Raymond v. Colton

• Decision Date: 25 July 1900
• Docket Number: 151.
• Citation: 104 F. 219
• Parties: RAYMOND v. COLTON.
• Court: U.S. Court of Appeals — Second Circuit

104 F. 219

RAYMOND v. COLTON.

No. 151.

United States Court of Appeals, Second Circuit.

July 25, 1900

E. C James, for plaintiff in error.

A Walker Otis, for defendant in error.

Before WALLACE and SHIPMAN, Circuit Judges, and THOMAS, District judge.

WALLACE Circuit Judge.

This is a writ of error by the defendant in the court below to review a judgment for the plaintiff entered upon the verdict of a jury. The jury found a verdict for $160,000.

The action was brought to recover damages for the breach of an agreement by the defendant to purchase the interest of the plaintiff in A. A. Vantine & Co., a joint-stock mercantile association created under the statutes of New York. Laws 1894, c. 235. The principal assignments of error present the question whether the contract was void under the statute of frauds, or because it involved a breach of the trust duties of the parties towards the association.

The complaint alleged that on or about August 3, 1898, the defendant promised plaintiff that if the latter would resign his position as vice president and general manager, and would 'sever his connection' with the company, and his brother would resign his position as manager in Japan, the defendant would pay the plaintiff, in consideration thereof, a one-fourth interest in the business of the company less the amount owing from the plaintiff to the defendant; that the plaintiff thereupon accepted the offer made by the defendant, and resigned his position as vice president and general manager, and his brother resigned his position as manager in Japan; and that the defendant thereafter refused to carry out the terms of the said agreement. The complaint further alleged that the value of the net assets and good will of the business of the company was over $300,000 in excess of the indebtedness of the plaintiff to the defendant.

The evidence upon the trial tended to prove the following facts Prior to the creation of the joint-stock company the defendant had been the proprietor of the mercantile business carried on in the name of A. A. Vantine & Co., and had promised the plaintiff, who had been in his employ and had contributed by his services largely to the success of the business, a one-fourth interest therein. In April, 1894, the plaintiff and defendant adjusted the value of his interest as of the sum of $100,000. The defendant then suggested the formation of a joint-stock company to which the business should be turned over, and in which the plaintiff should have his interest in shares, allowing the defendant therefor one-fourth of the net value of the assets less the $100,000. The plaintiff assented to this agreement, and thereupon the articles of association were executed and the company was created. Five persons besides the plaintiff and the defendant joined in executing the articles of association; the defendant agreeing to acquire 2,494 shares, and the others 1 share each.

By the articles of association the property was divided into 2,500 shares; the business was to be directed and governed by a board of directors, consisting of not less than three shareholders; a majority in number of the board were to constitute a quorum, and their decisions be deemed the act of the associates; four persons named were to be the first directors, among whom were the defendant and plaintiff and the plaintiff's father; and it was provided that the association might dissolve at any time, provided that eleven-twentieths of the interests of the shareholders should consent in writing, and thereupon a majority of the interests might direct the manner of closing up its business.

The defendant turned over the assets of the former concern, receiving the shares of the association in exchange, and caused a certificate for 625 shares to be delivered to the plaintiff, and certificates for 1 share each to be issued to the other associates. None of these associates paid anything for their shares. One of them was the wife of the defendant, and another was the father of the plaintiff. The plaintiff executed a note to the defendant for the difference between $100,000 and the one-quarter value of the assets, and assigned his certificate to the defendant as collateral for the payment thereof. There was a meeting of the board of directors of the association, and the defendant was elected president, and the plaintiff vice president, and the plaintiff was appointed general manager; and at this meeting salaries of $10,000 annually were voted to the president and the vice president. Thereafter no change took place in the board of directors or officers, or in the shareholders of the association. The business was conducted as it had been previously, except nominally; and the parties conducted themselves towards one another and towards the association as though the concern were a partnership, of which they were the only members. No dividends were declared, and both the plaintiff and the defendant drew out moneys in excess of their salaries. This situation continued until August, 1898. At that time the plaintiff's brother was a manager for the concern in Japan, receiving a salary of $5,000. August 3, 1898, differences having arisen between the plaintiff and defendant, the plaintiff proposed that the defendant buy out his interest, saying to him:

'I want my interest in the concern of Vantine & Co. in goods, and I'll go out. I will resign, and leave you to run your business by yourself. I will give you my brother's resignation, my resignation, and my father's resignation.'

Some conversation ensued as to the way the plaintiff's interest should be ascertained and the goods divided, and, as it would require a long time to take an inventory of the stock, it was suggested that the parties take the books on the preceding 1st of January as the basis for fixing the value of the plaintiff's interest and the valuation of the goods. The defendant finally assented. Thereafter it was suggested that the parties might make some new arrangement for continuing together; the plaintiff stating that he was willing to discuss such an arrangement, but it must be understood that the arrangement already made should stand, and any further arrangement be optional with him. Negotiations respecting a new arrangement ensued until August 15th, when the plaintiff said to the defendant:

'Mr. Raymond, we have talked ever since we made our trade. You have not come to anything definite. Now, I am going to give you my resignation, my brother's resignation, and my father's resignation, in compliance and fulfillment of the trade that we have made, and I want you to give me my one-fourth interest in the business, as you agreed to on that day.'

Thereupon the plaintiff handed the defendant his own resignation as vice president and general manager, and his brother's resignation, and the defendant took them and retained them. Later in the day the defendant sent a cable message to the plaintiff's brother in Japan, stating that the plaintiff had resigned, and directing him to turn over the business. Several days later plaintiff sent the defendant his father's resignation as director and his own resignation as director. At the time of these negotiations the plaintiff was indebted to the defendant, upon the promissory note for which his certificate of stock had been pledged as collateral, in the sum of $165,000, with interest from January 1, 1897, and in the further sum of $12,248 for moneys advanced. Evidence was also given tending to show that the value of one-fourth of the assets on the preceding 1st of January was $389,000. Upon the trial the plaintiff offered to the defendant the certificate for 625 shares of stock, which had been produced by the defendant and put in evidence by the plaintiff.

At the close of the evidence the trial judge was requested on behalf of the defendant to instruct the jury that the agreement on which the action was founded was void-- First, because, being for a sale of goods or things in action and not in writing, it was invalid by the statute of frauds; and, second, because, being between trustees of a joint-stock association, it was one in breach of their duties towards their associates. The judge refused to so instruct the jury. In submitting the case to the jury he instructed them, in substance, that if they found that, in consideration of the resignations promised by the plaintiff, the defendant promised to buy out the plaintiff's quarter interest in Vantine & Co., and pay him in goods of the concern, the amount of such interest and the value of the goods to be taken as they stood on the January 1st preceding, and if they found that the resignations were given on the one side and accepted on the other at the time, the plaintiff would be entitled to recover. In instructing them that the agreement was void under the statute of frauds, unless some part of the consideration of the purchase was paid by the plaintiff and accepted by the defendant at the time, he used the following language:

'Of course, the phrase 'at the time' has a reasonable measure of elasticity, depending upon the circumstances of the case while the transaction is still in progress of negotiation. When the minds have come into accord, and before the parties separate, that is the time within which payment can be made. But it may very well be, where the parties have negotiated and come into an agreement without any payment of part of the consideration, they subsequently, with the matter theretofore discussed by them plainly before them, may renew the agreement that their minds have met upon, and then proceed to carry out the agreement,-- by the payment of the consideration being made by the one as part of the transaction originally entered into, and then renewed, and accepted by the other with that

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