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defendant's answer and that it was

owed the money.

He afterwards part thereof that C. should pro- signed the mortgages and, as the cure H. to sign and seal assign- pleadings admit, they were dements of the same to plaintiff. He livered to the mortgagees to secure also found that the bonds and mort- the money due them. gages were never delivered to or r. Held, That from that moment in possession of the mortgagees or the mortgage in suit had a valid either of them, and that no con- inception and might be enforced sideration other than the said sum by the mortgagee or sold at any of $6,000 was paid by or in behalf price without imputation of usury. of the plaintiff or received by de- The fact that the mortgages were fendant C. or any one for said executed to H. & M. after a prebonds and mortgages or either of vious understanding with plaintiff them. The court held the mort.. that he would purchase them, gage in suit usurious and directed although for less than their face, its cancellation.

cannot make the purchase usurious C. Bainbridge Smith, for applt. or convert the contract of purchase Richard M. Bruno, for respts.

into a loan of money.

90 N. Y., Held, That as the complaint ex- 549; 4 id., 225; 79 id., 224. pressly averred the delivery of the Also held, That as the real debt bonds and mortgages to the mort due H. was less than the mortgage gagees named therein and as the given him, he could not enforce it answer admitted it, it was a fact for more than its true amount and in the case and for all the purposes plaintiff can have no better right. of the action to be taken as true, 61 N. Y., 88. Code of Civ. Proc., § 522; 90 Judgment of General Term, afN. Y., 111; 46 id., 418, whether firming judgment for defendants, the mortgagees took the bonds and reversed and new trial granted. niortgages away from the place Opinion by Danforth, J. All where the business was transacted concur, except Andrews, J., not or immediately handed them over voting. to plaintiff. It appeared that C. suggested

TELEGRAPH COMPANIES. to plaintiff that he owed H. &

STOCK. M. for building certain houses for him $7,000 and that by giving two

N. Y. COURT OF APPEALS. mortgages, one for $4,000 and the

Williams, respt., v. The Westother for $3,000, plaintiff might ern Union Tel. Co., applt. cash them for $6,000, which H. &

Hatch, respt., v. The Western M.would consent to, and so receive

Union Tel. Co., applt. $1,000. C. then employed an attorney to draw the mortgages,

Decided Oct. 2, 1883. stated to him the amounts to be

The defendant company had authority under stated and the names of the mort

Chap. 319, Laws of 1875, to increase its gagees, to whom, as he stated, he capital stock, and the necessary action to

Vol. 18.-No. 8a.

make a legal increase having been taken it | delivered in exchange for the 150,was authorized under Chap. 568, Laws of

000 shares of the stock of the Am. 1870, to purchase the property, franchises, U.Tel. Co., and $5,000,000 in bonds, &c., of the A. & P. and Am. Union Tel. Cos., the three companies not owning pre

the holder of each share of Am. U. cisely parallel lines or lines running be- Tel. Co. stock to receive upon surtween exactly the same places.

render of the same one share of Section 2, of Chap. 18, part 1, tit. 4, R. 8., re

fers to the property capital of a corporation W. U. Tel. Co. stock, and the and not to its share capital. A stock divi holder of each bond on surrender dend representing investments of surplus thereof to be entitled to shares of

earnings is not a violation of that section. the W, U. Tel. Co. equal at par to When a corporation has a surplus, the question whether a dividend shall be made, its

the amount of the principal of his amount, &c., rests in the discretion of the bond. To the A. & P. Tel. Co.,

directors, uncontrollable by the courts. 84,000 shares of the capital stock A stockholder who comes into court alleging of the W. U. Tel. Co. for 140,000 that an increase of stock was unauthorized

shares of its stock. It was also by the articles of association has the burden to prove and establish that fact.

provided that the shares of the

Am. U. Tel. Co. and the A. & P. The defendant, the W. U. Tel. Tel. Co. should be duly transferred Co., had a capital stock of $41,- and delivered to the W. U. Tel. 073,410, divided into shares of Co., and that that company should $100 each. The A. & P. Tel. Co. cause its capital stock to be inhad an authorized capital of 150,- creased by an addition of $38,926, 000 shares of $100 each, of which 590, represented by shares of $100 only 140,000 had been issued and each, and should distribute $15,were outstanding. The Am. U. 526,590 to those then holding its Tel. Co. had a capital of $10,000,- shares, the same being intended to 000 and owed a bonded debt of represent its investment of earn$5,000,000. These three corpora- ings in the purchase, construction tions were all organized under the and equipment of additional lines laws of this state. Their lines of wires and general plant since were to a large extent parallel and July 1, 1866, and the remaining between the same places, but each sum $23,400,000 for the acquisition company extended to some places of the property, privilege and franthat were not reached by the

not reached by the chises of the other companies. others. On January 11, 1881, at That possession of the property a conference of certain of the purchased should be delivered to directors of these companies it was the W. U. Tel. Co. Feb. 24, 1881, agreed that the W. U. Tel. Co. and the shares of its capital stock should purchase of the other com- delivered to the Un. Trust Co. of panies all their lines, property, N. Y. for the purpose mentioned rights, privileges and franchises, on or before that date. This agreeexcept that of being a corporation. ment was approved and adopted It was to pay to the Am. U. Tel. by the directors of the W. U. Tel. Co. 150,000 shares of its capital Co. at a meeting held Jan. 12, stock to be thereafter issued and I 1881, and its president instructed to call a special meeting of the ment of January 19, 1881, belongstockholders to carry out and ing to the Am. U. Tel. Co. and the effectuate the agreement. A meet- | A. & P. Tel. Co., were on Feb. 3, ing was duly called and held Feb. 1881, delivered to and received by 5, 1881. More than three fourths the W. U. Tel. Co. pursuant to in amount of the whole capital | the agreement.

Plaintiff purstock was represented and voted chased his 100 shares of stock Janfor the ratitication of the agree- uary 2, 1881, and since commenced ment and to increase the capital this action, Feb. 14, 1881, for an stock of the W. U. Tel. Co. to $80,- | injunction restraining the carrying 000,000. Plaintiff, who owned 100 out of the agreement which had shares, was present at this meeting been to a large extent carried into and voted against ratifying the effect by a delivery and distribuagreement and increasing the tion of the stock before that date. stock. On January 19, 1881, as The complaint alleged a fraudulent the Special Term found, the prop- combination and conspiracy. The erty, franchises and privileges of Court refused to find fraud and the W. U. Tel. Co. were worth, dismissed the complaint. over and above its indebtedness,

Wager Swayne, Wm. M. Evarts more than the amount of its capi. and A. J. Vanderpoel, for applt. tal stock, with the addition of the par value of the shares so dis

A. P. Whitehead, Robt. Sewell tributed to its stockholders, and and John Sessions, for respts. the property, rights and franchises Held, That the defendant had of the A. & P. Tel. Co. were fully authority to increase its capital and fairly worth $8,400,000, and stock, Laws of 1875, Chap. 319, those of the Am. U. Tel. Co. worth amending $ 8 of Chap. 265, Laws $15,000,000, and such on that day of 1848 ; that the necessary action were the estimates of the values having been taken to make a legal made by the directors of the re- and lawful increase, Chap. 568 of spective companies. The actual the Laws of 1870 furnished ample value of the investment of the sur authority for the purchase by deplus earnings of the W. U. Tel. fendant of the property, franCo. as they existed January 19, chises and privileges of the other 1881, was estimated by its di-. two companies and paying thererectors, and it was their judgment for by its stock, the three comthat the amount of the stock to panies not owning precisely parbe distributed among the stock. allel lines or lines running exholders of the W. U. Tel. Co. re-actly between the same places. 9 presented no more than the invest-Abb. N. C., 228. ments of its surplus earnings since

Section 2 of Chap. 18, part 1, July 1, 1866, and that they were title 4 of the Revised Statutes has worth over $15,526,590. All the reference only to the property telegraph lines and appurtenances capital of a corporation, and not thereto mentioned in the agree to its share capital. The Legislature intended by this section to saction was in good faith, there is create a property capital for the no principle of law, no public corporation and then to keep that policy and no statute that conintact so as to secure the solvency demns a stock dividend under the of the corporation and its responsi- circumstances. 51 Barb., 378 ; 57 bility to its creditors. The “capital N.Y., 196; 5 Fed. Rep., 743; 1 Div. stock as used in that section does & B. W., 445 ; 99 Mass., 101 ; 115 not mean share stock, but the id., 471 ; 49 Penn., 270; 74 id., property contributed by its stock - 83 ; 47 Conn., 141 ; L. R., 5 Eq. holders or otherwise obtained by Cas., 239; L. R., 5 Ch. App., 621; it, to the extent required by its Pierce on Law of Railroads (2d charter. 3 Zab., 195 ; 75 N. Y., Ed.), 123. 211; 1 Sandf. Ch., 280. When When a corporation has a surits property exceeds that limit plus, whether a dividend shall be the excess is surplus, which while made, and, if made, how much it it belongs to the corporation and shall be, and when and where it is a portion of its property and in shall be payable, rests in the fair a general sense may be regarded and honest discretion of its dias a portion of its capital, in a rectors, uncontrollable by the strictly legal sense is not a por- courts. 4 Eng. L. & Eq., 118 ; 2 tion of its capital, and is always Barn. & Ald., 620 ; 31 N. J. L., regarded as surplus profits. This 277; Clark's Ch., 351. surplus may be divided. If it A stockholder coming into consists of cash, it may be divided court and alleging that an increase in cash ; if of property and the of stock was unauthorized by the property is so situated that a articles of association, in order to division of it among the stock maintain his allegations would holders is practicable, a dividend have the burden to prove and es. in property may be declared. tablish that fact. Stock dividends do not diminish The defendant corporation and or interfere with the property of a all its directors and the Union corporation, and hence are not Trust Co. of N. Y. were made dewithin the purview of said $ 2, fendants. The judgment dismissand the directors of

of the de- ing the complaint was reversed by fendant did not violate that sec- the General Term and a new trial tion by the stock dividend. When ordered. The corporation defendstock has been lawfully created ant appealed and stipulated for and is held by a corporation which judgment absolute against it in has a right to issue it for value a case of affirmance. stock dividend may be made, pro- Held, That it had a right to do vided the stock always represents this. property. As there was no fraud, Order of General Term, granting conspiracy or unlawful combina- new trial, reversed and judgment tion, and it must be assumed under of Special Term, dismissing comthe findings that the whole tran- 'plaint, affirmed.

Opinion by Earl, J. All con- mony did not relate to a personal cur, except Ruger, Ch. J., and transaction or communication beDanforth, J., taking no part. tween the witness and deceased, on

the ground that the witness and

deceased did not meet personally, EVIDENCE.

plaintiff having been represented N.Y. SUPREME COURT. GENERAL

in the transaction by his attorney TERM. FOURTH DEPT.

who superintended the drawing of

the bond and its execution. The Levi J. Pease v. George F. Bar: attorney acted under the immenett, ex’r.

diate direction of plaintiff, who Decided Oct., 1883.

was cognizant at the time of all

the steps taken. Although the party did not meet the deceased J. D. Decker, for deft. personally in the transaction in question,

Stull & Bennett, for plff. but was represented by attorney who acted under his direction, yet the transaction

Held, That plaintiff's testimony was personal, within the statute, so far as

was incompetent. It was as conto exclude the living party's testimony; but vincing as if he had testitied that the attorney's testimony as to conversations the clause in question was in the with his principal was competent.

instrument when the testatrix Motion by defendant for new signed it. The admission of the trial on exceptions taken at Cir- testimony gave plaintiff an advancuit, and ordered heard at General tage which the statute does not Term in the first instance.

allow. Action on a bond executed by The giving of the bond was a one Davis and his wife Azubah, personal transaction between the defendant's testatrix, to plaintiff. obligors and the obligee, within The bond, which was produced at the meaning of the statute, so far the trial, appeared on its face to as to prevent the obligee from givhave been altered by the insertion ing testimony against the repreof a clause binding Mrs. Carpen- resentatives of

the deceased ter's separate estate, and the ques- obligor tending to show what was tion litigated was whether the al- the wording of the bond at the teration was made before or after time of its execution. 26 Hun, the bond was executed by her. 617; id., 619. See 2 Abb. N. C., Plaintiff was allowed, under ob- 9 (note); 16 W. Dig., 96. jection, to testify in his own be- Hill v. Herrman, 22 Hun, 456, half that he was not present when S. C., aff'd, 85 N. Y., 639; 17 Hun, the bond wis signed, but that he 472, distinguished. saw it in the hands of his attorney So much of Pease's testimony, after it was drawn and shortly also, respecting conversations bebefore it was executed, and that it tween him and his attorney prior then contained the clause in ques- to the execution of the bond as tion as it appeared at the trial. tended to show that the bond conPlaintiff contends that the testi- 'tained the married woman's clause

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