Gill v. Jamaica Bay Manufacturing Co.

171 A.D. 165, 157 N.Y.S. 52, 1916 N.Y. App. Div. LEXIS 5255

• Court: Appellate Division of the Supreme Court of the State of New York
• Decided: January 14, 1916
• Status: Published

Opinion

Jenks, P. J.:

This judgment represents the value of certain coupon bonds payable to bearer, issued by the defendant corporation. These bonds are part of a number of bonds lent to that corporation under an agreement executed by several bondholders (who were also stockholders) with the corporation. The plaintiff’s husband, Thomas Gill, was a party to the agreement. The plaintiff complains, on the equity side of the court, that she was induced to deliver the bonds by the fraudulent representations of Stillings, the secretary of the defendant corporation, and that the failure to return the bonds or their equivalent was attributable to the collusion and fraud of the corporation in concert with the other defendants. The defendants pleaded the general issue. The referee decided that the said agreement was secured by fraud, that the plaintiff did not ratify the agreement, that it should be canceled and annulled, that the personal defendants had combined through their control of the defendant corporation to prevent payments of the proceeds of the bonds to the plaintiff, and that there was due to her $5,000 from the cor, poration. Thereupon a money judgment only, and against the corporation only, was entered. The defendants appeal.

Thomas Gill, the husband of the plaintiff and a stockholder in the corporation, attended a meeting on October 26, 1909, at the office of Stillings. There were present Stillings, Corey, Swain and Chamberlain, all bondholders. An agreement prepared by the counsel for the defendant corporation was presented, and the various persons present, including Thomas Gill, signed it. Thomas Gill testifies that before signing it he inquired of Stillings, “What is this all about, Bill?” and Stillings answered, “It is just as I told you, Tom, I am signing the same thing myself,” whereon Gill, without reading the paper, signed it, together with the others present. The agreement is as follows:

“Memorandum of Agreement made October 26, 1909, between The Jamaica Bay Manufacturing Company, a corporation organized under the laws of the State of New York, (hereinafter called the Company) and the several holders of the bonds of the said corporation who shall lend the same to the company pursuant to this agreement and who are hereinafter called the bondholders.

“ The company is in need of additional capital to be used in the enlargement of its plant, the purchase of new machinery and the payment of existing debts. It is considered by the bondholders that it is not wise to increase the stock capitalization of the company. Each of the bondholders who becomes a party hereto is the owner of capital stock in the company equal to or exceeding in value the amount of the bonds held by him. For the purpose of raising money for the company so as to enlarge its business and thus increase the chances of added value to the stock, each of the bondholders who executes this agreement is willing to lend the company certain of his bonds, without interest, as hereinafter set forth.

“ Now in consideration of the' premises and of the sum of One Dollar by each party hereto to the other in hand paid, it is agreed:

“ 1. Each of the bondholders signing this agreement agrees to lend and does simultaneously with the execution hereof lend to the company the number of its corporate bonds now held by him which is set opposite his signature hereto.

“2. It is -understood and agreed that the company shall have the right to pledge the said bonds so lent to it as security for the loan of money, or as security for the payment of any debt incurred, or the performance of any contract made by it; and the company has the further right, if in the judgment of the board of directors it is in the company’s interest to do so, to sell any of the bonds so lent to it at such price as the board of directors shall deem adequate.

“ 3. The said loan of bonds is for an indefinite term, and the company agrees to return the same to the bondholders lending them only when and as the board of directors by a majority vote shall determine that the financial situation of the company is such that it may safely and prudently return the bonds, or some part thereof, or repay the value as hereinafter provided.

“4. The loan of bonds being without interest the bondholders hereby waive the payment of all coupons attached to the bonds maturing during the time of the loan.

“ 5. The company may at any time before the return of the bonds, and upon the vote of a majority of the board of directors, pay to any bondholder, party to this agreement, the value of the bonds, or any part of them, -lent by him at par; which payment shall be accepted as full value for the bonds and as satisfaction and discharge of the loan to the extent of the bonds so paid for.

“ 6. This agreement binds and benefits the parties, their representatives and assigns.”

The alleged fraud and deceit of Stillings is that Stillings theretofore had told Gill, and his wife, this plaintiff, that the bonds, if lent, would be returned to the lender within a year or a year and a half, which was in contradiction of- the 3d clause of the said agreement. In other words, when Stillings said at the meeting, “It is just as I told you,” he thereby intended that Gill should believe that the agreement provided that the bonds would be returned within one year or one year and a half.

Of course, so far as the fraud in procuring the bonds under this agreement is concerned, it depends primarily both upon proof that Stillings said these words or their equivalent, articulated with proof that Stillings had theretofore stated

that the bonds, if lent, would be returned in a year or in a year and a half. I put aside the questions of the authority of Stillings to represent the corporation if he made such statements, and as to the finality and exclusiveness of the written agreement.

The agreement was executed and the bonds were lent, both in October, 1909. Consequently the “year” expired in October, 1910, and the “year and a half” in April, 1911. The plaintiff and her husband, Thomas Gill, testify that at the end of the year and all within a year, they made several demands for the bonds, both upon Stillings and the defendants, all in vain, and that she and her husband were put off by pleas for patience and by statements that the corporation was not in a financial condition to respond.

Stillings died in July, 1911 — six or seven months after these alleged demands. This action was not begun until July, 1914, three years after Stillings’ death.

The plaintiff would establish that Stillings made these prior statements, solely by her testimony, that of her husband and that of her son. Thus the plaintiff, interested in the event, and her witnesses who are naturally biased, control the evidence, for Stillings is dead. Proof by oral statements of one’s adversary is in its nature comparatively unsatisfactory. And the proof in this case is of oral statements of him who is dead. In Lea v. Polk County Copper Co. (21 How. [U. S.] 504) the court say: “ And courts of justice lend a very unwilling ear to statements of what dead men had said.” In Piffet's Succession (37 La. Ann. 871-873) it is said: “The narration of conversations correctly is the most difficult feat of memory and of expression, and of all evidence the narration of a witness of his conversation with a dead person is esteemed in justice the weakest.” (See, too, Lehigh Coal and Navigation Co. v. Central R. R. Co., 41 N. J. Eq. 167; Crouch v. Hooper, 16 Beav. 182, 186.) The reason is not far to seek. The witness has no fear of direct contradiction by the other party to the conversation, and as against him there is no chance of explanation. Nothing can be said by the other party that recalls to the witness the circumstances which attended the statements, and there is no opportunity to check exaggeration or to suggest

the exact statements by way of correction. The rule enunciated in Rosseau v. Rouss (180 N. Y. 116) and like cases is made for the reason that “ ‘ such contracts are easily fabricated and hard to disprove, because the sole contracting party on one side is always dead.’” (See Taylor v. Higgs, 202 N. Y. 65, 69.) Thus Woodruff, J., writing for the court in Card v. Card (39 N. Y. 317, 319), says of the restriction of the statute, which is now section 829 of the Code of Civil Procedure: “ The restriction in question is intended to prevent the party from testifying to the personal act, declaration, or conversation of the deceased. These are matters which, if he were living, he might explain, qualify or contradict.”

As to these alleged pi’ior statements of Stillings, it is somewhat significant that in a complaint that pleads evidence to an unusual extent, the plaintiff complained at first three times that the statements were made to her husband and by him communicated to her, but never that they were made directly to her. So she saw fit to amend her complaint at trial to conform- to her proof. The plaintiff testifies that the statement was made first to her at a yacht club house in 1909, when, after some conversation, she said- to Stillings: “If I would loan you the bonds, when would I get them back ?” and Stillings answered: “Why, Mrs. Grill, in a year or a year and a half sure, without interest;” that a week after, at her house, Stillings said “ that if I loaned him the bonds he would return them in a year or in a year and a half without interest.” Although Thomas Grill, on his direct examination, testifies to the conversation at the club house, he but says that Stillings then said the company was perfectly solvent, that it was only a temporary loan, that we would get the bonds back, if not the bonds an equivalent of the bonds. But he does not testify that Stillings said that they would get back the bonds in a year or a year and a half. He also testifies that he and his son were present when Stillings came to the house, evidently the occasion referred to by the plaintiff, and although the witness was asked to tell everything, he does not mention the statement as to the return of the bonds in a year or a year and a half. But, further on, after he had been asked the direct question whether any representations were made or conversation had with him and.the plaintiff as to whether the bonds were to be kept absolutely or to be returned, he answers: “Why they were to be returned within a year or a year and a half,” and that this was said to him “Five different times, * * * before I delivered the bonds.” Upon his redirect examination he was asked: “ When Stillings came to your home, and when you saw Stillings at the Jamaica Bay Club, as you have testified in chief, in the presence of your wife, did Stillings make any other representations that the bonds would be returned within a year or a year and a half ? A. He said we were to get the bonds back or an equivalent to the bonds, at that time.” Plaintiff’s son, when testifying, was within 3 months of 19 years of age. He testifies to interviews in the summer of 1909, when he was about 13 years old. He recalls the interview at the yacht club between Stillings and his mother, and upon the requirement to give Stillings’ words as well as he can, he testifies: “Mr. Stillings said to my mother, Mr. Stillings asked my mother — won’t that do — to loan him bonds for the company needed some capital to make some repairs and to enlarge the plant, and he represented that these bonds would be given back, or their money value, within a year or eighteen months at the most, and the company was very solvent. Q. That the company was what ? A. The company was solvent; they had a standing capital. By Mr. Maddox: Q. They had a what? A. They had a capital, a surplus, a surplus. By Mr. Maddox: Q. A standing capital and surplus, you say ? A. Yes. And they had a surplus of money, and they only needed this money for the enlargement of the plant, and he thought that the idea of loaning the bonds was very good, as he was loaning some bonds himself, as were other bondholders.” He was also present at another interview and testified that Stillings said: “He wished to get the bonds, to get the loan of the bonds from my mother, and he said, he repeated that the bonds would be repaid within a year. He made that very emphatic.” He was also present at other interviews, but at none where Stillings is alleged to have made the representations. It is hard — I do not say incredible — to believe that a witness in recalling a conversation held at a casual meeting between

other persons, heard by him as a lad o£ 13, can testify that he then heard and has ever held fast in his memory until six years afterwards such expressions. We need not conclude nor think that these witnesses are guilty of deliberate lying. The importance of this proof seems to be fully understood by them. Thus when Thomas Gill was asked by the referee: “Was there any talk between you at all at the time she gave you the bonds to be given up ?” the witness answered, “Yes, she said, ‘We’ll get the bonds back in a year and a half, and you might as well let them have them for that length of time,” and again when plaintiff was asked: “Did you give your husband any instructions when you gave him the bonds, what to do with them ? A. Yes, sir. He must promise to have Mr. Stillings to promise that I will get them back in a year or a year and a half.” This constant reiteration might seem suspicious and not to the hypercritical alone. And if the witnesses are cor rect, Stillings’ statements were made in series. It is possible nay probable, that the length of the proposed loan was dis cussed. The Gills and Stillings were alike interested in thy. going concern. They appear to have been on friendly, if not intimate, terms. These witnesses do not pretend to say that Stillings said that there would be a fixed time for the return of the bonds, but only that they would be returned in a year or a year and a half. They do not pretend to say that Stillings said that this term would be stated in any agreement. According to them, Stillings9 statement was indefinite. The parties knew that the purpose of the loan was to further the business of the corporation. Success and the measure of success were of the future. Stillings naturally could not state exactly when the bonds could be returned. On the other hand, it was natural that he should express his opinion — his forecast. But a mere matter of opinion, isolated and stated as such, is not a basis for actionable fraud. (Hickey v. Morrell, 102 N. Y. 454, 463.) But it would be natural for an interested or a biased witness, convinced of the justice of a claim to regain the plaintiff’s own property, to convince himself that what was merely an opinion was a positive representation, and thus to strip the expression of any features of judgment or of belief, and to leave it as a positive assertion whereby the plaintiff was defrauded of her own. (See Crouch v. Hooper, 16 Beav. 182, 186.) I think that the probative force of such testimony is not sufficient.

But it must be remembered that if I am wrong in this thought, the case, so far as fraud is concerned, depends also upon the proof that Stillings made the declaration, “It is just as I told you,” to Thomas Gill at the meeting of the bondholders. Of course, the dead man, Stillings, cannot be heard in contradiction or in explanation, and to this extent Thomas Gill controls the evidence. But the meeting, as I have said, was attended also by Corey, Chamberlin and Swain. Chamberlin testifies that all were asked to sign the agreement and none asked for any explanation. Swain testifies that there was no discussion that he remembers, and that he did not remember of hearing Thomas Gill ask any questions of Stillings. Corey, called by the plaintiff, was formerly the president, but was not then interested in the corporation. He was not asked by plaintiff whether there was any conversation between Thomas Gill and Stillings, but upon cross-examination he was asked and answered as follows: “Q. Did you hear Mr. Gill ask for any meaning of the signature to the paper on that occasion ? A. I only remember Mr. Gill saying that if I didn’t put up my bonds the rest wouldn’t.” The agreement which Thomas Gill signed was in plain contradiction of what the Gills say that Stillings had said to them as to the return of the bonds. It was laid before Gill at the time, and after he signed it a copy thereof was given to him, which he took away. Chamberlin testifies that he delivered a copy of this agreement to Gill in his shop, left it with him after explaining the purpose of the scheme, about October 23d or 24th; that it was thereafter, on October 26th that the meeting was held; that he did not receive the bonds from Gill until October 28th, when he called upon Gill to obtain them, and that the receipt was signed by him as of that date. Yet I understand Gill to testify that he was handed the receipt on October 26th. If Stillings intended to work a fraud by such prior statements that could be done only by procuring Thomas Gill’s assent to the formal agreement without a reading of it. Stillings certainly took extreme chances; for he left in the possession of Gill the agreement as plain evidence of his fraud for Gill or the plaintiff to read during two days that intervened the execution of the agreement and Grill’s delivery of the bonds thereunder. Stillings had no reason to believe that at no time thereafter would the Grills read the agreement. But the Grills testify that they knew nothing of its contents until after they had handed it over to the attorney or counsel for the plaintiff in this action. Thomas Grill was not called to contradict the evidence adduced by the defendants. I think that the evidence that Stillings made such statement is not sufficient proof.

The fraud, then, is out of the case. The finding that the plaintiff in no way ratified the agreement and that, therefore, it should be canceled and annulled, is not justified. Even conceding that the plaintiff, and not Thomas Grill, was the owner of the bonds payable to bearer, and the testimony is not plain that she was such owner, it is undisputed that her husband attended the meeting, signed the agreement, and thereafter delivered the bonds pursuant to it. Thus it appears that plaintiff clothed Thomas Grill with entire authority in the premises and that he acted thereunder to the completion of the transaction. The plaintiff, by her own testimony, did not, after the lapse of the year, demand the bonds upon the theory that her husband had no authority to sign the agreement or to deliver the bonds, but that she understood that the time for the loan had expired. I think, therefore, that she is estopped. (Bank of Batavia v. N. Y., L. E. & W. R. R. Co., 106 N. Y. 195, 199; People v. Bank of North America, 75 id. 547, 562.) Even if Thomas Grill was but her special agent, yet he appeared as clothed with full authority to sign the agreement and to deliver the bonds thereunder. And, so far as the defendants are concerned, his powers were not limited by instructions uncommunicated to the other parties to the agreement. (Lowenstein v. Lombard, Ayres & Co., 164 N. Y. 324; Cox v. Albany Brewing Co., 56 Hun, 489.)

The judgment is reversed and a new trial is granted, costs to abide the final award of costs.

Thomas, Oarr, Mills and Rich, JJ., concurred.

Judgment reversed and new trial granted, costs to abide the final award of costs.