Bryan v. Northwest Beverages, Inc.
| Decision Date | 04 May 1939 |
| Docket Number | 6571 |
| Citation | 285 N.W. 689,69 N.D. 274 |
| Court | North Dakota Supreme Court |
Syllabus by the Court.
1. A contract is extinguished by its rescission.
2 Rescission of an express contract does not affect the rights growing out of it thereafter as implied obligations.
3. Where a party to a contract is prevented by the wrongful act of the other party from performing it, he may treat the contract as rescinded, and sue to recover the value of services performed, or he may bring an action on the contract for a breach thereof, and recover the contract price, less the necessary expense of completing the same.
4. Individuals promoting and organizing a corporation have no authority to obligate the corporation by any contract made prior to its coming into existence as a corporation.
5. Where a corporation with knowledge of a preincorporation contract that it might itself make, accepts the benefits therefrom, it does so subject to the burdens that go with such contract.
6. Where all the stockholders and officers of a corporation are present and agree to accept and do adopt a promoter's preincorporation contract, it becomes binding upon the corporation, although there is no formal vote either of the stockholders or of the directors taken or recorded.
7. Stock of a corporation issued in violation of Section 138 of the Constitution, and Section 4528, C.L.1913, is null and void.
8. Services performed by the plaintiff in bringing to the defendant some 190 customers' accounts, with an annual volume of business amounting to $200,000, and the good will of an established business, may be regarded as " labor done or * * * property actually received," within the meaning of Section 138 of the Constitution, and Section 4528 C.L.1913, and were a sufficient consideration for $16,000 worth of stock to be issued to the plaintiff.
9. The evidence objected to was material to the issues as framed by the pleadings, and the objections were, for reasons stated in the opinion, properly overruled.
10. A witness who has knowledge of the business in which services have been rendered for, and of the business accounts and good will brought to, a corporation, and of their value, may, in the sound discretion of the trial court, be permitted to give his opinion as to the value thereof.
11. The trial court, in its instructions, submitted the case to the jury, upon the theory that " the plaintiff is entitled to recover, if at all, for the reasonable worth and value of contributions made in service and accounts which enriched and benefited the defendant, brought to and conferred upon the defendant" by the plaintiff. This was the proper theory of the case on the issues framed by the pleadings.
12. The evidence is examined and, for reasons stated in the opinion is held sufficient to sustain the verdict.
Appeal from District Court, Burleigh County; R. G. McFarland, Judge.
Action by Leon Bryan against Northwest Beverages, Incorporated, on a quantum meruit to recover the reasonable value of services performed by the plaintiff in behalf of the defendant corporation and of the good will and accounts conveyed by him to the defendant corporation. Judgment for plaintiff on a verdict for $4,500, and the defendant appeals.
Affirmed.
Hyland & Foster, for appellant.
A creditor of a corporation who obtains a pledge of the unissued stock of such corporation as security for his claim has no right or title therein or lien thereon, the same being illegally issued and void. McAndrews v. Idawa Gold Min Co. 54 N.D. 734, 210 N.W. 514.
Stock issued as bonus stock in violation of § 138 of the Constitution is void. Lavell v. Bullock, 43 N.D. 135, 174 N.W. 764; Arkansas River Land, Town & Canal Co. v. Farmers Loan & T. Co. 13 Colo. 578, 22 P. 954; Clarke v. Lincoln Lumber Co. 59 Wis. 655, 18 N.W. 492; Mechanics' Bank v. New York & N.H.R. Co. 13 N.Y. 627; 14 C.J. 408.
A promoter's contract, as such, cannot by the incorporation of the contemplated company, ipso facto, become the contract of the corporation. Kirkup v. Anaconda Amuse. Co. 59 Mont. 469, 197 P. 1005, 17 A.L.R. 441.
It is soon enough for corporate bodies to enter into contracts encumbering their property, when they are duly organized and have chosen impartial directors to conduct their business. Ibid.
A promoter though he purport to act on behalf of the projected corporation, and not for himself, cannot be treated as agent. Weatherford, M.W. & N.W.R. Co. v. Granger, 86 Tex. 350, 24 S.W. 795, 40 Am. St. Rep. 837; Webster v. Webster Ref. Co. 26 Okla. 168, 128 P. 261, 47 L.R.A.(N.S.) 697; Rogers v. Gladiator Gold Min. & Mill. Co. 21 S.D. 412, 113 N.W. 86.
The capital stock of a moneyed corporation is a fund for the payment of its debts. It is a trust fund, of which the directors are trustees. Upton v. Tribilcock, 91 U.S. 45, 23 L. ed. 203; Furber v. Williams-Flower Co. 21 S.D. 228, 111 N.W. 548, 8 L.R.A.(N.S.) 1259, 15 Ann. Cas. 1216; Zelaya Min. Co. v. Meyer, 28 N.Y. 759, 8 N.Y.S. 487.
No suit will be entertained by either a court of law or a court of equity, by either party to an illegal contract against the other, where the contract is against public policy, whether it is executed or executory. Woodson v. Hopkins, 85 Miss. 171, 37 So. 1000, 38 So. 298, 70 L.R.A. 645, 107 Am. St. Rep. 275.
As a general rule there can be no recovery on a quantum meruit for services rendered or other considerations furnished under an illegal agreement. 12 Am. Jur. p. 727, Contracts.
An illegal agreement constitutes no criterion as to the amount of recovery. 11 C.J. 269, note 73; Cashin v. Pliter, 168 Mich. 368, 134 N.W. 482, Ann. Cas. 1913C 697; Kennedy v. Longabaugh, 19 Wyo. 352, 117 P. 1079, Ann. Cas. 1913E 133.
Rendition of services of furnishing of goods pursuant to a municipal contract entered into in violation of statute or contrary to public policy cannot give rise to an implied contract to pay therefor. Johnson County Sav. Bank v. Creston, 212 Iowa 929, 231 N.W. 705; Thompson Yards v. Haakinson & B. Co. 209 Iowa 985, 229 N.W. 266; Shaddock v. Schwartz, 246 N.Y. 288, 158 N.E. 872; Fritts v. Quinton, 118 Kan. 111, 233 P. 1036, 40 A.L.R. 31.
Courts will not aid either party to an illegal agreement, but will leave the parties where it finds them. Janzen v. Crum, 50 N.D. 544, 197 N.W. 138; Johnson v. Owen, 72 Neb. 477, 100 N.W. 945.
Thomas J. Burke, W. Ray Reichert and W. C. Crawford, for respondent.
If the company with knowledge of the contract accepts the benefits of such a contract, it will be required to perform its obligations. Annotation in 17 A.L.R. pages 452 to 512; Alexander v. Winters, 23 Nev. 475, 49 P. 116; Smith v. Parker, 148 Ind. 127, 45 N.E. 770; Metropolitan Tel. & Tel. Co. v. Domestic Tel. & Tel. Co. 44 N.J.Eq. 568, 14 A. 907; Wall v. Niagara Min. & Smelting Co. 20 Utah 474, 59 P. 399; Improvement Co. v. Osborn, 14 Colo.App. 488, 60 P. 730; Robbins v. Banger Rail & Electric Co. 109 Me. 496, 62 A. 136, 1 L.R.A. (N.S.) 963.
In the instant case the defendant cannot restore to the plaintiff everything of value which it has received from him, and upon rescission of the contract the plaintiff had the right to sue for his services and damages for the breach of the contract. Davis v. Bronson, 2 N.D. 300, 50 N.W. 836, 16 L.R.A. 655; Anderson v. Bank, 4 N.D. 182, 59 N.W. 1029; Northwest Hail Ins. Co. v. Gleming, 12 S.D. 36, 80 N.W. 147; New England Oil & Ref. Co. v. Wiltsee (C.C.A.) 7 F.2d 424; Rahway Nat. Bank v. Thompson, 7 F.2d 419; Mt. Pleasant Coal Co. v. Watts, 91 Ind.App. 501, 151 N.E. 7; Hinkley v. Sageminer, 191 Wis. 512, 210 N.W. 839.
Where a corporation, subsequent to its organization, accepts the benefits of a contract made prior thereto, it will be liable on contract, since it cannot repudiate the incident obligation. Packer & K. Company v. I. Frank & Sons, 119 Misc. 398, 196 N.Y.S. 289; Morgan v. Bon Bon Co. 222 N.Y. 22, 118 N.E. 205.
Where one of the parties to a contract omits or refuses to perform it on his part and renders it impossible for the other party to perform it on his part, the party in default is liable to the other for the damages sustained by him by such breach. Ramsey v. Brooke County Bldg. & L. Asso. 102 W.Va. 119, 135 S.E. 249, 49 A.L.R. 668; 6 R.C.L. 1024; 2 R.C.L. Supp. 267, 385.
Englert, Dist. J. Nuessle, Ch. J., and Morris, Christianson, and Burr, JJ., concur. Burke, J., did not participate, Hon. M. J. Englert, Judge of the First Judicial District, Sitting in his stead.
This is an action upon a quantum meruit. It was brought by the plaintiff to recover "the reasonable value of the services performed by him for and in behalf of the defendant corporation and of the good will and accounts conveyed by him to said corporation."
The answer of the defendant amounts to a general denial of the complaint. It alleges the defendant employed the plaintiff as a salesman at a salary of a hundred and fifty dollars per month, and that the defendant was obliged to terminate his services because he refused to carry out the instructions of the board of directors, and that he has been fully paid for all services he performed for defendant.
On the issues thus joined, the case was tried before a court and jury. A verdict of $ 4,500 was returned by the jury in favor of the plaintiff. Judgment was entered thereon.
The case comes before this court on appeal from the judgment and order denying judgment notwithstanding the verdict, and denying a new trial.
The issues presented by this appeal may be grouped as follows:
1. That the complaint states a cause of action on "an express contract," and there can "be no recovery on quantum meruit."
2. That the contract alleged in the...
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