Court Opinion

ID: 5227621
Source: CourtListenerOpinion
Date Created: 2022-01-06 16:48:40.788333+00
Date Added: 2024-06-11T08:27:36.704252
License: Public Domain

Ingraham, P. J. (dissenting):
The agreement upon which this action is based was an individual agreement between the plaintiff and Sam H. Harris individually. It was therein recited that the defendant Harris had requested the plaintiff to invest the sum of $20,000 in cash in a business which had been theretofore conducted by Harris, and that it was proposed that a corporation should be formed to which Harris should assign all the assets, property, trademarks and good will of the business theretofore conducted by him; that Harris should become the majority stockholder in that corporation and the plaintiff should become a minority stockholder *90therein; and that the defendant Harris had agreed to protect the plaintiff in the event that the plaintiff should not be retained by the board of directors of said corporation in the office of secretary and treasurer thereof at the full salary of $2,400 a year. It was agreed that Harris should convey his business to the corporation and that the plaintiff should subscribe $20,000 .to the capital stock of the corporation, to be paid in cash as therein provided. The defendant Harris was to enter into an agreement with the corporation to act as president at a salary of $5,000 a year, and the plaintiff would enter into a contract with the corporation to serve as secretary and treasurer thereof for the term of five years at a salary of $2,400 per arninm. It was further agreed that in the event of any breach by the corporation or its board of directors of said agreement, or in the event of the election of the plaintiff at any time after the expiration of five years to sell his stock in said corporation, the defendant Harris would purchase the said stock “ at the existing book value of same, as shown by the books and business of said corporation at the time of said election.” The plaintiff is still acting as secretary and treasurer and in receipt of his salary, and Harris is acting as president of the corporation and in receipt of his salary. The corporation is not a party to this agreement and has never formally adopted it or become bound by it. The plaintiff brings this action to reform the books of the corporation because, as he alleges, Harris has fraudulently and unjustifiably altered the books of the corporation so as to depreciate the book value of the stock on the books of the corporation, and he asks that the court should in this action compel the corporation to change the entries in its books so as to show that the stock has a greater value than is now shown on the books.
I do not see that this corporation, which is not a party to the agreement, can be compelled to alter its books so as to show that it has a greater capital invested in the business than the books now show, in order to enable the plaintiff to compel the defendant Harris to pay a greater sum of money for his stock in the event that he would be entitled to compel Harris to purchase it. There is no attempt to reform the agreement under which the plaintiff has acquired whatever right he. has *91against Harris, but the court is asked if it determines that certain entries in the books of the corporation do not correctly describe the assets of the corporation or then* value, to modify the books so as to express what the court should think from the evidence would be the correct market value of the property of the corporation. I know of no rights that a court of equity has to thus interfere with the books of a going corporation because two of its stockholders have made an agreement by which one is to acquire certain rights dependent upon what is shown on the books, and I, therefore, think that the complaint states no cause of action.
Order reversed, with ten dollars costs and disbursements, and motion denied, with ten dollars costs, with leave to defendants to apply at Special Term for permission, upon proper terms, to withdraw demurrer and to answer.