#### Samuel H. Mildenberg et al., Plaintiffs, *v.*Darwin E. James, et al., Defendants.

(Supreme Court, New York Special Term,

May, 1900.)

1. Corporation — Action by promoters against subscribers and corporation for compensation — Performance by substituted contract —■ Demurrer.

After each of certain subscribers to a proposed corporation had agreed with its promoters to use his influence to complete the enterprise, in consideration of a certain share of a block of stock which it was understood was to be given to the promoters by the corporation when formed, the promoters, with full knowledge of the facts, accepted from the corporation formed, an agreement which fully provided for their compensation. The corporation failed to perform this agreement. On demurrer to the complaint in an action by the pro. meters against the subscribers and the corporation,

Held, that, assuming that the agreements of the subscribers created any liability, the agreements were performed when the corporation offered the promoters its form of contract and they accepted it; and that consequently the failure of the corporation to perform, left the promoters no remedy except against it for damages for the breach, and none against the subscribers.

That the promoters could not procure an annulment of the agreement of the corporation, and pursue the subscribers on their agreement.

*Z.*Demurrer — Joint, when bad.

A joint demurrer is bad if the complaint states a cause of action against one of the demurrants.

Issues of law upon demurrer to complaint.

E. H. Benn, for plaintiffs.

Arthur J. Baldwin, for defendants-demurrant.

Bisohoef, J.

The plaintiffs, acting as promoters, procured the signatures of'certain of the defendants to a subscription list, which *608stated that each agreed to take a fixed number of shares of stock in a projected corporation, the agreement reciting that certain properties held by other corporations were to be acquired by this corporation, when formed.

Contemporaneously, an agreement was made between the plaintiffs and each subscriber, whereby the subscriber practically engaged to use his influence toward completing the enterprise, and the plaintiffs promised in their turn to give the subscriber a certain amount of the stock which it was “ understood ” that the corporation, when formed, should turn over to them for their services as promoters.

The corporation was formed under the name of the People’s Telephone Company, but a contract in the exact terms of the “ understanding ” recited in the individual agreements was not made. The plaintiffs and the corporation did, however, conclude an agreemént, unaffected by any element of fraud or. mistake, covering the whole subject of the taking over of properties, and of the compensation for plaintiffs’ services, but there was a failure of performance, and this action is brought to annul the contract thus made, and to enforce the individual agreements of the several defendants, or, in the event of the corporation’s agreement being held binding, to enforce that agreement against *“*the defendants,” , and for an apportionment of damages sustained by the plaintiffs and by the corporations whose properties were to have been acquired and purchased.

It is clear that the individual agreements of the subscribers, if sufficiently definite to give rise to any liability, were fully performed when the corporation offered its form of contract to the plaintiffs and they accepted it, and the failure of performance simply gave the plaintiffs their proper remedy for the breach.

This contract was made with a full understanding of all the facts, as appears from the allegations, and there was no fraud inducing the plaintiffs’ acceptance. True, it is alleged that the corporation afterward endeavored to avail itself of a condition of the agreement in a fraudulent manner, as an excuse for non-performance, but this fraud affected only the merits of a possible defense when sought to be set up by the corporation, and could afford no ground for setting aside the agreement itself.

In its most favorable aspect the complaint fails to disclose any cause of action against the defendant-subscribers, and the deter*609mination that the pleading is insufficient, as against them, necessarily covers the points, also taken by the demurrer, as to a misjoinder of causes of action and a defect of parties touching the case as thus framed.

So far as the action proceeds against the defendant, the People’s Telephone Company, there is no basis upon the allegations for an apportionment of damages, as though sustained severally by the plaintiffs and by the corporations whose properties would have been purchased had the agreement been carried out. The averments are consistent only with the fact that the plaintiffs acted as principals, not as agents for these different companies, and that they, personally, were to secure the proper transfers.

In fact their counsel describes the plaintiffs, in this aspect, as *“*trustees,” and if they were such, the damages would be recoverable by them in the first instance subject to their accounting to the parties interested in the trust. Certainly, the People’s Telephone Company did not contract with these corporations, nor make an agreement for their direct benefit.

I conclude that the complaint contains averments sufficient for an action at law against the People’s Telephone Company within the demand for relief by way of damages (Abb. Trial Brief on Pldg., § 120), and that except as to this defendant no cause of action is stated.

However, these views upon the merits of the case cannot result in my sustaining the demurrer to the extent to which it is substantially well taken, since the defendants, including the People’s Telephone Company, have jointly demurred, and, as matter of form, the demurrer must be overruled because the complaint states a cause of action against one of the joint demurrants. Phillips v. Hagadorn, 12 How. Pr. 17; Peabody v. Insurance Co., 20 Barb. 339; Abb. Trial Brief on Pldg., § 14.

Under the circumstances, leave will be given the defendants to withdraw and amend the demurrer (Abb. Trial Brief on Pldg., §§ 14, 26) within ten days, on payment of costs of the argument; unless this leave be availed of, the demurrer will be overruled with costs, with leave to answer on payment of costs within twenty days.

Ordered accordingly.