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accept said bequest, she will then be entitled to dower, her statutory rights under section 2713 of the Code of Civil Procedure, and the payment of any debt due her against the estate of said testator." From so much of the decree as contains such construction, the widow appeals.
Argued before PARKER, P. J., and SMITH, CHASE, CHESTER, and HOUGHTON, JJ.
McArthur & Starbuck, for appellant.
CHESTER, J. The appellant urges that the language of this will is effective to give the widow an implied alternative legacy in addition to the ordinary provision in lieu of dower, which entitles her, in case she rejects the provision for her benefit in the will, to the same distributive share in his personal estate as if he had died intestate. The language in giving the legacy is that it is "to be accepted and received by her, in lieu of dower and of all rights statutory and otherwise on her part against my estate.” She relies in support of her contention upon Matter of Vowers, 113 N. Y. 569, 21 N. E. 690. That was a case where a legacy by implication was upheld. In the will under consideration there, the provision for the benefit of the testator's wife was followed by this clause: "This provision to be accepted by my wife in lieu of her dower right and distributive share in my estate. She to make her election whether she accepts this provision of my will within sixty days of proving the same.' The will there contained a clause giving all the residue of the testator's property to his nephew. The widow rejected the provision within the time stated in the will, and thereupon claimed that she was entitled not only to her dower, but to a bequest by implication of a sum equivalent to what would have been her distributive share had the testator died without a will, and the Court of Appeals so held, overruling the construction given to the will by the General Term and the surrogate. That holding was based upon the conclusion that the words of the testator left “no doubt about his intention, and can have no other reasonable interpretation," and that a contrary construction required "that the words relating to a distributive share shall have no meaning, and can have none, and must be utterly expunged from the will.” It was said by Judge Finch; who wrote the opinion, that “the question of construction raised by the language of the testator in framing the provision for his wife is of a character so unusual that we can find no precise parallel or precedent in the courts of our own state.” With that statement in the opinion the case should not be deemed an authority for extending the doctrine there laid down beyond the precise case there decided.
The real question to be determined is, what was the intention of the testator? and that must be found from the will itself and the surrounding circumstances. Here there was no provision that the bequest to the testator's wife was in lieu of a distributive share of his estate, and requiring her to make an election, but instead the bequest to her was "in lieu of dower, and of all rights, statutory and otherwise, on her part” against the testator's estate. There was, of course, no intestacy, and in such a case the widow had no statutory or any other right to a distributive share of the testator's personal estate. The
and 120 New York State Reporter words employed must be construed in the light of the facts as they exist. Where a will is made effectually disposing of the testator's personal estate, there is no right under the law, statutory or otherwise, in the widow to have a share of such personal estate under the statute of distributions. The testator does not say the bequest is in lieu of "all rights," as in case of intestacy, and there is nothing, as there was in the Vowers Case, upon which to uphold a legacy by implication.
While we have reached the conclusion on this branch of the case that the decision of the surrogate should be affirmed, we think the decree should not have provided that the acceptance of the bequest would cut off any existing debt in favor of the widow against the estate. It is true that it does not appear in the record that there is any such debt. Nor does it appear that there is not. It may be purely an academic question in the case, but, if so, it should not have been adjudicated upon by the surrogate. The bequest to the widow follows the language, “after all my lawful debts are paid and discharged I give,” etc., and in the seventh clause the executors are required with the proceeds of the sale of the testator's property to pay his debts. No exception is made with reference to a debt to his wife, and the intent is clear that a construction which would prevent the collection of a debt in her favor, if she has one, is unwarranted by the language employed in the will.
The decree should be modified by striking out the provision respecting a debt in favor of the wife, and as so modified affirmed, without costs. All concur.
(91 App. Div. 37.)
GIVEEN V. GANS et al. (Supreme Court, Appellate Division, First Department. February 5, 1904.) 1. CORPORATIONS-CONTRACTS-OFFICERS—EMPLOYÉS-SERVICES-VALIDITY.
At the time of the execution of the contract sued on, plaintiff and G. owned all the stock and were officers of defendant corporation, which had no creditors. Plaintiff was employed by the corporation, which was engaged in manufacturing cotton cloth, at a regular yearly salary, and during such employment, but outside of the hours plaintiff was required to devote to defendant's business, he conceived an id for the manufacture of a peculiar kind of cloth, and rendered services in procuring a contract for a large quantity thereof, which was very profitable. Plaintiff communicated these facts to G., and solicited him to assist in the manufacture and sale of such cloth outside of the corporation, but G. suggested that the cloth be made by the corporation, and agreed that plaintiff should receive one-half of the profits derived therefrom under such contract of sale. Held, that the contract to pay plaintiff one-half of such profits was not void as between plaintiff and the corporation under such circumstances by reason of plaintiff's fiduciary obligations as an employé and officer of
the corporation. Appeal from Trial Term, New York County.
Action by John S. Giveen against Levi S. Gans and the Giveen Manufacturing Company. From a judgment in favor of plaintiff, and from an order denying defendants' motion for a new trial, defendants appeal. Affirmed.
Argued before VAN BRUNT, P. J., and MCLAUGHLIN, O'BRIEN, INGRAHAM, and LAUGHLIN, JJ.
Thomas D. Adams, for appellants.
O'BRIEN, J. The plaintiff sued upon a contract which was made by him and the defendant Gans, under which, it was alleged, the plaintiff was to receive one-half of the profits accruing from the sale of a cotton cloth called “khaki,” manufactured by the Giveen Manufacturing Company, and sold by it to a corporation known as the C. Kenyon Company.
There are two crucial questions upon this appeal, the first and more important being as to whether the contract sued upon was valid and enforceable, and, second, if it were, whether, as between the plaintiff and the defendant corporation, it constituted a partnership agreement which covered all the transactions in khaki cloth, in addition to that with the C. Kenyon Company. It appears that there were profits on the Kenyon contract, and the amount allowed by the jury is not excessive. It further appears, however, that, upon the other transactions in khaki cloth with other individuals and firms, the Giveen Manufacturing Company made a loss, and the question whether or not the plaintiff as a partner should bear his part of the loss becomes, therefore, important. We think that the disposition made by the learned trial judge in confining the contract sued upon to the transaction with the Kenyon Company was right, and for the reason that it was the only transaction with which the plaintiff had anything to do; the subsequent transactions with the other firms having all been made after the plaintiff was deprived of his position and no longer connected with the Giveen Company. The serious question, therefore, is whether the contract sued upon was valid.
At the time of the making of the agreement between the plaintiff and the defendant Gans, the plaintiff was in the receipt of a salary of $4,000 per annum from the defendant Giveen Manufacturing Company, was one of its stockholders, one of its directors, its secretary, and the manager of the manufacturing part of the company. The defendant Gans was a stockholder, director, and president of the company. There were two other stockholders named Bache and Von Gerichten. The preferred stock was $100,000, one half of which was owned by Bache and the other half by the defendant Gans. The common stock, which was originally $150,000, was afterwards reduced to $1,500, and was owned as follows: Five shares by defendant Gans, five shares by Bache, three shares by plaintiff, and two shares by Von Gerichten. In the month of October, 1898, two months before the Kenyon contract was made, the defendant Gans purchased the stock of Bache and had his son elected director in Bache's place, so that at the time of the Kenyon contract Gans owned all the preferred and all the common stock, except three shares of the common stock owned by the plaintiff, and two shares thereof owned by Von Gerichten. Although the testimony is that Von Gerichten's stock was all purchased by Gans in February, 1898, we are inclined to think that this must be an error in the printed record, for, of course, from the other dates it apparently should be February, 1899. Whatever the date, however, of the purchase of the two shares of Von Gerichten, it is conceded that when this and 120 New York State Reporter suit was brought, other than the stock owned by the plaintiff, the defendant Gans owned all the stock of the company, both preferred and common.
As bearing upon the question of the enforceability of this contract, the ownership of the shares of stock becomes a very important feature of the case, though we have not overlooked the distinction which exists as between the powers of a corporation as a legal entity and the rights of its stockholders, a distinction which was pointed out by the Court of Appeals in Buffalo L., T. & S. D. Co. v. Medina Gas Co., 162 N. Y. 76, 56 N. E. 505. This distinction must always be regarded where a question arises involving the rights of creditors or minority stockholders; but it is not as important in a contest where rights of creditors are not involved, and the dispute is between two stockholders who themselves own all the capital stock. This fact of ownership of all the stock has therefore a bearing upon the rights of the litigants. Here the plaintiff sues upon a contract which was made between himself and the defendant Gans, who between them owned all the capital stock of the corporation; and, as stated, no rights of creditors or other stockholders being involved, it really in substance gets to be a litigation between the plaintiff and the defendant Gans, though in form the suit is brought against the corporation. The only persons interested in the corporation, and that will ultimately be injured or benefited by the success or failure of the plaintiff in sustaining the validity of the contract, will be the plaintiff or the defendant Gans.
Starting with these premises, we are to consider, in addition to the parties by whom it is made, and to whom we have already alluded, what was the nature and purpose of the contract, and what was the effect or result to the Giveen Manufacturing Company, which company the contract by its terms sought to bind. The making of the contract, and the agreement by its terms that the plaintiff was to receive one-half of the profits, a's testified to by the plaintiff, were not rebutted by any evidence given for the defendant upon the trial. The plaintiff produced evidence to sustain the allegations of his complaint, which was not rebutted, and which tended to show that about June 1, 1898, he devised a peculiar finish for a cotton cloth called “khaki,' which the defendants were willing to use in connection with a contract which they contemplated making with the C. Kenyon Company, and that they agreed with him, for the unusual services (outside of those for which he was paid by his own company) rendered and to be rendered by him in developing the quality and production of the cloth, promoting its sale, and assisting the defendant in securing the Kenyon contract then under consideration, to pay him one-half of all profits accruing from the sale of the khaki as his share in said transactions; that he devoted himself to perfecting it, and labored in promoting the sale, and assisted in making the contract for a large delivery of said material for the corporation known as the C. Kenyon Company; that as the result the Giveen Manufacturing Company manufactured and sold to the Kenyon Company a quantity which realized a total net profit of $23,403.10, one-half of which the plaintiff was entitled to, for which sum he demanded judgment. Upon the trial, as stated, there was no attempt to contradict the plaintiff as to the making of the contract or its terms, but the defendants attacked the validity of the contract upon the ground that, as the plaintiff was a director of the Giveen Manufacturing Company and one of its managing officers, and was further employed as the manager of its department of manufacture, receiving a yearly salary, and as the business of the company was that of a converter of cotton goods, it was the plaintiff's duty under his employment to devise methods for the finishing and sale of cotton goods, and that he could not claim extra compensation for any services, however unusual, he may have performed in connection with devising a finish for the cloth which was afterwards manufactured and sold as khaki. If it had been shown that there were creditors or other stockholders interested in the company, there would be no doubt but such a contract was void, because it would be seeking a profit for services rendered to the corporation while plaintiff was under a contract to give his entire time and services to the business of the corporation. In addition, plaintiff was an officer and director of this corporation. The Court of Appeals, in Bosworth v. Allen, 168 N. Y. 165, 61 N. E. 165, 55 L. R. A. 751, 85 Am. St. Rep. 667, in speaking of the action of directors, said:
“That principle is that directors of a corporation are charged with the duties of trustees, and bound to care for its property and manage its affairs in good faith, and for a violation of that duty resulting in waste of its assets, injury to its property or unlawful gain to themselves, they are liable to account in equity the same as ordinary trustees. The corporation has a right to call upon them to account, not only for all the property intrusted to their care, but also for all moneys furtively made by them at its expense.”
In considering the contract here made, however, notice must be taken of the testimony of the plaintiff that this business of khaki cloth was outside of the regular business of the company, and that plaintiff's purpose originally was to have himself and Gans, as individuals, go into it, and that at one time Gans agreed to supply all the money therefor, but finally it was agreed that the cloth should be manufactured by the company, and that was the form which the transaction finally took, so that in the end the company obtained one-half of the profits which were derived under the Kenyon contract. We assume that one may be connected with a corporation, as manager, director, stockholder, and employé, and yet be at liberty to employ his talents and ability after the hours of the business day, which should be devoted to the business of the company, provided he does not employ them in a way inconsistent with his obligations to or detrimental to the business of the company. What is prohibited is that a director should not occupy an inconsistent position in respect to the duties which he owes to the corporation; nor should he for his own gain or profit make a contract for doing something which, considering his relation to the company, he was bound to do for it; nor should he attempt to sell to it property which he himself owns, and as a director buy the same for the company; nor should he sell the company's property to himself so as to reap therefrom a profit. Nor could the plaintiff during his employment engage in a business on the outside which was similar to or came in competition with the business of the company. It will be noticed, therefore, that the case really turns upon whether or not the plaintiff, upon his hiring with the plaintiff company, was already bound to per