Court Opinion

ID: 5462412
Source: CourtListenerOpinion
Date Created: 2022-01-09 19:40:31.090312+00
Date Added: 2024-06-11T08:32:57.013034
License: Public Domain

By the Court, Ingraham, P. J.
The decision of the general terrp, when this case was last before us, was rendered on the ground that the contract on which the action ■was founded contemplated the formation of the corporation therein referred to by the defendants ; and that the neglect or refusal of the defendants to organize such corporation rendered them liable to the plaintiff for such damages as he might sustain in consequence of such neglect. The contract was with the defendants, and was-to sell to them “the patent held by- the plaintiff, and with the further agreement to make such conveyances as were necessary to carry the agreement into effect, immediately upon the organization of the company ; and in consideration thereof the defendants agreed to transfer to' the plaintiffj an amount equal to fifty thousand dollars of the capital stock of the company, and to pay five hundred *579dollars.” It is evident, from this part of the contract, that the agreement was personal with the defendants, to be completed, on the formation of the company, by the defendants, when the transfer of the patent should be made to the company. The payment of $500 was to be made by the defendants. A similar contract was made in regard to the tools and other materials connected with the manufacture of the patented articles. Under this agreement the defendants were obligated to form the company, and if, after a reasonable time, the defendants refused or neglected to form the company, the plaintiff could recover, from the defendants, damages for such refusal or neglect. It can hardly be contended that the defendants could avoid the contract by such neglect, if they should afterwards think the 'same would be unprofitable.
The rule of damages adopted by the court was erroneous. The amount to be paid was $500 in cash, and $50,000 in stock of the new corporation, for the' patent, and $10,000 in stock for the tools and materials. The court directed a verdict for the nominal amount of the stock. This' was erroneous. The plaintiff was entitled to damages for a breach of the contract. The amount depended on the value of the stock after the corporation was formed, to be proven by showing what such value' would have been, if the company had been formed, taking into consideration the property that was to be transferred, and also the fact that, by the breach of the contract, the plaintiff was released from the obligation to transfer the property. It may be that the stock would have been valuable, or it may be that the damages would.be only nominal. Whatever it was, was to be ascertained by the jury, from" the testimony. These principles are settled by the case of Thomas v. Dickinson, (23 Barb. 431.) In that case, the rule of damages was said to be the amount of the obligation to be delivered in payment. But there the plain.tiff had transferred to the defendant the property he had *580agreed to sell, and the court held the -plaintiff could re-, cover the price at which the same was agreed to he sold. Here there has been no conveyance of the property, but the same is retained by the plaintiff", and he is only entitled to damages, and not to. the nominal value agreed to he paid. (S. C., 2 Kern. 364.) The rule of damages is to be fixed by proof of what the value of the stock would have been if the contract had been performed, over and above the property retained by the plaintiff". Had the property been transferred by the plaintiff, then, in the absence of any proof of value, the rule adopted" on the trial would be the correct one; but that is not this case.
[First Department, General Term, at New York,
January 1, 1872.
There was evidence of an agreement to rescind the contract, which should have been submitted to the jury. The parties agreed to surrender the papers, and further, that they should thereafter be held only as security for the money that had been paid to the plaintiff.
The verdict should be set aside, and a new trial granted, costs to abide the event.
Ingraham P. J., and Geo. G. Barnard, Justice.]