Rush v. Aunspaugh
179 Ala. 542
Ala.
1912
Check Treatment
ANDERSON, J.

While the contract is silent as to where the corporation was to be organized, and is therefore very indefinite on this point as well as many other conditions and contingencies therein treated, we may assume that it was to be organized under the laws of this state, and for the purpose of operating a laundry in the city of Mobile. Article 1, p. 397, Code of 1907, provides for the organization of business ■ corporations, and requires at least three or more persons to become a body corporate. Section 3463 of the Code of 1907 provides : “Every corporation organized under article one of this chapter, must have at least three directors, who shall be owners of stock of the corporation,” etc. The directors constitute the governing board of the corporation, and it is only through them, direct or' delegated, actually or by implication, that binding contracts can be made with the corporation. The contract in question ivas executed by the defendant, who, at most, had only an expectancy of helping to organize a corporation in order to dispose of his laundry to same, and who would doubtless become a large stockholder and probably a director. This would not, however, entitle *547him to govern the corporation as it would properly be within the control of the governing board, and whose duty it would be to employ people and manage the affairs thereof to the best interest of the corporation, and not at the dictation of a single stockholder or director in order to merely carry out a previously unauthorized private contract between a single shareholder and a third person. The governing board should have a discretion in the selection of employees and in fixing their compensation and prescribing their duty. The contract in question contemplated the doing of things by the governing board of a corporation, not then in existence, whether beneficial to the said proposed corporation or not, and that the defendant would cause them to so act as to comply with his personal undertaking, whether for the good of the corporation or not, and regardless of their fidelity to their trust. Said contract is contrary to public policy, and is nonenforceable in law or equity. In other Avords, the parties thereto required the defendant to undertake the control of the proposed corporation for the purpose of carrying out their private agreement, whether for the good of the corporation and public or not. — Cook on Corporations, § 622a; Withers v. Edmonds, 26 Tex. Civ. App. 189, 62 S. W. 795; West v. Camden, 135 U. S. 507, 10 Sup. Ct. 838, 34 L. Ed. 254; Woodruff v. Wentworth, 133 Mass. 309; Wilbur v. Stoepel, 82 Mich. 344; 46 N. W. 724, 21 Am. St. Rep. 568; Flaherity v. Cary, 62 App. Div. 116, 70 N. Y. Supp. 951; Guernsey v. Cook, 120 Mass. 501; Noyes v. Marsh, 123 Mass. 286; Fennessy v. Ross, 90 Hun. 298, 35 N. Y. Supp. 868. A contract in the case of Lorillard v. Clyde, 86 N. Y. 284, seems to have been upheld upon the theory that the parties to the contract Avould own all the stock and manage it in good faith, and the agreement Avas fully performed except as to the payment of a guar*548anty of 7 per cent. Under our statute, it was impossible for this defendant to own all of the stock or for him and plaintiff to do so jointly, nor could they constitute the requisite number of directors. Moreover, the contract does not provide for the good of the proposed corporation, but simply contemplates the organization of one for the purpose of serving the private interest of these two parties.

The trial court did not err in sustaining the demurrers to the complaint, and the judgment is affirmed.

Affirmed.

Dowdell, C. J., and Mayfield and de Graffenried, JJ., concur.