106
I'JlJ)ERA.L BDOBTEB.
voL 51.
under .the fifth item of the policy, of insurance sued upon. This item i. in the following words: ";"(6) Against all direct 10as or damage [excepting 811108888 caused, directly or 1:)1 fire or lIghtningl to the, property, real or personal, of the assured, the above-,described premises, caused by any accident to or by the bW1ers,epgines, elevators, [enumerated in the this policy,] steam shaftIng. belting. bangers',and pulleys, sitllated on the premises and against loss or damage resulting from such accident to the properb" of others for which the assured may be liable."
.Ih cbrilitruing this policy it musfbe borne in mind that it is a policy strictly accidents, and not policy. The whole tenor of the instrumentilhows clearly that it was intended only.as an accident pol. ,. 'as, an insurance against fire. The true meaning of the fifth iteiri ,()fthe policy WOUld, lthink.be'more clearly expressed if the clause excepting had been omitted, and there had been 'Written at the end of the paragraph a proviso saying that" this polis' hot to cover any losses caused directly or indirectly by fire or light. ning." In other words, it is not 'a. policy against fire, even if fire is the resultor)inmediate consequence of the accident. With this view of the of the policy I think the demurrer is well taken to counts, because the pleader has not stated that the loss was not dii,-ectly or indirectly by fire. The demurrer is therefore sus-fAllied as to theseconli and third counts. r,"' .(L <'
EASQN II. BUCKEYE BREWING
Oo.d aZ.
(C'Lrcu'Lt Cou,rt, N. D. OMo, W. D. July 21, 1892.) CoBPORATIONS-CONTRAOTS-ULTRA VIRES.
,A by a corporation created under the laws ot Ohio, while solvent and engaged'm a:profitable business, to sell its plant and ,assets for a consideration, the greater part of which is stock and bonds. of another corporation to be organized to carry on ,the business, no exigency makmg such sale necessary for the protection of stockholders, is ultra ""'res, as, under the state laws, one corporation cannot become the oWiller of stock in another unle8S' authority' to do so is clearly conferred bv statute.
At by Harry WilliaJ;D Easun against the Buckeye Brew· ing Company' and others. On demurrer to petition. Demurrer sustained. Hurd & Scribner and E. W. Tollman, for plaintiff. R. Waite and Doyle, Scott & Lewi8, for defendants. Before TAFt, Circuit Judge, and RICKS, District Judge. RICKS, District Judge. This is an action instituted by the plaintiff tl) recover $250,000 damages for the failure of the defendants to comply with the provisions of a contract for the sale of the defendants' property tG the 'plainti.fttlfhich contract was made between the parties on the 27th
EASUN t1. BUCJU:YE BREWING CO.
157
day ofJuly, 1891. By the provisionsl. f this contract of sale, the vendor, the Buckeye Brewing Company, obligated itself to sell to the vendee certain brewing property in the city of Toledo, known as the "Buckeye Brewing Company." The purchaser, on his part, as a consideration for said sale, agreed to pay the vendor the sum of $860,000, whereof lethe sum of $10,000 shall be paid in cash by way of deposit; the further sum of $334,000 shall be paid in cash on or before the completion of the purchase; the further sum of$258,OOO by issue to the vendors, or as they may appoint, of six per cent. debenture bonds of an English joi.nt-stock company, proposed to be formed by the purchaser, hereinafter referred to as the ·Company,' provided the total amount of such debenture bonds shall not exceed ninety thousand pounds; and the balance' of $258,000 by the allotment to the vendors of ordinary shares of the Company of that equivalent, nominal value, such shares to be deemed fully paid.'? The contract further provided that the vendor should deposit muniments of its title with the Second National Bank of Toledo, and that Dennis Coghlin and George E. Pomeroy, officers of the Buckeye Brewing Company, were to render certain services to the vendee, or its successor, after the completion of the sale. The petiti.on avers that the defendant the Buckeye Brewing Company failed to deposit its munimentsof title, and that Dennis Coghlin and George E. Pomeroy by written instruments notified the plaintiff that they would not render the service for in said contract to the vendee; and by reason of such breaches of contract the sale was not completed, to the damage of the plaintiff in the sum above stated. Demurrers were interposed by the defendants Coghlin, Kountz, Pomeroy, Jacobi, and William Coghlin, which it is admitted were well taken, and may therefore be sustained. The case stands, then, upon the demurrer of the defendant the Buckeye Brewing ,Company to the petition. Several grounds are set forth in argument why the demurrer should be sustained: First. That the ease was prematurely brought. Second. That the only allegations of formance by the plaintiff are the general allegations that "from the aforesaid date of the- execution of said agreement he has in all respects performed each and every condition of the contract on his part to be performed," while in a later part of the petition he was prevented, as he says, from performing. Third. That the only allegations of breach of contract by the Buckeye Brewing Company are (a) that it failed, to de,. posit the muniments of title -of the brewing company with the bank, ,to be held to the joint order of the plaintiff and the defendant, and the only iI\iury alleged by the plaintiff because of said failure is that thereby "he has been, and is now, unable to ascertain whether or not the said defendant brewing company has a good and perfect title to the property;" (b) that Dennis Coghlin refuses to have any connection with the English company proposed to be organized for the management of the brewery. FO'urth. That the contract sued upon, as made by the Buckvires. eye Brewing Company, was In the view which we take ()f this case, it is only necessary to con,sider the question of whether or not this contract sued upon was ultra vires.
158 settled in Ohio' ttilit 'oorporations have such ,powers" and ,such creating thern'cOnfel,'s;and'are confined to the exercise of granted"and such incidental flowers: those speoHically conferred. Under tnisconstruction of'tb'e! lrtatl1&j I it was' dernly·.settled in the' case of Jilrankti'/t; Bank v. Commercla0JBankt86 Ohio St. '/850, ,that one corporation cannot become the bWO'er:df'tlby'iiortion oftheoapital stock of another corporation, unless authoiity'tobeeome suoh is <ilearly conferred by the statute; The pro"isions'ofth-is ctlntract clearly contemplated that the Buckeye Brewing CotrJpanj,'wh'ich; 80 far as the pleadings before us show,was, at the time of making'sl1eh,Mntract,not only a solvent corporation,but a prosperous and pidfitable one, should:sell and dispose of ifs: plant and all its assets, 'andtlV'erylarge prtrt oNhe consideration for such sale was to be stocknmi: bdndsin an English corporation to be organbed to carryon the bt!-s,inessdf'the vendee. Theprovisioll8 of the contract specified as to the rate ofiriterest such bonds. should carry, and the dividend such stock should' prly.Byimplication it is fair to infer that it was contemplated Brewing Company. as a oorporation, should continue, 'forthepnrpose of collecting the interest on these debenture bonds, the dh'idendi!! on the stock of the 'new corporation, and to distribute the sarne atnong the shareholders of said Buckeye Brewing Company. It was'tbeteforetO'(!ontinue itsbtlsiness asacorporation, not for the purpose of'(larrYlDg ont the objects for which It was organized. viz., the business (j{il'brewing company; but for the purpose of owning stock in, a new corporation, and to the extent that ownership of snch stock in- I \Volved pa'l'ticipating in themanagell1ent of that corporation it was to as-sist in btlrryiil,.gon the business Of another corporation. There was no I llUCh exigenc'ih the business of this corporation as to make such sale of its propel'tY:tifid <Jhange irnhe nature ofits oorporate business necessary: for theproteetioli of its stockholders. Counsel for the plaintiff have, cited mallYCaEle8 in which the courteof severalofthe states, under stat-' utes vety siniparto those of Ohio, have held that corporations had a right to own arrdcontrol the stock of other corporations, but in every such &se tdw:hich OUr attention has been <JaIled such. power was con-' to the corporation as incidentto its inherent right to protflct its shareholders £1'omlos8, .owing to 'some! peculiar exigency in the affairs of the An insolYeht, corporation, contemplating vuluntary dissolutionby-'con'sent of its shareholders, mIght have a right to dispose accept,in whole or in part, for the purchase price thereof,stoclr ihanother corporatioll; this stock to be either sold, and the proceeds thereof distriblitedto the creditors, or to be apportioned in kind to stockholders as the might provide'. uAl'ooelver appointed to manage the affairs ofan insolvent corporation,andttHlose out might be authorized to dispose of its assets,. anutooeive in'payIilent therefor stock in the corporatioll, to be disposed of as the courtmightctrderin'the distribution of its assets. But in alltheaecases thElfEl must he some stringency or emergency to justify this departure from the ordinary courseoi' the business of the It is
'11.
,:j3REWINIl, CO.
159
corporation. But in this case no such emergency existed. As before doing a flourishing business. Its plant and stated, the good will and business were considered so desirable that the vendee agreed to pay theref01' the:large consideration specified in the contract. This sale could undoubtedly have been made for cash and deferred payments.. The purchaseptice might not have been so great upon, such a basis, but still would have been adequate. As no emergency existed to compel this sale, and the transaction was purely voluntary on the part of the corporation; there is no reason why it should be permitted to violate the well-settled principles of law by taking stock in a newcorpora:o tion, and therebyeIlhancing. the consideration which it was to receive. Public policy discourages such transactions. As the supreme court of Ohio has well said, in the case, in 36 Ohio St., above "Were this not so, one corporation, by buyi ng up the majority of the shares of the stock of another, could take the entire management of its business, boweverf<>reign such businl'ssmight be to that wbich the corporatIOn so purchasing said shares was created to carryon. A banking corporation could become thEH)perator, of a "ailroad. orcany on the businellsofmanufacturing, and any other corporation could engage in banking by obtairying control ofthe bank's !stork.'NOl' wauld this result follow any the Jess certainly if the shares of stock were received in pledge only to secure the payment of a debt, provided the shares were transferred on the books to the name of the pledgee. A pllrson in whose name the stuck of the corporation stands on the \,looks of the corporation is, as to the corporation, a stockholder, and has the right to vote upoJ1 ·tbestock." All these objections apply with· full force to,the transactions under considerationbelore us,' There is no reason why 'there should be a departure from these well-settled rules in this case. There are no creditare to be protected by upholding this sale. There ors whose are no unfortunate shareholders who are liable to be assessed for unpaid debtsunderthe statutes of the state. There was, in fact, no emergency to justify any such unauthorized transactions on the part of the Buckeye Brewing Company. The plaintiff does not sustain such a relation to this contract as entitles,him to any exemption from the application of these principles of law. He must be held to have dealt with this corporation with kl10wledge of its corporate powers. They were such as was confel'redby the laws of Ohio. of which he had the same notice as tbe defendant and allpersonsdealing with it. The want of power on the Plllt of defendant t() make such a contract prevents the plaintiff from either enforcing it in a.n action for specific performance or recQYE:ring damages for its breach. Coppin Y. Greenlees &- Ransom Co., 38 Ohio St. 275. "For the reason stated we think the contract ultra vires. It cannot, therefore, be enforced ,and this proceedlngillust fail. . The other grounds insisted Upl>ll the demurrer it will pot be necessary to notice. The demurrer must be sustained, and the petition dismissed.
160
, FEDERAL REPORTER,.
voL 51. 'D. DUN
CITY NAT. 1.
BANK OF
et ale
Oourt, S. D. New York. July 16,1892.) PRINCIPAL AND AGENT-FRAUDULENT REPRESENTATIONS OF AGENT.
2. SAME-MERCANTILE AGHNC1'..
Defendants, constituting a mercantile agency, agreed tofurnish plaintiff. through its subagents, information concerning the mercantile standing and credit of merchants;, dlltendants not to be responsible for the negliJ;l'ence of its agents in procuring information, and not guaraQtyingthe thereof. Held, where defendants' agent, in repiy to their call, knowingly false. information ing thestanQing of a. merchant with intent.to mislead plalDtlff and benefit said merchant, &lld plaintiff sustained .loss .thereby, that defendants were liable, tho agent's action being within'the scope of his authority, aild for alfd upon the busi· . ness of the defendants.
At Law. Action by the City National Bank of Birmingham, Ala., against Robert G. Dun and others. Judgment for plaintiff. Defendants move for a new trial. Denied. Lorenzo Semple, for plaintiff. Wm. W. MacFarland, for defendants. SHIPMAN, Circuit Judge. This is a motion by the defendants for a new trial of an action at· law to recover damages incurred by the plaintiffs by reason of the fraud committed by the defendants' agent, acting as such, and in the course of his agency. The complaint was in the nature of an action for deceit, and treated the fraud of the agent as that of the principals, who were in fact ignorant of it. The defendants constitute a "mercantile agency" in the city of New York. The plaintiff is a bank in Alabamawbich became a subscriber to the said agency, under· a written contract of which the following are the material portions: j'Memorandum of the agreement betweenR,' G. Dun & Co., proprietors of the mercantile agency; on. the one part, and the undersigned, subscribers to the said agency, on the other part, viz.: The said proprietors are to comm unicate to us, on request, for our use in our business, as,an aid to us in detercredit, such information as they may possess mining the propriety of concerning the mercantile standing and credit of me;rchants. traders, manufacturers, etc., throughout the United States and in: the dominion of Canada. It is agreed that such information has mainly been, and shall mainly be, ob· tained and communicated by. servants, clerks, attomeys, and employes, appointed as our subagents, in our behalf, by the said R. G. Dun & Co. The said information to be communicated by the said R. G. Dun.,& Co., in accordance with the following rules and stipulations, with which we, subscribers to the agency as aforesaid, agree to complY to wit: * * * (2) The said R. G. Dun & Co. shall ridt be responsible for any loss caused by the neglect of any of the said servants, attorneys, clerks, and employes in procuring, collecting, and communicating the said information, and the actual verity or correctness of the said information is in no manner guarantied by the said R. G. Dun & Co. The action of the said agency being of necessity almost entirely confidential in all its departments and details, the said R. G. Dun &;