Woodbridge v. Pratt & Whitney Co.

| Conn. | Jun 15, 1897

Baldwin, J.

The contract between the parties of January 1st, 1889, made the compensation for the plaintiff’s services, outside of his stated salary, dependent on the profits annually realized upon the sales for the year of goods manufactured or dealt in under his superintendence, and in his particular department of the business. He contends that the transfer of the main assets of the company, in 1893, to the New Jersey corporation, which had been organized to succeed to its business, in which transfer all the goods then in the small tool department were included, was in substance a sale of those goods, for a price which can readily be computed by the aid of the inventory and the defendant’s books, out of the profits from which he is entitled by the contract to receive ten per cent.

The Connecticut company sold nothing to the New Jersey company. Its stockholders sold their shares to certain individuals who caused them to be transferred to the New Jersey company. Thereupon (subject only to any rights of creditors) the property of the defendant, which had been held by it for the benefit of its previous shareholders in certain proportions, remained in its keeping for the benefit of its new shareholders, that is, in effect, of the shareholders in the New Jersey company.

The latter had been organized by concert between its shareholders and those of the defendant, in order to succeed to the defendant’s plant and property, and to carry on its business without any break or interruption. Where all the stockholders in a corporation act together in its behalf, though there may be no regular meeting or formal vote, their action is substantially corporate action. Wood v. Wiley Construction Co., 56 Conn. 87" court="Conn." date_filed="1887-12-16" href="https://app.midpage.ai/document/wood-v-wiley-construction-co-6582306?utm_source=webapp" opinion_id="6582306">56 Conn. 87, 96. So where the directors of a corporation, by the desire of all the shareholders, take corporate action which has no other end than to protect or promote the shareholding interest, the form of the transaction (if no rights of creditors are involved) is of little importance in determining its validity. Smith v. Gaylord, 47 Conn. 380" court="Conn." date_filed="1879-12-15" href="https://app.midpage.ai/document/smith-v-gaylord-6580989?utm_source=webapp" opinion_id="6580989">47 Conn. 380, 383. The Hartford company, being in possession of property under a legal title, for the use of those holding the beneficial title (namely the New Jersey company, in its own right and as representing the nine individuals in each of whom had been vested, at its instance, one share in the Hartford company)^ transferred both its possession and its title to the real owner. No objection was interposed by any party in interest or by the State. The transfer, therefore, must be treated as effectual for the purpose for which it was planned and executed. This was the continuance of the business of the Hartford company upon a different basis of capitalization and for the benefit of a new set of stockholders. That business was to make and sell certain goods. The goods which were on hand, unsold, on February 21st, 1893, when the last share outstanding of the Hartford company was assigned to the New Jersey company, thereupon became in equity the property of the latter, and if thereafter sold, would be sold for its benefit. Their delivery to it, a week later, simply changed the hand by which any such sales would be made. It did not affect the equitable title to the proceeds, or to the goods themselves. It simply clothed the equitable owner with the legal title and the possession which was its proper incident.

The plaintiff’s claim to an accounting of the profits derived from an alleged sale of these goods was therefore properly disallowed.

Nor was he entitled under his contract to an additional salary of $2,000, for the last year of the term. Aside from any other considerations, such addition was only to become due, if the contract were not renewed by reason of the negligence or refusal of the company. He contends that the transfer of February 28th, 1893, made any such renewal impossible. But if this be so, the transfer was the natural consequence of a reorganization actively promoted by the plaintiff, and under which he had originally intended to consent to a novation of his contract by its continuance under the New Jersey company. He cannot found a claim against the defendant, for a neglect or refusal to renew the contract, upon a course of action on which it entered by his own procurement.

From the facts set forth in the finding, the Superior Court reached the conclusion that the contract between the parties was terminated on February 28th, 1893. Before that time the plaintiff had determined not to consent to treat it as a continuing one with the New Jersey company.- After that time, so far as the Connecticut company, which is the defendant in this cause, is concerned, he had no dealings with it; while so far as the other company is concerned, he gave it prompt notice that he should not and did not consent to a novation; and to this it took no exception.

It may be that his promotion of the scheme of reorganization would have given the New Jersey company, after the transfer of February 28th, an equitable right to insist on his continuance in the small tool department, during the residue of the term of his .contract with the defendant. No such right, however, was asserted in its behalf. He notified it that his services were being rendered to it “ upon indefinite terms ” until they should agree either to make a contract in respect to his further employment, or not to make one; and it did not claim that they stood to each other in any other relation.

While, therefore, there are circumstances (particularly the monthly salary payments) which tend to show that the New Jersey company considered the contract as in force, the Superior Court was justified in finding from all the facts taken together, that it was terminated on February 28th, 1893.

This termination was virtually accomplished by mutual consent. It followed from a transfer of the plant and business, made as part of a scheme which the plaintiff had been active in carrying through, and from his declining to accept a substitution of the new company as his employer. Such a rescission left the defendant under an obligation to pay him the agreed percentage of any profits realized from the January and February sales. The amount of this depended on what might remain after deducting from the proceeds of the sales for that year of goods belonging to the small tool department, certain debits specified in the contract; and of these several were to be ascertained upon a computation of the defendant’s expenditures or interest charges for the entire year.

Had the contract been broken by the defendant, the plaintiff would have had a right to sue at once for whatever damages he might have thus sustained. But as it was rescinded by consent, his only right was to recover what remained unpaid of the stipulated compensation for services already performed; the amount of which was to be determined, so far as practicable, by the terms specified in the contract under which they had been rendered.

The stipulated debit of five per cent on the value of the plant of the small tool department, as it might be fixed by the inventory of January 1st, 1893, was evidently intended as an equivalent for a year’s interest on the capital thus invested ; and in stating the account for a period of only two months, it would be equitable to charge the plaintiff for the proportion due for that period only. But while such a fixed charge would be susceptible of immediate apportionment, this would not be true respecting the debit of a certain fraction of the actual expenses for the year, on such accounts as taxes, insurance, and litigation. Until the year had closed, these items would be incapable of exact computation. It follows that the action, which was instituted in July, 1893, was prematurely brought.

During its pendency, however, and after the close of the year 1893, the complaint was amended by the addition of three new counts. Of these, the fourth and fifth set forth the contract of January 1st, 1889, a sale, on February 28th, 1893, to the New Jersey company, of all the goods then in the small tool department, and sales of other goods in said department during January and February, 1893; and allege that upon an accounting it will be found that the profits upon the latter sales, determined according to the provisions of the contract, will be $10,000, of which ten per cent will be found to be due to the plaintiff. The defendant met these counts with a general denial, excepting only an admission of the execution of the contract, and an averment that on its part it had been duly performed. To the sixth count, in which the additional salary of f2,000, for the year 1893, was claimed, on the ground that the defendant had terminated the contract by its sale to the New Jersey company, and hence made its renewal of the contract for another term impossible, a demurrer was interposed, founded in part on the ground that the action was prematurely instituted. No such objection having been taken in pleading to the other counts, the parties went to trial on the merits of the case presented by these and were felly heard. Under these circumstances, although the claim that the commissions could not be computed under the terms of the contract until the close of the year, and so that the suit was brought before the cause of action was complete, was made in argument before the trial court, and overruled, it is evident that no substantial injustice was thus done to the defendant.

An action at law can only be supported on the facts existing when it was first brought. It rests on the charge of a breach of duty, for which, at common law, the defendant was liable to immediate arrest and imprisonment. In such a proceeding, if it appears that the plaintiff had suffered no wrong, which would support his suit, when the process was served, there can be no recovery. Equitable proceedings rest upon different foundations, and in them the parties can always rely on new matter, if properly pleaded. The plaintiff asked for both legal and equitable relief, but the latter only was awarded him by the judgment. Had he put the allegations of the fourth or fifth count in the shape of a supplemental complaint, the accounting ordered would have been entirely proper. His failure to present his cause of action in that form, cannot invalidate the judgment unless the defendant was injuriously affected by it. General Statutes, § 1135. Nothing appears upon the record to indicate that such can have been the result. It had full opportunity, under the pleadings as they stood, to offer all testimony and present all claims of which it could have availed itself upon a trial under a supplemental complaint.

The judgment of the Superior Court, in every other particular, is warranted by the facts found; it disposes of the whole controversy between the parties in such a manner as to do substantial justice; and it is not our duty to grant a new trial for a mere slip in pleading by which no one has been really prejudiced.

Similar considerations must govern the disposition of other well-founded assignments of error. It was held by the Superior Court, upon the facts found, that the transfer of February 28th, 1893, constituted a sale of the goods in the small tool department, though not such a sale as fell within the provisions of the contract; and that this transfer was of itself a termination of. the contract by the defendant, which the plaintiff had the right to treat as a wrongful breach of its provisions. These conclusions of law were erroneous, but the resulting judgment was not.

There is no error upon either the plaintiff’s or the defendant’s appeal.

In this opinion the other judges concurred.