Mildenberg v. James

The plaintiffs, acting as promoters, procured the signatures of certain of the defendants to a subscription list which stated that each agreed to take a fixed number of shares of stock in a projected corporation; the agreement reciting that certain properties held by other corporations-were to be acquired by this corporation, when formed. Contemporaneously an agreement was made between the plaintiffs and each subscriber whereby the subscriber practically engaged to use his influence towards completing the enterprise, and the plaintiffs promised, in their turn, to give the subscriber a certain amount of the stock which it-was understood that the corporation, when formed, should turn over to them for their services as promoters. The corporation was formed under the name of the People’s Telephone Company, but a contract in the exact terms of the understanding recited in the individual agreements was not made. The plaintiffs and the corporation did, however, conclude an agreement, unaffected by any element of fraud or mistake, covering the whole subject of the taking over of properties and of the compensation for plaintiffs’ services, but there was a failure of performance; and this action is brought to annul the contract thus made, and to- enforce the individual agreements of the several defendants, or, in the event of the corporation’s agreement being held binding, to enforce that agreement against the defendants, and for an apportionment of damages sustained by the plaintiffs and by the corporations whose properties were to have been acquired and purchased.

It is clear that the individual agreements of the subscribers, if sufficiently definite to give rise to any liability, were fully performed when the corporation offered its «form of contract to the plaintiffs and they accepted it, and the failure of performance simply gave the plaintiffs their proper remedy for the breach. This contract was made with a full understanding of all the facts, as appears from the allegations, and-there was no fraud inducing the plaintiffs’ acceptance. True, it is alleged that the corporation after-wards endeavored to avail itself of a condition of the agreement in a fraudulent manner, as an excuse for nonperformance; but this fraud affected only the merits of a possible defense when sought to be set up by the corporation, and could afford no ground for setting aside the agreement itself. In its most favorable aspect, the complaint fails to disclose any cause' of action against the defendant subscribers, and the determination that the pleading is insufficient as against them necessarily covers the points, also taken

So far as the action proceeds against the defendant the People’s Telephone Company, there is no basis upon the allegations for an apportionment of damages, • as though sustained severally by the plaintiffs and by the corporations whose properties would have been purchased had the agreement been carried out. The averments are consistent only with the fact that the plaintiffs acted as principals, not as agents for these different companies, and that they personally were to secure the proper transfers. In fact, their counsel describes the plaintiffs, in this aspect, as "trustees,” and, if they were such, the damages would be recoverable by them in the first instance, subject to their accounting to the parties interested in the trust. Certainly the People’s Telephone Company did not contract with these corporations, nor make an agreement for their direct benefit. I conclude that the complaint contains averments sufficient for an action at law against the People’s Telephone Company, within the demand for relief by way of damages (Abb. Tr. Brief Pl. § 120), and that, except as to this defendant, no cause of action is stated. However, these views upon the merits of the case cannot result in my sustaining the demurrer to the extent to which it is substantially well taken, since the defendants, including the People’s Telephone Company, have jointly demurred, and, as matter of form, the demurrer must be overruled because the complaint states a cause of action against one of the joint demur-rants. Phillips v. Hagadon, 12 How. Prac. 17; Peabody v. Insurance Co., 20 Barb. 339 ; Abb. Tr. Brief Pl. § 14.

Under the circumstances, leave will be given the defendants to withdraw and amend the demurrer (Abb. Tr. Brief Pl. §§ 14, 26) within 10 days, on payment of costs of the argument. Unless this leave be availed of, the demurrer will be overruled, with costs, with leave to answer on payment of costs within 20 days.

Ordered accordingly.