The first question presented by this appeal is whether the agreement of November 21, 1958 was void as against public policy. This preincorporation contract between the parties was intended to serve as a stockholders’ agreement after incorporation. Such agreements are governed by the general principles of contract lаw. 13 Am. Jur.,
Corporations
§ 127. The signatories bound themselves “to use their influence and stock votes” to secure the election of each as a director and the election of plaintiff by the directors as president of the corporation for a five-year period at a beginning salary of ten thousand dollars with indefinite annual increases during the succeeding four years “contingent upon the progress of the company.” Whatever may have been the legal status of such an agreement prior to the enactment of the Business Corporation Act of 1955, (see
Harvey v. Improvement Co.,
“An otherwise valid contract between two or more sharehоlders that the shares held by them shall be voted as a unit for the election of directors shall, if in writing and signed by the parties thereto, be valid and enforceable as between the parties thereto, but for no longer than ten years from the date of its execution. Nothing herein shall impair the privilege of the corporation to *128 treat the shareholders of record as entitled to vote the shares standing in their names, as provided in G.S. 55-59 nor impair the power of a court to determine voting rights as provided in G.S. 55-71.”
Likewise, the contract to elect plaintiff president of the corporation at a specified salary is not subject to the usual objection that it interferes with the discretion of the directors in view of the provisiоns of G.S. 55-73 (c), to wit:
“An agreement between all or less than all of the shareholders, whether solely between themselves or between one or more of them and a party who is not a shareholder, is not invalid, as between the parties thereto, on the ground that it so relates to the conduct of the affairs of the corporation as to interfere with the discretion of the board of directors, but the making of such an agreement shall impose upon the shareholders who are parties thereto the liability for managerial acts that is imposed by this chapter upon directors.”
Thus, the Business Corporation Act clearly aligns North Carolina with the majority of jurisdictions which hold that a contract entered into between cоrporate stockholders by which they agree to vote their stock in a specified manner — including agreements for the election of directors and corporate officers — is not invalid unless it is inspired by fraud or will prejudice the other stockholders. The cases are collected in an annotation: Validity and Effect of Agreement Controlling the Vote of Corporate Stock,
The rationale of this rule is aptly stated in
Mansfield v. Lang,
A competent person gainfully employed in his chosen field, will not ordinarily give up a secure position to take another with a new enterprise without some assurance as to his future. No corporation could ever be created without a preliminary agreement between the parties proposing to form it as to the mode and manner of doing so. However, when such agreements providing for the future management and сontrol of a corporation violate the express charter or statutory provision, contemplate an illegal object, involve any fraud, oppression or wrong against other stockholders, or are made in consideration of a private benefit to the promisor, the courts will declare them invalid. Annot.
There is no evidеnce here that the contract between the plaintiff and defendants was not made in good faith or that, at the time it was made, it was not in the best interest of the corporation. Prima facie, it was a valid exercise of the promoters’ right to contract. 13 Am. Jur., Corporations § 127. Since the organization of the corporation, the defendants have not owned a majority of its stock. Therefore, they could not have forced their will upon either the stockholders or the other eight directors. To remove plaintiff from the board of directors and the presidency of the corporation they ultimately required the proxies and votes of other stockholders.
The defendants’ contention that the agreement was void as against public policy is not sustained. Furthermore, as parties to the agreement and recipients of the benefit of plaintiff’s knowledge, experience, work, financial support, and voting support under it, they are in a poor position to assert the invalidity of the contract on the ground that it is contrary to public policy.
Bonta v. Gridley,
The defendants’ second defense is that plaintiff’s acceptance of a contract with Gateway for one year’s employment instead of five was in legal effect a novation. In
Tomberlin v. Long,
“In this connection ‘Novation may be defined as a substitution of a new contract or obligation for an old one which .is thereby *130 extinguished * * The essential requisites of a novation are a previous valid obligation, the agreement of all the parties to the new contract, the extinguishment of the old contract,. and the validity of the new contract * * *.’ 66 C.J.S. Novation Secs. 1 and 3.
“ ‘Novation implies the extinguishment of one obligation by the substitution of another.' (Citations omitted).
“ ‘Ordinarily,’ as stated in Growers Exchange v. Hartman,220 N.C. 30 ,16 S.E. 2d 398 , in opinion by Devin, J., later C.J., ‘in order to constitute a novation the transaction must have been so intended by the parties’.”
■ The agreement of November 28, 1958 must receive that construction which will best effectuate the intention of the parties.
Faust v. Rohr,
“ ‘An elementary rule invoked in the construction of contracts requires the court to ascertain the intention of the parties, and to do this note must be taken of the purpose to be accomplished, the situation of the parties when they made (the contract), and the subject-matter of the contract’.” DeBruhl v. Highway Commission,245 N.C. 139 ,95 S.E. 2d 553 .
It is difficult to follow defendants’ contention that, when the corporate directors declined to give plaintiff an employment contraсt for longer than one year, and he accepted the one-year appointment as the best bargain he could make at the time, such acceptance released them from any further obligation to work for his election as a director and appointment as president for the ensuing four years. As it applied to the plaintiff, the obvious purpose of their agreement was to insure, as nearly as possible, his prospective position with Gateway for a five-year period before he severed his connection with Coastal Plain Life Insurance Company. When the directors declined to give him a contract for a longer period than twelve months, the 'only way in which the parties could then accomplish the end they had in view was to secure from the corporation four additional one-year terms for the plaintiff. There is no evidence from which it can be inferred that plaintiff ever intended to release defendants from their obligation to support him for president of the company until he had served five years, or *131 that defendants themselvеs ever thought they were released. The evidence in this case fails to establish a novation whereby Gateway’s employment contract with plaintiff was substituted for his voting agreement with defendants.
The defendant’s third defense is that plaintiff, by accepting the one-year contract, waived his rights under the agreement and is estopped to claim under it. The mode of рerformance was not the essence of the agreement, and plaintiff did not waive his rights or estop himself merely because he took from the corporation the only contract of employment obtainable. If defendants are to be released from their obligations under the agreement they must establish their fourth defense, i.e., that plaintiff failed to pеrform his duties as president because of alcoholism.
Any agreement to employ an individual, or to promote his continued employment, contains the implied condition that the agreement may be terminated at any time for cause.
Mansfield v. Lang, supra.
An employer undertakes to pay an employee only so long as he performs his duties with reasonable care, diligеnce, and attention. He may discharge an employee for just cause at any time without incurring liability therefor. This rule protects him in the efficient conduct of his business, and employment contracts thus impliedly conditioned are not against public policy.
Mt. Pleasant Coal Co. v. Watts,
As justification for the abandonment of their agreement, defendants alleged that plaintiff’s addiction to alcohol had caused him to neglect the business of Gateway. Plaintiff denied the allegation. It therefore became a question for the jury whether plaintiff used alcohol to an extent which would justify his discharge.
“Confirmed ■ habits of intoxication on the part of an employee are necessarily inconsistent with the duties of any employment and justify discharge, but the extent to which drinking of liquor or occasional excess may disqualify an employee depends upon the character of the employment.” 4 Williston on Contracts, (rev. ed.) 1020; 35 Am. Jur., Master and Servant § 43.
The rule is well stated in 56 C.J.S., Master and Servant § 43 (i):
“Independently of any agreement to that effect, the master may discharge the servant when, by intoxication, he unfits himself for the full and proper discharge of his duties, and it is immaterial that at the time of the discharge the employee had quit drinking, and discharge is justifiable even when the employee is not incapacitated thereby, if his intoxication' is. or may be prej *132 udicial to the master’s interests; and this is especially true when the employment, in its very nature, requires sobriety. The fact that liquor was drunk as medicine is no excuse for gross intoxication.”
If plaintiff used alcohol to the extent that it interfered with the proper discharge of his duties as a director and president of Gateway, defendants were justified in withdrawing the support which they had agreed to give him. However, as to the first cause of action, this is an affirmative defense interposed by defendants in a suit on their individual contract with plaintiff. It is, therefore, for the jury to determine the validity of that defense. The granting of defendants’ motion to nonsuit the plaintiff’s first cause of action was erroneous and that ruling must be reversed.
Plaintiff’s second cause of action is in tort for the wrongful interference by defendants with the contractual relation existing between him and Gateway. It is based upon
Childress v. Abeles,
. . (T)he overwhelming weight of authority in this nation is that an action in tort lies agаinst an outsider who knowingly, intentionally and unjustifiably induces one party to a contract to breach it to the damage of the other party. . . .
“To subject the outsider to liability for compensatory damages on account of this tort, the plaintiff must allege and prove these essential elements of the wrong: First, that a valid contract existed between the plaintiff аnd a third person, conferring upon the plaintiff some contractual right against the third person. Second, that the outsider had knowledge of the plaintiff’s contract with the third person. Third, that the outsider intentionally induced the third person not to perform his contract with the plaintiff. Fourth, that in so doing the outsider acted without justification. Fifth, that the outsider’s act caused the plaintiff actual damages.” (All citations are omitted.)
The contrаct which defendants’ interference caused to be terminated in
Childress
was terminable at the will of the parties. The contract here was for one year only, but it is a fair inference that both plaintiff and Gateway expected it to be renewed from year to year as long as plaintiff was able to perform his duties. The distinction between
Childress
and the case
sub judice
is that defendants here are not
outsiders.
They are all stockholders and directors of Gateway. As stockholders they had a financial- interest in the corporation; as directors
*133
they owed it fidelity and the duty to use due care in the management of its business. G.S. § 55-35. As either directors or stockholders, they were privileged purposely to cause the corporation not to, renew plaintiff’s contract as president if, in securing this аction, they did not employ any improper means and if they acted in good faith to protect, the interests of the corporation. In other words, because of their financial interest and fiduciary relationship they had a qualified privilege to interfere with contractual relations between the corporation and a third party. Restatement,
Torts,
§ 769 (1939); 30 Am. Jur.,
Interference
§§ 34, 37; Annot.,
In an article entitled Liability For Inducing a Corporation to Breach its Contract, 43 Cornell Law Quarterly, 55, 65, by Avins, we find this statement:
“Officers, directors, agents or employees who have an interest in the activities of a corporation or the duty to advise or direct such activities should be immune from liability for inducing the corporation to breach its contract, assuming their actions are in pursuit of such interests or duties. Public policy demands that so long as these parties act in good faith and for the best interests of their corporation, they should not be deterred by the danger of personal liability. . . .”
The comment of the Georgia Court of Appeals in
Rhine v. Sanders,
“. . . They (defendants) had the right while acting as corporate officers and agents to counsel and advise with the defendant corporation as to the management of its affairs in all matters with which the corporation was concerned without the risk of rendering themselves personally liable to third parties for their acts in that regard if they should err. ‘Any other rule would make it impossible for corporate business to be carried on at all except at the peril that every agent who advised concerning corporate action would be suable under some such allegations as are made in this complaint’.”
The acts of a corporate officer in inducing his company to sever contractual relations with a third party are presumed to have been done in the interest of the corporation. “Individual liability may, however,
*134
be imposed where his acts involve individual and separate torts distinguishable from acts solely on his employer’s behalf or where his acts are performed in his own interest and adverse to that of his firm.”
Rampell, Inc. v. Hyster Co.,
Plaintiff’s own testimony reveals that he voluntarily сommitted himself to the State Hospital as an inebriate in January 1960. The testimony of other witnesses for the plaintiff tended to show that it was plaintiff’s use of alcohol which prompted defendants to take the action which resulted in Gateway’s failure to renew his contract. Directors of an insurance company may not be subjected to liability for acting on the аssumption that it might prejudice the corporation to retain as president a man with a drinking problem who had been committed to a State institution as an inebriate. Plaintiff offered no evidence tending to show that the defendants abused their privilege as directors.
The question whether plaintiff’s use of alcohol had
actually
rendered him unfit to perform his duties or prejudiced the business of Gateway is not determinative of the seсond cause of action. An error in judgment about this would not impose liability upon the directors. The judgment of nonsuit as to the second cause of action must be sustained.
Langley v. Russell,
The plaintiff excepted to the order of the court below striking certain allegations from his complaint relative to special damages. The assignment of error based on these exсeptions has been considered and it is overruled. The briefs debate the admissibility of certain evidence which the court excluded over plaintiff’s objection. Without this evidence plaintiff was still entitled to go to the jury on his first cause of action, and it could not have changed the status of the second cause of action. Since these questions of evidence may not arise on the retrial, this opinion will not be lengthened with further discussion.
As to the first cause of action —
Reversed.
As to the second cause of action —
Affirmed.