Court Opinion

ID: 9653953
Source: CourtListenerOpinion
Date Created: 2023-08-23 18:00:12.12099+00
Date Added: 2024-06-11T18:13:04.056869
License: Public Domain

AUGUSTUS N. HAND, Circuit Judge
(dissenting). In view of.the contents of the bill of particulars and especially Exhibit A thereof, I can feel no doubt that the parties contracted with one another to subscribe for stock of the corporation to be formed to the amount of $100,000. The allegations of the complaint, that the plaintiffs agreed to provide $40,000 as working capital, and the defendant agreed to provide $60,000 as working capital, are therefore necessarily to be construed as relating to subscriptions for stock of the corporation afterwards organized.
After the corporation came into being, it could have ratified the agreement of the parties, and could have sued the defendant for failure to pay his subscription of $60,000. The ease comes up only on a motion to dismiss the complaint, which contains no allegation-that the company accepted or ratified the subscription. It may perhaps,' therefore, be assumed that the company did not choose to do this. But it can make no difference whether there was acceptance or not.
If the company had given its acceptance, it would have been the only person entitled to sue for sueh breach, because the agreement for furnishing working capital was to pay a subscription to the company for corporate stock and nothing else. But the agreement would have no other practical effect, if the corporation failed to ratify the promoters’ contract. Performance was to be to and for the company, and the company alone could recover damages in ease of default. .Any rights which plaintiffs have are derivative, and must be worked out through their stock interest in the company. Green v. Victor Talking Mach. Co. (C. C. A.) 24 F.(2d) 378, 59 A. L. R. 1091.
But it seems to be argued that the faet that the defendant had agreed to use his best efforts to secure business for the corporation and had neglected to do this, whereas the plaintiffs had used their best efforts, in some way affects the case. An indefinite undertaking without term or limit cannot in any legal sense be the subject of an executory contract. Martin v. New York Life Insurance Co., 148 N. Y. 117, 42 N. E. 416; Watson v. Gugino, 204 N. Y. 535, 98 N. E. 18, 39 L. R. A. (N. S.) 1090, Ann. Cas. 1913D, 215. A temporary performance of services by the plaintiffs surely gave rise to no obligation under the contract. Nor would any right of action in quasi contract be created thereby. Sueh a cause of action would have to be based upon unjust enrichment. The corporation was the'only person enriched by plaintiffs or at their expense, and the corporation is not a party to the action.
It may be added that, according to some authorities, the defendant had a right to withdraw from his agreement to take stoek until the corporation had been organized and had accepted the subscription, and no acceptance appears to have been given. Williston on Contracts, § 118; Bryant’s Pond Steam Mill Co. v. Felt, 87 Me. 234, 32 A. 888, 33 L. R. A. 593, 47 Am. St. Rep. 323; Hudson Real Estate Co. v. Tower, 161 Mass. 10, 36 N. E. 680, 42 Am. St. Rep. 379. If such be the correct theory, no contract enforceable against any one has been pleaded.
Higgins v. Applebaum, 186 App. Div. 682, 174 N. Y. S. 807, is inapplicable to the present facts, because the contract there involved more than a promise to pay the de*11fendant’s subscription, for it also provided that the defendant should pay part of the plaintiffs’ own stock subscription. In such a situation the promisee could sue and recover in the same way that he can do where a promisor agrees to discharge the debt of the promisee to a third person. Williston on Contracts, § 361; Alexander v. McPeck, 189 Mass. 34, 75 N. E. 88; Fairfield v. Day, 71 N. H. 63, 51 A. 263.
Because the contract, so far as it had any validity, was a stock subscription contract, and because the performance of all its promises was to run only to the corporation, the plaintiffs could suffer no damage from any breach other than that derived through their stock ownership. Any action to recover damages should be brought by the corporation which is apparently under the plaintiffs’ control.
In my opinion, the complaint was properly dismissed, and the judgment should be affirmed. v