86 N.Y. 384, Lorillard v. Clyde

Citation86 N.Y. 384
Party NameJACOB LORILLARD, Appellant, v. WILLIAM P. CLYDE et al., Respondents.
Case DateOctober 11, 1881
CourtNew York Court of Appeals

Page 384

86 N.Y. 384



WILLIAM P. CLYDE et al., Respondents.

New York Court of Appeal

October 11, 1881

Submitted Jun. 23, 1881.

Page 385


Horace Barnard for appellants. As the demurrers admit all the facts contained in the pleading demurred to, not only for the purpose of the argument but as evidence, the plaintiff has legal capacity to sue. ( Alcott v. Carroll, 39 N.Y. 436; Mackey v. Auer, 8 Hun, 180.) The laws of the State of New York have but one mode in which such corporations can be organized, and the allegation in the complaint is tantamount to setting it out at length. ( Rockwell v. Merwin, 45 N.Y. 166.) The agreement having been made in anticipation of the consolidation of the two transportation companies, it was perfectly lawful to provide for the business of the new company, and for those who were to be the chief stockholders to provide for its management and secure honest service by a guarantee. ( Foulds v. Yates, 24 Am. Rep. 26; 57 Ill. 416;

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Havemeyer v. Havemeyer, 43 N.Y. Supr. 506; Barnes v. Brown et al., 80 N.Y. 527; Bliss v. Matteson, 45 Id . 22; White v. Hoyt, 73 Id . 512; Booth v. Cleveland Mill Co., 74 Id . 21.)There is nothing in the contract, which conflicts with the provisions of the acts for the incorporation of companies formed to navigate the ocean by steamships, etc. (Laws of 1853, chap. 228, amended by chap. 419 of the Laws of 1867.) Plaintiff's contract with defendants not to run steamers on the routes of defendants, mentioned therein, is a sufficient and lawful consideration. ( Oregon St. Nav. Co. v. Winsor, 20 Wall. 64.) Defendants, as parties to the contract, were estopped from setting up such plea. ( Rapalee v. Stewart et al., 27 N.Y. 310; Phoenix Ins. Co. v. Badger, 57 Id . 294; Denike v. N.Y. & R. L. & C. Co., 80 Id . 599; Comm'rs v. Bolles, 4 Otto, 104.)

Wm. N. Dykman for respondents. The agreement was bad as providing for the formation of a corporation by an inadequate number. (R. S., Part I, chap. 18, title 14, art. 1; Perkins v. Savage, 15 Wend. 412; A. & A. on Corp. 207.) The public has an interest in the precise extent of powers conferred on corporations, and public policy is concerned in their being confined strictly to the exercise of such powers. ( Bissell v. M. S. R. R. Co., 22 N.Y. 258, 286, 887.) A party is not estopped by not taking issue upon a matter of law averred in his adversary's pleadings. ( Jordan v. Nat. Bank, 74 N.Y. 472.) Every new agreement entered into for the purpose of carrying into effect any of the unexecuted provisions of a previous illegal contract is void. ( Gray v. Hook, 4 N.Y. 449; Robinson v. Kalbfleisch, 5 N.Y.S. Ct. 212.) It is illegal for stockholders to combine to control a corporation for a pecuniary consideration personal to themselves. ( Bliss v. Mathieson, 45 N.Y. 22-26; Fuller v. Dame, 35 Mass. 482; Card v. Hope, 2 B. & C. 661; Ward v. Ruckman, 36 N.Y. 33; Fort Edward P. R. Co. v. Payne, 15 Id . 583.) Though plaintiff may have performed his part of the contract and the act required of defendant is not illegal, still, if the consideration for defendant's

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promise is illegal, the contract cannot be enforced. (4 N.Y. 449; 15 Wend. 412; Knowlton v. Congress Springs Co., 57 N.Y. 518; Saratoga Bank v. King, 44 Id . 92.)


We think the complaint discloses a good cause of action. The presumption is in favor of the legality of contracts. The law does not assume an intention to violate the law, nor will an agreement be adjudged to be illegal, where it is capable of a construction which will uphold it, and make it valid.

The scheme of the agreement of June 14, 1874, is plain. The plaintiff Lorillard, and the firm of Wm. P. Clyde & Co. were competitors in the transportation business by water, between New York and Philadelphia, and each party owned vessels, employed...

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