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Schuler v. Southern Iron & Steel Co.

77 Eq.

fied; and in this view he could not complain because the thing complained of would then have been an accomplished fact, and no remedy by injunction would be available. Viewed thus narrowly, the corporation would have a right to say to him:

"You either are not a stockholder and, therefore, have no right to object to the issuance of our stock; or else, you are a stockholder by reason of the issuance of our stock for the property in question, in which event your present application for an injunction is a futility."

But I do not purpose dealing with this case upon any narrow issue of that character, whatever the proper holding thereon may be found to be. I intend to consider this case as if the complainant was complaining because certain property in which he is interested is about, by his own agreement, to be transferred to a New Jersey corporation to be created, to carry out the purposes of the agreement, and his insistment that the agreement in question provides for a larger amount of stock than the value of the property.

I therefore assume, without deciding, that one thus circumstanced, upon a proper showing, would not be held in pari delicto, or, even if so held, would still be permitted to apply to the court to prevent the issuance of the stock for the purpose named.

Counsel upon each side of this case have exhibited most commendable industry and great skill and ability in presenting every possible question suggested by the situation; but, in my view, the case turns upon a very simple point, and does not call for a consideration of the numerous important and interesting questions dealt with at such great length by the respective counsel.

The sole injury which the complainant suggests that he may be subjected to is, that in the carrying out of this plan in exact compliance with its terms, and with the agreement that he made therein, he will receive stock to which a liability attaches because issued to a larger amount than is permitted by law.

Before any such question can arise it seems to me entirely clear that he must state clearly and unequivocally in his bill that such is the result of existing facts. He can only do this by a clear, unequivocal statement of the value of the property which is to pass to the new company as consideration for the amount

7 Buch.

Schuler v. Southern Iron & Steel Co.

of stock that is to be issued against it. In no other way can he show on the face of his bill, as he must do, that he has any equity of the character claimed.

As Vice-Chancellor Leaming says in Hageman v. Brown, 7,3 Atl. Rep. 862 (at p. 863): "There are probably few rules of equity pleadings more firmly established than the requirement that every material fact which it is necessary for a complainant to prove to establish his right to the relief he asks must be alleged in the premises of his bill, with fullness and particularity

*.Smith's Arm'd v. Wood (Vice-Chancellor Van Fleet, 1887), 42 N. J. Eq. (15 Stew.) 563; Arnett v. Ielch (Court of Errors and Appeals, 1890), 46 N. J. Eq. (1 Dick.) 543; Ter Knile v. Reddick (Vice-Chancellor Stevens, 1898), 39 Atl. Rep. 1062; Brown v. Carpenter (Chancellor McGill, 1898), 57 N. J. Eq. (12 Dick.) 23; Schrai't v. Wolters (Court of Errors and Appeals, 1902), 63 N. J. Eq. (18 Dick.) 793; Graham v. Spence (Vice-Chancellor Garrison, 1906), 71 N. J. Eq. (1 Buch.) 183.

The only statement in the bill of any facts concerning the matter with which we are dealing, is contained in paragraph 12, in which the complainant says

"that

the representations and statements contained in said plan or scheme of reorganization were false and untrue, in that, as shown by an appraisement in said bankruptcy proceedings filed subsequent to the time sour Orator became a party to said reorganization scheme, the value of the property of said Southern Steel Company and its subsidiary compa nies does not exceed the sum of $7.750,000, which fact was unknown to your orator at the time he became a party to said reorganization aereement. That subsequently and on or about the twelfth day of April, 1909, as your orator is informed and believes, the property of the said Southern Steel Company, including the stock of the subsidiary companies owned by it, was sold for the sum of $5,110,000 to the defendant William W. Miller, a member of the firm of Hornblower, Miller & Potter, attorneys for the defendants as reorganization committee aforesaid, and said reorganization committee, and for the purpose and with the intent of turning the same over to said defendant Southern Iron and Steel Company, all as provided in said reorganization agreement, and for

company said defendant Southern Iron and Steel Company poses to, and unless restrained by this court will, issue bonds and preferred and common stock in payment therefor to the amount of $27.000,000, as provided in said plan.”

which

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Schuler v. Southern Iron & Steel Co.

77 Eq.

As to so much of this paragraph as is on information and belief, the demurrer is not an admission of the facts so pleaded. Trimble v. American Sugar Refining Co. (Vice-Chancellor Emery, 1901), 61 N. J. Eq. (16 Dick.) 340. So, that even if it were seriously contended, which it was not, that the allegation of what the property brought at a bankruptcy sale was an averment of its value, such fact is not so pleaded in this bill as to be effective on this demurrer.

It was contended on behalf of the complainant that the first part of this iwelfth paragraph is an averment that the value of the property of the Southern Steel Company, and its subsiduary companies, did not exceed the sum of $7,750,000. I think it perfectly fair to the complainant to say that he concedes that unless he has averred this fact he has not stated any case for relief. If he does not so concede, I decide without any question that such is the necessity of the situation, and that unless it be found that he has so averred, he has not made out any case for relief.

No charge or statement in general vague form will take the place of an averment of the substantial necessary facts. So, that it is immaierial, if elsewhere in the bill there are statements that an excess of stock is to be issued or that the stock issued will be assessable, and other like general vague conclusions of the pleader. As Chief-Justice Beasley said in Stephens & Condit Transportation Co. v. Central Railroad of New Jersey (Supreme Court, 1869), 33 N. J. Law (4 vr.) 229, where the declaration demurred to charged that defendant was "unlawfully” doing this and that, "neither adjectives nor adverbs, no matter how numeror sonorous, can fill the place of

substantial statements” (at p. 232); and Chief-Justice Gummere, in Marples v. Standard Oil Co. (Supreme Court, 1904), 71 N. J. Law (42 Vr.) 352 (at p. 358), said

"in considering the sufficiency of the declaration, the court does not accept the conclusion drawn by the pleader, but determines for itself the legal force of these facts," citing Breese v. Trenton Ilorse Railroad Co., 52 N. J. Law (23 Vr.) 250, and Clyne v. Helmes, 61 N. J. Law (32 Vr.) 358. Sce, also, to the same effect, Redmond v. Dickerson (Court of Errors and Appeals, 1853), 9 N. J. Eq. (1 Stock.) 507; Sullivan v. Browning (Vice-Chancellor Stevenson,

ous

7 Buch.

Schuler v. Southern Iron & Steel Co.

1904), 67 N. J. Eq. (1 Robb.) 391; Equitable Life Association Society v. Brown, 213 U. S. 25.

It will be observed, upon reading the twelfth paragraph of the bill, as quoted in full above, that he first states that the representations and statements contained in the plan or scheme of reorganization

"were false and untrue, in that, as shown by an appraisement in said bankruptcy proceedings filed subsequent to the time your orator became à party to said reorganization scheme, the value of the property of said Southern Steel Company and its subsidiary companies does not exceed the sum of $7,750,000,” &c.

As I have before stated, there were no representations and statements contained in the plan or scheme of reorganization concerning the value of the property of the Southern Steel Company; and, therefore, no appraisement (prior or subsequent to the said plan or agreement) of the value of the said property could possibly show that the representations and statements in the said plan or scheme of reorganization were false and untrue

in this respect.

But, passing this, it is impossible for me, upon this demurrer, as it was at the time that the bill was presented for a preliminary injunction, to give to this language the effect claimed for it by

the complainant.

If the averments of the bill are ambiguous, or capable of two constructions, that one must be adopted which makes in favor of the defendant—the pleading is always construed most strongly against the pleader and in favor of his adversary. Stephens & Condit Transportation Co. v. Central Railroad of New Jersey (Supreme Court, 1869), 33 N. J. Law (4 Vr.) 229; Marples Y; Standard Oil Co. (Supreme Court, 1904), 71 N. J. Law (42 V r.) 352; Dick v. 11cPherson (Supreme Court, 1905), 72 N. J.

(43 Vr.) 332. In disposing of the application for preliminary injunction, counsel for the complainant was informed that if a statement, clear and unequivocal in its character, was inserted in the bill averring that the value of the property did not exceed the sum named in this twelfth paragraph, the court would consider the

Law

Schuler v. Southern Iron & Steel Co.

77 Eq.

very important and interesting questions which would then be raised.

The same question which now comes before the court on this demurrer finds, in my mind, the same answer, namely, that it is impossible to give to this language any such force as contended for by the complainant; it is impossible from this language to find that the complainant charges, shows or avers that the value of the property of the Southern Steel Company does not exceed the sum of $7,750,000. All that this paragraph avers in this respect is that the appraisement made in the bankruptcy proceedings shows that the value of the property does not exceed the sum named.

It seems to me to be perfectly clear that the material issue is not what that appraiscment shows. The material thing is, what is the value of the property for the purpose of a stock issue by a New Jersey corporation ?

If the demurring defendant herein should answer this twelfth paragraph by denying that

"the representations and statements contained in the plan or scheme of reorganization were false and untrue in that, as shown by an appraisement in the bankruptcy proceedings, the value of the property did not exceed the sum of $7,750,000,”

an issue would be joined upon a perfectly immaterial matter; and the proof by the complainant that the appraisement was for the sum named, or a lesser sum, would clearly and certainly not entitle him to the relief sought for in this suit. Such proof would not, as before demonstrated, show that the representations and statements in the plan and agreement were faise and untrue, because there were no such representations or statements in said plan and agreement, and the proof of the value shown in said appraisement would not show the only thing beneficial to the complainant, namely, that the actual value of the property was less than the stock to be issued for it.

Until the complainant in this suit assumes the responsibility of charging just what the value is, he does not state a case that the defendant is bound to meet, and does not state a case that entitles him to relief in this court.

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