Misc.] Supreme Court, January, 1899. The fact that some of the stockholders and some of the directors supposed and believed and had some knowledge that Richter was making a profit on the sale of the land to the company, does not defeat this action. Such knowledge on the part of the directors or stockholders is not notice to or knowledge on the part of the company. The rule that the company is chargeable with knowledge of facts known to a director and which he has in mind at the time of transacting corporate business, does not apply to the facts of this case. In this case less than a majority of the directors had any knowledge on the subject, but even if all had full and complete knowledge, they could not have bound the stockholders, who were ignorant of the facts, by a contract from which one of their members received an individual profit. If all of the stockholders knew and consented to Richter's making a profit, he would not be obliged to account to the company therefor; but in the absence of such consent, given with such knowledge, he may not retain any individual profit or benefit to himself, but must fully account therefor to the corporation. Imperial M. C. A. v. Coleman, L. R., 6 H. of Lords, 189; Simons v. Vulcan Oil Co., 61 Penn. St. 221; Pittsburg Mining Co. v. Spooner, 74 Wis. 307; Burbank v. Den-. nis, 101 Cal. 90; Parker v. Nickerson, 112 Mass. 198. It is further contended that this action cannot be maintained by the corporation, but that the remedy of each stockholder is by an individual suit for an accounting. The evidence in this case shows that many of the subscribers were relieved by Richter from making the down payment on their subscriptions, and that such down payments were not made by Richter or by anyone. The other subscribers who paid their entire subscriptions would be entitled to an accounting on the part of their fellow subscribers and to have each, compelled to pay in the entire amount of his subscription. Such relief, however, cannot be granted in this action for the reason that there is no demand therefor in the complaint, and the subscribers, with the exception of Richter, have not appeared in the action, and as to some of these subscriptions the corporation as such probably would not be in a position to maintain such an action. The corporation, as such, is, however, injured by the execution of the bond and mortgage and by all of the other profits which Richter made. A stockholder could not maintain the action without first requesting the corporation to bring it, and then only on the latter's refusal. If the stockholder could not maintain the action without such demand on the corporation to bring it, as Supreme Court, January 1899. [Vol. 26. is well settled by the decisions, it must follow that the action is properly brought by the corporation. Greaves v. Gouge, 69 N. Y. 154; Burbank v. Dennis, 101 Cal. 90. It is further contended that this is an affirmative action by the company to rescind part of the contract, and that it has retained the fruits of the contract and does not seek to rescind it in toto. It is urged that the plaintiff should be held to have ratified the contract. I do not regard this as an action to rescind the contract, but rather an action to require Richter to account for the profits which he made and to preclude him from receiving any benefits on account of the bond and mortgage which were executed by the company to him, and for which it now appears there was no consideration, inasmuch as the bond and mortgage wholly represented profits. Pondir v. N. Y., L. E. & W. R. R. Co., 55 N. Y. St. Repr. 63. It follows from the conclusions reached that Richter could not enforce this bond and mortgage against the company, and under the rule that an assignee of a mortgage takes the same subject to all of the equities between the original parties, Knox cannot enforce the same. Rapps v. Gottlieb, 142 N. Y. 164; Stevenson Brewing Co. v. Iba, 155 id. 224. It was incumbent upon Knox to allege and prove that he took the assignment in good faith and paid value therefor, and what value, in order to make a case for equitable relief, and this he has failed to do. Jewett v. Palmer, 7 Johns. Ch. 65; Jackson v. McChesney, 7 Cow. 362; Weaver v. Barden, 49 N. Y. 297-299; Seymour v. McKinstry, 106 id. 239-242; Duffus v. Howard Furnace Co., 8 App. Div. 572; McGuire v. Hartford Fire Ins. Co., 7 id. 591, 592; 2 Pom. Eq. Jur., § 785. The plaintiff is entitled to judgment that the bond and mortgage, having been given to Richter for profits, are not enforceable against the company, and declaring the same void and directing the county clerk to cancel the mortgage of record, and for an accounting of all other profits made by Richter and for the appointment of a referee to take such accounting as provided in the decision filed herewith. Ordered accordingly. Misc.] Supreme Court, January, 1899. ALFRED BRUMME, Plaintiff, v. WILLIAM HEROD, Defendant. (Supreme Court, Kings Special Term, January, 1899.) 1. Action by a materialman upon a promise made to the owner for his His character not changed by taking security from the benefit A materialman does not lose his rights or character as such because he accepted from an owner of real estate, who was constructing fifteen buildings thereon, bonds and mortgages upon four of them to secure payment; and, upon the insolvency of the owner, the materialman may recover a balance, still due him after the foreclosure of the bonds and mortgages, of a grantee of the premises who received his conveyance in consideration of his agreement with the owner, made subsequent to the furnishing of the materials, by which he promised "to pay all claims for materials and labor furnished and delivered for the erection of fifteen buildings, in course of erection, on land conveyed in pursuance thereof, subject to all mortgages, incumbrances and liens to him by" the owner, and all notes given by the latter, "out of the proceeds of said houses and lots", the grantee further agreeing to pay all indebtedness due to himself from said owner and then to divide any surplus between himself and said owner. 2. Statute of Frauds Original promises Adoption by third party. Although the grantee never received any such proceeds of sale, such an agreement amounts to an original promise on his part to pay all claims for materials, and the materialman, after having demanded payment of both grantor and grantee, is to be deemed to have accepted and adopted the promise and may sue the grantee thereon. JUDGMENT Overruling demurrer. Facts appear in the opinion. John F. Brush, for plaintiff. A. M. Pierce, for defendant. MADDOX, J. By the agreement in the complaint defendant agreed" to pay all claims for materials and labor furnished and delivered for the erection of fifteen buildings in course of erection, on land conveyed in pursuance thereof, subject to all mortgages, Supreme Court, January 1899. [Vol. 26. incumbrances and liens to him by Denike," and all notes given to (by) said Denike "out of the proceeds of sale" of said houses and lots, and after paying all indebtedness due to himself from said Denike, then to divide "any. surplus between himself and said Denike." It is also alleged that theretofore plaintiff had sold and delivered to Denike a large quantity of building materials for the erection of said fifteen buildings, and that on August 17, 1893, there was owing therefor, upon an account stated, $3,000; that thereafter and before the making of the aforesaid agreement, Denike executed and delivered to plaintiff four bonds and four mortgages covering four of said buildings to secure the payment, upon demand, of said $3,000 and interest, which mortgages were thereafter foreclosed, and the mortgaged premises sold, and an aggregate deficiency of $1,308 10/100 remains unpaid; that executions have been issued thereon, returned unsatisfied, and that said Denike is and since the conveyance to defendant has been insolvent. Defendant demurs to the complaint upon the ground that it does not state facts sufficient to constitute a cause of action, contending: First. That plaintiff having accepted the four mortgages, ceased to be a materialman; and Second. That defendant's obligation by the agreement was to pay only from the surplus, if any, realized from a sale of the fifteen houses, and that since no surplus is alleged no liability is shown. As to the first contention, can it be said that because plaintiff took four mortgages to secure the payment, on demand, of the $3,000 and interest, thereby the character of his claim was changed? I think not. Was it not still a claim for materials furnished secured only by the mortgages? It was not a claim for money loaned, and if the mortgages had been assailed for want of consideration a complete answer would have been that they had been given to secure the payment of a claim for materials furnished. Hence my view upon that branch of the case is, that the balance due plaintiff, if any, and not including the costs and expenses of the foreclosures, is still a claim for materials furnished, and is within the contemplation of the agreement and one of the "claims for materials * * * furnished and delivered for the erection of fifteen buildings * * *" The second point urged by the defendant and presenting the main question here involves and depends upon the consideration to be given to the contract upon which plaintiff relies. Misc.] Supreme Court, January, 1899. Is defendant's agreement to pay an original or a collateral promise? The question is not free from doubt since the contract is ambiguous, made so by the use of the words "out of the proceeds of sale of said houses and lots." In consideration of the defendant's agreement so to pay, said Denike agreed" to deed said fifteen houses and lots to said William Herod, subject to all mortgages, incumbrances and liens, and paying them to divide as above any balance." Defendant took from Denike a conveyance of said property, went into possession thereof, and Denike "ever since the conveyance has been insolvent. * * Defendant's promise was "to pay all claims for materials," not so much thereof as the proceeds of sale might prove sufficient, nor to pay only from such proceeds "but to pay all such claims. The use of the expression "out of the proceeds," in my opinion fairly implies a covenant on defendant's part to apply the proceeds to the liquidation of the indebtedness, i. e., mortgages, claims, etc., specifically enumerated and referred * * * to in the contract. In consideration of his promise defendant received Denike's property, and the fact that no proceeds of sale have been realized in nowise lessens his liability under the contract. Thus it seems to me plain that the intention of the parties, as ascertained from the language of the instrument and the surrounding circumstances, was that the defendant's promise was and is an original and absolute one "to pay all claims for materials." Clark v. Howard, 150 N. Y. 238. Plaintiff's claim is, as we have seen, one of those contemplated by the contract, and he having demanded payment from defendant as well as from Denike, he thereby accepted and adopted the promises, and may maintain this action thereon. Clark v. Howard, supra. Judgment is, therefore, directed for the plaintiff upon the demurrer, with costs, but with leave to the defendant to plead over upon the payment of costs. Ordered accordingly. |