82 N.Y.S. 1070 | N.Y. App. Div. | 1903
The plaintiff brought this action upon an agreement made and entered into on the 13th day of September, 1897, by and between E. H. Gary, for himself and his associates, as party of the first part, and G. H. Ten Broeck, representing himself and his associates, as party of the second part. Among other things the agreement provides “ that for and in consideration of the mutual promises and obligations herein, entered into and the expenses incurred and to be incurred by the parties hereto, said parties agree among themselves to bring about, if possible, by their individual and united efforts, the formation of a corporation and the purchase by said corporation of wire rod, barb wire and wire nail manufactories of the United States or elsewhere; each individual party hereto obligates and pledges himself to the others'to make every effort in whatever capacity or direction he may be able to use Ms efforts to bring about the results contemplated by this agreement. * * - Any profits, gains or compensation of any sort which may accrue to any of the parties hereto or all of them, whether in cash or securities or stock of the proposed corporation or in whatever form such profits, gains and compensation may be, are to be pooled and placed in the hands of J. P. Morgan & Co., who is to act as trustee and treasurer for the joint interests of the parties hereto in this transaction.” The agreement further provided for the payment of expenses incurred in and about promoting the consolidation out of the profits of the enterprise, and after payment of expenses “ all profits of any kind remaining * * * are to be divided into two equal shares, the said parties of the first part receiving one for himself and associates one share or half, and the second party for himself and associates receiving one share or half,” such division being full compensation for all services rendered in carrying out the purposes of the agreement by any one of the individual parties thereto and to constitute a full release of all obligations of each to any or all of the others. The agreement further provided that, in estimating or calculating profits or gains, there was not to be included any consideration or bonus paid to any of the parties as part of the purchase price for any property sold or turned over by him or them to the proposed corporation, nor was there to be included any amounts paid for legal
The complaint avers that this agreement was duly carried out and performed and that a corporation was^ duly organized, as provided thereby, under the name of the American Steel and "Wire Company, and that plaintiff did and performed much work and labor' in and. about the formation of such corporation and contributed his just share of the expenses incurred therein ; that large gains and profits, amounting to several million dollars, were realized out of the formation of such corporation; but that the defendant has never accounted, nor paid over any part of the same to the plaintiff, or any other person. but has retained the same for his own benefit; that the defendant has made some arrangement or settlement with all "the other individuals entitled to share, in the profits of the venture, except the plaintiff, and that they have relinquished, or accepted payment in satisfaction of, their rights to participate in the profits, and that the plaintiff is the only person entitled to share therein. The complaint demands judgment that an account be taken of all gains and profits received or realized by the defendant; that the' defendant pay over. to this plaintiff the proportionate share of such gains and profits due to him under the agreement, and for the costs of the action.
The defendant foi; answer, among other things, denies that the said agreement was carried out or performed, alleges that the same was abandoned by the parties thereto, and denies that the American Steel and Wire Company acquired all the property, real or personal, of the corporation intended by said agreement. The answer further avers that no profits were made in the transaction, and denies all the other averments in the complaint.
It appeared upon the trial that Ten Broeck and four others had been engaged for some time in attempting to establish a combination of the industries mentioned in the agreement; that the plaintiff had also been working independently for some time along the same lines, and that on the 10th day of September, 1897, he was admitted into association with Ten Broeck and his associates under an agreement that he should have an equal share with the others in whatever profits were made. This arrangement provided that the proposed consolidation must be effected on or before March 1, 1898. The defendant in connection with Gary had been engaged in the
It is insisted by the appellant that this finding was without sufficient evidence to sustain it, and that, upon the contrary, it appears that the scheme was never abandoned. It is evident that all of the ■associates in the Gary and Ten Broeck agreement understood that the scheme of consolidation, which was proposed therein, could not he accomplished unless there could be enlisted some person, corporation or company of sufficient financial ability to furnish the funds needed to consummate the same. Such necessity was the subject of -conversation prior to the execution of their agreement, and in the agreement it is recited that the profits and gains and compensation were “ to be pooled and placed in the hands of J. P. Morgan & Co., who is to act as trustee and treasurer for the joint interests of the parties hereto in this transaction.” This was followed by the execution ■of the Morgan agreement, and it is undisputed that the plaintiff and his associates relied upon the fulfillment of that agreement in order to carry out the scheme. It is also undisputed that Morgan & Co. refused to proceed with the scheme after examination had been made of the manufactories submitted to them under the options. It is established, therefore, as an undisputed fact that the contract
There is no evidence in the case which in the slightest degree disputes the testimony that after the reception of the letter from Morgan & Co. a meeting was held by a large number, if not all, of the manufacturers who had given options; that they refused further to extend the same, and that Ten Broeck and the plaintiff were informed of this meeting and of its results. It cannot be doubted but that, if the parties had separated at that time with the state-
• Unless the plaintiff, therefore, by reason of his subsequent negotiations with the defendant, kept the ' contract alive between them and continued the obligation which the defendant had assumed to him,, no liability is established. The plaintiff claims that such was the fact, in consequence of which, as between himself and the defendant, the contract remained and continued, and the acts of the defendant in what he did subsequently inured to the plaintiff’s benefit. This is based upon the conversation which the plaintiff had with the defendant after the meeting at which the claimed abandonment took place, and is contained in substance in these words“ Q. Who used the expression, ‘ the jig was up,’ do you remember ? A. It was a common expression that it was off, that the whole deal was off, and Hr. Gates and Mr. Gary were going back to Chicago ; and I asked at that meeting if I might undertake the matter here with some of my financial friends, Mr. Rogers and others, and they said that was all right, to go ahead; they did not believe I could do it, but I had the right to do it; they would co-operate.” It is noticeable in this statement that the plaintiff recognized that the deal was off and the contract abandoned. He asked that he be permitted to go on with their co-operation: It is evident from the testimony that the word' “they,” to which the plaintiff refers, was limited to the defendant, and, possibly, may have embraced Gary. There is no pretense even upon the part of the plaintiff that he assumed to continue any further negotiations looking to the fulfillment of the contract with Ten Broeck, or "with his associates, except as appears from a conversation he had with Hr.
We think the effect of this testimony in its entirety, giving the plaintiff the full benefit of all he sought and hoped for,- constituted no more than the expression of a Willingness upon the part' of the defendant to co-operate with the plaintiff at any' time when he had advanced' his negotiations so far as to find a person who would finance the scheme.. It certainly cannot- be construed as a binding agreement upon tlie part of the defendant to withhold active exertions on his oWn part in the promotion of any scheme in which he saw fit to engage. Acting in good faith he was as free to negotiate, either alone or in association with others, as' he would have been had there never been any agreement between the parties!
Assuming, however, that the testimony of the plaintiff was sufficient to establish a binding continuation of the old contract' with the defendant Gates; it was perfectly competent for the court under the evidence to find that such contract was not continued. At the most the evidence presented a question of fact for the court’s determination. The whole of the testimony is quite' as consistent with an agreement to aid in any subsequent negotiations when the plaintiff
There is, however, another, and, we think, a complete answer to-the claim of the plaintiff. It appears that while on the way to Chicago, after the abandonment of the contract, the defendant and others discussed the possibility of forming a combination of certain, companies in the State of Illinois. These negotiations were continued somewhat actively and resulted in the formation of the American Steel and Wire Company of Illinois, made up of five of the fourteen companies mentioned in the Morgan agreement. It is undisputed that no bonus was paid to any one in and about the formation of this corporation; nor were any promotion profits derived therefrom. The defendant contributed his holdings of stock in the company of which he was president, which entered inte the combination, and received in the distribution in lieu thereof stock in the new concern. He was an underwriter of its securities, and in whatever profits he made in that capacity, the plaintiff was not entitled to share, as they were never covered by any agreement. The case is utterly destitute of any proof showing that any profits were made by that combination. The incorporation of the American Steel and Wire Company in Hew Jersey followed in January, 1899. It is not shown that any profits were made by the promoters
The question thus presented is the same in principle, although the reverse in fact, of the question presented in Schantz v. Oakman (supra). There the question arose upon demurrer to the complaint, in an equitable action for an accounting which averred a scheme quite similar to the one now under consideration ; it was held bad for the reason that there was'no averment that profits were made while the parties, were working in combination, or that defendants had been intrusted -with any of plaintiff’s money or property, for which they were required to account. ' In the present case the complaint avers the transaction in which the defendant engaged and for which he was sought to be Called upon to account, which lie has retained for his own benefit. There is no averment that the defendant received or .had any of the property of the plaintiff, for which he is bound to account; that element, therefore, is out of the case. While the averment of the complaint as to profits earned is sufficient, there is an entire absence of proof of any profits which arose out of the corporations which were formed through the instrumenr
It follows that the judgment should be affirmed, with costs.
O’Brien, Ingraham, McLaughlin and Laughlin, JJ., concurred.
Judgment affirmed, with costs.