Court Opinion

ID: 6416438
Source: CourtListenerOpinion
Date Created: 2022-06-25 11:56:31.000883+00
Date Added: 2024-06-11T15:51:34.545709
License: Public Domain

Ames, J.
It is admitted that the plaintiff’s right to maintain his bill must depend upon the contract of February 17, 1865. This contract has been so often recognized and acknowledged by both parties, that it must be considered as taking the place of all previous incomplete arrangements in relation to the same subject matter, if any such there were.
This agreement, although not expressed with entire technical precision, is far from being unintelligible. It imports that the plaintiff was at that time in the service of the Tudor Company and that he had been so employed since January 1, 1864. The evidence, indeed, shows that he entered their service at a still earlier date. The contract provides that he might continue in their employ until January 1, 1871. It does not undertake to define the nature of the service which he had rendered, or was to render ; and we must therefore infer that the parties fully understood each other upon that point, and that the plaintiff was to continue to be employed in substantially the same manner as he had been before. The report shows that the plaintiff held an important and confidential position in relation to the business ol the company, and that his services were fully appreciated by and were satisfactory to the defendant.
The agreement provides that, at some future time, he was to become entitled to three hundred shares, without saying at what valuation or nominal price, and without even directly saying in what corporation, although it is sufficiently manifest, from other parts of the paper, that the Tudor Company was the one intended. We must conclude; upon the evidence, that the course of business in that company, in which the stockholders were few in number, and were all active participators in its management, was to increase the corporate fund by reserving and accumulating the earnings, instead of distributing them in the form of dividends. The earnings upon the three hundred shares, that should accrue after October 1,1870, were to belong to the plaintiff, but the shares themselves were not to be transferred to him until a later period. The interpretation of the contract seems to be, that, if the plain' *59tiff should continue in the employment of the company until January 1,1871, rendering services of the same general character as he had previously rendered, he should be considered as having earned three hundred shares in the stock then standing in the name of the defendant. The services were to pay for the shares, and were agreed to be their equivalent. There was, therefore, no occasion to name any other salary or price for the services, or to affix any definite valuation to the shares. In case of the death of the plaintiff, or if he should leave the employment of the company, before the expiration of the time limited by the contract, the number of shares to which he or his personal representative would be entitled was to be reduced in an equitable proportion. The transfer was to be delayed for the convenience of the defendant, who was to retain the nominal and legal title in his own hands until such time as he could part with them and yet retain the control of a majority of all the shares of the capital stock. The contract implies that there was to be an annual making up of the corporate accounts on the first day of October, for the purpose of ascertaining the earnings of the previous year; and it indicates also (what the evidence shows was the usual policy of the company) a purpose on the part of its managers to have its servants and agents interested in its fortunes, and solicitous for its prosperity, by becoming participators in its profits.
Upon this view of the contract, (the correctness of which we cannot doubt,) it imports in its terms a valid and sufficient consideration. It is a promise by the defendant to pay in a specific mode for services to be rendered to a corporation in which he had a very large interest, and in which he had, and was desirous to keep, a controlling influence. The objection on the ground that the contract was without consideration cannot be sustained, without doing violence to the most familiar and well settled definitions of that word.
The objection that the contract is illegal under Gen. Sts. e. 105, § 6, appears to us to be equally untenable. According to that statute, every contract for the sale or transfer of any share in the stock of any corporation is void “ unless the party contracting to sell or transfer the same is, at tbs time of making the contract, *60the owner or assignee thereof,” or authorized by such owner, &e., to sell and transfer. But the defendant, when he made this contract, owned a much larger number of shares than he promised to transfer. His undertaking was in relation to three hundred shares which he then held, and which he promised to hold until the happening of a future and expected event, and then to iranstei. It will not bear the interpretation that he was first to buy three hundred additional shares, and to transfer those specifically, rather than any other three hundred that stood in his name.
The by-law of the corporation, which provides that no stock shall be transferred by any shareholder without having been first offered to the corporation itself at par, furnishes no legal objection to the defendant’s contract. It might be an embarrassment in the way of its fulfilment, but cannot affect its interpretation. It may be, in view of his position and influence in the company, and his ability to outvote all the other stockholders, that this part of his contract presents no difficulty which he did not feel able to overcome. It is clearly no obstacle in the way of his holding the nominal and legal ownership, while at the same time the income, profits or benefits should belong wholly to the plaintiff.
We see no ground, therefore, on which it can be said that the contract was not legally and equitably binding upon the defendant.
It gave to the plaintiff the right to remain, at his option, in the service of the company for the whole of the stipulated period. It makes no reservation of any right on the part of the company to dismiss him from their service, or of any right on the part of the defendant to concur in such a dismissal. So far as the defendant is concerned, he has given to the plaintiff an absolute right to an opportunity to earn the three hundred shares by rendering the services which were the subject matter of the contract. This right can only be defeated by his death, or his voluntary withdrawal from the company’s employment before the expiration of the term.
The expression, “if he should leave the Tudor Company” before January 1871, can only mean, if he should resign, or voluntarily quit or give up his employment. It is not the proper form *61of expression for the case of his expulsion or dismissal by the act of the company, without his consent, and against his remonstrance. As the plaintiff has made a formal tender of his services, and has refused to resign his position, there has been no such termination of his engagement with the company as to rer - der the defendant responsible, under the contract, for less than the whole-number of shares originally agreed upon. He cannot claim an apportionment on the ground that the contract was only partially fulfilled.
It is insisted that the removal of the plaintiff from his position was not the defendant’s own act. It was, at least, an act in which he participated. He not only concurred in it officially and personally, but he made it the occasion for renouncing his own personal contract, and gave notice that his written agreement with the plaintiff would terminate at the same time. In so doing, he violated his contract. The plaintiff is in a position to say that he has wrongfully been prevented from finishing the proposed service, and that his rights are substantially the same as if he had served for the whole term.
The effect of the contract was to create a trust for the benefit of the plaintiff. It provided that he was to have an equitable right, title and interest in the shares, distinct from the mere legal ownership. After a certain date, all the earnings on these shares were to belong to him, and to be accounted for by the defendant to him. On the happening of a certain event, he was to be entitled to the legal ownership also. The defendant’s promise is, that whenever (that is to say, as soon as) he can part with these shares and yet keep a majority of the stock, he will make a trans-fez accordingly. His holding of them in his own name in the mean time is provisional and temporary. The written contract is express, that this temporary holding is in trust for the plaintiff ; and it will bear no other interpretation. There is nothing in the answer to show that the defendant has not been able to procure other shares, or that he has made any effort to do so.
It is true that the plaintiff’s bill was filed before the time had arrived at which his right to the earnings upon the shares had accrued. But no such ground of defence is suggested in the de*62fendant’s answer. According to the pleadings, he denies that he ever made the contract; he denies that the document of February 17, 1865, was of any validity, or amounted in law to a contract ; he insists that it only provided for a gratuity, or mere act of friendship, and was without any legal or equitable consideration ; and he denies that it created any trust, or gave the plaintiff any interest or right in the • shares whatever. As we find, however, that none of these defences can be sustained, we find ourselves dealing with a case of the unwarrantable and wilful repudiation of a fully established trust, and a direct endeavor to deprive the party in whose favor it was created of all its benefits. Under these circumstances, we think that the plaintiff is entitled, to have the trust declared, and that the objection that the suit is prematurely brought, even if it were open to the defendant upon the pleadings, cannot be maintained.
If the defendant had merely remained passive, the case in this respect might have stood differently. But, in fact, he has formally and in writing repudiated the contract; he has joined in removing the other party from his position; he has denied the plaintiff’s right, and has taken active measures to defeat the trust. The plaintiff’s right, although its practical enjoyment was deferred, was vested, and not merely contingent. It was not a mere probability of title, depending upon an event which might or might not happen, but it comes within what Lord Westbury describes as an existing right, which, whether vested or contingent, and however future or remote, may form the foundation of a right to come here to have it secured. Davis v. Angel, 10 Weekly Rep. 728.
A mere denial of the plaintiff’s right might not, of itself, furnish a sufficient ground for a decree declaring the existence of the trust; but a denial of the right, coupled with an attempt to defeat it by taking part in the removal of the plaintiff from his position, and thereby to deprive him, in part at least, of the benefit of the trust, stands upon different ground. In Baylies v. Payson, 5 Allen, 473, such a denial, accompanied with proof that the trustee was about to go to a foreign country, was held sufficient ground for a like decree.
*63Our judgment therefore is, that the plaintiff is entitled to a decree declaring the existence of the trust, and ordering that the defendant hold the three hundred shares only upon the trust that all the earnings and profits accruing thereupon after October 1, 1870, are to belong to the plaintiff, and are to be accounted for to him; and that the shares themselves are to be transferred to him as soon as, by purchase or otherwise, the defendant shall have become the owner of not less than two thousand one hundred and one of the shares into which the capital of the company is now divided.
The objection that the bill is multifarious cannot be sustained. If the plaintiff is right in charging the existence and violation of a trust, he may properly ask the aid of the court, if the proper parties are before it, to prevent the trust fund from being squandered, or exposed to improper or unreasonable risks. We cannot see that, in so doing, there would bé any confusion of distinct grounds of suit in one bill of complaint. Robinson v. Guild, 12 Met. 323.
But as to so much of the bill as charges that the Tudor Company, in its mode of doing business, has exceeded its corporate powers, and acted in violation of law, it is to be remembered that that corporation is not now a party to the suit. It is true that the bill alleges that this violation of law originated with, and was controlled, and carried into effect, by the defendant Minot, by reason of his being the owner of a majority of the stock; and that its effect has been, and must continue to be, to impair the value of the property; and the relief prayed for is, that he be enjoined and restrained, as to all future operations of the company, from allowing such illegal proceedings. But it is manifest that we cannot grant relief in that form without affecting the interests of the corporation, and possibly to a very great extent. Upon this question of ultra vires, the corporation is an indispensable party, having so great and important an interest in the controversy that no final decree upon the subject could be made without affecting that interest. We must decline, therefore, to make any such decree in its absence. Palmer v. Stevens, 100 Mass. 461. Story Eq. PL §72.

Trust declared.