The bill sets forth the pleader's construc- | itors of the last-mentioned corporation for the tion of the said plan and agreement; but, difference between what it may be found that since a copy thereof is attached to the bill, the true value of the property was and the the allegations of the pleader in this respect par value of the stock issued therefor. are not controlling, but the document itself will be read and construed by the court. Dick v. McPherson, 72 N. J. Law, 332, 62 Atl. 383 (Supreme Court, 1908); Dillon v. Barnard, 21 Wall. 430, 22 L. Ed. 673; Equitable Life Assur. Soc. v. Brown, 213 U. S. 25, 29 Sup. Ct. 404, 53 L. Ed. 682; Bogardus v. N. Y. Life Ins. Co., 101 N. Y. 337, 4 N. E. 522; Greeff v. Equitable Life Assur. Soc., 160 N. Y. 19, 54 N. E. 712, 46 L. R. A. 288, 73 Am. St. Rep. 659.

The claim of the complainant to be entitled to this relief is based upon the argument that the bill shows that the issue of stock provided for in the reorganization agreement (of which approximately $12,000,000 is now to be issued in exchange for existing securities) is for a larger amount of par value than is lawful to be issued by the defendant cor- The sole injury which the complainant sugporation for the property in question; and gests that he may be subjected to is that in that if such stock is issued the complainant the carrying out of this plan in exact comwill thereupon become liable to future cred-pliance with its terms, and with the agree

ment that he made therein, he will receive | therefor to the amount of $27,000,000, as prostock to which a liability attaches because is- vided in said plan." sued to a larger amount than is permitted by law. Before any such question can arise, it seems to me entirely clear that he must state clearly and unequivocally in his bill that such is the result of existing facts. He can only do this by a clear, unequivocal statement of the value of the property which is to pass to the new company as consideration for the amount of stock that is to be issued against it. In no other way can he show on the face of his bill, as he must do, that he has any equity of the character claimed.

As Vice Chancellor Leaming says, in Hageman v. Brown, 73 Atl. 862, at page 863: "There are probably few rules of equity pleading more firmly established than the requirement that every material fact which it is necessary for a complainant to prove to establish his right to the relief he asks must be alleged in the premises of his bill with fullness and particularity. ** * 19 Smith's Adm'r v. Wood, 42 N. J. Eq. 563, 7 Atl. 881 (Van Fleet, V. C., 1887); Arnett v. Welsh, 46 N. J. Eq. 543, 20 Atl. 48 (Ct. of Errors, 1890); Ter Knile v. Reddick, 39 Atl. 1062 (Stevens, V. C., 1898); Brown v. Carpenter, 57 N. J. Eq. 23, 41 Atl. 562 (Chan. McGill, 1898); Schrafft v. Wolters, 63 N. J. Eq. 793, 52 Atl. 694 (Ct. of Er. 1902); Graham v. Spence, 71 N. J. Eq. 183, 63 Atl. 344 (Garrison, V. C., 1906).

As to so much of this paragraph as is on information and belief the demurrer is not an admission of the facts so pleaded. Trimble v. American Sugar-Refining Co., 61 N. J. Eq. 340, 48 Atl. 912 (Pitney, V. C., 1901). So that even if it were seriously contended, which it was not, that the allegation of what the property brought at a bankruptcy sale was an averment of its value, such fact is not so pleaded in this bill as to be effective on this demurrer.

It was contended on behalf of the complainant that the first part of this twelfth paragraph is an averment that the value of the property of the Southern Steel Company and its subsidiary companies did not exceed the sum of $7,750,000. I think it perfectly fair to the complainant to say that he concedes that unless he has averred this fact he has not stated any case for relief. If he does not so concede, I decide without any question that such is the necessity of the situation, and that, unless it be found that he has so averred, he has not made out any case for relief.

46

No charge or statement in general vague form will take the place of an averment of the substantial necessary facts. So that it is immaterial if elsewhere in the bill there are statements that an excess of stock is to be issued, or that the stock issued will be The only statement in the bill of any facts assessable, and other like general vague conconcerning the matter with which we are clusions of the pleader. As Chief Justice dealing is contained in paragraph 12, in Beasley said in Stephens & Condit Transporwhich the complainant says: "That the rep- tation Co. v. Central R. R. of N. J., 33 N. resentations and statements contained in said J. Law, 229, 232 (Sup. Ct. 1869), where the plan or scheme of reorganization were false declaration demurred to charged that defendand untrue, in that, as shown by an appraise- ant was "unlawfully" doing this, and that ment in said bankruptcy proceedings filed "neither adjectives nor adverbs, no matter subsequent to the time your orator became a how numerous or sonorous, can fill the place party to said reorganization scheme, the value of substantial statements." And of the property of said Southern Steel Com- Chief Justice Gummere, in Marples v. Standpany and its subsidiary companies does not ard Oil Company, 71 N. J. Law, 352, at page exceed the sum of $7,750,000, which fact was 353, 59 Atl. 32, at page 33 (Sup. Ct. 1904), unknown to your orator at the time he be- said: In considering the sufficiencame a party to said reorganization agree cy of the declaration, the court does not acment. That subsequently and on or about cept the conclusion drawn by the pleader, but the 12th day of April, 1909, as your orator is determines for itself the legal force of these informed and believes, the property of the facts"-citing Breese v. Trenton Horse R. R. said Southern Steel Company, including the Co., 52 N. J. Law, 250, 19 Atl. 204, and Clyne stock of the subsidiary companies owned by v. Helmes, 61 N. J. Law, 358, 39 Atl. 767. it, was sold for the sum of $5,110,000 to the See, also, to the same effect, Redmond v. defendant William W. Miller, a member of Dickerson, 9 N. J. Eq. 507, 59 Am. Dec. 418 the firm of Hornblower, Miller & Parker, at- | (Ct. of Errors, 1853); Sullivan v. Browning. torneys for the defendants, as reorganization 67 N. J. Eq. 391, 58 Atl. 302 (Stevenson, V. committee aforesaid, and said property was C., 1904); Equitable Life Assur. Soc. V. bought in by said Miller acting for and on Brown, 213 U. S. 25, 29 Sup. Ct. 404, 53 L. behalf of said reorganization committee, and Ed. 682. for the purpose and with the intent of turning the same over to said defendant Southern Iron & Steel Company, all as provided in said reorganization agreement, and for which company said defendant Southern Iron & Steel Company proposes to, and unless restrained by this court will, issue bonds and

It will be observed, upon reading the twelfth paragraph of the bill as quoted in full above, that he first states that the representations and statements contained in the plan or scheme of reorganization "were false and untrue, in that, as shown by an appraisement in said bankruptcy proceedings filed

suit. Such proof would not, as before demonstrated, show that the representations and statements in the plan and agreement were false and untrue, because there were no such representations or statements in said plan and agreement, and the proof of the value shown in said appraisement would not show the only thing beneficial to the complainant, namely, that the actual value of the property was less than the stock to be issued for it. Until the complainant in this suit assumes the responsibility of charging just what the value is, he does not state a case that the defendant is bound to meet, and does not state a case that entitles him to relief in this court.

I think that this complainant is in a similar situation to the one dealt with by Chancellor Williamson in the case of Philhower v. Todd, 11 N. J. Eq. 54 (1855), where he held the complainant, by refusing to commit himself upon the vital point, had failed to state a case for relief. And the same chancellor, in the case of Herbert v. Scofield, 9 N. J. Eq. 492 (1853), adverts to the fact that the complainant must state his case with accuracy, and holds that, if the bill is so framed as to be disingenuous, it is obnoxious, and deprived the complainant of the benefit of doubts which might otherwise be resolved in his favor.

party to said reorganization scheme, the val- | lesser sum, would clearly and certainly not ue of the property of said Southern Steel entitle him to the relief sought for in this Company and its subsidiary companies does not exceed the sum of $7,750,000," etc. As I have before stated, there were no representations and statements contained in the plan or scheme of reorganization concerning the value of the property of the Southern Steel Company; and, therefore, no appraisement (prior or subsequent to the said plan or agreement) of the value of the said property could possibly show that the representations and statements in the said plan or scheme of reorganization were false and untrue in this respect. But, passing this, it is impossible for me upon this demurrer, as it was at the time that the bill was presented for a preliminary injunction, to give to this language the effect claimed for it by the complainant. If the averments of the bill are ambiguous, or capable of two constructions, that one must be adopted which makes in favor of the defendant-the pleading is always construed most strongly against the pleader and in favor of his adversary. Stephens & Condit Transportation Co. v. Central R. R. of N. J., 33 N. J. Law, 229 (Sup. Ct. 1869); Marples v. Standard Oil Co., 71 N. J. Law, 352, 59 Atl. 32 (Sup. Ct. 1904); Dick v. McPherson, 72 N. J. Law, 332, 62 Atl. 383 (Sup. Ct. 1905). In disposing of the application for preliminary injunction, counsel for the complainant was informed that if a statement, clear and unequivocal in its character, was inserted in It is quite clear, in the consideration of the bill averring that the value of the prop- the case at bar, that the complainant, as a erty did not exceed the sum named in this party to the plan and agreement of reortwelfth paragraph, the court would consider ganization, feared that the same would be the very important and interesting questions carried out, so far as any right to object which would then be raised. The same ques- thereto by him was concerned. It is perfectly tion which now comes before the court on apparent that there were no misstatements, this demurrer finds, in my mind, the same misrepresentations, or fraud which would peranswer, namely, that it is impossible to give mit him to rescind, or to retire from the plan to this language any such force as contended and his agreement. He therefore feared to for by the complainant; it is impossible from charge in this bill, as a fact, that the value this language to find that the complainant of the property was less than the amount charges, shows, or avers that the value of the of the stock to be issued, because, if he so property of the Southern Steel Company does committed himself in this suit and was not not exceed the sum of $7,750,000. All that successful in preventing the plan being carthis paragraph avers in this respect is that ried out, such admission might be used against the appraisement made in the bankruptcy him in the future, in the event that credproceedings shows that the value of the prop-itors of the new company should pursue the erty does not exceed the sum named. It stockholders for unpaid balances on their seems to me to be perfectly clear that the material issue is not what that appraisement shows. The material thing is: What is the value of the property for the purpose of a stock issue by a New Jersey corporation?

stock.

The bill, being an injunction bill, would be sworn to, and might, therefore, be used against the complainant. If, without committing himself to anything in this respect, If the demurring defendant herein should and by merely referring to the appraisement answer this twelfth paragraph by denying made in the bankruptcy proceedings, he could that "the representations and statements con- cast the whole burden upon the defendant tained in the plan or scheme of reorganization and obtain a decree either that the value was were false and untrue, in that, as shown by sufficient to found the stock issue upon, or an appraisement in the bankruptcy proceed- that it was not, he would have procured proings, the value of the property did not exceed tection upon an issue which he never tenderthe sum of $7,750,000," an issue would be ed or assumed any responsibility concerning. joined upon a perfectly immaterial matter; As will be observed from the most casual and the proof by the complainant that the ap-reference to this bill, the complainant aspraisement was for the sum named, or a sumes no responsibility of proving any fact

Similarly, I cannot believe it possible that a filed appraisement in a bankruptcy proceeding is conclusive proof of the value of the assets thus appraised. Whether it is an

And yet this appraisement and sale are the
only facts set forth in the bill which in any
way affect the vital question involved.
I cannot conceive how, under any proper

excepting the appraisement in bankruptcy. | is conclusive of such value. This is too He does not assume the responsibility of clear upon reason to require authority, but it proving that this was more or less than the has the latter. Pomeroy v. N. Y. Smelting value of the property, or that it had any real & Refining Co., 48 Atl. 395 (Emery, V. C., relation to the actual value of the property. 1901). Apparently the pleader's theory was that the entire burden, by this bill, could be shifted to the defendants to prove that the value of the property equaled the amount of the stock about to be issued for it. Without de-instrument of proof at all I do not decide. ciding anything more than the case before me, I am clear that one who has joined in an agreement such as this complainant has is not in a- position to cast any burden upon the defendants with whom he has contracted principles of equity pleading, it would be until after he has charged, and thereby un-possible, under this bill, to raise the only isdertaken to prove, such facts as make it im-sue which could be beneficial to the complainproper, as to him, to hold him to his agree-ant. That issue, as above pointed out, is an ment and have it carried out. affirmance upon his part of the fact that property of a certain value is about to have stock of a much larger value issued for it. Since the bill, as above stated, utterly fails anywhere to aver what the value of the property is, the issue is not even suggested, much less tendered. For him to charge or state or show (whichever this bill may be claimed to do) that in a bankruptcy proceeding appraisers, appointed for some purpose in that proceeding, estimated the property as having a certain value, is merely to plead, at most, a portion of his evidence; and is certainly not a pleading of what the actual value is, which is the only thing with which we could be possibly concerned in this suit. With respect to the responsibility assumed by the complainant under this charge, all that he assumed to do was to produce the appraise

While the word "fraud" is used in the bill, and the word "misrepresentation," I am utterly unable to perceive their signification or relevancy to the facts charged. I cannot find anything in the plan or agreement which by any proper use of language can be said to represent or state the value of the property of the Southern Steel Company, and, consequently, no proof as to its value could possibly show any misrepresentation or misstatement in the said plan or agreement. It is entirely settled that the mere use of the word "fraud" is futile, and that a complainant who desires to complain of fraud must set forth the facts which he claims constitute the fraud upon him. Byard v. Holmes, 34 N. J. Law, 296 (Sup. Ct. 1870); Smith's Adm'r v. Wood, 42 N. J. Eq. 567, 7 Atl. 881 (Van Fleet, V. C., 1887), affirmed 44 N. J.ment and prove that it was filed in the bankEq. 603, 17 Atl. 1104 (1888); Davis v. Davis, 55 N. J. Eq. 37, 36 Atl. 475 (Chan. McGill, 1896); Hageman v. Brown, 73 Atl. 862 (Leaming, V. C., 1909). See, also, State v. Minnesota L. & I. Co., 20 Mont. 198, 50 Pac. 420; Equitable Life Assur. Soc. v. Brown, 213 U. S. 25, 29 Sup. Ct. 404, 53 L. Ed. 682.

In the case at bar the complainant, who was a holder of a very large amount of stock in the old company, had every source of information open to him before he went into the agreement. The committee refrains from making any statements of the value of the property, and further explicitly informs all concerned that whatever they have said is not to be taken as if its accuracy was guaranteed, but is only to be taken as having been obtained from the best sources available to the committee.

The only other thing, besides the agreement in question, which has happened, so far as the complainant's bill shows, which has any relevancy at all, is an appraisement in the bankruptcy proceedings and a sale. As to the sale, it cannot be possible that any court will hold that the price obtained at a sale of assets in bankruptcy, bought in by the creditors by agreement, is so conclusive upon the value of those assets that the mere

ruptcy proceeding.

that he he

In the case of Brokaw v. Brokaw, 41 N. J. Eq. 215, 220, 4 Atl. 66, 70 (1886), there was a demurrer to the bill. One question sought by the complainant to be raised was whether the defendant executors had neglected to perform a duty enjoined upon them by the will. In dealing with the bill upon this point, Vice Chancellor Van Fleet, said: "The bill, it is true, says that the father complained to the complainant * was not receiving the support was entitled to under the will, but this averment * * * does not affirm the truth of any actionable fact. Under an averment in this form, the complainant would not be required to prove that the father had been deprived of anything which the will gave him, but he would maintain the issue tendered by his pleading by simply proving that the father had complained that he was not receiving what he was entitled to. Such proof would, of course, show no right of action. It is an elementary rule of pleading that a bill must state all the facts on which the complainant's right to relief rests with certainty and clearness, and positively. Story's Eq. Pl. § 241." Surely the appraisement filed in the bankruptcy case, which could

cross-examination, could not be held to be tain price had agreed to do a thing prohibitconclusive; and yet that is all that the com-ed by the law of New Jersey; and, therefore, plainant tenders in this case.

Unless, therefore, the complainant could maintain that which seems to me to be an impossible contention, he cannot succeed upon the facts averred. If he could maintain that, because this property was appraised in a bankruptcy proceeding at a certain sum, such sum must in this court be taken as conclusive proof of the value of the property, so that an issue of stock by a New Jersey corporation to a larger amount than such sum would be an overissue to the amount of the excess, he might then succeed in this suit. But I have not found, nor was I furnished with, any authority for any such principle. And I cannot conceive that any court could reach such a conclusion. Whatever the functions of the appraisers in bankruptcy may be, and whether their appraisement is evidential or not in other proceedings, it does not seem to me that it can be reasonable to hold such appraisement to be anything more than evidence. I feel that I would waste time were I to indulge in elaboration with respect to what seems to me to be so plain and clear a proposition.

any one of the parties might appeal to the court to undo such unlawful agreement and prevent its being proceeded with. In this view of the case, it seems to me that it would not only be proper but necessary to bring in all the parties so that the court could make a binding decree affecting them all.

Another insistment of the demurrant is that this complainant is not in a position to ask for the relief prayed for, even assuming that his bill charges all that it should charge, because what he, in effect, is asking for is rescission, and rescission, under the circumstances, is impossible. The contention of the demurrant is that the status quo ante cannot possibly be restored; and since the complainant is in a similar situation to all the other parties, and has not been the subject of any fraud, nor has any concealment been practiced with respect to him, he cannot now have the contract rescinded as to him without the acquiescence of all the others, because it would be impossible to restore him or the others to any position which a court would deem equitable.

It certainly would be extremely difficult to The vital determining question in this case work out any equitable result under the ciris whether the complainant has averred, cumstances. Parties owing $33,000,000 of seshown, or stated that a New Jersey corpora-curities, stock, etc., have joined in this plan, tion is about to issue more stock than certain or at least a very large majority have. It property is worth. And the only way he can contemplated settlements upon agreed bases. do that is to show what that property is It contemplated a sale of the assets and a worth. Unless the appraisement in the bank- purchase for the benefit of all, and a revestruptcy proceedings is conclusive, he has no-ing of the assets in a new corporation, and where in his bill charged any facts raising this question. I find that the appraisement in the bankruptcy proceedings is not conclusive; that it may be (although I do not decide that it is) evidential, but it is nothing more than evidential; and therefore the complainant, by merely pleading that, has not pleaded the facts which he must plead to raise the question which he seeks to raise. Upon this ground my judgment is clear that the demurrer must be sustained.

The demurrant urged with equal Insistence many other grounds. It insists that this bill is defective because it is brought by the complainant on behalf of himself and others; whereas, the charge seems to be a fraud perpetrated upon him. Chester v. Halliard, 36 N. J. Eq. 313 (Ct. of Errors, 1882). If the pleader's apparent theory of his own case were adopted, there would be much in this objection. But, as. above pointed out, I do not think that theory can possibly be tenable. I cannot see how, from any of the facts that he alleges, it would be possible to find a fraud perpetrated upon him or upon any one. The sole cause of complaint which I see it possible to urge, the facts were properly pleaded, would be that under the law of New Jersey it is against public policy to issue more stock than the value of property paid in for it; and, therefore, these parties who had agreed to put in property at a cer

an issuance of securities by that corporation in exchange for rights against and securities of the old corporation. The only remedy, in this view of the case, would be a completely new agreement, which it seems to me would be practically impossible for the court to make, even if all the parties were before it and the court had jurisdiction to do so. The parties are not before it, since only the reorganization committee and the new company are defendants. If the entire subject-matter of the trust is to be dealt with, and everybody's rights in it are to be affected (as they would have to be to meet the complainant's demand), it seems to be clear that the other cestuis que trustent are indispensable parties. This latter principle, if it is applicable, is too familiar to require citation of authorities.

Another insistment is that in reorganizations the courts have held that an overissue does not result if what is done is merely exchanging new securities for old. The following authorities are cited for this: Pomeroy v. N. Y. Smelting & Refin. Co., 48 Atl. 395 (Emery, V. C., 1901); Memphis & Little Rock R. R. v. Dow, 120 U. S. 287, 7 Sup. Ct. 482, 30 L. Ed. 595; Mackintosh v. Flint & P. M. R. Co. (C. C.) 34 Fed. 582; Sioux City, O. & W. Co. v. Manhattan Trust Co., 92 Fed. 428, 34 C. C. A. 431; Toledo, etc., R. Co. v. Cont. Tr. Co., 95 Fed. 497, 36 C. C. A. 155; Blum v. Whitney, 185 N. Y. 232, 240, 77 N. E. 1159.