Court Opinion

ID: 3595974
Source: CourtListenerOpinion
Date Created: 2016-07-05 23:43:23.732359+00
Date Added: 2024-06-11T13:59:19.535059
License: Public Domain

I am unable to concur in the opinion of the chief judge that the judgment here appealed from should be reversed. The agreement upon which the liability of the defendant is predicated is, upon its face, one between the organizers of the defendant and no one else. It in no way purports to bind the corporation or to have been executed on its behalf. The only reference to the plaintiff is that after the corporation shall have repaid Lyon for the money loaned by him to it, and paid its other debts, there shall be issued to the plaintiff twenty-five shares of stock "for services to be rendered." The agreement was executed prior to the organization of the defendant and on the very day it was entered into all of the stock was issued to the organizers and by them put up as collateral to secure the payment of the money advanced by Lyon. After the corporation was organized the plaintiff installed a system of bookkeeping and opened a set of books for it. These were the services which he performed and for which it is claimed he has a right to recover under the agreement, on the theory that the corporation adopted such agreement because the organizers constituted the board of directors or officers of the corporation during the time the services were rendered. This is the only evidence there is bearing upon the question of adoption. There is nothing to show corporate action of any kind other than that the organizers of the corporation acted in the capacity referred to.
The action is upon the agreement, not to recover for the value of the services rendered, and before such action can be maintained something more, I think, must be shown. Allegations to the effect that the persons executing the agreement organized the corporation, that *Page 30 
one of their number thereafter loaned money to it, that all of them became officers or directors, and acted as such during the time the services were rendered, seem to me quite insufficient to warrant a finding that the corporation adopted the agreement and thereby became bound by it. Obviously, an agreement between the organizers of a corporation, to the effect that after the organization is completed the stock shall be issued in a certain way, is not binding upon the corporation. Once the corporation is organized the statute states for what the stock may be issued. (Stock Corp. Law, chap. 564, Laws of 1890, as amended by chap. 354, Laws of 1901; Cons. Laws, ch. 59, § 55.) The language is: "No corporation shall issue either stock or bonds except for money, labor done or property actually received for the use and lawful purposes of such corporation." When the agreement referred to was made, the corporation was not organized; the services had not been rendered; and the fact that services were thereafter rendered, of which the corporation had the benefit, obligated it, in my opinion, to do, not what the agreement provided (deliver to plaintiff twenty-five shares of its stock), but to pay him what his services were worth.
It is not difficult to imagine if the plaintiff here can recover from the corporation twenty-five shares of its stock, how easily the provisions of the statute above quoted can be evaded. Assume that the promoters, instead of agreeing among themselves to give the plaintiff twenty-five shares for services to be rendered by him, had agreed to give him substantially all of the stock for the same services. What would there have been left after the agreement had been carried out by the corporation? It would have adopted a system of bookkeeping and opened a set of books, and had an empty treasury. Not only this, but the plaintiff, his action being predicated upon the agreement, must have known *Page 31 
when the services were rendered by him that the corporation having issued all of its stock could not deliver to him the twenty-five shares which the organizers had agreed to.
For these reasons, as well as those given in the prevailing opinion of the Appellate Division, I dissent and vote to affirm the judgment appealed from.
COLLIN, CUDDEBACK, HOGAN, POUND and ANDREWS, JJ., concur with HISCOCK, Ch. J.; McLAUGHLIN, J., dissents in opinion.
Judgment reversed, etc.