Summary
In Flaherty v. Cary, 70 N.Y.S. 951, the defendants, a firm of attorneys, had agreed to assist plaintiff in organizing a mortgage insurance company, and to accept as stockholders only those who would consent that plaintiff should be employed as general agent of the corporation when formed, at a fixed salary, and should have full control of the solicitation of insurance and the employment of subagents for that purpose.
Summary of this case from Hardman v. PolinoOpinion
June Term, 1901.
Arthur C. Palmer, for the appellant.
Willard Parker Butler, for the respondents.
Plaintiff failed to prove a cause of action, and his complaint was properly dismissed. Defendants did not agree absolutely to form a corporation or to secure a contract therewith for plaintiff as its sole general agent. They merely agreed to assist him in accomplishing these things.
It does not appear that they could have formed a corporation composed of stockholders who would agree in advance to the company's employing plaintiff on the extraordinary terms proposed, and it is extremely improbable that it could have been done even if authorized by law.
Even if the stock could have been sold subject to the agreement, these conditions would not have been binding upon or enforcible against the directors who, especially in a company of this character organized to carry on an insurance business, would owe a duty to the public as well as to the stockholders to conduct the business and affairs of the corporation according to their judgment as to what would be for the best interests of all concerned. ( Bliss v. Matteson, 45 N.Y. 22; Snow v. Church, 13 App. Div. 108; West v. Camden, 135 U.S. 507; Fennessy v. Ross, 5 App. Div. 342.)
The contract was unenforcible for lack of definiteness. We are unable to determine from the contract where, or under what laws, the company was to be incorporated. If under the laws of this State, as might be inferred from the testimony relating to the efforts of the parties to have the Insurance Laws amended, subscriptions for stock upon such conditions as those embodied in plaintiff's agreement with defendants would have been void. ( Fort Edward, etc., Plank Road Co. v. Payne, 15 N.Y. 583; General Electric Co. v. Wightman, 3 App. Div. 118; Dix v. Shaver, 14 Hun, 392; Craig v. Town of Andes, 93 N.Y. 405, 414.)
Nothing is stated as to the amount of capital stock, the number of directors, the scope of the operations of the company or as to the form or manner in which the assent of stockholders to the plaintiff's employment upon these conditions was to be secured. The terms and conditions of the employment of defendants as counsel for the corporation were never agreed upon. We find no cases exactly in point, but there are many cases where contracts more definite have been declared unenforcible either in an action at law or a suit in equity. ( United Press v. New York Press Company, 164 N.Y. 406; Sourwine v. Truscott, 17 Hun, 432; Van Schaick v. Van Buren, 70 id. 575; Milliman v. Huntington, 68 id. 258; Bennett v. Egan, 3 Misc. Rep. 421; Snow v. Russel Coe Fertilizer Co., 58 Hun, 134; Davie v. Mining Co., 93 Mich. 491; Sherman v. Kitsmiller, 17 S. R. 45; Marble v. Standard Oil Co., 169 Mass. 553.)
The contract was also void as against public policy. It was an attempt on the part of plaintiff to use the corporation laws for his special benefit and advantage. The law requires that subscriptions to the original issue of capital stock shall be paid for in money or property, and the directors are authorized to open subscription books and receive subscriptions for such stock (Stock Corp. Law [Laws of 1890, chap. 564], § 41, as amd. by Laws of 1892, chap. 688), but plaintiff, by his agreement, seeks to engraft additional conditions. The agreement contemplated, precluding any person from becoming a stockholder who would not agree in advance, in addition to paying cash for his stock, that plaintiff should be employed during the entire corporate existence subject to the termination of the contract on six months' notice, and that he should receive for his services nearly one-third of the gross receipts of the company, not only while he continued in its employ, but a like percentage thereafter of the premiums on policies then in force and on policies in renewal thereof. He was a comparative stranger in New York, having come here from Canada within two years. The directors were to have no option but to employ him on these terms, even though in their opinion his services might be of no value to the corporation. He was to have exclusive charge of soliciting and securing business for the company.
It is difficult to see how the directors could perform their statutory duty of managing and controlling the affairs of the corporation in the interests of the stockholders, its policyholders and other creditors, if they were to be thus limited and restricted by this contract. ( Fisher v. Bush, 35 Hun, 641; Brown v. Britton, 41 App. Div. 57; Dickson v. Baker, 77 N.W. Rep. [Minn.] 820; Jackson v. Ex'rs. of McLean, 100 Mo. 130; West v. Camden, 135 U.S. 507; Fennessy v. Ross, 5 App. Div. 342; Cook Corporations [4th ed.], § 622.)
Appellant, with apparent confidence, relies upon the cases of Lorillard v. Clyde ( 86 N.Y. 384) and King v. Barnes (109 id. 267) as sustaining the validity of this contract. These authorities are distinguishable from the case at bar. In the Lorillard case plaintiff and a firm of transportation competitors agreed to form a corporation, each to contribute one-half the capital and to receive one-half the stock, and upon the understanding that the firm was to manage the corporation in good faith and with economy and to guarantee seven per cent dividends to plaintiff. The agreement was fully performed except payment of the dividends, which the action was brought to recover on the guaranty. It was held that the agreement being between parties who were to and did contribute the entire capital stock, was binding upon them, but that it might not be binding upon the directors. In the King case a corporation was organized as contemplated by the parties who made the preliminary agreement. That was a suit in equity for an accounting and the delivery of stock which defendant had received for plaintiff pursuant to the agreement which had in all other respects been fully executed. The court based the decision upon the ground that the contract had been executed. This is shown by the opinion which says: "What might have been the remedies of the parties to this contract if it had remained unexecuted, and there had been a breach thereof, is quite unnecessary to inquire, inasmuch as the contract was subsequently executed and large sums of money were advanced and expended upon the faith of it in the formation of the corporation, and in the purchase of the lands intended to be used in the contemplated enterprise."
No competent evidence of damages was given or offered, and if plaintiff established the breach of a valid contract, we would not be required to reverse in order to enable him to recover merely nominal damages.
The judgment should be affirmed, with costs.
O'BRIEN, J., concurred.
I concur on the ground that there was no contract enforcible against Cary Whitridge.
I concur in the result reached by Mr. Justice LAUGHLIN in this case, upon the ground that the contract is so indefinite and uncertain as to be unenforcible. It was not averred in the complaint nor proved on the trial that the efforts of the defendant to organize the corporation, such as was contemplated, was or would have been successful, in consequence of which no cause of action was either averred or proved. It is evident that no damages can be predicated of a breach of such a contract. The whole matter is so speculative and uncertain that no enforcible right is established by the proof.
Upon the other matters discussed in the opinion of Mr. Justice LAUGHLIN, I express no opinion.
The judgment should be affirmed, with costs.
O'BRIEN and McLAUGHLIN, JJ., concurred.
Judgment affirmed, with costs.