Stern v. McKee , 75 N.Y.S. 157 ( 1902 )

McLaughlin, J.:

Plaintiff having pleaded full performance of the contract could not recover without establishing that fact. This he did not do, and, therefore, the motion of the defendants at the close of the trial to dismiss the complaint on that ground should have been granted. The allegation of the complaint in this respect is “ that prior to the said 22d day of September, 1896, said Shainwald performed all the conditions and requirements of said agreement as so modified on his part; that said Shainwald caused a corporation to be formed under the laws of the State of West Virginia; that said Shainwald secured purchasers of Seventy-five thousand ($75,000) dollars of the stock of such corporation, and thereupon called upon and required the said defendants to comply with their part of the said agreement and to transfer the patents and improvements set forth therein to said corporation, and receive, the consideration and the stock called for by the said contract and modification thereof as hereinbefore set forth.” This allegation was put in issue by the'answers of the defendants and no proof whatever was offered at the trial tending to establish the truth of the same. On the contrary, the evidence is uncontradicted to thei effect that Shainwald did not form a corporation . with, a . capital ■ stock of $300,000; nor did he procure purchasers of stock in any corporation which was formed to the amount of $75,000. The contract, in express terms obligated Shainwald to form a corporation with a capital stock of $300,000, and impliedly obligated him to procure purchasers of such stock to the amount of $75,000. This latter obligation is implied from the fact that the plaintiff’s assignor was to receive $16,000 in cash and $68,000 in stock; and the plaintiff alleges it in the complaint and his assignor, testified upon the trial that the agreement obligated him to do this. Thé plaintiff, therefore, having alleged performance, was bound to establish that fact, and failing to do so, no. recovery could be had. (La Chicotte v. Richmond R. & El. Co., 15 App. Div. 380 ; Schnaier v. Nathan, 31 id. 225 ; McEntyre v. Tucker, 36 id. 53 ; Cox v. Halloran, 64 id. 550.) But in this connection it is suggested that the recovery can be upheld upon the theory that Shainwald was excused from full performance by reason of the defendants’ refusal to proceed. This cannot be done for the reason that there are no appropriate. allegations in the complaint which would permit a recovery Upon that ground. The plaintiff having predicated his right to recover on the breach of the agreement, was bound to allege and prove performance on the part of his assignor, or an excuse for non-performánce, and if an excuse were relied upon, then he was bound to allege facts constituting such excuse, and, in addition thereto, that he was at that time ready and had the ability to perform, and would lmve done so except for the acts of the other parties to the contract. But had the plaintiff alleged facts, showing an excuse for the non-performance based upon the refusal of the defendants to proceed, it would have been unavailing, inasmuch as it appears, and this fact is tmcontradicted, that at the time the defendants refused to perform — September 22, 1896 —' the plaintiffs assignor not only had not performed, but he did not. then have the ability to do so. The refusal of the defendants at that time to proceed under the contract did not relieve the plaintiffs assignor from the obligations which he had assumed, nor from proving that at that time he was able, ready and willing to proceed to. carry out the contract on his part. (Bigler v. Morgan, 77 N. Y. 312; Lawrence v. Miller, 86 id. 137; Eddy v. Davis, 116 id. 247.). The plaintiffs assignor could not then have performed. He had: not formed the corporation as agreed, nor had he procured a purchaser to a single dollar of the stock. The most favorable claim that can be made for him in this respect is - that he had formed a corporation with a capital stock of $500 and had obtained subscript tions to the extent of $75,000 to the stock of a corporation when formed. The corporation which he had formed, as already said, only had a capital stock of $500, and it is difficult to see, until something further had been done, how the stock which he claims had been subscribed for could have been delivered, or how the defendants could receive the stock which the agreement provided should be delivered to them as a consideration for the assignment of their patents. But it is suggested that had the defendants acted with Shainwald the capital stock of the corporation formed could have been increased to $300,000. It is true that the terms of the certificate of incorporation provided for such increase, but before that could be done it would have been necessary for the stockholders to have taken some action showing that they had voted upon the subject of such increase; and had Shainwald and the defendant McKee favored such increase, it does not necessarily follow that the increase would have been voted, inasmuch as it appears that they were minority stockholders.

Nor do we think that the subscriptions to the stock could have been enforced if the capital stock of the corporation formed had been increased to $300,000. These subscriptions were obtained in connection with a prospectus which stated that the purpose of the corporation to be formed was “ to acquire all patents and rights for all countries except the United States and Canada, to metal turning machines, known as the ‘ Hoffmann machines,’ and of which E. G-. Hoffmann is the inventor and patentee, as well as all improvements., additions, etc.” The subscribers agreed to take stock in a corporation formed for this purpose. The corporation as organized by Shainwald, as appears from the certificate of incorporation, was “ to. make, contract for the manufacture, or purchase of, buy, use, sell, lease, rent or mortgage all mechanical or other apparatus, machinery and implements for metal turning machines, or any other article or articles connected therewith or incident thereto, or any or all of them, and in general to do a manufacturing business.’■’ This was a material departure from the agreement entered into by the subscribers,- and to which, so far as appears, none "of them ever assented. The corporation having been formed without their knowledge, or at least some of them, and they never having ratified the additions to the contemplated' business' of the corporation, certainly could not be called upon to pay their subscriptions, or take stock in-such corpoporation. (Dorris v. Sweeney, 60 N. Y. 463.) Nor do we think it satisfactorily appeared in other respects that valid subscriptions to ' the amount of $75,000 had been secured. Some $17*500 of such stock- appears to "have" been subscribed for, not by parties purporting to have subscribed for it, but by Shainwald, under an alleged authorization to so subscribe. These authorizations, according to the testimony of Shainwald, were by parol, with .the exception of one,' which is" claimed to be by a cablegram and which cablegram was not introduced.in evidence, and as to one of them the. alleged subscriber testified that he never signed the list and never authorized Shainwald to sign 'for him. In addition to this, all of the subscriptions are conditioned upon the payment of the bonus by the defendants, and how the corporation could enforce the payment of such bonus it is difficult to see. If it could not do so, then it could not. enforce the payment of the subscriptions contingent upon the bonus.

Other questions are raised by the appellants, but we deem it unnecessary- to consider them.'

The judgment and order appealed from must be reversed and a new trial ordered, with costs to the appellants to abide the event.

Yan Brunt, P. J., O’Brien, Hatch and Laughlin, JJ. concurred.

Judgment and order reversed, new trial ■ ordered,; costs to appellants to abide event.