Spencer, Ch. J.
By the former decree of this Court, the respondents were required to pay towards the discharge of the appellant’s debt against the Dutchess Cotton Manufactory, the amount of their respective shares of stock of 100 dollars each, or so much thereof as was necessary to pay the appellant’s debt, when ascertained.
In obedience to this decree, the Court of Chancery referred the ascertainment of that debt to a master, who has made his report to that Court, and both parties have excepted to it | the appellant’s counsel contending, that under the decree the master could receive no evidence to lessen, impeach, or destroy the consideration of the judgment obtained by the appellant against the company. He, also, excepted to the report, contending, that no evidence can be taken by the master under the pleadings in the cause, of any unwarranted and deceptive representations or concealment [682]*682of material facts as to the value of the property sold by the appellant to the company, nor could any evidence be given of any incumbrances on, the property, in consequence of any previous conveyance to George Reid, or any other person. Another exception is, that the master has reported that the respondents are entitled to falsify and surcharge the appellant’s account at large, which, it is insisted, ought not to be done under the pleadings in the cause. These are the material points of exception on the part of the appellant.
The respondents have, also, excepted to the report, (1) because the master has decided not to admit proof of the overvaluation of the property sold, if such overvaluation appears to be the error of judgment only, upon a full knowledge of facts ; the counsel contending, that he ought to have admitted such evidence without restriction, and that they ought to have been allowed to show the actual and fair value and worth of such property at the time of the sale; (2) because, the master ought to have allowed the defendants to prove, that the original contract of sale was, that the appellant agreed to sell the factory and machinery at the prices they originally cost him, and should not have decided, that they had failed to prove such contract; and, (3.) because, the accounts ought to be opened generally, and the appellant required to substantiate all the items of the same.
The Chancellor has decided, that the judgment is not binding or conclusive upon the respondents in their individual capacities, on the ground, that the acts of the trustees, while the corporation subsisted, however binding on the corporation and its property, are not binding and conclusive upon the individual stockholders; and, he has, also, decided, that the master shall hear evidence of at) overvaluation of the property sold to the company, from whatever cause such excess of valuation was produced. He has further decided, that evidence may be taken by the master of the actual cost of the factory and machinery to the appellant, and of the real and fair value of the spindles at the time of the sale; and all the exceptions taken by the appellant’s counsel to the master’s report, were overruled, and, [683]*683also, the third exception taken by the respondents’ counsel, The principle adopted by the Chancellor is, that the trustees of the company were not the agents or trustees of the individuals composing the company, and that, although the company was bound by their acts, the individuals were not.
This Court did not intend to decide, on the former appeal, what constituted the appellant’s debt, or whether the respondents were precluded from questioning the amount of it. The former decree of the Court of Chancery, which came under consideration upon the first appeal, had not decided upon that debt, nor had any principle been adopted in that Court, deciding whether the liquidation of the debt by the company might be impeached or not. This Court declined hearing arguments upon those points, and confined itself solely to the question, whether the corporation was dissolved or not; and, if so, whether the respondents were not liable by force of the statute to pay that debt when ascertained. The questions now come up, for the first time, whether, from the pleadings and proofs in the cause, the judgment rendered in favour of the appellant against the company is binding and conclusive on the respondents in their individual capacity; whether sufficient foundation has been laid by the pleadings for opening the judgment, and the accounts on which it is founded: and whether the respondents can be permitted to show, before a master, a material overvaluation of the property sold by the appellant to the company, for any cause.
These inquiries involve the construction of the seventh section of the act relative to incorporations for manufacturing purposes. (1 N. R. L. 247.) That section enacts, “ That for all debts which shall be due and owing, by the company, at the time of its dissolution, the persons then composing such company shall be individually responsible, to the extent of their respective shares of stock in the said company, and no further.”
This Court decided, on the former appeal, that the case contemplated by the statute had occurred, that the company was dissolved, and that the respondents were chargeable with the debt due from the company to the appellant, to the extent of their respective shares of stock in the com[684]*684pany. I perceive no escape from the conclusion, that the respondents are individually liable, to the same extent that the company itself was liable. Whatever was a debt against the company, is now, by force of the statute, a debt against them; and if the company itself was concluded, the respondents are equally concluded. As an abstract proposition, it is undoubtedly true, that the trustees of the company were not the trustees or agents of the individual stockholders. The trustees could not bind the individual members b.eyond the funds of the company, with this qualification, that they could bind the individual stockholders, in the event of the dissolution of thé corporation, to the extent of their respective shares, and no further. It is, on this principle, and on this distinction, that the trustees were, in the event which has happened, the agents of the stockholders. His honour the Chancellor was of opinion, on. the former appeal, that the trustees were, to a certain extent, the agents of the stockholders, for he held, that the resolutions of the trustees were a compact between the representative and constituent, between the trustees and the stockholders, and he decided, that they might, therefore, avail themselves" of resolutions, to which, in no other sense, were they parties. This principle was adopted and approved by this Court, with the qualification, that such resolutions must be fair and equitable, and not founded in fraud. This Court gave effect to a resolution, passed with the appellant’s assent, to accept fifty per cent, on the shares, while they refused to give effect to a resolution, subsequently passed against the appellant’s assent, absolving the stockholders from all further payments, on their paying thirty per cent, on the ground that it was a legal fraud.
I must, conclude, therefore, that the respondents are chargeable with the appellant’s debt, on the principle that the trustees, as their agents, have contracted this debt, and because the statute fixes their liability. The respondents cannot, therefore, impeach. the consideration of the debt, in any other manner, nor on any other ground than any principal can'8 be allowed to impeach a debt contracted by his legally authorized agent. If, then, it has been shown, that the sum claimed as a debt was fraudulently enhanced, [685]*685itt’ that the liquidation of the account is either fraudulent or founded in error, provided a foundation has been laid for such proof, the respondents would be entitled to relief. And, we must regard the judgment as a solemn admission merely, on the part of the company, of indebtedness, for it is not of itself, as res judicata, binding on the stockholders, if it was procured by fraud, or is founded in error. I do not perceive the necessity of a cross bill for this purpose. The appellant has minutely stated in his bill the origin and consideration of his debt, and the manner of its final liquidation; and it was competent to the respondents, in their answers, to impeach it for the causes I have stated. But they were bound, if such was their purpose, to specify in their answers the particular facts on which they relied. It is a just and well established rule, both in law and equity, that matter in avoidance must be stated with precision and certainty, so that the opposite party may not be surprised by evidence unwarranted by the pleadings.
This brings us to the inquiry, whether the respondents have, in their answers, set up fraud and imposition In contracting this debt, or error in the settlement of the account.
We must bear in mind, that there are two transactions only to be investigated : the original sale of the factory and machinery, on the 7th of February, 1815; and the settlement of the appellant’s account, in November, 1816, by a committee of the board.
The answer alleges, that when the report was made by Crosby, there were only 400 spindles, and not 912, and that they cost only 9 dollars each : That they were not worth more than 10 or 12 dollars, and not 16 dollars, as the plaintiff fraudulently procured them to be estimated. And again, the answer alleges, that the report of November, 1816, was not made from any examination by the persons who signed it, but on the appellant’s statements, which were not warranted by the truth ; and that the factory and machinery were not worth, on the 7th of February, 1815, 24,000 dollars. And again, that the deed given by the appellant, contained covenants of seisin, and of a good right to sell; w.hereas there were two mortgages on a tract of 200 acres of land, including the site of the factory, the one to John [686]*686Cope, for 2,400 dollars; and the other to the Washington Insurance Company, for 12,000 dollars, which "were then due, and carrying interest, and that these incumbranceswere not disclosed, but concealed. These are all the suggestions of fraud in the sale, or error in the accounts, set up by the answers.
The factory was built, and in operation, some time before the sale to the company, and it was situated within a short distance of Poughkeepsie, where the respondents reside. Before the purchase-was made, the company, by resolution, instructed their treasurer and secretary, to confer with the appellant, and report at their next meeting at what price the company could purchase of him the land and factory, stock and materials, then belonging to him. On the 7th of February, Mr. Crosby, the treasurer, reported, in the absence of the secretary, that he had conferred with the appellant, and that the factory, in its then present state, and all the rights vested in the appellant, and which ought to belong to the factory, with two acres of land, on which it was built, ought not to be purchased by the company at a greater sum than 30,912 dollars ; and he presented a detailed statement of the several items, making the aggregate amount. The report does not state that 912 spindles were in operation, but states merely 912 spindles, at 16 dollars, 14,592 dollars.
It appears, from the evidence of many witnesses, and, among others, from the depositions of Stafford, Cunningham, Herrick, and Schenck, that the spindles were not overcharged. They estimate them as worth from 15 to 17 dollars. It does appear that the appellant had engaged them at 10 dollars;' but Aaron Stafford, with whom the contract was made, testifies, -that 480 were then in operation, and 432 more were preparing, and under good way; and that the appellant, in consideration of the appreciation of the price, had agreed to give him 12 dollars instead of 10 dollars, and had also agreed to -give him what the company gave. The report then did not misrepresent the state of the spindles, for there were 912 in operation or to be put in immediate operation; and the report evidently alluded to this, in speaking of “ the rights vested in the appellant, and which ought to belong to the factoryand as to the price, it was the fair medium value.
[687]*687It is not proved that the appellant agreed to sell the factory and machinery at what it cost him, nor is this alleged in the answers. The allegation is, that they were not worth 34,000 dollars on the 7th of February, 1815, and this would be decisive against the suggestion, were it really so. Mr. Tallmadge testifies, that after the incorporation, a conversation took place in regard to taking the factory of the appellant, and he offered that the company should have the factory and machinery at what they had cost him j and the appellant intimated, that he should consider that an allowance was to be made to him for his personal services and attention. in building the factory, as he had given his entire time and services to it, for two years and upwards, and said, he should claim 1,000 dollars. That the conversation was loose, and without any conclusion, and a committee was appointed to examine the factory and report as to the value, which was accordingly done ; that after the report, a considerable conversation took place respecting it, in the course of which the appellant said, that the sum reported was below what the factory had cost him, and it being objected that the amount was greater than had been expected, the appellant said, he should submit to the report, but would prefer having the report set aside, and have the value fixed by indifferent men, to be bound by their decision, and that lie should be a gainer by such valuation, believing it would be made at a higher sum than that reported by the committee. That the board inclined to hold to the report of the committee, which was unanimously adopted by the trustees. Mr. Tallmadge says, he considered the sum at which the factory was taken not to be higher than the first cost, which opinion was founded on the appellant’s representations before stated. I perceive no pretext for saying, that the appellant was guilty of any misrepresentation or concealment as to the value of the property sold by him ; it was all visible, and the respondents and their committee had ample means of examining and judging for themselves; and whatever may have been said preparatory to the consummation of the bargain, it is very certain that the trustees acted on the report of their treasurer. The subscription to the stock took place after the agreement by the trustees to purchase ; and if the stockholders, With their eyes open, and [688]*688the means of information at hand, were content to become members of the corporation, without due consideration, or examination, they must ascribe their losses to their own want of prudence and caution. But we do not hear a lisp of complaint, until the events of peace had materially changed the aspect of affairs, and rendered the stock less valuable; and even after that period, we find the stockholders paying up calls on their stock, without any objection that they had been defrauded; and, indeed, there is no, trace of any complaint as to the fairness of the transaction of sale, until the concerns of the establishment were overwhelmed with ruin; and, even in their answers, the respondents do not pretend that the factory and machinery were agreed to be sold at what they cost the appellant.
To admit proof, at this period, that the factory and machinery were not worth what was agreed to be given, would violate every principle of reciprocity. The contract is executed, and the appellant is finally concluded as to price. Had political events terminated differently, it appears, from all the evidence, that the speculation would have been a profitable one. Can it then be seriously urged, that because events have turned, out unpropitiously, the respondents, who took their chance in those events, shall not abidé the loss ? Besides,, the respondents have ratified the acts of the trustees, by subscribing for the stock, by paying repeated calls, and by their entire silence for so long a time in making any complaint of the purchase.
It has been urged, that several of the stockholders and trustees, who took a principal agency in making the contract of purchase, have become insolvent, and have ceased to have any interest in the result of the cause. They were not insolvent when the affairs of the company were confided to their management, and they have not been charged with any fraudulent combination with the appellant, to betray their trusts and defraud the other stockholders. They were, themselves, deeply interested in making the purchase, on the best terms they could; and this consideration refutes any suggestion, that they consented to an overvaluation of- the property, or that they did not consider it to be worth what they gave; and I cannot but repeat what was said on a former occasion, “ the charge is so destitute of foundations that [689]*689it does not deserve a serious refutation.” On this branch of the subject, my opinion is, that the sale and purchase, founded on the report of Mr. Crosby, of the 7th of February, 1815, is binding and conclusive on the respondents in their individual capacity, and that no foundation has been laid for opening that transaction, which has not been sufficiently and fully removed by the proofs.
With respect to the appellant’s account, adjusted by a committee of the trustees, on the 5th of November, 1816, many exceptions have been taken, not warranted by any allegations in the answers. Herrick and Cunningham, who settled that account, have not been interrogated in relation to it, whether the items were correct, nor on what principles it was adjusted. It is, therefore, evident, that the exceptions now taken, were not thought of when the witnesses were examined. If I could discover any principle, on which that account could be re-investigated, I should readily assent to it $ but there is no ground laid for such reexamination in the pleadings. It is no where alleged, that any particular items of that account are false, or that the charges and credits are erroneous. It is generally stated, in Mr. Bloom’s answer, “ that it was not made from any view or inspection, by the persons who signed the same, of the state of the factory, or accounts of the appellant, but was made on certain statements and allegations of the appellant, not warranted by the truth of the facts, and represented a balance not due to the appellant, and, therefore, ought not to be binding on the respondents ; for the factory, machinery, &c., as the same were situated on the 7th of February, 1815, were not worth 24,000 dollars.”
The only issuable facts, set up by this answer, are, that the account was made out without any view or inspection by the persons who signed it, of the state of the factory and accounts, and that the factory and machinery were not worth 24,000 dollars, on the 7th of February, 1815. Nathan Moulthrop testifies, that exhibit C. contains the items referred to in exhibit B., and that all the articles in exhibit C. were examined by B. Herrick, as a committee of the company, and were found in and about the factory, I forbear to add any thing to what has been said on the last fact, the value of the factory and machinery, Here, too, [690]*690we must remember, that the committee, who settled that account, were personally interested in reducing the amount due the appellant as low as they, could; and .we find, in exhibit D., that they made two deductions, amounting to dollars, on the first purchase. In addition, Cunningham states, that the account was made but with care, that the balance was reported to the trustees, who approved of the report, after.making another deduction of 950 dollars, which balance, he says, so adjusted, was considered a final balance due to the appellant from the company. Herrick fully concurs in this statement. From all these considerations, I perceive no grounds to consider the accounts, thus settled, liable to be re-opened. The balance, thus settled, the trustees, afterwards', confirmed, by giving a bond for its payment, and, when sued on that bond, they confessed judgment ; and it is worthy of remark, that some of the very persons, who took an. interest in urging the giving this bond, and confessing the judgment, seek to set the whole aside as a gross imposition.
I cannot think, that the course adopted, of referring to the master- an examination into facts that went to the merits of the cause, and, with respect to which, proofs had been taken in chief, in the usual way, was a correct or proper procedure. If the respondents are concluded from an examination into the original purchase of the factory and machinery; and, if they are, in like manner, concluded from opening the account, either from the imperfection of their answer, or from the proofs in the cause", there was nothing to,refer to a master on these points. I do not understand, that facts, which relate to the gist of a controversy, which the plaintiff is bound to prove, to entitle himself to relief, or which a defendant is bound to prove, in avoidance or discharge of the demand, are ordinarily referred to a master. Matters of account are thus referred, when the principles upon which they are taken have been previously settled by the Court. My conclusion, as regards the account of the appellant, is, that there is no foundation laid, by the answers, for impeaching it, which has not been fully and satisfactorily met and repelled; and that, consequently, the appellant’s debt against the company, of 23,493 dollars 35 1-2 cents, must be considered as conclusively established at that [691]*691amount; and this balance must be considered as con» elusive and binding on the respondents in their individual capacity, according to their respective shares of stock.
With regard to the two mortgages, there is no foundation for the allegation that they were concealed from the company or stockholders. The proof shows, that they were known to several of the stockholders, and that negotiations were entered into for the assumption of them by the company. The land mortgaged included 230 acres, exclusive of the site of the factory, and these 230 acres were then considered to be worth 25,000 dollars, a sum amply sufficient to pay off the mortgages. It has been urged, that the appellant violated his warranty, in the deed to the company, in consequence of the prior sale to Reid, of a water privilege for a paper-mill. This formed no part of the defence set up in the answers; and the proof in relation to it, was irrelevant and inadmissible. Had it been alleged, possibly it might have been shown, either that the fact had been made known to the company, or that it was not injurious, from the abundant supply of water. We cannot now notice the proof.
I am, upon the whole matter, for reversing the Chancellor’s decree, moverruling the 2d, 4th, the addition to the 4th, and 5th exceptions, taken by the appellant’s counsel to the master’s report $ and, I am, also, for reversing the decree, allowing the 1st and 2d exceptions, taken by the respondents’ counsel to the master’s report ; and am in favour of a decree, carrying the principles I have stated into effect.
A majority of the Court
ts.
Nov. 18th. For affirming in toto, 8. For reversing in part, 16.