
    CROSS a. SACKETT.
    
      New York Superior Court; General Term,
    
    
      March, 1858.
    Cebtifioate of Stock.—Bubble Company.—Liability of Officebs fob Deceit.
    A certificate of stock, issued upon the organization of a corporation under the general laws of this State, is to be deemed as a representation, on the part of those issuing it, that the holder is entitled to an interest, proportionate to the whole stock, in a money capital, or in property equivalent substantially to a money capital, of the amount specified as the capital of the company.
    Parties who project and promulgate the scheme of a joint-stock company, cause the usual books to be opened, allow or cause the inscription of a person as owner of an interest to a definite amount and value therein, and issue certificates of stock therefor, when the capital has not been paid in fully and in good faith—and annex to the certificate a written power, authorizing the transfer at large by the party to whom the certificate is issued—who publish false statements, tending to produce the belief that the stock was at least of par value, and that the business had warranted successive dividends from profits, are liable directly in damages in an action for deceit brought by any innocent party who, on the faith of the public representations and of the statements of the certificate, has purchased from third parties, and paid for, shares of the stock.
    
      
      It seems, that there is no wrong or fraud which directors of a joint-stock company, incorporated or otherwise, can commit, which cannot he redressed by appropriate and adequate remedies.
    Appeal from an order overruling demurrer to complaint.
    The action was against the defendants, part of whom, it was alleged, had organized, and the others, it was'alleged,- had united to carry on, a bubble company, stock in which the plaintiff had pm-chased of a third party, induced thereto by the public representations made by the defendants concerning the company, and by the statements of the certificates of stock issued, and by the fact that dividends had been declared.
    The facts in detail are stated in the opinion as.well as in the complaint, which, as the action was of a peculiar character and the pleading was sustained, we give below.
    
    
      The defendants demurred. The grounds of the demurrer, which were specified in great detail, were briefly that the complaint did not state facts sufficient to constitute a cause of action ; that the injuries alleged were in their nature common to all the stockholders, and furnished no ground of action to the plaintiff alone ; and that causes of action relating to the organization of the company were improperly united with those respecting its subsequent management, over which only a portion, of the defendants had any control.
    
      The cause was heard at special term before Mr. Justice Duer, and judgment ordered for the plaintiff on the demurrer. The defendants appealed.
    
      
      Platt Gerard & Buckley and Charles O'Conor, for the appellants.
    I. If defendants obtained stock from the company without paying for it, or committed a breach of trust, or declared dividends wrongfully, the remedy is an action' by the company. (Robinson v. Smith, 3 Paige, 232.)
    II. The only way in which a stockholder can proceed for injuries thus affecting the corporation interests, is by action on behalf of himself and all other injured stockholders, charging the officers with complicity in the wrong or their neglect to redress it by suit.
    III. Laying out of view objections to the form of the pleading, and the want of any particular allegation that might be supplied, the state of facts intended to be charged would not entitle the plaintiff to maintain an action. Such bubbles are not novelties. (Lempriere's Biog., tit. John Law; Ency. Brit., tit. John Law; 3 Ib., 746; Edinb. Ed., 1797, tit. Bubbles; Westm. Rev., vol. 46, p. 36; and see 7 Cobbetts Parl. Hist., 658.) The common law contained no principles to make the getter up of such a company responsible to a remote purchaser, with whom he had no dealing; hence the act of confiscation. (7 Cobbett's Parl. Hist., 856, 834, 832, and p. 827, n.; 7 Geo. I., ch. 27, and ch. 32), and the act of 1719, (7 Stat. at Large, 308, § 20.) The existence of the last-mentioned statute, and the absence of any precedent for the maintenance of a civil action at eommon law by a remote purchaser, in such case, conclusively establish that the action will not lie.
    IV. The cases in which an action was sustained for an injury ■suffered by- one not aimed at by the tort-feasor, afford no analogy in support of the action. The squib case (Scott v. Shepherd, 2 Wm. El., 892; 2 Smith's Lead. Cas., 210) only settled that he who sets a destructive physical agent in motion is responsible to the party injured by its action. Dixon v. Bell (5 Maule & S., 198), Lynch v. Hurdin (1 Add. & E., N. S., 29), Thomas v. Winchester (2 Seld., 411), are all cases of injury by the action of a destructive physical agent. ¡Nothing is decided in any of those cases except the negative of an irrational alleged distinction, i. e., that the active intervention of a third party necessarily shifted the responsibility to the latter. In Guille v. Swan (19 Johns., 383), the defendant was considered as having requested the crowd who caused the damage to do the act from which the damage resulted. (1 Den., 534; 4 Ib., 467; Com. Dig., Action on case for misfeasance, A 7 ; 9 East., 277.) Allen v. Addington (7 Wend., 7; 11 Ib., 374) and the case of the false open letter of recommendation, rest on the distinct ground that defendant intended, as against somebody, the precise deceit which was the subject of the action, the actor therein being, quoad hoc, his agent. The proposition that he who commits a deceit on A, is responsible for every injury that may result to third persons from dealing with A, who, in so dealing, are misled by the instrument which misled A, is without authority and a dangerous doctrine. (See Gerard v. Bates, 2 Ell. & B., 476 ; Longmeed v. Holliday, 6 Eng. L. & Eq., 565.)
    V. That an act is criminal does not render the perpetrator liable for consequences more remotely resulting from the act, than if it was merely wrongful. In either case the injury must be the direct and immediate consequence of the act (Cunningham v. Brown, 18 Verm., 126). The criminal nature of the act rather impedes than aids the civil action. (See Butler v. Kent, 19 Johns., 226 ; Com. Dig., Action B, 2 ; Ib., Action on case for Nuisance, C.) If A forges a bond and sells it to B, who afterwards sells it to C., the latter cannot maintain an action against A, either for the forgery or the sale (Coleman v. Riches, 29 Eng. L. & Eq., 323, 326, per Williams, J.)
    "VI. It cannot be maintained that every wrong shall be remediable by action against anybody and everybody, who mediately or immediately, by negligence, breach of law, or any moral wrong, in any degree contributed to produce it. (Com. Dig., tit. Action B ; Smith v. Lewis, 3 Johns., 169; Grove v. Brandenburgh, 7 Blackf., 234; Cunningham v. Brown, 18 Verm., 126 ; Revis v. Smith, 36 Eng. L. & Eq., 273.)
    VII. The injury complained of is, that plaintiff did not receive the contemplated benefit of a bargain. The foundation of the .claim is contract. It is settled that the election of remedies given to a party injured by deceit in a contract shall not enlarge his right. 1. A sale is a-contract executed (6 Cranch, 136; 17 Johns., 215; 11 Pet., 573). 2. There was a warranty, at least implied, on the part of Schell, that the stock was real and full paid. (Williams v. Matthews, 3 Cow., 252; Herrick v. Whitney, 15 Johns., 24; Furniss v. Ferguson, 15 N. Y. (1 E.P. Smith’s), 440 ; Ib., 576.) 3. The right to sue in tort or on contract is a mere choice of remedies. 4. By adopting a form ex delicto, plaintiff cannot involve a party who could not have been charged ex contractu. (Jennings v. Randall, 8 T. R., 357; Green v. Greenbank, 4 Eng. Com. L., 375, S. C.; 2 Marsh., 485 ; 1 South., 87; 1 Lev., 247 ; Com. Dig., tit. Action on case B (last case); Fanhurst v. Liverpool Loan Association, 26 Eng. L. & Eq., 393; Price v. Hewett, 18 Ib., 524; Vasse v. Smith, 1 Am. Lead. Cas., 4th ed., 261.)
    YIH. In fact the complaint contains no allegations of fraud or illegality. 1. It does not show that the defendants or the certificates suppressed or concealed any fact which ought to have been disclosed, or which the plaintiff could not have found out on the slightest inquiry. The theory of the complaint is, that the certificates should have contained a statement that they were issued on the purchase of property. 2. The answer is, that the certificate does not pretend to state that any money has been paid in; it merely states the number of shares and their par value. It ism mere statement of what would be found in the certificate of organization. (See 1 Rev. Stats., 4th ed., 1215, § 19, 1220, § 43; 5 Hill., 303.) There is no averment of inquiry as to its capital or basis of formation. The interest acquired by the purchaser of a certificate is simply that he becomes entitled to the proportion of the assets which his number of shares bears to the whole number of shares. The certificate is a mere designation of the holder’s interest, and does not purport to give him any money or representative of money whatever, and the very idea of a mining company repels the idea that the capital consists in money (Angel & A. on Corp., .§§ 556, 550). “ Capital stock” does not mean money, but whatever is the basis for conducting the business of the company (Mutual Insurance Co. of Buffalo v. The Supervisors of Erie, 4 Comst., 445). The purchase for which the stock was issued was authorized by law {Laws of 1853, 705), and in pursuance of a contract which the company could enforce. 3. The declaration of dividends, unconnected with any affirmation as to the condition or prospects of the company, is no representation at all. The words in the complaint, “ fraudulently and illegally contriving,” &c., do not import fraud unless the facts amount to it. Declaring an unearned dividend makes the officers responsible to creditors, but not to stockholders. The language of the allegations, in reference to the dividends, is very general, and would apply even to a mere clerical or other mistake, in calculating the profit and loss of the company. The complaint does not allege that no profit was made or dividend earned, but only that the exact amount declared was not earned.
    IX. There is a misjoinder of causes of action. Those relating only to the organization of the company, with which the defendants Wolfe and I. H. Smith had nothing to do, are united with claims arising subsequently to the organization, when they, for the first time, appeared on the stage. The causes of action cannot affect all the parties to the action, under section 167 of the Code (Wells v. Jewett, 11 How. Pr. R., 134).
    
      F. N. Bangs and D. D. Lord, for the respondents.
    I. The complaint sufficiently avers a loss or damage to the plaintiff. (See Pontifex v. Bignold, 3 Mann & G., 63.)
    II. The means by which he was induced to purchase were the affirmations of defendants respecting, not the value of the property, but facts on which the value depended.
    III. The complaint sufficiently connects the injury with the defendants’ acts when it states that their acts were committed with a fraudulent intent, and induced the plaintiff to do that which was prejudicial to himself. Whether they were actually intended to produce that effect on him in particular, is not material. It is sufficient if the defendant intending to injure one defrauds another. (Williams v. Wood, 14 Wend., 130 ; Addington v. Allen, 11 Ib., 374.) The complaint sufficiently alleges a fraudulent intent. It states that they intended to get the public at large to believe various things which were not true. Benefit to the deceiver is not essential to the idea of defrauding. (Merritt v. White, 3 Seld., 355.) As to the technical form of averring such intent, see Zabriskie v. Smith (2 Kern., 322).
    IY. Defendants were not bound to communicate to the public any information on the subject in question; but if they assumed to do it they were bound to. do it honestly, and the violation of that duty was a wrong to all deceived by it. Such an act as theirs is' indictable at common law (Rex v. De Beranger, 3 Maule & S., 67; and is under our statute (2 Rev. Stats., pt. 4, ch. 1, tit. 4, §8).
    Y. Such a fraud as this is a cause of action, unless cases of fraud are to be singularly distinguished from cases of negligence or of violence. (See Thomas v. Winchester, 2 Seld., 397; Scott v. Shepherd, 2 Wm. Bl., 89 ; Guille v. Swan, 19 Johns., 381.) And that, as to range of responsibility, fraud stands on the same footing, as other wrongful acts, see Lobdell v. Baker (1 Metc., 193); Benton v. Pratt (2 Wend., 385); Addington v. Allen (11 Ib., 374); Williams v. Wood (14 Ib., 130); Gerhard v. Bates (20 Eng. L. & Eq., 67); Taylor v. Ashton (11 Mees. & W., 601). In this case the representations were addressed to the same community in which the certificates were issued, and were, intended to deceive every one who should see and act upon them.
    YI. The case of the Mechanics’ Bank v. The New Haven Railroad Company (3 Kern., 300) 'is not applicable here. This is an action against individuals for a wrong, not against the corporation on any assumed contract.
    YII. The complaint shows that the whole scheme of defendT ants was a wrong, contrived to injure and defraud indefinitely ; and that such was its consequence. There was—besides the false declaration of dividends—a fraudulent issue of false certificates for the purpose of public traffic and investment: a reliance by the plaintiff on the statements of those certificates, and the formation of an erroneous belief founded on them: the fact that the plaintiff did not acquire such an interest as the certificates falsely purported to represent, and such as he supposed he purchased: the fact that the interest purchased, and the certificate which represented it, was absolutely worthless.
    YHI. It nowhere appears on the complaint that the injuries alleged to have been sustained by the plaintiff were" common to every stockholder.
    IX. There is no misjoinder of causes of action. The acts were all similar, committed by the same parties, and combined to produce the injury. •
    X. The corporation is not a necessary party; a recovery will not subject it to any payment.
    
      
       The allegations of the complaint were as follows :
      That on the 13th day of August, 1853, the defendant, Moses L. Holmes, executed a certain instrument in writing, with no schedules attached thereto, of which, and of the whole of which, a copy follows, in these words:
      [Here followed a copy of the agreement, the substance of which is stated in the opinion of the court.]
      and delivered the said instrument to the said parties therein named, who accepted the same. ,
      That on or about, and not later than the 31st day of August, 1853, the said defendants, Amos M. Sackett, John D. Maxwell, Franklin Osgood, Samuel Smith, Moses L. Holmes, and Henry W. Belcher, being the same parties named in said instrument, made and signed an instrument in writing (with no schedules attached thereto), in these words, namely :
      [Here followed a copy of the agreement to assign the first-mentioned contract, in consideration of the transfer of 150,000 shares of the stock of the Gold Hill Mining Company, 60,000 of which were then transferred, and the remainder to be transferred thereafter.]
      But the plaintiff alleges that at the time of the making and signing of the said instrument there was not in existence any body corporate, or other association, existing under the name of The Gold Hill Mining Company, other than as is next hereinafter stated; and therefore the plaintiff alleges and charges that the- said instrument last above set forth was inoperative and void, and intended only to cover the fraudulent and illegal designs of the defendants hereinafter stated.
      That on the same thirty-first day of August, all the said defendants in this action, not being members of nor composing any body corporate by the name of the Gold Hill Mining Company, jointly used and assumed the name of the Gold Hill Mining Company, and professing to act as a body corporate duly created and existing, did, at a meeting in the city of Hew York, at which they were all present, jointly assent to and adopt a resolution in these words, namely:
      
        Resolved, That the Gold Hill Mining Company will accept the proposition made to them by A. M. Sackett, and others, purchasers of the Gold Hill Mines, per ■contract of Moses L. Holmes, for the sale of the same to the Gold Hill Mining Company, and pay said A. M. Saekett, and others, as therein demanded.
      That on the first day of September, in the same year, the defendant, Moses L. Holmes, made and signed an instrument in writing, of which, and of the whole of which, the following is a copy:
      I do this day agree to sell and convey to the Gold Hill Mining Company the following property, to wit:
      [Here followed an inventory of certain mining lands, and leases of mining lands and machinery, the location of which was not stated.]
      And the plaintiff alleges that the actual value of the property in said instruments mentioned did not exceed the sum of three hundred and seventy-five thousand dollars when wholly unencumbered; and over the encumbrances thereon, did not exceed the sum of two hundred and fifty thousand dollars; and that a large portion thereof consisted only of leases, or a right to use certain lands for a limited time, for mining purposes.
      That, notwithstanding the said pretended contracts, the said defendants have never acquired the title to the lands therein mentioned, nor any part thereof, as an association or corporation, or otherwise, and that the title to said lands then was, and now is, in some person unknown to the plaintiff, as trustee thereof, who holds the same as security for the payment of the encumbrances thereon.
      That on the same first day of September the said defendants in this action, not being members of nor composing any body corporate, nor being otherwise authorized by law, fraudulently and illegally contriving and intending to cause it to be generally believed that they constituted a body politic and corporate, duly created and existing, and thereby to make great gains and unlawful profits in the carrying out of the said pretended contracts, and the disposal of said property, and jointly assuming the name of The Gold Hill Mining Company, did, without authority of law, fraudulently design, engrave, and print, and mutually deliver to each other certain papers, commonly called certificates of stock, to the purport and effect that the'said The Gold Hill Mining Company was a corporation organized under the general law of the State of Hew York (meaning an act of the Legislature of the State of Hew York, entitled, &c.): that the capital of such company consisted of two hundred thousand shares, of five dollars each, and that the respective parties in such certificates mentioned were respectively entitled to some interest in said capital stock ; but not stating or purporting that such stock consisted of property purchased by said company, or that said certificates were issued in payment for such property; that one such certificate, purporting and stating that the said Amos M. Saekett was interested in said pretended capital to the extent of six thousand shares thereof, was issued and delivered to and received by the defendant, Amos M. Saekett:
      [Here followed similar allegations of the issue of like certificates of stock to the defendants, Belcher, Holmes, Maxwell, Samuel Smith, and Osgood, respectively.]
      That, in fact, the said certificates, and each and every of the same, were false, fraudulent, and deceptive ; inasmuch as there was no association or body corporate organized or created, under the general law aforesaid, by the name of The Gold Hill Mining Company, and inasmuch as the said The Gold Hill Mining Company had not, in fact, any capital consisting as in said certificates stated, nor any other capital; and the said persons, in said certificates respectively mentioned, had not the respective interests in any such capital as are in such certificates respectively stated and averred; and inasmuch as the said property pretended to be purchased, as aforesaid, was of no greater value to said corporation than the sum of two hundred and fifty thousand dollars, and was incapable of being divided into sixty thousand shares, five dollars each, being the number of shares thereof falsely purporting to be represented by said certificates of stock ; all which matters above stated the said defendants in this action then well knew. That on or about, and not before, the third day of September, in the same year, the said defendants, Moses L. Holmes, Samuel Smith, and Franklin Osgood, caused to be filed, in the office of the clerk of the city and county of Hew York, a certificate, duly acknowledged by them on the 31st day of August, 1853, of which, and of the whole of which, a copy follows, in these words :
      [Here followed a certificate of incorporation, in the usual form.]
      Whereby, as the said plaintiff is advised and believes, the said defendants, Samuel Smith, Franklin Osgood, and Moses L, Holmes, became, on the said third day of September, and not before, in fact and in name, a body corporate, and as such, entitled then to use, for the first time, the aforesaid name of The Gold Hill Mining Company; and that, immediately thereafter, the others of said defendants in this action became and were associated with them in the management, direction,-and control of the affairs and business of said corporation, and assisted at and joined in the commission of the several fraudulent acts and representations hereinafter set forth.
      That no payment whatever in cash to the capital stock of said corporation was made or subscribed for, or promised, or agreed to be made or subscribed for by any person or persons whomsoever; that the only cash ever received by the defendants, or by said corporation, by way of contribution to the capital of said corporation, consisted in the sums hereinafter alleged to have been received upon the fraudulent issue of certificates of stock, and that no conveyance of the said lands above mentioned, was ever made by said defendants, or by any other person, to said corporation; but that the said defendants, well knowing the premises, but fraudulently and illegally intending and contriving to dispose of the said property at a false and fictitious value, for their own benefit, as individuals, and to cause it to be generally believed that the said company possessed capital, or had property to the amount of one million dollars in all, and that the several parties in said certificates named, as aforesaid, had contributed in cash to the capital of said company the sum of three hundred thousand dollars in all, did authorize, direct, and assist the said Amos M. Sackett, John D. Maxwell, Franklin Osgood, Samuel Smith, Moses L. Holmes, and Henry W. Belcher, to hold said certificates, and the pretended shares falsely purporting to be represented thereby, as a payment for said property, under color of a pretended sale thereof to said corporation, and upon no other consideration whatever, and for their own sole benefit as individuals, and as being true in fact, and as truly representing the extent and value of the respective interests of the said parties in the said pretended property of said company, and the said Amos If. Sackett, John D. Maxwell, Moses L. Holmes, Franklin Osgood, and Henry W. Belcher, did, thereupon, by and with the knowledge, consent, and assistance of others of the said defendants, fraudulently put in circulation, sell, pledge, and dispose of the certificates so fraudulently issued and delivered to them as aforesaid, and the pretended shares and interests purporting to be represented thereby, to sundry persons whom the. said plaintiff is unable more particularly to specify, but who, as he charges, are well known to the said defendants, and that for their own sole benefit, and without paying to said corporation therefor any sum of money whatsoever.
      That the said defendants, fraudulently and illegally intending and contriving, as aforesaid, and also contriving and intending to cause it to be believed that the said Samuel Smith had contributed in cash to the capital of said corporation the further sum of twenty thousand dollars, did also, in the name of said corporation, and under color of its corporate character and privileges, but in violation of its. corporate rights and duties, but under color of the pretended obligation of said pretended contracts, and upon no other consideration whatever, fraudulently and illegally make and deliver to the said Samuel Smith, for his own use, on or about, the ninth day of September, eighteen hundred and fifty-three, one other certificate of stock, purporting and representing that said corporation was duly organized under said general law, and that the capital thereof consisted of two hundred thousand shares, five dollars each, and that the said Samuel Smith was interested in such pretended capital stock to the extent of four thousand shares thereof, and not purporting or stating that said certificate was issued for property purchased by said corporation: which last-mentioned certificate was sold, pledged, or otherwise disposed of by the said Samuel Smith, for his own sole use and benefit, and without the payment to said company therefor of any sum of money whatsoever.
      [Here followed similar allegations of the issue, on the 19th of September, of such certificates, to the defendants, Sackett, Belcher, Holmes, Osgood, Maxwell, and S. Smith, respectively, and to two. other persons.]
      And that the defendants illegally contriving and intending, as aforesaid, and further intending and contriving to cause it to be believed that the said corporation had received, as an additional cash payment to its capital, the sum of forty-, four thousand dollars, on or about the twenty-eighth day of January, 1854, falsely and fraudulently issued and delivered to one John Peters, for his own use, one other certificate of stock, numbered 664, purporting and representating that the said John Peters was interested in said pretended capital stock to the extent of two thousand shares thereof.
      [Here followed similar allegations, showing that issues of certificates of stock were made in like manner on that day, and on the 9th and 18th days of February, 1854, to each of a number of other persons named.]
      Whereas, in .truth and in fact, and the defendants well knew that no one of the said parties named in said certificates issued on the said twenty-eighth day of January, and on the ninth and eighteenth days of February, 1854, had paid or promised, or agreed to pay, in cash, or otherwise, into the capital of said corporation, more than the sum of three dollars for each share of said pretended capital, purporting to be represented by said certificates respectively ; and each of said certificates was an original certificate, not issued in lieu of any other certificate theretofore issued and then surrendered, and each of said certificates stated and represented that the said The Gold Hill Mining Company had been duly organized under said general law, with a capital of two hundred thousand shares, at five dollars each.
      And the plaintiff alleges that no certificates of stock were issued by the said •defendants, prior to the 14th day of April, 1854, upon any other consideration to them or said company, or for any other stock than as is above stated, nor except the surrender of some of the said certificates.
      And the plaintiff further shows that it is the usage and custom of corporations ■organized under the said general law, and doing business in the city of New York, to attach to or endorse upon certificates of stock issued by them, a skeleton form ■of a power of attorney, for the purpose of enabling the persons to whom such certificates are issued, and their successors in interest, to transfer the same, and the interest and share of such persons and their successors respectively, in the ■capital stock of such companies with facility, and without entering every such transfer upon the books of such companies, or otherwise notifying such companies ■of such transfers; and that it is also the usage and custom of persons to whom such certificates are issued, and who are named in the body of such certificates, to ■execute such form of power of attorney in due form, but without inserting therein ■the name of any attorney or any transferee; but upon transfer of such share or interest, to deliver the original certificate received by such person or persons to the transferee or successor in interest of such person, with such skeleton form -executed as aforesaid, and with authority to insert in such form the name of such attorney and transferee as such transferee himself may designate ; by means of which usage and custom, shares and interests in corporations created by virtue of said law are sold, pledged, and otherwise disposed of, from hand to hand, with great facility, and for that reason are much sought after for the purposes of lawful traffic and investment, and have an enhanced value. That the -said defendants, at the several times of issuing and delivering the said' certificates as aforesaid, well knew the said usage and custom, and caused to be appended to each of said certificates a skeleton power of attorney in the words following :
      [Form of power.]
      And that in so issuing and delivering the said certificates, with such forms attached, the said defendants knew and intended that such certificates, and the shares or interests purporting to be represented or evidenced thereby, would become and be easily current and negotiable as evidences of property, and subjects of traffic from hand to hand, without inquiry, or opportunity to examine the books or affairs of the said The Gold Hill Mining Company.
      And further, the plaintiff alleges that the said defendants, well knowing the premises, and fraudulently and illegally contriving and intending to give a fictitious value to the said certificates, and to cause it to be generally believed that they possessed the said capital of one million dollars, and that shares or interests in said capital were of great value, and a means of profitable traffic and of safe investment, did, from time to time, publish and declare in newspapers published in said city of New York, that the persons interested in said capital were entitled to dividends of money out of the profits of said company’s business, and, in particular, on the second day of November, eighteen hundred and fifty-three, did cause it to-be notified and announced to the public at large that the directors of said company had, on the said day, declared a dividend of two per cent, from the business of the first two months, ending on the twelfth day of said November, which dividend was payable on the 25th day of the same month, and, in accordance with such notification, did, on the 26th day of November, 1853, pay in cash to sundry persons interested in said stock, as a pretended dividend out of the earnings of said company, the sum of fifteen thousand and fifty dollars; whereas, in truth and in fact the defendants well knew, and so the plaintiff alleges, that the said company had not earned or received as profits the said sum so paid out for dividends on its business during the said two months.
      [Here followed similar allegations, showing that two other like dividends were declared. In respect to each of the second and third dividends it was further alleged that ‘ ‘ a large part of said sum was paid out of the capital of said company, or out of money borrowed for that purpose.”]
      And the plaintiff further shows that on the fourteenth day of April, 1854, by means of the aforesaid false and fraudulent acts, practices, statements, and representations of the said defendants, it had come to be generally believed in the city of New York, and was believed by the plaintiff, that the said The Gold Hill Mining Company was in fact possessed of property of at least one million dollars in value, and that shares and interests in such capital were of the value of at least five dollars per share, and that the said company had, since the organization thereof, earned, over and above its expenses, at least the sum of fifty thousand dollars. And the said certificates so issued by the said defendants, as aforesaid, or other certificates of like tenor and effect, which had been issued by the defendants upon the surrender to them of some of the said original certificates, were, with such skeleton powers of attorney as aforesaid, in circulation, and in course of sale, pledge, and other disposition, in the city of New York, and were believed by the public generally, and by the plaintiff in particular, to be.true and genuine evidences or representatives of actual interests in an existing capital to the amount of one million dollars; and so believing, and on the faith and credit of the aforesaid false and fraudulent acts, practices, and representations of the said defendants, of the falsity and fraud whereof the said plaintiff was ignorant, the said plaintiff did, on the aforesaid 14th day of April, 1854, purchase of one Richard Schell, then being the holder of one of the aforesaid original or substituted certificates, an interest in the said capital stock, to the extent of one thousand shares r thereof, and paid therefor the sum of thirty-five hundred dollars, which the said plaintiff then verily believed to be less than the actual value of the interest so purchased by him, and received from said Schell the said certificate so held by him, with such power of attorney in blank, but duly signed and executed, and thereto attached; which certificate the plaintiff thereupon surrendered to the said The Gold Hill Mining Company, and received from the defendants in lieu thereof, as a true and genuine evidence and representative of the plaintiff’s supposed interest in said pretended capital, one other certificate, numbered 856, dated April 14, 1854, purporting and representing that the said The Gold Hill Mining Com¡pany was duly organized, as aforesaid, with a capital of two hundred thousand shares, five dollars each, and that said plaintiff was interested in such pretended capital to the extent of one thousand shares thereof, and the said defendants transferred one thousand shares of said capital to the plaintiff, whereas, in fact, the said statements and representations contained in said certificate, held by said Schell, were false, fraudulent, and deceptive, and neither said Schell nor his predecessor in interest had contributed to the capital of said company the sum of five thousand dollars, either in cash or other property, and the interest supposed and pretended to have been acquired by the plaintiff was, in fact, worthless. That, by means of said false, fraudulent, and deceptive acts, practices, and representations -of the said defendants, the said plaintiff has sustained damage to the amount of six thousand dollars, for which sum, with the costs of this action, he demands judgment.
    
   By the Court

Hoftman, J. The complaint contains the following statements:—

That on the 13th day of August, 1853, the defendant Holmes •entered into a written agreement with the defendants Sackett, Maxwell, Belcher, Osgood, and Samuel Smith, by which he sold to the last-named parties all the estates, mines, fixtures, and property described and set forth in a schedule declared to be annexed.

The consideration for this sale was to be as follows :—Upon the receipt of the leases, described in the schedule, and delivery of the personal property therein mentioned, $60,000 was to be paid. On the 20th day of September ensuing, upon receipt ■of the deeds of all the estates mentioned in the schedule, conveying unquestionable titles (except as to $125,000 encumbrances), the further sum of $91,600 was to be paid, and thirty thousand shares of stock of the Gold Hill Mining Company were also to be delivered to him.

This instrument declares that the-Gold Hill Mining Company was a company proposed to be formed upon the basis of the property therein mentioned. That property was to be divided into, and represented by, 200,000 shares, the par value to be five dollars a share. Fifty thousand shares were to be reserved as a capital by the company, and to provide, for the payment óf the $125,000 before stated.

Holmes, then the owner of the property to be conveyed, consents to sell the whole of it for the price in cash of $151,600, and of stock to be given him in the proposed company of thirty thousand shares, the par or arbitrary value of which was to be five dollars a share, or $150,000. The encumbrances amounted to $125,000.

Taking the value of $150,000 in stock at the nominal amount, the estimate, including encumbrances, was $300,600.

And the complaint alleges that the actual value of the property did not exceed $375,000, when wholly unencumbered, and? was not more than $250,000 beyond the encumbrances.

On the 20th day of August, 1853, the defendants Samuel Smith, Osgood, and Holmes executed a certificate of organization under the act of February 7, 1848, for the formation of corporations for mining, mechanical, and chemical purposes, as such act was amended by the statute of.,June 7, 1853. The certificate stated the corporate name, the object, the capital, one-million of dollars, the duration twenty-five years, and the number of shares two hundred thousand. The trustees for the first year were the present defendants, except the defendant Maxwell,

This instrament was acknowledged on the 31st day of August, 1853, and filed in the office of the clerk of the county on the 3d day of September of that year.

On the 31st day of August, 1853, the defendants Sackett, Maxwell, Osgood, Holmes, and S. Smith, executed an instrument by which they assigned to the Gold Hill Mining Company the contract or obligation of Holmes, and agreed to pay Holmes all the money stipulated to be paid to him in such contract, except the $125,000, the amount of the old encumbrances. They also agreed to deliver to Holmes -the thirty thousand shares of the company acknowledged to have been received, and ninety thousand shares to be delivered on or-before the 20th day o£ September ensuing.

On the same 31st day of August, the defendants, acting as a corporation, by the name of the Gold Hill. Mining Company, accepted and agreed to the purchase, upon the terms expressed in the foregoing instrument.

And on the 1st day of September, 1853, Holmes executed an instrument by which he agreed to sell and convey to the Gold Hill Mining Company the property specified. It consists of various leases, steam-engines, pumps, fixtures, &c., with certain parcels of real estate in fee. Ho consideration is expressed in it.

It may here be observed that the counsel of the plaintiff has treated the case as if there had been a company completely organized on the 31st day of August, although the certificate was-not filed until the 1st day of September.

Pausing at this stage of the facts, we find that the company had become vested with the whole of the estate and rights of Holmes and of the five other parties, in the whole propertyZor this the company was bound to pay one hundred and fifty thousand shares of its stock, taking it subject to $125,000 of old encumbrances. Holmes had the personal engagement of Maxwell, Osgood, Sackett, Belcher, and S. Smith, to' pay him $151,600 in cash, and to deliver him thirty thousand shares of the stock of the company.

Thus the property which was to cost the five parties $151,600 in cash and thirty thousand shares, nominally $150,000, is put into the company at $750,000, nominal value. It is to be paid ’for at that estimate, and by the issue of the stock.

The complaint then states that certificates were then printed .and issued by the defendants, stating that the party named was entitled to the specified .number of shares in the capital stock, ■that such capital consisted of one million of dollars, and the shares were two hundred thousand of five dollars each.

The complaint further states the issuing of shares of stock to the defendants at different periods, and in different amounts, in the aggregate one hundred and forty-five thousand shares. Certificates were also issued to persons other than -the defendants .(except 300 to Sackett), to the amount of nine thousand three .hundred shares. The total issue was therefore 154,600 shares ; 45,400 shares were reserved, and apparently under the provision that fifty thousand shares were to be a capital to provide for the ■encumbrances of $125,000.

The complaint proceeds to state a custom in the city of Mew York, of attaching a skeleton power of attorney to certificates of stock issued by such corporations, enabling a transfer of the right to the stock to be made without an entry on the books ; the knowledge by the defendants of such custom; their attaching such power of attorney to the certificates; and that they knew .and intended that such certificates would thus become easily current and negotiable as evidences of property, and subjects -of traffic from hand to hand, without recourse to the books of the company.

Another allegation of the complaint relates to a public declaration of dividends for two months as out of the profits of the concern, caused to be made and published by the defendants, In order to give a fictitious value to the stock, when they well knew that the company had never received any such profits; .-and as to two of such dividends, it is alleged that a large part of such dividends was paid out of money borrowed, or out of the-capital stock.

The complaint then alleges that on the 14th day of April, 1854, by means of such false and-fraudulent practices and statements-of the defendants, it had become to be generally believed in-the city of Hew York, and was believed by the plaintiff, that the said Gold Hill Mining Company was in fact possessed of property of at least one million of dollars in value, and that shares and interests therein were of the value of at least five dollars a share, and that such company had earned at least the sum of' $50,000 over expenses; that the certificates issued by the defendants with the power of attorney were in circulation and in course of sale, pledge, and disposition, and were believed by the plaintiff to be true and genuine evidences or representations of' actual interest in a capital of one million of dollars; and so believing, and on the faith and credit of the aforesaid false and fraudulent acts and representations of the defendants, of the-falsity and fraud whereof the plaintiff was ignorant, he did, on the 14th day of April, 1854, purchase of one Richard Schell, then being the holder of one of the original or substituted certificates, an interest in the said capital stock to the extent of one thousand shares, and paid therefor the sum of $3500.

That he received a certificate and power from Schell, which he surrendered to the company, and received in lieu thereof' from the defendants another certificate representing the capital as aforesaid, and that the defendants transferred one thousand shares to him; that the statements and representations were false, and that the interest supposed to have been acquired by him was in fact worthless. That by means of such false, fraudulent, and deceptive practices of the defendants, the said plaintiff-has sustained damage to the amount of $6,000, for which he demands judgment.

Such is the substance of the case made by the plaintiffs. My first subject of inquiry shall be, What did the certificates-issued by the defendants in their corporate name purport to represent ; what, under the statute of organization ought they by law to have represented ; and what was the truth in relation to-such representations ?

The representation on the certificate, with its attendant power... was, that the party named in it was entitled to an interest, proportionate to the whole stock, in a money capital or in property equivalent substantially to a money capital, of one million of dollars. This is the statement made and uttered by the defendants, with an implied engagementforits truth upon these instruments.

And this is precisely what under their charter they were allowed and directed to represent; and they could only comply with the acts of the Legislature when such was the representation, and when it was true.

Section 14 of the act of 1848 (Laws of 1848, 54, § 14) declared that “ nothing but money should be considered as payment of any part of the capital stock.” The act of 1853 (Laws of 1853, 705) provided “ that the trustees may purchase mines, manufactories, and other property necessary for their business, and issue stock to the amov/nt of the value thereof in payment therefor, and the stock so issued shall be taken as full stock.” It is to be reported not as cash paid into the company, but according to the fact.

We accede to the proposition of the counsel of the plaintiff, that the Legislature, in substituting mines and other property for the money capital before prescribed, intended and declared, that such property should have an actual value reasonably proportionate to the stock issued to pay for it. Nothing else is consistent with the honest purposes of such an association, and nothing, else can have been the legislative will.

But what did these certificates in truth represent? What, for example, was the fact, as the complaint states it, as to the certificate for one thousand shares purchased by the plaintiff? Instead of an interest in five thousand dollars of money once contributed and presumed to exist in some form of value, or in mines and property of an equal or substantially equal value, he got what he alleges to be wholly worthless, and which, upon any calculation upon the statements made, must be of greatly inferior value.

We are bound to assume the allegations of this complaint to be true, in all their reasonable and legal import; and if so, a case is presented of the formation of a bubble company, contrived for purposes of private emolument, its authors and managers fraudulently publishing statements tending to produce the belief that the stock was at least of its par value ; that its business had warranted successive dividends from profits; that these false and deceptive representations were made by the defendants, the authors or managers of the scheme; that they were made in such an apparent form of negotiability, as from the custom of business was peculiarly calculated to delude and to injure; and that a delusion and injury has actually been produced and fallen upon the plaintiff in consequence of such acts.

We may here observe, that some of the acts of fraud are stated to have been performed before the company was organized; and as to two of the defendants, it is not said that they originally participated in them. But as to the frauds stated to have been subsequently practised, it is averred, that all the defendants acted together, and did so well knowing the premises. This is sufficient to render them responsible by the adoption, as the others are by their performance, of the acts.

The learned counsel of the defendants has pressed upon us the proposition that such a suit as this has been unknown through all periods of the law, except when it was warranted by the statute of George the 1st (cap. 18, § 20, 1719), consequent upon the South Sea Bubble. He insists “ that because the common. law afforded no remedy to the remote purchaser, this statute was passed, giving in the 20th section an action for damages.”

He has called our attention to the history of those gigantic' frauds, which have acquired an immortality of pre-eminence among the destructive projects of the visionary or the designing, the Mississippi and South Sea schemes. A member of Parliament, when the act of George the 1st was discussed, admitted, that the directors could not be reached by any known law, but he said extraordinary crimes called for extraordinary remedies. The Roman lawgivers had not foreseen the possibility of a parricide, but as soon as the first monster appeared they found a law. The sack and the Tiber was his doom.” (Lord Mahon's History, vol. 1, p. 280.)

But I cannot believe that either the argument of the learned counsel, or the declamation of the rhetorician of the House of Commons, is sufficient to stamp the law of England with the impoten cy attributed to it. I consider that there have always been principles of law, and tribunals adapted and competent, to redress wrongs of this «ature.

The act of George the 1st was annulled in the sixth year of George the 4th (1825). The 19th, 20th, and 21st sections were recited and repealed, with this declaration: “ And whereas, it is expedient that so much of the above act as is above set forth should be repealed, and that the said undertakings, attempts, practices, and acts should be adjudged and dealt with according to the common law, notwithstanding such act. Therefore,” &c.

We may assume that the Parliament thought there was some mode of dealing with such fraudulent practices as the 20th section of the act had aimed at, according to the doctrines of the common law, and through some of the methods of redress it had supplied.

In the Charitable Corporation y. Sutton (2 Atk., 401, 1742), Lord Hardwicke announced as an unquestionable principle, that a court of chancery could give relief against all who are constituted expressly or by operation of law trustees or agents, to parties injured by their acts. It is true the corporation itself there sued the managers for a defalcation.

In the case of Hayes v. Morgan (April, 1857), I had occasion to consider the following authorities : Hitchens v. Congreve (4 Russ., 562); Walburn v. Ingilby (1 Mylne & K., 61); Foss v. Harbottle (2 Hare, 461); Dodge v. Woolsey (18 How. U. S. R., 33); Benson v. Heathcum (1 Y. & Coll. Ch. Cas., 326); and Robinson v. Smith (3 Paige, 222).

- The law which may be gathered from these cases is, that there is no wrong or fraud which directors of a joint-stock company, incorporated or otherwise, can commit, which cannot be redressed by appropriate and adequate remedies. The first mode is, when the company, in its corporate name, seeks to set aside the fraud, to reclaim abstracted property, or prevent a corporate loss. Such was the case of the Corporation y. Sutton, and the rule in Foss y. Harbottle. The next mode is, when shareholders bring an action for the same object, unitedly, or in the form which the court of chancery permits, of a bill by one or more on behalf of themselves and all others, having a common interest. This right exists under various circumstances. It clearly exists when the directors or agents, whose deeds or omissions are impeached, do themselves control the company, and impede the assertion of a right in its own name. See also Mozley v. Alston (1 Phill. Ch. R., 790).

I may particularly notice the case of Walburn y. Ingilby. 'It was against director's of an unincorporated joint-stock company by a holder of shares. The company was for working mines in Peru. The advertisement was of a capital of £1,000,000 in 20,000 shares of £50 each. The defendants were the original directors, and still continue to be such. The bill stated various acts by which the property of the company was abstracted and appropriated to the defendants. It also set forth that tire plaintiff purchased, at various times from different persons, 2,000 shares, and was the holder thereof. The bill was sustained in every point raised against it, except for not stating the manner in which the plaintiff had acquired title to shares purchased from others. The bill showed that no transfer was valid without the approval of the board. This was held to be a condition precedent and to be stated. It was framed to get back money for the general fund.

But another question, and closer to the present, arises when an individual claims redress in his own name, and solely on his own account, for a fraud practised' by a trustee or director of an association from which he has suffered loss; when, although his claim is founded precisely upon the same facts and relations as many others, yet, as his injury and loss is disconnected and peculiar, he seeks to assert his right alone.

The old case of Colt v. Woollaston (2 P. Wms., 154), is an example of this character. The plaintiff sought by his bill to be repaid two sums of money advanced to the defendants as managers and projectors of a bubble called the Land Security and Oil Patent, for the purpose of extracting oil out of radishes. There were two plaintiffs, and they purchased six shares each. The company was to have a capital of £100,000. The shares to be 5000, at £20 each. Woollaston bought an estate for £31,800, which was under mortgage for £28,000, and he was to be paid £57,200 out of the fund. It was represented by the defendants to be a most advantageous project. The master of the rolls said: This is an imposition, to propose the surplus of the value of an estate (which cost but £31,800), after £85,000 charged upon it— more than double its value—as a security to the contributors who laid out their money upon this project; it is giving them moonshine instead of any thing real.

“ It is‘ no objection that the parties have their remedy at law, and may bring an action for money had and received; for in case of fraud a court of equity has a concurrent jurisdiction with a court of law.” The decree was for payment of the money paid, interest, and costs.

In Green v. Barrett (1 Sim., 45), the plaintiff was a shareholder, and the defendants were directors of a company, called the Imperial Distillery Company. His bill was to recover a deposit of £100, which he had paid upon twenty shares allotted to him. His communications were with the secretary and bankers of the company. But a circular or prospectus had been issued by the directors, on which he much relied. The nature of the bill is thus stated by the vice-chancellor:—“The prospectus of this-undertaking was published, not with any intention to establish a-company on the principles there stated, but as a snare to persons who might unwarily become subscribers, and for the purpose of enabling the directors to make a profit by the sale of shares-which they thought fit to assume to themselves. It appears tome the case is governed by that of Colt v. Woollaston, and upon that authority I overrule the demurrer.”

In Jones v. Garcia Del Rio (1 Turner & R., 297), where the bill proceeded upon similar grounds of fraud, three persons filed it as shareholder's, on behalf of themselves and others, to have their subscriptions returned. The case came up on injunction,, and a motion to dissolve it after answer. The answer set up that many of the shareholders who were in the same situation as the plaintiffs, were content to abide by the contracts.

The lord-chancellor said—that the plaintiffs, if they had any demand at all, had each a demand at law, and each a several demand in equity; that they could not file a bill in behalf of themselves and the other holders of scrip: as they were unable to do that, they could not, having three distinct demands, file one bill..

In Blain v. Agar (1 Sim., 37; 2 Ib., 289), the bill was by five persons, on behalf of themselves and numerous other parties to an indenture, by which a large number of shares had been assigned to the five. It was in trust, with a power of attorney to sue; obviously to avoid the difficulty of making all parties.. The allegations were of a deceptive prospectus, caused to be printed and published, by the directors, and other acts of fraud, in misapplying the deposit money, &c. The bill also showed that some of the original shareholders had transferred their shares to others; and some of the former, with the latter, united in the assignment to the plaintiffs.

The vice-chancellor overruled a demurrer for want of equity, but sustained one ore terms for want of parties, holding that the assignors must be on the record. •

The bill was then amended, and the assignment was left out, and naming three other shareholders as parties, stating that they held some of the shares by the original purchase, and some by transfers made to them by other shareholders.'

A general demurrer was taken for want of equity, and one taken ore tenus, for want of parties.

The vice-chancellor (Shadwell) held that this was a case of fraud which a court of equity could relieve as well as a court of law, and cited and approved of Colt v. Woollaston. He held that the plaintiffs, in their capacity as original shareholders, could sustain the bill, but not as purchasers from prior purchasers. An objection, for want of parties, was overruled, the bill stating that the plaintiffs did not know the names of the other shareholders.

When we consider the arguments of counsel (Mr. Sugden), it will appear that the objection was on the ground that the case could not proceed,without the assignors of the scrip assigned being brought in, and upon nothing elsé.

Lord Brougham is stated by Mr. Colyer (Coll. on Partn., § 1101) to have disapproved, in the case of Thompson v. Paules, of the series of cases I have cited. I have searched ineffect- •» ually for this decision. It may well have been placed upon the ground that this simple case, even of a fraud thus presented, was not proper for a court of chancery, when the remedy was perfect at law.

It must have been upon this ground, or some ground which does not extend to a denial of any redress in any court. This is clear from his other decisions. Walburn v. Ingilby was before him, and would have been sustained by him, as I consider, but for the technical objections before noticed.

And in the National Exchange Company v. Drew (House of Lords, 32 Eng. L. & Eq., 4), he stated, in the clearest terms, that a deception by a company, through its directors, by representing shares to be worth £100, which were known not to be worth over £50, gave the right of action, on the ground of a false representation, against all who made it.

The case at common law of Gerhard v. Bates (20 Eng. L. & Eq., 130) has been much criticised by counsel.

The second count in that case was sustained by the court, and when analyzed, it presents this case :—That the defendants, and other’s unknown, had formed a company for the purpose of smelting and refining the ores of certain mines in Spain, and divided it into 96,000 shares of £1 each, out of which 12,000 shares were to be appropriated to the public at 12s. 6d. each, free from further calls; that such 12,000 shares were actually offered to the prrblic; that the defendant was promoter and managing director; and being such on the day, &c., intending to defraud, deceive, and injure the public, and to cause it to be publicly advertised and represented that the company was likely to be a safe and profitable undertaking, and also to deceive the public who might become purchasers of the said 12,000 shares, and to induce them to become such purchasers, falsely, fraudulently, and deceitfully procured, and caused it to be publicly made known and advertised, in and by a certain prospectus issued by the defendant as such director, that the promoters did not hesitate to guarantee to the bearers of the 12,000 shares a minimum dividend of 33 per cent, payable half-yearly, to remain in force until the 12s. 6d. per share should be paid. That the defendant, by means of such false cmd fraudulent pretences and representation, after the making of the same, wrongfully and fraudulently induced the plaintiff to become the purchaser and bearer of 2,500 of the said 12,000 shares, and that he paid 12s. 6d. for each share; that, in truth, the statement, &c., was false.

Lord Campbell said that had the declaration been, that the defendants delivered the prospectus to the plaintiff, containing the false representation, there could be no question in the case. If the plaintiff had only averred further, that having seen the prospectus he was induced to purchase the shares, objection might be made that a connection did not sufficiently appear between the act of the plaintiff and the act of the defendant; but the count goes on to aver “that the defendant, by means of the said false and fraudulent representations, wrongfully and fraudulently induced the plaintiff to become the purchaser and bearer,” &c.

Judgment was given for the plaintiff on this count.

I may observe, that the inducement to pm-chase was a false representation of the defendant. By means of that the plaintiff was deceived, and that false representation was contained in a prospectus issued by the defendant, but, as his lordship impliedly .•admits, not delivered to the plaintiff by the defendant. It appears to me this means simply, that the fact of a prospectus issued by the defendant, inducing the plaintiff to purchase, and Being false and fraudulent, was enough.

In the course of the argument Justice Coleridge said—“ It is a continuing representation to the public, and amounts to a representation to whomsoever shall hold shares.”

See, also, the Rational Exchange Company v. Drew, in the House of Lords (32 Eng. L. & Eq., 10).

The proposition of the defendant’s counsel, that the action can only exist if at all in favor of one to whom the false and fraudulent statement has Been directly made, and his reasoning to •support it, is similar to that of Justice Selden, in the Farmers’ and Mechanics’ Bank v. The Butchers’ & Drovers’ Bank (Court of Appeals, December, 1857). He cites the cases of Grant v. Norway (10 Com. B. R., 665); Coleman v. Riches (29 Eng. L. & Eq., 323), and The Mechanics’ Bank v. The New York & New Haven Railroad Co. (3 Kern., 599). He says “ they are plainly distinguishable from the case before the court. In neither of these cases was the document upon which the question arose negotiable. It was sought there to make the principal responsible for a false representation of the agent; not responsible to ■the person to whom the representation was made, but to one with whom the agent had no dealings, and to whom he had made no representation.”

But a great distinction exists between the present case and that •of the Hew Haven Railroad Company, or that of the Farmers’ and Mechanics’ Bank, connected with the question of a transferred responsibility. In each of these cases the directors of the companies were wholly innocent; they were themselves the victims of a misplaced confidence. But here the instrument sent forth by the directors is framed by themselves : if it was false, the falsehood is their own, and the imposition it produces must bé treated as the result of their own deceptive practices.

Grant v. Norway, commented upon by the learned justice, is fully stated by Justice Bosworth and Justice Comstock, in the New Haven Railroad case. There, the immediate holder of a bill of lading had no right of action, the goods not being put on board the vessel. The master, as agent of the owners, had not conferred any right of action upon the party to whom he gave the false bill of lading.

So in Coleman v. Riches (29 Eng. L. & Eq., 323), the false receipt was given by Bond, the agent of the defendant, to Lewis, and Lewis obtained money on it from the plaintiff. It was a receipt given by the keeper of the defendant’s wharf when the goods had not been received; and the plaintiff was defeated.

It is true Williams,' Justice, said—Suppose Riches himself had given the fraudulent receipt, would that have constituted a representation by Riches to Coleman ?

This seems to me the nearest approach to the proposition, that the false representation of the principal himself to one party who could support an action, is unavailing in favor of another to whom that party has transferred fully the subject-matter of the action, in respect to which the representation was made.

But as I understand the opinion of the court, this suggestion is contradicted. The court say—There was no evidence from which it could be inferred, as between Coleman and Riches (plaintiff and defendant), that Riches agreed to give the vendee of corn, vouchers of the delivery, on which the vendee should act. Had there been such an agreement, it would have made the case very different, because Riches then would have undertaken to deliver vouchers to Coleman, and to employ proper persons to give such'vouchers to him. But there is no evidence of any thing of the kind.

At any rate, I have come to the conclusion, that when a party projects and publicly promulgates the scheme of a joint-stock company; when he causes the usual books to be opened, and allows or causes the inscription of a person as an owner of an interest to a definite amount and value therein, which is false within his own knowledge ; when he embodies such false statements in a certificate of this right directly issued, and of the same effect as if signed by himself; when he accompanies that certificate by a written power, authorizing a transfer at large, by the party.to whom he has given the certificate; when that representation induces an innocent person to advance his money;— the .defendant’s own individual act has created the privity of contract which the cases referred to appear to demand, and he must be held responsible to any one who has been deceived.

The representation was publicly addressed by the defendants to all; was intended to influence all who should become apprised of it; did exercise an influence upon the plaintiff, one of the mass addressed: that influence has resulted in his damage; and the fact embodied in the representation must be treated, for the present, as untrue, and as meant to deceive.

We all agree that the order should be affirmed, with costs. 
      
       Present, Bosworth, Hoffman, Slosson, Woodruff, and Pierrepont, JJ.
     
      
       Seiser a. Mali (Supreme Court, First District, Special Term, January, 1868), ■was an action against Mali, the president, and Jewett, the secretary of the Parker Vein Coal Company, who, it was alleged, had made an over-issue of stock, some ■shares of which the plaintiff had been induced to purchase. The complaint stated the incorporation of the company, the number and par value of its shares, and that, before a day named, the company had issued certificates for such stock to the full extent of its capital, which certificates were outstanding and valid, and were in great demand in the market; that defendants, being officers of the company, and knowing the premises, then together made out, issued, and sold in the market a great quantity of paper writings, partly written, and partly engraved or printed, signed, and purporting to be, and resembling in all respects, the original certificates of stock lawfully issued, and intended to be sold in the market, with the object of raising money; that defendants, by such sale of spurious certificates, held out the false pretence that purchasers thereof would obtain the rights and privileges of stockholders in the company, whereas the certificates were utterly worthless and void; that within a period named, defendants so issued and sold in the market 128,000 shares, and realized $1,300,000 ; that, at various times ^within that period, the plaintiff, ignorant of the over-issue, bought, in the market in New York city, spurious certificates for 3,000 shaves," and paid therefor §19,250, induced thereto by the fraudulent acts and pretences of defendants. On information and belief, that all of the certificates so purchased by him were of the spurious issue, and sent into the market for the purpose of defrauding any person into whose hands they might fall; but that if any of them were genuine they were rendered worthless by the alleged acts of the defendants, and that on the discovery of the over-issue, subsequently, the credit of the company was destroyed, and the certificates of its stock became unsaleable, except at nominal prices. Damages were laid at §19,250, and interest.
      Defendants demurred.—1. That the complaint did not state facts sufficient. 2. That plaintiff’s remedy was exclusively against the parties from whom he purchased, 3. That a cause of action against defendant, as officer, for official misconduct, injuring plaintiff as stockholder, was improperly joined with one for deceit, and obtaining money on false pretences. 4. That so far as the action was based on official misconduct of defendants, to the injury of the corporation and its stockholders, the corporation was a necessary party plaintiff. 5. That for such corporate injury the remedy was for the corporation, not for individual stockholders. 6. That so far as the action was for deceit, the complaint was defective, in not stating any false representations, nor when, by whom, or to whom made, nor knowledge of their falsity, nor intent to deceive plaintiff
      
        S. W. and R. B. Roosevelt, for the plaintiff.
      
        Van Gott and Cady, for defendant Mali.
      
        E. W. Crittenden, for defendant Jewett.
      Davies, J., before whom the case was argued, overruled the demurrer, and ordered judgment for the plaintiff. No written opinion was rendered. (Compare also Cazne^ux a. Mali, Post.
      
     