and 120 New York State Reporter the various uses the chemical standard is modified to a great extent. For instance, we speak of pure water; meaning by that water that is not contaminated, not defiled, not vitiated, although it may have mineral salts in solution. It may have in solution any product not deleterious; yet, strictly speaking, the only water that can be said to be chemically pure is distilled water. Still, in the various legislative acts providing for pure water for municipalities and communities, it has never been contemplated that absolutely, chemically pure, distilled water was to be procured. Under the evidence in this case-and it is undisputed-the presence of water is necessary in order to make a vinegar. In the process of manufacture the high percentage of acetic acid renders the product unmarketable, unpalatable, and not properly a vinegar, but an acid, and wholly unfit for the purposes to which merchantable vinegar is usually put. There is no denial that the water was "pure water," in the common acceptation of these words, not distilled water, and there is no claim made nor evidence to show that its addition was deleterious, or in any way impaired the quality or deteriorated the product, but, upon the contrary, it rendered the product a palatable and marketable article. The object of the statute, namely, to prevent adulteration and injury to health, is not defeated, or in any way hindered, by the treatment of the apple juice in the course of manufacture by the introduction of pure water for the purpose of reducing the acid to vinegar. And so long as the product complied with the standard of unadulterated products, all its ingredients being pure and in no way deleterious, it ought not to be declared impure or adulterated. The construction to be given to the word "pure," as used in this statute, should be "free from mixture or contact with that which is deleterious, impairs, vitiates, or pollutes." Within this definition no violation of the statute has been shown, and the findings of the trial judge were justified by the evidence. No error appears, and the judgment should be affirmed, with costs. All concur. (90 App. Div. 109.) MCVITY v. E. D. ALBRO CO. (Supreme Court, Appellate Division, First Department. January 15, 1904.) 1. CORPORATIONS-SUBSCRIPTION FOR STOCK-GUARANTY OF DIVIDENDS-ULTRA VIRES. Plaintiff, having loaned money to a foreign corporation, was induced by its president to deliver up the note he had taken and receive stock of the corporation to the same amount, with a written guaranty of a 6 per cent. dividend. After paying the dividend for some time, it was refused on the ground that an agreement to pay dividends when the company was not earning them was ultra vires. Held, that plaintiff was entitled to rescind the agreement, and, though it was ultra vires, the corporation could not retain the benefit and compel plaintiff to retain the stock to his disadvantage. 2. SAME-OFFICERS-CONTRACTS-AFFIRMANCE. Where the president of a corporation sold stock with a written guaranty of certain dividends, the corporation, by paying such dividends for some time, affirmed the contract. 3. SAME-FOREIGN CORPORATIONS. Whether or not a foreign corporation was authorized to issue stock with a guaranty of dividends was determinable by the law of its residence, and a purchaser was not chargeable with knowledge of that law. Van Brunt, P. J., and Laughlin, J., dissenting. Appeal from Trial Term, New York County. Action by James S. McVity against the E. D. Albro Company to cancel a contract for the purchase of stock. From a judgment for plaintiff, and from an order denying a new trial, defendant appeals. Affirmed. Argued before VAN BRUNT, P. J., and HATCH, PATTERSON, INGRAHAM, and LAUGHLIN, JJ. James R. Burnet, for appellant. INGRAHAM, J. The defendant is a foreign corporation, organized under the laws of the state of Ohio. In April, 1899, and prior thereto, the defendant was engaged in the business of dealer in lumber in the city of New York. The material facts, which are not seriously disputed, are: That in April, 1899, the plaintiff held the defendant's note for $10,000 for money loaned, which was payable on demand, with interest at the rate of 6 per centum per annum. That the plaintiff wrote a letter to the defendant, asking for payment of $5,000 on account of this note. That in answer to this demand the plaintiff received a letter from the defendant corporation, signed by "E. D. Albro Company, W. H. Justice, Prest.," which was as follows: * In your recent letter to Mr. Justice you stated you would like to have say, $5,000 in cash. Our stockholders all agreed on one point and that is that we much prefer to pay the note in full and therefore we repeat that it would give us pleasure to hand you check for $10,000 at once if you so desire and we can arrange the interest due on our note for $10,000 by short time notes. As you mention, however, that $5,000 in cash is the sum you wish to get, we all join in the suggestion and it is simply a suggestion and offer to you in the true spirit of good advice for your interest and not for ours that we can and will pay you at once cash $5,000 and are willing to sell you five shares of the Company's stock at the par value of $1,000 per share and guarantee you on same a six per cent. dividend annually. Of course we expect to pay more dividend, but we are willing to guarantee a six per cent. dividend and will also agree, or Mr. McDougall and Mr. Justice will jointly agree, to buy the stock back from you at the end of two or three years at the same price per share you having a guarantee of six per cent. dividend in the meanwhile. * * Please understand that we are not anxious to sell Albro Company stock but are willing to sell you five shares if you desire to purchase it on the basis mentioned. Our preference you understand is to pay the note in full $10,000 at once. This letter was dated April 22, 1899, and about the 10th of May, 1899, Mr. Justice, the president of the company, called upon the plaintiff in New York City. Mr. Justice said that he had called to see the plaintiff in reference to the E. D. Albro Company's demand note which the plaintiff held, and referred to the letter of April 22d. then told the plaintiff of the prosperity of the company, and that they had 10 years' good business before them, and that the company expected to pay 10 per cent., if not more. He then offered to the 86 N.Y.S.-10 and 120 New York State Reporter plaintiff that, if the plaintiff would take the stock of the company, they would guaranty a dividend of 6 per cent. per annum in exchange for the note. The plaintiff asked him if that would be preferred stock, to which Justice answered that it would be stock guarantied by the Albro Company, which they had a right to do. The plaintiff replied that he did not care about buying stock, as he was well advanced in years, and would prefer to have the note go on as it was on the books, and, if they did not want to do that, they could pay the note in full in cash. To that Justice said that it was not convenient for them to pay cash on the note at that time, and the plaintiff said that he would think the matter over, and would see him again. The plaintiff, having confidence in Justice, and believing what he said, in a day or two afterwards called upon Justice at the office of the company in New York, when Justice asked the plaintiff what he had decided about taking stock. The plaintiff said, "No, I didn't see where I was going to be benefited by taking stock for my note, which was six per cent. per annum, and the stock wouldn't pay any more." Justice replied that this note was the only obligation of the kind that they had on their books, and they wanted to get it off their books as a liability. "He then said that the company would sell me eight shares of stock, and guaranty me a dividend of six per cent. per annum, payable quarterly, and the balance, $2,000, they would pay in cash in exchange for my demand note;" and that, in addition, they would give the plaintiff an additional advantage, and that was that the company would continue the interest on the note from that time-from the 1st of January to the 1st of July-and that the Albro Company had decided to pay dividends, to commence them on the 1st of July, 1899, and that, if he would decide then and there to take stock, he would get a dividend in July. The plaintiff said that he would accept his offer; that is, that he would accept eight shares of stock at par with their guaranty of 6 per cent. per annum, payable quarterly, and the balance, $2,000, to be paid in cash, in exchange for the note. As a result of this conversation, early in June, the plaintiff received from Justice eight shares of the capital stock of the defendant corporation at the par value of $1,000 each, and with it the following letter: "New York, May 13, 1899. "Mr. Jas. S. MeVity-Dear Sir: You hold the note of The E. D. Albro Co. for $10,000.00 bearing Int. at 6%. If as proposed you will buy 8 shares of The E. D. Albro Co. stock we will guarantee you a 6% dividend on same payable quarterly and the remaining $2,000.00 we can arrange as you may desire. "This is the arrangement proposed by Mr. McDougall, and he and Mr. Justice will agree to purchase back the stock at par 2 to 3 years if you wish to sell, and you are guaranteed a dividend of 6% per annum in the meanwhile. "Yours truly, The E. D. Albro Co. "W. H. Justice, Prest." The certificate for eight shares of stock and the letter accompanying it were delivered to the plaintiff by the president of the company. At the time it was delivered Justice told the plaintiff that he would like to continue the $2,000 as an account until the 1st of January, 1900, and Justice, on behalf of the company, then borrowed an additional $1,000 in cash from the plaintiff as a loan, and gave a note of the corporation for $3,000, which the plaintiff accepted, and delivered the note for $10,000 to the defendant. Thereupon, and down to December 31st, the defendant paid dividends of 6 per cent. upon the stock owned by the plaintiff, and also made various payments on account of the note for $3,000, until at the commencement of the action there was due upon the note for $3,000 $400, with interest from July 1, 1902. On December 3, 1901, the plaintiff received from the defendant the following letter, dated Cincinnati, Ohio, December 3, 1901: "Dear Sir: As to the dividends, some of our stockholders have entered a protest and this protest will have to be heeded, because it is an ultra vires act and beyond the power of any officer of this Company to pay dividends when the Company is not earning them." In reply to this letter the plaintiff, on December 15, 1901, wrote a letter as follows: "The E. D. Albro Company-Gentlemen: I note what you say (and which has been before intimated by you), that it was beyond the power of the Company to issue stock with guarantee of dividend. This transaction was entered into at the request of the Company, and it was supposed at the time that it was a good thing both for the Company and myself, and I supposed it was done on the advice of the Company's legal adviser. I had no idea at the time of the transaction that it was unlawful, and of course I ought not to hold you to it if it was, and have no desire to do so. Will you kindly advise me if it is the judgment of the Company and its present legal adviser that it was beyond the power of the Company to issue the stock with the guarantee of dividend which I hold. I want my affairs with the Company adjusted as far as possible without friction, and if your Company holds that it was beyond its power to issue the stock, with the guarantee of dividends which I hold, I offer to return the stock to you, properly endorsed for surrender or transfer, together with the guarantee executed by the Company at the time of the issue of the stock, you to return me the Company's note for $10,000, which I gave up when the stock and guarantee was given to me, on which you may endorse payment of interest (which I received under the agreement as dividends), to October 1st, 1901, together with payment of Two thousand dollars on account of principal. "Yours truly, James S. McVity." This letter does not seem to have been answered by the defendant, when the plaintiff, on January 10, 1902, sent a copy of the letter to the defendant, with a request for an immediate reply. In answer to that, on January 16, 1902, the plaintiff received a letter from the legal adviser of the defendant, dated Cincinnati, January 16, 1902, which stated that in the opinion of the writers the alleged guaranty of dividend upon the stock referred to was made without the authority. of the company itself. "Furthermore, even if the Company had authorized the guarantee, it would have been ultra vires, because a corporation has no right to guarantee to an individual stockholder the dividend upon his stock. This being the case, the Company as now constituted cannot now undertake to be responsible for the unauthorized act of some former management of the Company, and it is not in a position to receive from you the stock, nor to give you its note for $10.000 as you request. You could have known, as a matter of law, at the time, that the Company could not make such a stipulation. Having taken the stock, under the circumstances set forth, you are not entitled to return it to the Company, and receive therefor the Company's note." The plaintiff testified that he did not at any time know that it was forbidden in Ohio to pay more than the company earned. For and 120 New York State Reporter the defendant, Mr. Cassatt, a member of the bar of the state of Ohio, was called as a witness, and testified that he was familiar with the law of Ohio relating to corporations; that there was no authority under the law of that state for a corporation to guaranty a dividend upon its capital stock; that by the law of Ohio dividends can be declared by the company upon only what are called the "surplus profits" of the company; and certain statutes of the state of Ohio relating to the powers of corporations were introduced in evidence. By these statutes it was made unlawful for the directors of any corporation organized under the laws of that state to make dividends, except upon the surplus profits arising from the business of the corporation. Both the plaintiff and the defendant then asked for the direction of a verdict, whereupon the court granted the motion of the plaintiff, and directed a verdict in favor of the plaintiff for the amount due upon the note of $10,000, and from the judgment entered upon that verdict the defendant appeals. Each of the parties asked for the direction of a verdict, and, there being no application to submit any question to the jury, the question presented is whether, upon these facts, the plaintiff was entitled to a verdict. This corporation, being organized under the laws of the state of Ohio, was subject to the law of that state, and had such power as that state had granted to it. Whether or not it was authorized to issue stock with a guaranty of dividends, which would make it entitled to dividends in preference to other stock of the corporation, was a question to be determined by the laws of Ohio, and as to the law of that state the plaintiff, a resident of New York, was not chargeable with knowledge. There is nothing that would restrict the power of the Legislature of the state of Ohio to confer upon a corporation organized under its authority power to guaranty dividends upon the stock of the company, even though such dividends would be payable out of the capital of the company, as distinguished from its profits or surplus earnings. Notwithstanding the fact that the defendant had expressed to the plaintiff a great desire to pay this note in cash, it endeavored to induce the plaintiff to make some terms with the company by which a payment could be prevented. It accomplished that result by inducing the plaintiff to surrender the note in return for shares of the stock of the company, on which the company would guaranty the payment of a dividend of 6 per cent., and upon the representation by the defendant's president that the defendant had a right to issue its stock and guaranty the payment of the dividends. The plaintiff testified, and it was not disputed, that: "I then asked him [the president] if that would be preferred stock. He answered me by saying it would be stock guarantied by the Albro Co., which they [Albro Co.] had a right to do." Here was a distinct representation by the president of the defendant, to induce the plaintiff to accept the stock of the corporation, that the defendant had a right to make such a guaranty; and that right depended upon the law of the state of Ohio, with knowledge of which the plaintiff was not chargeable. The plaintiff expressly swears that he relied upon this statement of the president, and that he had no knowledge of |