Whittlesey v. Smith ( 1916 )

Bkooke, J.

(after stating the facts). Plaintiff in the court below and in this court distinctly disclaims any right to a judgment against defendant J. Henry Smith. It appears to be his claim that, as president and principal stockholder of the defendant Peter Smith & Sons Company, J. Henry Smith had authority to enter into the contract in question on behalf of the corporation, and that the plaintiff in reliance upon said contract .entered upon and accomplished the substantial performance thereof. His testimony seems to indicate that in their negotiations he was misled by statements of J. Henry Smith with reference to the terms upon which the preferred stock had been sold. He further seems to charge the defendant Smith with a failure to co-operate with him in securing the consent of the preferred stockholders to the bond issue. While these claims might require consideration in an action in which the plaintiff sought to recover from Smith damages growing out of Smith’s failure to carry out his agreement with the plaintiff, we are unable to see how they are pertinent to the consideration of the liability of the corporation to the plaintiff under the alleged contract.

Assuming the contract to have been made between the plaintiff and defendant corporation acting through J. Henry Smith, and further assuming that such contract was not ultra vires the authority of Smith as president of the corporation, we are forced to the conclusion that the learned circuit judge was correct in directing a verdict for the defendant upon the ground that there was no performance on the part of plaintiff. Both he and Smith knew that in order to effect a bond issue which would take precedence as a security of the preferred stock it would require the assent of two-thirds of such preferred stock. This assent plaintiff undertook to secure, and himself testifies that he failed to secure it. Plaintiff says, “He [Smith] told me if I negotiated it, $5,000,” in reference to a question as to what his compensation was to be.

It is, we think, clear from this record that he not only failed to secure the assent of the preferred stockholders which was a condition precedent to the issuance of the bonds, but he likewise failed to secure an underwriting of the bonds through Mr. Seagraves or anybody else. The most that can be said of his arrangement with Mr. Seagraves is that the president of the First National Bank had agreed to finance Mr. Seagravés in the purchase of the bond issue at a discount of 10 per cent, if the statement of assets and liabilities of Peter Smith & Sons Company could be verified by an accountant. It does not appear that the defendant corporation was advised that the bonds would have to be discounted to the amount of 10 per cent, or that it assented to such discount; neither does it appear that any verification was made by the bank of the financial statement of the defendant corporation. The arrangement made by the plaintiff with Mr. Seagraves and the bank was, at most, preliminary, tentative, and certainly unenforceable.

Judgment is affirmed.

Stone, C. J., and Kuhn, Ostrander, Moore, and Steere, JJ., concurred. Bird and Person, JJ., did not sit.