Eden v. Miller

• Decision Date: 13 January 1930
• Docket Number: No. 56.,56.
• Citation: 37 F.2d 8
• Parties: EDEN et al. v. MILLER.
• Court: U.S. Court of Appeals — Second Circuit

37 F.2d 8 (1930)

EDEN et al. v. MILLER.

No. 56.

Circuit Court of Appeals, Second Circuit.

January 13, 1930.

A. Bruce Bielaski, of New York City, for appellants.

Martin Conboy, of New York City (David Asch and Charles W. Tooke, both of New York City, of counsel), for appellee.

Before MANTON, AUGUSTUS N. HAND, and CHASE, Circuit Judges.

CHASE, Circuit Judge (after stating the facts as above).

The defendant insists that his agreement was in legal effect a subscription to $60,000 worth of the capital stock of the corporation, and for his failure to perform such an agreement the plaintiffs have no cause of action. He relies much on the case of Athol Music Hall Co. v. Carey, 116 Mass. 471. In that case the defendant, with others, signed a subscription agreement to take stock in a corporation to be organized and to "pay to the treasurer of said corporation the amount of the several shares set against our respective names." It was held that this amounted to an offer to the corporation, which was incomplete as a contract until the corporation was formed and accepted the offer. It was shown that upon organization the corporation did accept the offer, and its right then to maintain an action against the subscriber for failing to take and pay for the stock for which he had subscribed was upheld. The defendant cites other authority to the same effect, but the Massachusetts case fairly covers his legal position. We disagree only with its applicability to the facts in this case.

This contract is alleged in plain language, and its meaning is in no wise dependent on, or affected by, the fact that the formation of a corporation was one of the things that the plaintiffs agreed to, and did, do in reliance upon the promise of the defendant. Without reading into the contract the interpretation put upon it by the defendant, which requires the assumption of facts which cannot be in the case for consideration without appropriate pleading to that end, we find nothing but a promise made by the defendant directly to the plaintiffs to provide a third party (the corporation to be organized by the plaintiffs) with a definite sum of money to use in doing its business, and to perform certain services for it, all in consideration of the promise of the plaintiffs, made directly to the defendant, that they would organize the corporation, provide it with a certain sum of money or its equivalent with which to do business, and to perform services for it.

While it is possible that the contract has been so alleged that it has a disarming simplicity, which would disappear if the details of performance as agreed upon were before us, we cannot go outside of the record we now have, and must consider only the legal effect of the contract as alleged. It will be noticed that nothing is said about the defendant receiving any stock in the corporation, or any other specific thing in return for what he agreed to do. The sole consideration for his promise was the promise of the plaintiffs. These promises were mutual, and each was a sufficient consideration for the other. Coleman v. Eyre, 45 N. Y. 38; Milliken v. Western Union Telegraph Co., 110 N. Y. 403-412, 18 N. E. 251, 1 L. R. A. 281; Loudenback Fertilizer Co. v. Tenn. Phosphate Co. (C. C. A.) 121 F. 298, 61 L. R. A. 402.

Nor need we determine whether the corporation, as the beneficiary under a contract to which it was not a party, and in which it was not shown to have acquiesced in any way, might, regardless of any stock subscription, maintain an action against the defendant for its breach. Cases on the subject are numerous, and much diversity of opinion is disclosed. We will assume for the purposes of this case, without deciding, that the corporation has such right of action, for the recovery of what damages, if any, it has sustained. We are concerned now only with the right of the plaintiffs, as promisees, to maintain an action against the defendant, as promisor, to recover their, not the corporation's, damages, where the promise is for the benefit both of the plaintiffs and of a third party, who may or may not sue. The obvious benefit to be obtained by the plaintiffs was the establishment of a freight-forwarding business, having the likelihood of success afforded by the promised assistance of the defendant, whereby they were to obtain employment for themselves and an opportunity for investment.

Because they performed their promises by organizing the corporation, taking employment, and making an investment in it, in reliance upon the now broken promise of the defendant to give to the business both financial and personal aid, they claim to have been damaged. For such damage as they can prove, they may recover, regardless of any cause of action the corporation may have against the defendant. Their right is analogous to that of a debtor, with whom a third person has contracted to pay the debt to the creditor. That such a promisee may maintain an action against the promisor for breach is, I suppose, generally recognized. In re H. L. Herbert & Co. (C. C. A. 2d) 262 F. 682; Wright v. Chapin, 87 Hun, 144-148, 33 N. Y. S. 1068; Ward v. Cowdrey, 51 Hun, 641, 5 N. Y. S. 282; Belloni v. Freeborn et al., 63 N. Y. 383; Baldwin v. Emery, 89 Me. 496, 36 A. 994. Compare Ritchie v. McMullen (C. C. A.) 79 F. 522; and Clark v. Sidway, 142 U. S. 682, 12 S. Ct. 327, 35 L. Ed. 1157.

The defendant also insists that that part of the agreement covered by his promise to use his best efforts to secure business for the corporation was but an indefinite undertaking to serve at will, for the breach of which no action will lie. Martin v. New York Life Insurance Co., 148 N. Y. 117, 42 N. E. 416; Watson v....