57 F. 375 | 2d Cir. | 1893
The plaintiffs in error were defendants in the court below. On the trial the jury rendered a verdict for the plaintiff. The principal assignment of error presents the question whether the promise upon which the action was founded was void because of an unlawful consideration. The suit was brought to recover of defendants a share of the profits made in building a railroad for the Toledo, Saginaw & Muskegon Railway Company. The nominal plaintiff really represented four -persons,— Robison, Jr., Ashley, Baker, and Cummings. These four persons were the promoters of the enterprise for building a railroad from Muskegon to Ashley, in the state of Michigan. One Mason was associated with them to some extent, and insists that he was to
It is insisted for the defendants that, because the promoters were directors of the railroad company at the time the contracts for the building of the road and the division of the profits were made, the latter contract was illegal, and against public policy, and did not afford a good consideration for the subsequent promise upon which the action is brought. . They invoke the rule which forbids fiduciaries to make contracts or engage in transactions in which their private interests may conflict with the interests of their principals, and contend that a contract made for a corporation by its directors with a view of obtaining a private advantage for themselves at the expense of the corporation is not only voidable at the election of the corporation as fraudulent, but is unlawful, as contrary to public policy. We fail to see how the doctrine which is invoked has any application to the facts of the present case. Treating the two contracts as one transaction, conceived for the purpose of enabling the promoters to make a profit out of the construction of the railroad, we fail to see how the public, or third persons, were to be injuriously affected, or could have any just reason to complain. The promoters were not acting as fiduciaries, except perhaps as they had impliedly promised to use the aid which hhd been donated towards the building of the road. It is not pretended that they did not use the donations legitimately. Certainly the contracts did- not contemplate any misapplication of them. The promoters were to furnish the roadbed upon which the defendants were to build the
"All tlie slock and bonds wore issued in payment for the construction of tlie railroad, and were taken by a syndicate of persons who assumed the contract for the work. It is true that the syndicate was made up of members of the board of directors, but, as the members of the syndicate were practically the company, and composed the whole number of stockholders, there was no one to object, and the manner in which they chose to divide up their interests in the proprietorship of the corporation and io represent them in shares concerned only themselves. No principle of law forbade tlie company agreeing to pay for the construction of its railroad in the way or in the amount it did. If the company’s directors were interested in the work and profits of construction, and evaded a direct contract through the form or device of an intermediary contractor, that was a matter for the company or for its stockholders to take hold of. But tlie stockholders and members of the syndicate were the same persons, and, however wrong the transaction might he if other persons were concerned, here no injury was effected to any one interested in the corpora Aon.”
The defendant's, by confounding names with things and form with substance, have built up a theory to shelter themselves from performing their own part of the contract which is as unsound as their own conduct is dishonest. There was no error in the refusal of the trial judge to instruct the jury as requested by the defendants that the promise sued upon was void.
The conclusions thus reached dispose of all the assignments of error which have been argued at the bar, except some with respect to the admission of evidence. The plaintiff was permitted to give the names of all the original subscribers for the stock of the corporation, and to show that the subscriptions which were made in the names of persons other than the promoters were in fact made for the promoters, and the payments therefor were made by them. If there was any error in admitting this testimony against the objection of the defendants that the subscription hook was the best evidence, that error was cured when, at a later stage of the trial, the defendants themselves produced the subscription hook. It was entirely competent to show that some of the subscribers were
The judgment is affirmed.