Case Name: Abraham L. Goldshear, Appellant, v. John C. Barron, Respondent
Court: New York Supreme Court
Jurisdiction: New York
Decision Date: 1903-12
Citations: 42 Misc. 198
Docket Number: 
Parties: Abraham L. Goldshear, Appellant, v. John C. Barron, Respondent.
Judges: 
Reporter: New York Miscellaneous Reports
Volume: 42
Pages: 198–201

Head Matter:
Abraham L. Goldshear, Appellant, v. John C. Barron, Respondent.
(Supreme Court, Appellate Term,
December, 1903.)
Corporation—Exception to the rule that a director cannot make a profit out of his corporation — When distinct actions are maintainable upon an entire demand.
The rule that a director of a corporation cannot make a profit out of it does not apply to an agreement openly made, to the knowledge of the body of the stockholders.
It is not a defense to an action for commissions which the defendant promised to pay the plaintiff’s assignor, one Turner, provided the introduction by Turner to the defendant of a person named Otto, practically the owner of two corporations, resulted in the leasing or purchase of the defendant’s property, that when he thereafter sold his property to one of the corporations he was a director thereof, it appearing that Otto had consented that he might make the commission if he could.
If the owner of an entire demand assigns an item of it before he sues and recovers on the rest of it, his recovery therefor does not preclude his assignee frcftn subsequently recovering of the debtor on the item assigned.
Appeal by plaintiff from a judgment of the City Court of the city of New York, rendered in favor of the defendant for the dismissal of the complaint.
Roger Foster, for appellant.
Stephen H. Olin (Louis James Phelps, of counsel), for respondent.

Opinion:
Bisohofp, J.
The plaintiff's assignor, Turner, introduced to the defendant one Albert T. Otto upon the defendant's promise that, if a sale or lease of his property grew out of the introduction, Turner should receive a commission, performance upon the part of the latter involving no services beyond and after the introduction itself.
From this introduction a lease resulted, followed a year later by a sale, the lessee and the vendee being corporations each controlled and practically owned by Otto, and the evidence would have justified a finding by the jury that the agreed commission had been earned upon the sale.
The dismissal at the close of the plaintiff's case proceeded upon the ground that a defense had been disclosed in the fact that Turner, at the time of the salé, was a director of the vendee corporation, and, further, that a prior recovery of his commission upon the lease, without the assertion of the claim of a commission upon the sale, which had accrued at the time when the prior action was commenced, operated to preclude a recovery upon this latter claim because the items of damages under the same contract were not severable.
The claim in suit had been assigned to this plaintiff before Turner's action for his commission upon the lease was brought, and, assuming that the demands were not legitimately the subject of distinct actions at his instance, because growing out of an entire contract, this did not affect the right of his assignee to maintain an action upon the claim assigned, notwithstanding the assignor's recovery, for the remaining item. Miller v. Union Switch & Signal Co., 13 N. Y. Supp. 711.
This ground for dismissal of the complaint, therefore, could not suffice, and the result reached by the court below must depend for its accuracy upon the question whether Turner's connection with the corporation invalidated his contract for commissions, as a matter of law upon the facts in evidence.
When this contract was made and Turner's services performed, the vendee corporation was not in existence, but since his commission depended upon the fact of a sale, his interest under the contract was in possible conflict with his duty as director, assumed at the time of sale, and the rule which forbids an officer of a corporation to profit by a transaction in which his interests are or may be inconsistent with the corporate interests would apply, although the contract itself, when made, was valid. Koster v. Pain, 41 App. Div. 443.
The policy of the law is to avoid the possibility of prejudice to stockholders through a director's assumption of an interest inconsistent with the trust reposed in him, and the presence or absence of a wrongful intent, or of actual prejudice to the corporation in the transaction does not affect the rule which renders the contract, if executory, unenforceable by the director (3 Thomp. Corp., § 4011, and cases cited), and voidable at the instance of the corporation. Barr v. N. Y., L. E. & W. R. R. Co., 125 N. Y. 263, 274.
The rule discussed, however, applies only to secret agreements for the director's own profit, and does not invalidate an agreement openly made, to the knowledge of the body of the stockholders, whereby the profit is to be enjoyed. 3 Thomp. Corp.,- § 4025.
It appears from the evidence that Otto was the actual owner of the vendee corporation, as he was, also, of its predecessor, the lessee of the defendant's property during the period intervening the contract for commissions and the sale.
Whatever openness and fair dealing, upon the part of Turner, were required to make this contract valid, could be due from him to Otto only, for there was no other interest represented.
The directors were nominal holders of stock, to qualify them, but, as appears, Otto was the owner of the corporate business and property, in substance and in fact, during all the time when Turner's connection with the corporations could have had a bearing, nominally or otherwise, upon the corporate interests to be affected by the proposed purchase of the defendant's property.
This being the situation, Turner's testimony that before going to see the defendant, he told Otto of his intention to procure a sale of this property and to make a commission if he could, and that Otto said " all right," was, in our view, sufficient to take the case to the jury upon the question of this party's fair dealing and of the consequent validity or invalidity of the agreement for commissions.
Having the consent, in advance, to just such an agreement as was made, of the only person whose interests were to be affected, Turner, could be absolved from the charge of cor cealing anything which hore upon the fulfilment of his official duties, and, with this evidence in the case, the court's determination that the contract in suit was invalid as matter of law cannot be supported.
Upon proof that other interests had intervened, before the sale and while Turner was acting as director, it may well be that he would be required to justify this contract, by something more than Otto's consent, but, as the case stands, there is no proof of intervening interests and, at best, there is but a suggestion that stock was issued after the sale, or at the very time, but after all steps toward its completion had been taken in behalf of the corporation.
The judgment must be reversed and a new trial ordered, with costs to appellant to abide -the event.
Fbeedmatt, P. J., and Blakchabd, J., concur.
Judgment reversed and new trial ordered, with costs to appellant to abide event.