Case Name: The Hecla Consolidated Gold Mining Co., Resp't, v. William L. O'Neill, App'lt
Court: New York Supreme Court, General Term
Jurisdiction: New York
Decision Date: 1892-06-29
Citations: 47 N.Y. St. Rep. 211
Docket Number: 
Parties: The Hecla Consolidated Gold Mining Co., Resp’t, v. William L. O’Neill, App’lt.
Judges: 
Reporter: New York State Reporter
Volume: 47
Pages: 211–214

Head Matter:
The Hecla Consolidated Gold Mining Co., Resp’t, v. William L. O’Neill, App’lt.
(Supreme Court, General Term, First Department,
Filed June 29, 1892.)
Corporations—Contract op promoters not binding upon.
The promoters of a mining corporation entered .into an agreement to place their interests in certain mining claims in defendant’s hands, in trust to hold the same until the company was incorporated and then to transfer them to the corporation. They at the same time agreed by paroi that they and the corporation would pay defendant a large sum for his services. Held, that such paroi agreement was a personal one on the part of the promoters, and was not binding on the company, and that the non-perform-once thereof was no defense to an action to compel the delivery of the property to, the corporation.
Appeal from interlocutory judgment sustaining demurrer to the defendant’s answer and counterclaim.
W. L. O'Neill, app’lt in person; J. H. Hayes, for resp’t.

Opinion:
Van Brunt, P. J.
— The complaint in. this action alleges that the plaintiff is a corporation duly organized, under the laws of the state of Colorado, in August, 1891; and that in February, 1888, one Jerry Collins and one Patrick J. Hegarty were the owners of certain mining, claims situated in that state, that they exeécuted a certain instrument between themselves whereby they agreed to organize a joint stock company to be called the Heel a Consolidated Gold Mining Company, and whereby it was declared that the parties had theretofore agreed that they would absolutely transfer and assign all their several interests in the said mining properties to the defendant William L. O'Neill, as trustee, to be held by him in trust for their benefit until the organization of said company should be completed, and that forthwith thereupon the said trust properties should be absolutely assigned and transferred by said O'Neill as such trustee to said mining company.
The agreement further recited that it had been agreed as to what the capital stock of the company should be, and what proportion of stock the owners of the mining claims should have.
On the 1st of March, 1888, a further agreement was entered into between said Collins,, Hegarty and O'Neill, in which it was recited that the said Collins and Hegarty were the owners of certain mining claims (describing them). Said agreement also recited the fact of the agreement of February, 1888, and that it was expressly, desired by the parties as a further assurance to execute these presents, further assuring, assigning and conveying said mining claims to said O'Neill as trustee for the purpose and subject to the trust declared in said agreement of February 3, 1888; and also that the said O'Neill had duly accepted the trust created by said agreement, and duly executed the same in acceptance of the trust thereof, and that in order further to give effect to the intention of the parties he had consented and agreed to become a party to the agreement for the purposes therein appearing.
And by said agreement the said Collins and Hegarty thereupon absolutely transferred, assigned and conveyed to said O'Neill all said several mining claims to be held by him in trust for the purposes declared by and contained in said agreement of February 3, 1888. And it was further declared and agreed by and between the parties that the said agreement of February 3, 1888, was to be deemed part and parcel of said agreement of March 1, 1888, and to be read as part thereof, and all the conditions and agreements therein contained were to be incorporated in said deed of March 1, 1888, with a view to the further and better giving effect to.the intention of all the parties.
That the incorporation of said mining company having taken place, in pursuance of the provisions of the said trust deed a demand was made upon the defendant O'Neill to transfer said property, which he refused; and judgment is demanded that the defendant execute and deliver to the plaintiff, pursuant to said agreement and trust deed, a proper assignment of said mining claims therein described, etc.
The answer of the defendant does not deny these facts ; but alleges' that prior to the acceptance of the trust mentioned in the complaint, said Collins, acting on bis own behalf and as the agent of Hegarty, entered into an agreement under and subject to which the agreement mentioned in the complaint had been entered into, and the plaintiff took and acquired such rights and interests as it had or possessed; that said agreement was verbal, and Collins, personally, for himself and as the agent of Hegarty, expressly agreed with said O'Neill personally as trustee, that said Collins and Hegarty and their company when duly incorporated would pay to said O'Neill, for his remuneration for services as trustee, a large amount of money therein mentioned ; and also do other things named in said answer; and that the plaintiff acquired such rights as it might have subject to said agreement; and that neither Collins nor Hegarty nor the plaintiff have complied with any of the requirements of said agreement; and the defendant demanded judgment against the plaintiff dismissing the complaint, with costs, and an affirmative judgment for the alleged agreed remuneration.
The plaintiff demurred to this answer upon the ground that it did not state facts sufficient to constitute a defense, which was sustained. And from the interlocutory judgment thereupon entered this appeal is taken.
In support of the defendant's contention it is claimed that the trust agreements were simply in part execution of the paroi agreement alleged in the answer between Collins, Hegarty and the defendant; and that the personal liability of Collins and Hegarty now rests upon the plaintiff corporation, because the corporation practically is Collins and Hegarty; and that if the corporation takes the benefit of the trust attempted to be created, it must assume the agreement to pay the trustee, and must ratify the whole transaction or no part of it.
The difficulty with the position of the defendant is that by the written agreements themselves he has agreed to do certain things, viz., upon the organization of this company to convey this property.
By this agreement, this corporation when organized became the cestui que trust, the beneficiary under the agreement, and had a right to enforce the same. It had nothing to do with the outside agreements between Collins, Hegarty and the defendant. Its rights are fixed by the trust deeds, and as far as the defendant is concerned his obligations to the plaintiff are also fixed by the trust deed, and as between these two the outside agreements could in no manner affect the rights and obligations which arose from the written contracts; because it is entirely immaterial whether the trust deeds were executed in pursuance of a paroi agreement or not; such paroi agreement was outside the trust deeds. By the trust deeds the defendant accepted this property upon certain trusts, and agreed to convey upon a certain contingency to a certain corporation when it should come into existence. That corporation having been organized now calls upon the defendant to fulfill his obligation. It is difficult to see how any agreement between Collins and Hegarty and O'Neill in regard to compensation can affect the right of the beneficiary of the trust deed to claim the property which the trustee has expressly agreed to convey. If the trustee desired to protect himself, he was bound to insert in the deed in which he agreed to convey the conditions upon which a conveyance might be claimed, the more particularly as the agreement became a binding contract between the beneficiary and the trustee the moment the beneficiary sprang into existence, and it was in the contemplation of the parties at the time of the execution of the trust deeds that such should be the case.
It further appears froip the very statement thereof that the agreement for compensation was a personal one on the part of Collins and Hegarty. And it is a familiar principle, which it does not need authority to support, that the promises of the promoters of a corporation to be organized are not contracts binding upon the corporation when it comes into existence. So, perhaps,- even if Collins had assumed to bind the corporation, which it is evident he did not, it is doubtful whether it could be enforced against the corporation. But, as already stated, the defendant has agreed to transfer this property to this corporation upon its coming into existence; and now he proposes to hold the property because it is alleged that Collins upon his own behalf and on behalf .of Hegarty agreed that he should receive a certain compensation, and it might be observed in passing that there is nothing whatever in the contract as alleged in the answer which in anywise gave a lien, or attempted to give a lien to the defends ant upon the trust property for this alleged remuneration.
The case, therefore, is that the defendant holds property which he has agreed to transfer to the corporation, and having no valid claim against the corporation by reason of any contract which Collins and Hegarty had made or could make, refuses to make such transfer according to his agreement because Collins and Hegarty have not lived up to their individual agreement.
We cannot see how such a claim can prevail. If the condition of the obligation to transfer had rested upon the compliance of Collins and Hegarty with their agreement, then another case might have been presented. But the obligation entered into upon the part of the defendant was absolutely unconditional, and this he refuses to perform.
We think, therefore, that the demurrer was well taken, and that the j udgment appealed from should be affirmed, with costs, with leave to the defendant to amend his answer upon payment of the costs below and of this appeal in twenty days.
O'Brien and Patterson, JJ., concur.