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rely thereon, were some evidence on the question of contributory negligence, which, therefore, was for the jury. I do not quarrel with the law of my learned brother who has written so ably for the court; but I deny that it applies to this case and invoke the principle that it is the duty of common carriers to warn their passengers of a danger of their own creation, which, while it could be seen, the passenger was not bound by law to see after an assurance of safety had been given by the conductor in charge. The rule of "utmost care" made for the protection of passengers should not be relaxed, for the safety of the citizen is the highest concern of the state.

I vote for affirmance.

CULLEN, C. J., and HAIGHT and WERNER, JJ., concur with WILLARD BARTLETT, J. VANN, J., reads dissenting opinlon. HISCOCK, J., not sitting. GRAY, J., absent.

Judgment reversed, etc.

(186 N. Y. 368)

BACH et al. v. KIDANSKY et al. (Court of Appeals of New York. Nov. 13, 1906.) VENDOR AND PURCHASER-VENDOR'S LIENPAYMENT BY VENDOR.

Where part of the purchase price of land was to be paid by the assumption of mortgages for a certain amount, and the vendor, at the time he executed the conveyance, paid a part of one of the mortgages to secure the release of a collateral mortgage on other land securing the mortgage in question, he was entitled to a vendor's lien for the amount so paid.

[Ed. Note.-For cases in point, see Cent. Dig. vol. 48, Vendor and Purchaser, §§ 641-650.]

Appeal from Supreme Court, Appellate Division, First Department.

Action by Myer Bach and another against David Kidansky and another. From an order of the Appellate Division, First Department (94 N. Y. Supp. 752), reversing on the law and facts, a judgment dismissing the complaint on the merits, and awarding a new trial, defendants appeal. Affirmed.

Manfred W. Ehrich, for appellants. Edward W. S. Johnston, for respondents.

EDWARD T. BARTLETT, J. This is an action in equity to establish a vendor's lien upon real estate for unpaid purchase money. The plaintiffs agreed to sell to the defendants, and the latter agreed to purchase, improved real estate in the city of New York, known as 321, 323, and 325 Madison street for $101,000. The contract was reduced to writing and duly executed. The terms of payment were $1,500 in cash at time of executing the contract, $6,500 in cash on delivery of the deed, and $93,000 by taking deed of premises subject to four mortgages aggregating that amount, each covering all, or a

portion, of said premises. One of these was a third mortgage of $13,000, covering entire premises, secured by a collateral mortgage of like amount on 185 and 187 Allen street in the city of New York. There was a covenant in the $13,000 mortgage that, in case of sale of the mortgaged premises, $3,000 of principal was to become immediately due and payable. The present litigation is due to the transactions relating to this mortgage. The order from which this appeal is taken states that the reversal is on the law and the facts, but an examination of the record shows that no material fact is in dispute. In view of the uncontradicted testimony and the admissions in the answer, there were presented to the Appellate Division questions of law only, upon undisputed facts, as was stated in the opinion of that learned court.

After the execution of the contract and prior to the law day, the $13,000 mortgage was purchased by Flora Levy, the wife of the defendant Louis J. Levy. It appears that the collateral mortgage on the Allen street property, to which reference has already been made, contained a provision that when $4,000 should have been paid on the principal mortgage covering the Madison street property, the collateral mortgage should be satisfied. The plaintiffs had, after the execution of the contract with defendants, agreed to sell the Allen street property to Weil and Mayer free and clear of all incumbrances. At the time fixed for the closing of the title, November 30, 1903, an adjournment was taken to December 1, 1903, the fact having become known that Flora Levy had purchased the $13,000 mortgage and the collateral mortgage on the Allen street property. It was also agreed that the defendants' counsel should notify Flora Levy to be present at the time and place for closing the title, in order that the plaintiffs might pay to her, either the sum of $4,000, or that the defendants should pay to her the sum of $3,000 and the plaintiffs the sum of $1,000, so as to comply with the conditions of said mortgages, and to obtain a cancellation of the collateral mortgage on the Allen street property. On the 1st of December, 1903, at the time for closing title, Flora Levy did not attend, and, on her behalf, her husband, the defendant Louis J. Levy, refused to accept the sum of $3,000 from the defendants and the sum of $1,000 from the plaintiffs, with interest, and execute a satisfaction or release of the Allen street mortgage, and also execute a writing produced by plaintiff's counsel, subrogating the plaintiffs to an interest of $1,000 in the said $13,000 mortgage. Thereupon the plaintiffs paid to Flora Levy the sum of $1,000 on said mortgage, and she released and canceled the collateral mortgage on the Allen street property. The plaintiffs, upon receiving the final cash payment of $6,500 delivered to the defendants a conveyance of the property, having, as matter of fact, received from them

only the sum of $100,000, instead of $101,000 they had covenanted to pay.

On these undisputed facts plaintiffs insist that the sum of $1,000 so paid by them to Flora Levy was under compulsion in order to secure the closing of the sale of the Madison street property and clear the title of the Allen street property from the lien of the collateral mortgage, the plaintiffs having contracted to convey the same to Weil and Mayer free and clear. The transaction at the time of closing the title is thus stated by one of the attorneys for the plaintiff on the witness stand: "There was paid on the $13,000 mortgage at the time of the closing simply the $1,000. The other $3,000 that was to be paid at the time of the closing of the title was a matter to be paid by the grantees, and that was conceded to them on the closing in the figures I have given, and the $1,000 also, the whole $13,000 was deducted from the purchase money, although there was only $12,000 unpaid." Mrs. Levy, as the owner of the $13,000 mortgage, was entitled to a payment of $4,000 thereon before discharging the lien of the collateral mortgage on the Allen street property; the plaintiffs paid $1,000, and the balance of $3,000 was due to her from her husband and his codefendant as vendees of the Madison street property under the contract with plaintiffs. If she saw fit to extend to the vendees further time in which to pay, it did not concern the plaintiffs. The sale of the Madison street property and the collateral mortgage on the Allen street property to secure the payment of the third mortgage for $13,000 on the Madison street property are one transaction and are to be construed together. The vendees in the Madison street contract were given the full credit for the $13,000 mortgage when taking title, notwithstanding the fact that the vendors (the plaintiffs) had paid $1,000 thereon to the assignee thereof, Mrs. Levy. The bald proposition of the vendees is that, while there is really due on said mortgage only $12,000, they are to evade payment of $1,000 of the purchase money paid for their account by the vendors, in order to escape loss under their contract to sell the Allen street property free and clear of all incumbrances.

We are not called upon to determine the position of the vendees if they had refused to take title on the law day; the question now presented is as to the vendors' rights, the vendees having taken title subject to the $13,000 mortgage. The appellant vendees insist that the payment of $1,000 to Flora Levy was a transaction that cannot be considered in the matter of the sale of the Madison street property, and that, if vendors have any remedy, it is an action for their subrogation to the extent of the amount in question, to the rights of Flora Levy in the $13,000 mortgage. We are of opinion that this view of the legal situation is erroneous, and that the payment of the $1,000 by vendors is to

78 N.E.-69

be treated in law as a part of the purchase money, and, the vendees having refused to pay the same on closing title, a vendor's lien was at once impressed upon the premises sold.

It is of no importance whether the defendant Louis J. Levy was the real purchaser of the $13,000 mortgage and the collateral mortgage, using his wife's name as a cover. We may assume Mrs. Levy purchased in good faith. The vendees were entitled by the terms of the collateral mortgage to secure its satisfaction by payment of $4,000 on the $13,000 mortgage. The vendees, by accepting title to the Madison street premises on the law day, took it subject to the mortgage upon which the vendors had paid $1,000. The vendees now insist that, while they were allowed the full amount of the $13,000 on taking title, when in fact only $12,000 was due thereon, they are under no liability to refund the vendors the $1,000 paid under the express terms of the collateral mortgage. In a court of equity such a suggestion cannot be entertained-forms give way to substance -and the vendees must pay for the premises the sum agreed upon. They cannot escape payment of $1,000 by reason of Mrs. Levy's purchase of purchase of the $13,000 mortgage. The rights of the parties were not changed by that incident.

Mr. Warvelle, in his recent treatise on the "American Law of Vendor and Purchaser of Real Property," vol. 2, § 678, states: "The implied lien of a vendor for the unpaid purchase money, though having many apparent analogies in the law, is nevertheless sui generis and distinguished from all those things to which it may bear some resemblance. It appears to be founded upon the presumption that the vendor does not intend unconditionally to part with his land without payment, and that, in common honesty, he who buys land from another should pay for it, or, if he does not, that the land should be held for whatever he fails to pay." It has been sometimes said by learned courts that equity judges have experienced difficulty in finding a solid basis upon which to rest the lien. As between the original parties and persons having actual notice of the lien no better foundation is required than that above stated. Garson v. Green, 1 Johns. Ch. 308; Bradley v. Bosley, 1 Barb. Ch. 125; Stafford v. Van Rensselaer, 9 Cow. 316; Seymour v. McKinstry, 106 N. Y. 230, 239, 12 N. E. 348, 14 N. E. 94; Dusenbury v. Hulbert, 59 N. Y. 541.

The order appealed from should be affirmed, and judgment absolute ordered for the plaintiffs on appellants' stipulation, with costs in all the courts.

CULLEN, C. J., and WERNER, WILLARD BARTLETT, HISCOCK, and CHASE, JJ., concur. GRAY, J., absent.

Ordered accordingly.

(186 N. Y. 285) STOKES v. CONTINENTAL TRUST CO. OF CITY OF NEW YORK.

(Court of Appeals of New York. Nov. 13, 1906.) 1. APPEAL RECORD - QUESTIONS PRESENTED FOR REVIEW-QUESTIONS IN INTERMEDIATE COURT.

Code Civ. Proc. § 1338, provides that on appeal to the Courts of Appeals from a reversal of a judgment entered in the trial court, it must be presumed that the judgment was not reversed upon a question of fact unless the contrary clearly appears. On an appeal from a judgment of the Appellate Division, reversing a judgment of the special term, no exceptions appeared in the record except those taken to the conclusions of law found by the trial court, and the record was silent as to whether or not the reversal was based on a question of fact. Held, that the determination of the appeal in the Court of Appeals must turn on whether the legal conclusions of the trial court were justified by the facts found.

[Ed. Note.-For cases in point, see Cent. Dig. vol. 3, Appeal and Error, § 2950.]

2. CORPORATIONS-RIGHTS OF STOCKHOLDERS -ISSUE OF NEW STOCK.

A stockholder has a right to a proportionate share of new stock issued for money only, of which, aside from waiver, he cannot be deprived without his consent, except when the stock is issued at a fixed price not less than par, and he is given the right to take at that price in proportion to his holding, or in some other equitable way whereby he may protect his interests.

[Ed. Note.-For cases in point, see Cent. Dig. vol. 12, Corporations, §§ 587, 589.]

3. SAME-WAIVER.

A corporation, having a large surplus, received from an outsider an offer to purchase all of an additional issue of stock at a certain premium. At a meeting, called to consider the proposition, a stockholder voted to increase the stock, but protested against the sale to the outsider, voted against it, and, prior to the acceptance by a majority vote of the outsider's offer, himself offered to purchase his own proportionate share of the new issue at par, and subsequently renewed his offer, making formal tender of payment. Held, that while he was not entitled to his share of the new issue at par, his offer and conduct did not constitute a waiver of his right to subscribe for his share at the price fixed by the acceptance of the offer of the outsider.

4. SAME MEASURE OF DAMAGES.

A stockholder, who has not been given an opportunity to subscribe to his proportionate share of a new issue of stock at the price fixed by the stockholders, and who has offered to take his share at par, is entitled only to the difference between the market value and such fixed price, and not between the market value and the par value offered by him.

[Ed. Note.-For cases in point, see Cent. Dig. vol. 12, Corporations, § 589.]

Haight and Willard Bartlett, JJ., dissenting in part.

Appeal from Supreme Court, Appellate Division, First Department.

Action by William E. D. Stokes against the Continental Trust Company of the city of New York. From an order of the Appellate Division (91 N. Y. Supp. 239) reversing a judgment in favor of plaintiff, entered after trial at Special Term, plaintiff appeals. Reversed, and judgment of the trial court modified and affirmed.

This action was brought by a stockholder to compel his corporation to issue to him at par such a proportion of an increase made in its capital stock as the number of shares held by him before such increase bore to the number of all the shares originally issued, and in case such additional shares could not be delivered to him for his damages in the premises. The defendant is a domestic banking corporation in the city of New York, organized in 1890, with a capital stock of $500,000, consisting of 5,000 shares of the par value of $100 each. The plaintiff. was one of the original stockholders, and still owns all the stock issued to him at the date of organization, together with enough more acquired since to make 221 shares in all. On the 29th of January, 1902, the defendant had a surplus of $1,048,450.94, which made the book value of the stock at that time $309.69 per share. On the 2d of January, 1902, Blair & Co., a strong and influential firm of private bankers in the city of New York, made the following proposition to the defendant: "If your stockholders at the special meeting to be called for January 29th, 1902, vote to increase your capital stock from $500,000 to $1,000,000 you may deliver the additional stock to us as soon as issued at $450 per share ($100 par value) for ourselves and our associates, it being understood that we may nominate ten of the 21 trustees to be elected at the adjourned annual meeting of stockholders." The directors of the defendant promptly met and duly authorized a special meeting of the stockholders to be called to meet on January 29, 1902, for the purpose of voting upon the proposed increase of stock and the acceptance of the offer to purchase the same. Upon due notice a meeting of the stockholders was held accordingly, more than a majority attending either in person or by proxy. A resolution to increase the stock was adopted by the vote of 4,197 shares, all that were cast. Thereupon the plaintiff demanded from the defendant the right to subscribe for 221 shares of the new stock at par, and offered to pay immediately for the same, which demand was refused. A resolution directing a sale to Blair & Co. at $450 a share was then adopted by a vote of 3,596 shares to 241. The plaintiff voted for the first resolution, but against the last, and before the adoption of the latter he protested against the proposed sale of his proportionate share of the stock, and again demanded the right to subscribe and pay for the same, but the demand was refused. On the 30th of January, 1902, the stock was increased, and on the same day was sold to Blair & Co. at the price named, although the plaintiff formerly renewed his demand for 221 shares of the new stock at par, and tendered payment therefor, but it was refused upon the ground that the stock had already been issued to Blair & Co. owing in part to the offer of Blair & Co. which had become known to the public, the market price of the

'stock had increased from $450 a share in September, 1901, to $550 in January, 1902, and at the time of the trial, in April, 1904, it was worth $700 per share. Prior to the special meeting of the stockholders, by authority of the board of directors, a circular letter was sent to each stockholder, including the plaintiff, giving notice of the proposition made by Blair & Co. and recommending that it be accepted. Thereupon the plaintiff notified the defendant that he wished to subscribe for his proportionate share of the new stock, if issued, and at no time did he waive his right to subscribe for the same. Before the special meeting, he had not been definitely notified by the defendant that he could not receive his proportionate part of the increase, but was informed that his proposition would "be taken under consideration." After finding these facts in substance, the trial court found, as conclusions of law, that the plaintiff had the right to subscribe for such proportion of the increase, as his holdings bore to all the stock before the increase was made: that the stockholders, directors, and officers of the defendant had no power to deprive him of that right, and that he was entitled to recover the difference between the market value of 221 shares on the 30th of January, 1902, and the par value thereof, or the sum of $99,450, together with interest from said date. The judgment entered accordingly was reversed by the Appellate Division, and the plaintiff appealed to this court, giving the usual stipulation for judgment absolute in case the order of reversal should be affirmed.

Ernest Hall, for appellant. Hornblower, for respondent.

William B.

VANN, J. (after stating the facts). No exception worthy of notice appears in the record, except those filed to the conclusions of law found by the trial judge. If those conclusions are supported by the facts found, the Appellate Division had no power to reverse the judgment rendered by the Special Term on questions of law only, as, from the silence of the record, it must be presumed was done. Code Civ. Proc. § 1338. If the facts found did not warrant the legal conclusions of the trial court the order of reversal was right and should be affirmed. Thus the question presented for decision is whether according to the facts found the plaintiff had the legal right to subscribe for and take the same number of shares of the new stock that he held of the old? The subject is not regulated by statute, and the question presented has never been directly passed upon by this court, and only to a limited extent has it been considered by courts in this state. Miller v. Illinois Central R. R. Co., 24 Barb. 312; Matter of Wheeler, 2 Abb. Pr. [N. S.] 361; Currie v. White, 45 N. Y. 822. In the first case cited judgment was rendered by a divided vote of the

General Term in the first district. The court held that the plaintiff was entitled to no relief because he did not own any shares when the new stock was issued but only an option, and that he could not claim to be an actual holder until he had exercised his right of election. election. The court further said, however, that if he was the owner of shares at the time of the new issue he had no absolute right as such owner to a distributive allotment of the new stock. Matter of Wheeler was decided by Judge Mason at Special Term, and, although the point was not directly involved, the learned judge said: "As I understand the law, all these old stockholders had a right to share in the issuing of this new stock in proportion to the amount of stock held by them. And if none of the stock was to be apportioned to the old stockholders, they had certainly the right to have the new stock sold at public sale, and to the highest bidder, that they might share in the gains arising from the sale. In short, the old stockholders, as this was good stock and above par, had a property in the new stock, or a right at least to be secured the profits to be derived from a fair sale of it if they did not wish to purchase it themselves; and they have been deprived of this by the course which these directors have taken with this new stock by transferring or issuing it to themselves and others in a manner not authorized by law." In Currie v. White the point was not directly involved, but Judge Folger, referring to the rights acquired under a certain contract, said: "One of these rights was to take new shares upon any legitimate increase of the capital stock, which right attaches to the old shares, not as profit or income, but as inherent in the shares in their very creation," citing Atkins v. Albree, 12 Allen (Mass.) 359; Brander v. Brander, 4 Ves. 800, and notes, Sumner Ed. While this was said in a dissenting opinion, Judge Rapallo, who spoke for the court, concurred, saying, "As to the claim for the additional stock, I concur in the conclusions of my learned Brother Folger." The fair implication from both opinions is that if the plaintiff had preserved his rights, he would have been entitled to the new stock.

In other jurisdictions the decisions support the claim of the plaintiff with the exception of Ohio Insurance Co. v. Nunnemacher, 15 Ind. 294, which turned on the language of the charter. The leading authority is Gray v. Portland Bank, decided in 1807 and reported in 3 Mass. 364, 3 Am. Dec. 156. In that case a verdict was found for the plaintiff, subject, by the agreement of the parties, to the opinion of the court upon the evidence in the case whether the plaintiff was entitled to recover, and, if so, as to the measure of damages. The court held that stockholders who held old stock had a right to subscribe for and take new stock in proportion to their respective shares. As the

corporation refused this right to the plaintiff be was permitted to recover the excess of the market value above the par value, with interest. In the course of its argument the court said: "A share in the stock or trust when only the least sum has been paid in is a share in the power of increasing it when the trustee determines or rather when the cestuis que trustent agree upon employing a greater sum. A vote to increase the capital stock, if it was not the creation of a new and disjointed capital, was in its nature an agreement among the stockholders to enlarge their shares in the amount or in the number to the extent required to effect that increase. If from the progress of the institution and the expense incurred in it any advance upon the additional shares might be obtained in the market, this advance upon the shares relinquished belonged to the whole, and was not to be disposed of at the will of a majority of the stockholders to the partial benefit of some and exclusion of others." This decision has stood unquestioned for nearly a hundred years and has been followed generally by courts of the highest standing. It is the foundation of the rule upon the subject that prevails, almost without exception, throughout the entire country.

In Wey v. American Grease Company, 60 N. J. Eq. 263, 269, 47 Atl. 14, the headnote fairly expresses the decision as follows: "Directors of a corporation, which is fully organized and in the active conduct of its business, are bound to afford to existing stockholders an opportunity to subscribe for any new shares of its capital, in proportion to their holdings, before disposing of such new shares in any other way." In Eidman v. Bowman, 58 Ill. 444, 447, 11 Am. Rep. 90, it was said: "When this corporation was organized, the charter and all of its franchises and privileges vested in the shareholders, and the directors became their trustees for its management. The right to the remainder of the stock, when it should be issued, vested in the original stockholders, in proportion to the amount each held of the original stock, if they would pay for it, and was as fully theirs as was the stock already held and for which they had paid." In Dousman v. Wisconsin, etc., Co., 40 Wis. 418, 421, it was held that a court of equity would compel a corporation to issue to every stockholder his proportion of new stock on the ground that "he has a right to maintain his proportionate interest in the corporation, certainly as long as there is sufficient stock remaining undisposed of by the corporation." In Jones v. Morrison, 31 Minn. 140, 152, 16 N. W. 854, it was said: "When the proposition that a corporation is trustee of the corporate property for the benefit of the stockholders in proportion to the stock held by them is admitted (and we find no well-considered case which denies it), it covers as well the power to issue new stock as any other franchise or prop

erty which may be of value, held by the corporation. The value of that power, where it has actual value, is given to it by the property acquired and the business built up with the money paid by the subsisting stockholders. It happens not infrequently that corporations, instead of distributing their profits in the way of dividends to stockholders, accumulate them till a large surplus is on hand. No one would deny that, in such case, each stockholder has an interest in the surplus which the courts will protect. No one would claim that the officers, directors or majority of the stockholders, without the consent of all, could give away the surplus, or devote it to any other than the general purposes of the corporation. But when new stock is issued, each share of it has an interest in the surplus equal to that pertaining to each share of the original stock. And if the corporation, either through the officers, directors or majority of stockholders, may dispose of the new stock to whomsoever it will, at whatever price it may fix, then it has the power to diminish the value of each share of old stock by letting in other parties to an equal interest in the surplus and in the good will or value of the established business."

In Real Estate Trust Co. v. Bird, 90 Md. 229, 245, 44 Atl. 1048, the court said: "There can be no doubt that the general rule is that when the capital stock of a corporation is increased by the issue of new shares, authorized by the charter, the holders of the original stock are entitled to the new stock in the proportion that the number of shares held by them bears to the whole number be fore the increase." In all these cases, as well as many others, Gray v. Portland Bank, supra, is followed without critcism or question. In some cases the same result is reached without citing that case. Thus in Jones v. Concord & Montreal R. R. Co., 67 N. H. 119, 38 Atl. 120, it was declared, as stated in the headnote, that "an issue of new shares of stock in an increase of the capital of a corporation is a partial division of the common property, which can be taken from the original shareholders only by their consent or by legal process." So, in Bank of Montgomery v. Reese, 26 Pa. 143, 146, and Reese v. Bank of Montgomery, 31 Pa. 78, 72 Am. Dec. 726, the court said: "Morgan L. Reese, as one of the stockholders of the Bank of Montgomery, was entitled to a portion of the unsold capital stock. His right was as valid as that of a tenant in common of real estate to his purpart on a partition. The corporation was a trustee for the stockholders, but in disregard of the duties of the trust in distributing this stock it deprived Mr. Reese of the number of shares to which he was entitled. He has established his right in this action." The question of power was broadly presented and decided.

In another case in the same state (Morris v. Stevens, 178 Pa. 563, 578, 36 Atl. 151) Mr. Chief Justice Sterrett used the following lan

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