the regular selling rates. Neither is it apparent that the plaintiffs have suffered any damage in that regard, or that they have ever been refused the purchase of lands upon the tender of scrip. The only manner in which the plaintiffs can establish an injury in this respect is by proving some act done by the corporation in breach of this contract, and this contract is not broken until some seripholder goes to the corporation for the purpose of buying lands, and tenders the scrip for 75 per cent, thereof. If the corporation refuses to sell upon these terms, at their regular selling rates, then a breach of the contract has taken place; but merely because, in the case of an outside purchaser for cash, they make a contract that nothing but cash shall be received, no breach of the rights of the scripholders or of the contract between the scripholders and the corporation is effectuated. There is no obligation or agreement whatever that the corporation shall receive in payment of the debts due from third parties scrip which should be purchased for that purpose. The contract is that they *911.shall receive for the purchase of lands, at their regular selling rates, 75 per •cent, in scrip, and that this scrip must be tendered at the time of the pur•chase of the lands seems to be apparent from the terms of the contract. There is therefore no cause of action set out in the complaint whereby any ■damage is alleged to these plaintiffs as scripholders because of the refusal to receive this scrip in payment for lands. The second alleged cause of action ¡seems to rest upon a more substantial foundation. It is based upon the allegation that the company is about to issue as a dividend to its stockholders ¡scrip which had been purchased from the proceeds of land which should have been canceled and retired, and which is no longer an obligation of the •defendant. It is urged in defense of the demurrer to this cause of action that the scripholders have nothing to do with this matter; that it is entirely a question for the stockholders; and that the stockholders sustained no injury by the declaration of this scrip dividend. But it is not entirely a question for the stockholders. If the corporation have right to reissue this scrip, by way of dividends, or otherwise, then the scrip which, by the contract of the defendant, has been given to the scripholders is impaired by such reissue. The claim that if the corporation have no right to reissue scrip as dividends it is therefore void, and cannot be held as an obligation against the company in the hands of any purchaser, is no answer to this proposition, because that necessitates the tracing out of every share of this scrip after receipt thereof "by the company in payment for lands. It is difficult to see how the scrip-holder is going to impeach the title of any purchaser. This could only be done by the corporation, and the scripholders have no power to set the corporation in motion. The lands are pledged to the redemption of this scrip. The company is pledged to sell to the scripholder the land at its regular rates, .receiving the scrip in payment of 75 per cent, of the purchase money. Any proceeding upon the part of the corporation which increases the volume of this scrip is an attack upon the integrity of this contract, and imperils the security of the other scripholders. For example, there are so many millions of acres which can be purchased by six millions of scrip. One million acres of that land is sold, and the purchase price received by the corporation. That purchase price is devoted to the redemption of the scrip. Then the scrip is reissued, and as a result the five millions remaining of the original scrip have their security impaired by just the purchase price of the one million of scrip which has been purchased and should have been retired. That this scrip became functus officio when purchased by the defendant seems apparent upon a consideration of the agreement which defines the rights of the scripholders and the corporation. The provision in the contract is that the scrip shall be received in payment of 75 per cent, of the-price of the lands of the company, at its regular selling rates, with an option to the company to retire the scrip from time to time by the payment of its par value, and liberty to purchase it out of the company’s surplus fund, under public notice and sealed proposals, at the lowest price at which it may be offered. In other words, the corporation has a right to buy without public notice at par, but it cannot purchase the scrip above par except upon public notice and sealed proposals. If it is to be retired by the payment of its par value, it must necessarily be so retired out of the company’s surplus funds. If it is to be purchased at a premium, the provision is that the purchase price shall be paid out of the same surplus funds. The words “out of the surplus funds” evidently apply to both the paragraphs of the agreement, and it is evident that the sole purpose of the use of the company’s funds was the retirement of this scrip, whether paid for at par without notice, or above par upon public proposals. The whole idea was that the surplus proceeds of the lands should be devoted to the redemption of these scrip certificates. It seems to us, therefore, apparent that when the corporation purchased this scrip, it was for the purpose of retirement under the tenor of this agreement, and that it had no power whatever *912to revive it any more than it had the power to revive a debt which had already been extinguished by payment. Under these allegations of the complaint, therefore, the scripholders had a grievance which, if true, they had a right to restrain, and a cause of action in their favor was therefore set up. It consequently appears that the overruling of the demurrer upon the ground that no cause of action on behalf of the scripholders was stated in the complaint was correct. We think, therefore, that the judgment should be modified, sustaining the demurrer that the complaint does not state facts sufficient to constitute a cause of action in favor of the plaintiffs as stockholders, and overruling the demurrer that the complaint does not state facts sufficient to constitute a cause of action in favor of the plaintiffs as scripholders. The judgment as modified should be affirmed, without costs to either party.
Brady and Daniels, JJ., concur.