Dickerson v. Appleton
123 A.D. 903
N.Y. App. Div.
1907
Check Treatment

The following is the opinion delivered at Special Term:

Kelly, J.:

In this case I reach the following conclusions: I think Rev. Father Wynne originated the idea of the publication of the encyclopedia; that he consulted with the plaintiff regarding the publication from a business point of view, and that the plaintiff at his request undertook to procure such publication through association with publishers and other persons experienced in the busi*904ness; "that, what the arrangement contemplated was the formation of a corporation, the capital stock of which was'to be .divided so that the editorial end of the management should control, owning fifty-one and one-half per cent, the balance . to go to the business-end of said agreement.. In these negotiations Rev. Father "Wynne represented the editorial end. The plaintiff had enlisted the defendant Robert Appleton in the enterprise and thé defendant,, said Appleton, represented ' the business, end. In all the negotiations Father Wynne insisted that he should' not,be bound by any agreement save- on the condition that it be finally approved by the board" of directors of the new. company when selected. There'was no" partnership between Father Wynne and the plaintiff or defendant Appleton, but Father Wynne assented to plaintiff’s undertaking the formation off a, company to publish the book, and plaintiff rendered various services to the enterprise ; leading up to and assisting in the final formation of the defendant company. It was the plaintiff who first' called the defendant Appleton’s attention to the matter; he introduced Appleton to "Father Wynne; he engaged offices and obtained various data and information useful to the enterprise. It was the original intention of the parties that plaintiff should become vice-president of the new com- , pany, but this was all- tentative and dependent on the approval of the. directors. of "the new "company when chosen, But I find that there was a binding agree-, ment based on valuable.consideration between the defendant Appleton and the plaintiff, that plaintiff should.shafe in the capital stock issued to. the business end of the enterprise, and.that Appleton "agreed that plaintiff should receive one-half of whatever stock Ije. Appleton, received up to $17,500. When the corporation defendant was finally organized, the directors did not assent to-plaintiff’s, presence in the management. Appleton, was accepted; he became president. The company was capitalized at §100,000. Thp rights of Father Wynne, the idea of the publication, the contracts with .the editors, the plans, papers and the result of the labors of: Appleton, Crowley and the plaintiff were ail turned over to Appleton, whoin turn transferred them to the Corporation.in consideration of the issuance to him of the entire' capital-stock. This was.carried out, the stock was issued as full-paid stock and the defendant corporation has certified in accordance with law -that all its stock has been issued for property. The corporation cannot" be heard to contradict its own. declaration verified by. Apple- ' ton, its president, and filed,in the public offices. It must be. held that this stock belongs-to Appleton and was .issued for value. He could do what he liked with " it. He could transfer it to whomsoever he wished to receive it, but thé-cofporátion had parted with it. The company-could, if it had seen fit, have issued but" one-half or three-quarters of its stock to Appleton, for the .property transferred to-it; . On the contrary, it issued all of the stock to Appleton, and the fact that certificates for 220 shares were never issued does not alter the situation. The stock bélorfgs to Appleton so far as the company is concerned. Appleton has -agreed todivide up his stock. In accordance with the original understanding he has transferred the agreed portion to the editorial end of the enterprise. Out of the remainder he has turned over to Mr. Crowley his share- as agreed upon. But he has not transferred to. the plaintiff or to any One else the 175 shares to" which the -plaintiff is entitled out of-Appleton’s holdings. Befóre Appleton, can voluntarily sur*905render his stock to the company or its appointees he must carry out his agreement with the plaintiff. I do not think Appleton can be heard to deny plaintiff’s services to him at any rate; if not to the company. Plaintiff was the means of introducing Appleton in the first place. Appleton does not deny the agreement" to give plaintiff 175 shares of any stock he might receive. The fact that the plaintiff was not acceptable to the board pf directors of the corporation may have relieved the corporation of" furtherresponsibility to him, but it did not relieve Appleton of his responsibility. It might have been better if Appleton had said to the board of directors that he was obligated to turn over to plaintiff one-half of any stock which he might acquire up. to 175 shares. Possibly the company might have then made a different bargain with him. He did not inform them, as far as the evidence indicates, and I do not see how they qan be heard to question the validity of the issue of the entire stock to him for value.' They cannot control the rights of the plaintiff as against Appleton, and before he can agree to turn the stock back, or consent to. its issuance to appointees of the directors, he must fulfill his obligations to the plaintiff. As already suggested, the corporation might have issued to Appleton but $75,000 of the capital, retaining §25,000 in the treasury for further disposition. "Whether the fault be with Appleton for not informing the directors of the claims of plaintiff on any stock issued to him, Appleton, or not, I cannot say, but I have no difficulty in finding that Appleton made the agreement alleged, and I can see no reason why he should not carry it out. I had some doubt as to whether plaintiff’s rights were not confined to the stock actually retained by Appleton to the end, but I think his right is not so limited and that the defendants cannot contradict their own resolutions and certificates upon which their existence as a corporation depends. The learned counsel for the defendants insists that the proof is not in accord with the allegations in the complaint. The pleading in question is certainly very much involved and intricate in its method of stating the plaintiff’s grievances, but I think he makes out a case fairly within his pleading. There should be judgment for the plaintiff establishing his ownership in 175 shares of the stock now unissued but belonging to Appleton, and certificates for such stock should be issued to him. Costs are awarded against defendant Appleton. Prepare findings and decree in accordance with this memorandum.