1. The powers of a corporation are limited to those which are common to all corporations, except such additional valid powers as may be specifically conferred by the authority creating it. Gunn v. Central Railroad, 74 Ga. 509 (2); Brunswick Timber Co. v. Guy, 52 Ga. App. 617 (2), 619 (184 S.E. 426), and cit.
(a) The right of a corporation to enter upon a contract of copartnership is not a power common to all corporations, and such authority will not be presumed. See the two authorities above cited.
(b) Our law recognizes a relationship characterized by the term limited partnership (Code, §§ 75-401 et seq.); and this too would seem to constitute such a status as would come within the inhibition above set forth, since the limitations do not destroy the status of partnership, but only deprive the special partner of authority to bind the partnership, and restrict his liability to the amount of capital actually paid in by him. His status, though thus restricted in authority and liability, is recognized by our Code itself as that of a partner.
(c) Differing from an ordinary partnership or limited partnership, is a co-operative enterprise pertaining to a single definite transaction. This is usually termed a "joint adventure" or "joint enterprise." The distinction between such a joint enterprise pertaining to one particular transaction and that of a partnership is generally recognized by the courts of the country; and this is true, even though some if not all of the other incidents pertaining to a partnership may exist. 30 Am. Jur. 679, §§ 5 et seq.; Forman v. Lumm, 214 App. Div. 579 (212 N.Y. Supp. 487); Fletcher v. Fletcher, 206 Mich. 153 (172 N.W. 436); Harris v. Bellet (N. J.), 135 A. 266; Wyoming Indiana Oil c. Co. v. Weston, 43 Wyo. 526
(7 P.2d 206, 80 A.L.R. 1037); Dexter v. Carpenter,
20 F.2d 647; Hey v. Duncan, 13 F.2d 794; Dexter v.
Guyton, 327 Mo. 1030 (40 S.W.2d 562).
(d) The authorities not only recognize the distinction between a copartnership and persons engaged in a joint enterprise, but with apparent unanimity hold that a corporation is not debarred from entering upon such a specific joint undertaking, provided the nature of the enterprise comes within the scope of its ordinary and legitimate powers. 13 Am. Jur. 831, § 825; Wyoming-Indiana Oil c. Co. v. Weston, supra. See also Quitman Oil Co. v. McRee, 18 Ga. App. 128
(88 S.E. 921).
2. While this court has held that, irrespective of whether or not an indefinite option to buy land created a technical perpetuity, in the absence of a time limit within which the option should or could be exercised, such an instrument was unilateral and void (Turner v. Peacock, 153 Ga. 870, 113 S.E. 585), this ruling does not appear to have application to the state of facts here involved, where the agreement set up a fiduciary relationship, and where the continuance of the agreement for co-operation in the particular joint enterprise was to remain of force until mutually dissolved. This agreement, so far as it goes, is analogous to a partnership, and even a partnership, though unlimited in the general scope of the continuing partnership business, does not require a limitation upon its duration. The law recognizes this fact, for, in the absence of any agreed limitation in the articles of partnership, the statute provides for its termination, and further provides with respect to all partnerships that they may be terminated by mutual consent, and will be terminated by operation of law upon the extinction of the business for which the partnership was formed. Code, §§ 75-106, 75-107. A fortiori, where an agreement such as the one now under consideration concerns, not a general partnership business as to matters within a general designated scope, but concerns mutual participation in only one particular transaction, the accomplishment of such purpose, or the definite failure of any power to accomplish it, would afford its own sufficient and definite termination, irrespective of any voluntary rights of withdrawal which the contract might provide. See 30 Am. Jur. 701, § 44; 33 C. J. 849, §§ 23, 24; McDonough v. Saunders, 201 Ala. 321 (78 So. 160, 11 A.L.R. 419). This seems to be in line with what appears to be the uniform authority.
3. The objection to the petition, that the alleged agreement for co-operation in the joint enterprise was invalid, in that, as insisted, it lacked consideration other than the mutual promises which neither was bound to comply with except by mutual consent, and for the additional reason that either party could in good faith withdraw at any time prior to the purchase of the particular securities, while without merit, presents a proposition of greater difficulty, and is dealt with in the opinion.
No. 14881. JULY 7, 1944.
Wyatt, Neal Waggoner, a partnership, sued Clement A. Evans
Company Inc. for an accounting. The petition made the following
allegations: The plaintiff and the defendant are both engaged in the business of stock and bond brokers, buying and selling corporate stocks and bonds for others and for their own account, and also acting as underwriters for the purchase and sale of securities, and both have been so engaged for many years in the City of Atlanta. In September, 1940, Thomaston Cotton Mills had outstanding an issue of approximately 20,000 shares of first-preferred-cumulative 6 1/2 per cent. stock of the par value of approximately $2,000,000. Before that time, in 1936, there was a "joint account" formed among seven dealers in Atlanta for the purpose of selling 6500 shares of that preferred stock owned by certain Atlanta banks, and the "joint account" sold those shares of stock. Both the plaintiff and the defendant were members of that "joint account." In September, 1940, the plaintiff and the defendant participated in discussions with other brokers as to the possibility of refinancing at a lower dividend rate the outstanding preferred stock of Thomaston Cotton Mills. As a result of their meetings, the plaintiff, the defendant, and five other brokers entered into a "joint account" to handle the refinancing of said stock. Under the agreement between these brokers, if Thomaston Cotton Mills employed any one of them to refinance and underwrite its preferred stock, then all the members of the joint account would participate equally in the profits and losses. It was further agreed that this "joint account" was to run until October 31, 1940. The petition then proceeds to define the term "joint account" as follows: "The term ``joint account' as used herein before and hereinafter is a trade name used by dealers and brokers in stocks and bonds and has been used by the stock and bond dealers in Atlanta, Georgia, and specifically used by the plaintiffs and defendant, for many years, and under the custom of the trade and dealing among the local stock and bond brokers in Atlanta, Georgia, means an agreement, oral or in writing, between two or more stock and bond dealers, whereby they agree to engage in a particular enterprise dealing with purchase and sale of stocks and bonds on an equal partnership basis, unless otherwise agreed, whereby each is to share in the profits and losses of such particular enterprise. That unless it is otherwise specified in the agreement, it is generally understood among dealers in securities: first, that any action taken by the joint account shall be mutually agreed upon; second, that prior to the
purchase of the securities covered by the agreement, any member may in good faith withdraw from the account; third, that unless otherwise agreed, each member shares equally in the liabilities, profits, or losses of the joint account; and fourth, if no time limit is specified in the agreement between the parties, and the securities covered have not been purchased, the joint account continues until dissolved by mutual agreement." The negotiations with Thomaston Cotton Mills as to the "joint account," formed in September, 1940, were unsuccessful, and the "joint account" expired by mutual consent on November 1, 1940. On August 8, 1941, the plaintiff, through its member Waggoner, had a conversation with the president of the defendant, and stated that he was considering writing letters to the members of the above "joint account" of September, 1940, with a view of reviving the "joint account" and taking up with Thomaston Cotton Mills the possibility of refinancing its 6 1/2 per cent. preferred stock. The president of the defendant suggested that instead of reviving the old account, there by a joint account consisting of only the plaintiff and the defendant, and it was agreed that they would form a joint account in the matter of the refinancing of Thomaston Cotton Mills' 6 1/2 per cent. preferred stock, whereby, if and when Thomaston Cotton Mills could be induced to employ either the plaintiff or the defendant as underwriters, each would participate as "joint account" in the refinancing. Both parties to the discussion agreed that the question of refinancing this preferred stock depended upon many conditions, such as market, interest rate, and federal taxation, and any plan for refinancing would have to be made attractive to Thomaston Cotton Mills. Such negotiations would probably take a considerable time, and therefore no time limit was set as to how long the "joint account" would run. On August 8, 1941, the plaintiff wrote to the defendant a letter of two sentences, in which the plaintiff stated that "We are joint account with you" on the proposed refinancing of Thomaston Cotton Mills' 6 1/2 per cent. preferred stock, "the account to run until mutually dissolved." The letter further requested that, if this was not in accord with the understanding of the defendant, the defendant would please advise the plaintiff. The letter was received by the defendant. After this "joint account" was entered into, the plaintiff on more than one occasion sought to interest Thomaston Cotton Mills in refinancing
its preferred stock. The refinancing was discussed between the plaintiff and the defendant on different occasions down to October, 1943, at which time the plaintiff discovered that the defendant had made an agreement with Thomaston Cotton Mills to refinance its 6 1/2 per cent. preferred stock, by which Thomaston Cotton Mills would issue 15,000 shares of 4 1/2 per cent. preferred stock of the par value of $100 per share, and the defendant would handle the stock as an underwriter. Thomaston Cotton Mills would receive the net proceeds of $1,462,500 from the 4 1/2 per cent. preferred stock, and the defendant would receive $37,500 as underwriting commissions. The plaintiff immediately called the attention of the defendant to the "joint account" agreement of August 8, 1941, and demanded that it be permitted to participate in the refinancing under the joint account. On October 20, 1943, the plaintiff wrote a letter to the defendant, calling attention to the "joint account," and insisting that it had a right to participate in the refinancing. On October 21, 1943, the defendant wrote a letter to the plaintiff, stating that the "joint account," formed August 8, 1941, was for the refinancing of Thomaston Cotton Mills' preferred stock under discussion at that particular time; that that refinancing did not materialize; and that the "joint account" came to an end. It was further alleged that the plaintiff was ready, able, and willing to carry out its duties and obligations under the "joint account" agreement of August 8, 1941, and that the defendant refused and failed to permit the plaintiff to participate in the refinancing in October, 1943, of the preferred stock of Thomaston Cotton Mills. The plaintiff at no time received any notice from the defendant of its desire to dissolve or terminate the "joint account." The defendant did not deny the existence of the "joint account" of August 8, 1941, until after the above arrangements in October, 1943, to refinance the preferred stock of Thomaston Cotton Mills. The defendant never advised the plaintiff of the negotiations with Thomaston Cotton Mills concerning refinancing in October, 1943, although the defendant was obligated to inform the plaintiff of those negotiations, and to permit the plaintiff to participate in the refinancing. The defendant would earn profits of $30,000 or more in the refinancing of Thomaston Cotton Mills by the sale of 15,000 shares of the 4 1/2 per cent. Cumulative preferred stock above referred to. The "joint account" of August 8, 1941,
was of full force and effect. The defendant has refused to permit the plaintiff to participate in the refinancing, and is liable to the plaintiff in good faith and equity to account for the profits made in the "joint account," which profits were unknown to the plaintiff, but were peculiarly within the knowledge of the defendant, and the plaintiff was entitled to an accounting from the defendant for such profits. The defendant filed general and special demurrers to the petition. The court overruled the general demurrer without passing on the special demurrer. Exception is taken to the overruling of the general demurrer.
There are three and only three points of law made by the defendant which, according to its contention, would require a ruling that the general demurrer should have been sustained. These points are: (1) The petition alleges that the "joint account" is "on an equal partnership basis," that the defendant is a corporation, and a corporation has no power to enter into a partnership. (2) The petition alleges a contract, which is in effect perpetual, that the plaintiff shall have a right to participate with the defendant in any underwriting of the Thomaston Cotton Mills' preferred stock, and a perpetual contract is void and unenforceable. (3) The alleged agreement for a "joint account" is without consideration, and therefore does not constitute a contract which the law will enforce, — that, as said in the Code, § 20-301, "A consideration is essential to a contract which the law will enforce. An executory contract, without such consideration, is called nudum pactum, or a naked promise." Under the allegations of the petition as to what is meant by the term "joint account," the agreement for a "joint account" provides: "first, that any action taken by the joint account shall be mutually agreed upon; second, that prior to the purchase of securities covered by the agreement, any member may in good faith withdraw from the account." No consideration except mutual promises is alleged. An executory contract which depends upon mutual promises for its consideration must contain promises that are enforceable by each party against the other. Where, as in this case, the alleged agreement provides that no action shall be taken which binds either party until "mutually agreed upon," neither party has bound himself to do anything until he expresses his assent to the action to be taken. Also, where, as here, an alleged agreement contains a provision that, before the purchase
of the securities covered by the agreement, either party may, in good faith, withdraw from the agreement, a party may avoid all obligation by withdrawing, and there is no consideration for the contract; and an agreement which lacks consideration is not a contract which the law will enforce, and so far as the law is concerned, such an agreement ab initio had no binding effect upon the parties, and no contract whatever existed.
Exception is taken to the overruling of a demurrer to a petition, setting up an alleged cause of action wherein the plaintiff seeks an accounting in equity under an alleged agreement creating a joint enterprise for the purchase and resale of certain described securities. The defendant contends that there was no valid contract, and that consequently no cause of action was shown. It is contended that under the allegations of the petition, the "joint account" really amounted to nothing more than preliminary negotiations looking to the making of a contract, and that, since no action could be taken by either party unless and until mutually agreed upon, and since either party could withdraw from the agreement before the purchase of any of such securities, the agreement lacks mutuality and neither of the parties is bound to anything or to do anything. Consequently, it is urged that the alleged agreement could not support the action brought, and that the demurrer thereto should have been sustained. The gravamen of this contention appears to be, that while it is true enough that the promise of one party constitutes a good consideration for the promise of the other party, yet in order for this to be true the mutual promises must be binding upon each promisor, otherwise there is a mere nudum pactum. Morrow v. Southern Express Co.,101 Ga. 810 (28 S.E. 998), is cited, in which the court said: "A promise . . is not a good consideration for a promise unless there is an absolute mutuality of engagement, so that each party has the right at once to hold the other to a positive agreement." This court, in Buick Motor Co. v. Thompson, 138 Ga. 282
(75 S.E. 354), used this language: "If mutual promises are relied on as a consideration to support a contract, the obligations of the contract must be mutually binding upon the respective parties." See also McCaw Manufacturing Co. v. Felder, 115 Ga. 408,
412 (41 S.E. 664). In the light of these indisputable rules, let us examine the agreement forming the basis of the action. It will be observed that in the alleged joint account whereby an agreement was made for participation in a joint enterprise, to wit, the purchase and resale of certain specifically mentioned preferred stock of a designated corporation, it was agreed that "prior to the purchase of thesecurities covered by the agreement any member may in good faith withdraw from the account," and also, "that any action taken by the joint account shall be mutually agreed upon." It appears from the allegations of the petition, which on demurrer must be taken to be true as alleged, that subsequently to the revival on August 8, 1941, of a previous, expired agreement, the plaintiff not only repeatedly sought to interest the corporation whose preferred stock the plaintiff and the defendant were seeking to secure for the purpose of refinancing in furtherance of the joint enterprise, but also and repeatedly down to the month of October, 1943, conferred with the defendant with respect thereto; and that it was only after the defendant had already secured the stocks that it sought in October, 1943, to repudiate the joint account constituting the basis of the joint enterprise. We do not think that, because the agreement allowed either of the parties in good faith to withdraw from the joint account before any of the benefits of the enterprise had been achieved, and thus before any equities had arisen in favor of the other member, this would render the agreement nugatory. In the absence of a limitation upon the duration of the agreement, such would seem to be the right of either party, even in the absence of any such specific authority. We do think, however, that, after one of the paramount objects of the joint enterprise had been accomplished by one of the parties to the agreement, to wit, the acquisition of the stock, he should not be permitted, either in good conscience or under the express terms of the agreement itself, to thereafter terminate the joint account; and especially would this seem true where it appears by the petition that the defendant had knowingly allowed the other party to the agreement to expend its time and efforts in furtherance of the agreement up until the time of its attempted dissolution; and where it was sought to cancel the contract only after the stock had been actually acquired. Nor do we think that the contract lacked effectiveness as being without consideration, on the theory that the mutual promises
relied on were not obligatory, but were conditioned on mutual consent, and that therefore the agreement was unenforceable, as being a nudum pactum. We cannot agree that the effect of the agreement amounted to nothing more than a preliminary undertaking whereby the parties proposed and agreed to enter thereafter upon a contract in accordance with subsequent understandings which were required to be mutually agreed upon. We are dealing with a fiduciary relationship; and as was said by Judge Cardozo in Meinhard v. Salmon, 249 N.Y. 458 (164 N.E. 545, 62 A.L.R. 1), while sitting upon the appellate bench of the State of New York: "Joint adventurers, like copartners, owe to one another, while the enterprise continues, the duty of the finest loyalty." According to this conception, it becomes the duty of each member associated in the joint enterprise to put forth his best endeavors to bring about the consummation of the two purposes sought by the agreement of co-operation; and this is true even though the contract provides that neither could bind the other without its consent, either in the acquisition or sale of the securities sought to be refinanced. That each member of the joint enterprise in order to be bound by the actions of the other with respect to the terms of the purchase or of a resale would have to be consulted and would have to agree, does not seem to mean or imply, as contended by able counsel, that neither was "bound to do anything." We can see no valid reason why persons associated in such a hazardous venture as is here involved could not legally and with the utmost propriety stipulate that, when it came to the vital question as to how much money should be parted with in the purchase of the stock, or what profit should be deemed satisfactory in the resale thereof, either would be privileged to pass upon and approve for himself the proposal of his colleague. Indeed, an agreement of the particular type and character now under consideration, which did not contain such a saving provision, would seem to subject all of the contracting parties to a hazard that few if any would venture to assume. That the purchase of stock by the defendant was not approved by the plaintiff in advance, is not a matter of which the defendant can or does complain, since the plaintiff was not consulted. It must be borne in mind that this is not a contract for the purchase and sale of ordinary commodities or services, such as was the case in many of the cases relied upon by the defendant; but it is one which sets
up a fiduciary relationship similar in many respects to an ordinary contract of copartnership. If owing to the peculiar hazard of the enterprise the contracting parties thought it wise and expedient to depart from the general rule governing partnerships, which by the Code, § 75-302, provides that "All the partners shall be bound by the acts of any one, within the legitimate scope of the business of the partnership," we can see no legal reason why they were not privileged to do so. This provision of the contract, as we see, did not convert the agreement into a mere preliminary undertaking for a future binding agreement. The contract engaged the use and employment of the energy and efforts of each party to the agreement in obtaining an offer of sale of the stock on terms such as would be mutually agreeable. The value of the stock being in its nature fluctuating, it seems difficult to conceive how else such a joint enterprise could be entered upon. The same reasoning applies to the future resales. That neither member of the joint enterprise owned or had already existing options on the stock at the time the joint account was established, makes no difference. SeeFloyd v. Kicklighter, 139 Ga. 133 (5) (76 S.E. 1011);Jones v. Fuller, 27 Ga. App. 84, 86 (5) (107 S.E. 544). As we view the case, the agreement set forth in the petition was a valid contract, and if the defendant desired to withdraw from the joint-account agreement alleged in the petition, he should have exercised such right in accordance with the terms of the agreement, and when he could have done so "in good faith," "prior to the purchase of the securities covered by the agreement," and before equities in favor of his associate had arisen.
We think that the judgment of the trial judge was correct in overruling the demurrer to the petition.
Judgment affirmed. All the Justices concur.