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be maintained in any case where the facts are such that the plaintiff may be treated as the owner of the shares, and the court is called upon only to decree the issue of proper certificates.23 § 42. Actions for damages.—Definiteness of agreement.

A remedy which is always open to every party complaining of the breach of an enforceable agreement, is an action at law for the recovery of the money damages suffered by reason of the breach.24

The party bringing an action for damages for the breach of an agreement to form a corporation must, in order to recover, show the making of a contract in terms sufficiently definite to form a basis for the computation of damages. The property that is to go into the corporation and the proportionate part of the capital stock to be issued to the plaintiff must be substantially fixed, otherwise it cannot be determined what the plaintiff was entitled to receive, or what damages he has suffered by reason of the breach.25 If the agreement fixes, with reasonable certainty, such absconding defendant was en- Walsh, 36 Wash. 190, 78 Pac. 786. titled to receive from the defendant 25. See Haskins V. Ryan, 71 N. corporation more than 245,000 J. Eq. 575, 581, 64 Atl. 436; Watson shares, such corporation was byv. Bayliss, 71 Wash. 499, 128 Pac. the court directed to issue 245,000 1061. of the individual defendant's shares. The court in Flaherty v. Cary, 62 directly to the plaintiff.

N. Y. App. Div. 116, 70 Supp. 951, 23. Chater v. San Francisco affirmed, 174 N. Y. 550, 67 N. E. Sugar Refining Co., 19 Cal. 219, 1082, defeated the plaintiff on the seems to have been an action of ground that the agreement under this character. See also Chambers consideration was a mere agreement v. Mittnacht, 23 S. D. 449, 122 N. W. to assist the plaintiff in forming a 434.

corporation and not an absolute Cf. Dickinson v. Matheson Motor agreement to form the corporation. Car Co., 161 Fed. Rep. 874, affirmed, See also Porter V. Blair, 83 Fed. 171 Fed. Rep. 646, 97 C. C. A. 29. Rep. 104; Brehm v. Sperry, 92 Md.

24. Crichfield v. Julia, 147 Fed. 378, 403, 48 Atl. 368, 372. Rep. 65, 77 C. C. A. 297; Perrin v. A mere agreement to make a deSmith, 135 N. Y. App. Div. 127, 119 finite agreement is not enforceable. Supp. 990; Kirschmann v. Lediard, See Haskins v. Ryan, 71 N. J. Eq. 61 Barb. (N. Y.) 573; Grant v. 575, 64 Atl. 436.

the assets to be transferred to the corporation, the total share capital, and the portion thereof which the plaintiff is to receive, or contains definite provisions from which the relation between these factors may be computed, the courts will not, or at least should not, be too astute in discovering uncertainties by reason of which the plaintiff's right of recovery may be defeated. 26

In Crichfield v. Julia, 27 the defendant agreed to pay the plaintiff for his asphalt mine $5,000 in cash and $100,000 in guaranteed 6 per cent preferred shares of a corporation to be organized to operate the mine. The agreement did not fix the capitalization of the proposed company, its bonded indebtedness, or even

to receive $100,000 par value. It was claimed that the contract was too indefinite for enforcement. The court said that the amount of common stock that might be issued was immaterial as such common stock would be subject to the preferred stock and would not affect its value; that in the absence of any words or definition of limitation, “ the use of the term 'preferred stock, in connection with defendant's guaranty of interest, may fairly be taken to indicate stock whose par value is to be based upon the actual value of the property it represents, and not upon any fictitious or speculative value. If the stock were so affected by a bonded indebtedness as not to have a substantial value representing a par value it would be a preferred stock merely in name, and would not represent the understanding of the parties as evidenced by the agreement and the defendant's guaranty.” The contract was held sufficiently definite to enable a jury to estimate the value of the preferred stock which the plaintiff was under his contract entitled to receive.

In Waring & Gillow, Ltd., v. Thompson,28 it was held that because of the indefiniteness of the contract to form the corporation, which “left open for future agreement a number of points, e. g., the memorandum and articles of association, the borrowing and other powers of the company, and the plaintiffs' percentage of profit, with other matters,” the plaintiffs could not recover damages for the breach thereof. The case is not satisfactorily reported. If the percentage of the profits to be paid to the plaintiffs was left open for future determination, the decision that the contract was too indefinite for enforcement was correct. The fact that the memorandum and articles of association and the borrowing and other powers of the company had not been agreed upon, was, however, no reason for denying the plaintiffs' relief in an action for damages. An understanding that the company shall be organized upon a reasonable basis may be implied, and the absence of a definite understanding in regard to matters not constituting a necessary factor in the computation of the value of the shares is no reason for denying relief in damages.29

26. Crichfield v. Julia, 147 Fed. 27. 147 Fed. Rep. 65, 77 C. C. A. Rep. 65, 77 C. C. A. 297. But see 297. cases cited under notes 28 and 29. 28. London Times, Feb. 9, 1912.

§ 43. Measure of damages.

The measure of damages in an action for the breach of a contract to organize a corporation to purchase the plaintiff's property and pay for it in shares, is the amount the plaintiff would have gained by the performance of the contract. If the plaintiff's property has been conveyed to the corporation, or to the defendants, the measure of damages is the value of what the plaintiff was to receive. If the plaintiff has not parted with his property, the measure of his damages is the difference between the value of the property which he agreed to convey and the value of what he was to receive under his contract. 30

If the shares in which the plaintiff was to be paid are, at the time of the breach, bought and sold in the open market to such

29. See, however, Flaherty . Cary, 62 N. Y. App. Div. 116, 70 Supp. 951, affirmed without opinion, 174 N. Y. 550, 67 N. E. 1082; Wat

son v. Bayliss, 71 Wash, 499, 128 Pac. 1061.

30. Kirschmann v. Lediard, 61 Barb. (N. Y.) 573.

an extent that their market value has been fixed, this market value forms the measure of the value of the shares. The difficulty with the action for damages is that the shares, have, in most cases, at the time of the breach, no market value, and a market value is, in many cases, never established.

The fact that no market value for the shares was ever established does not defeat the plaintiff's action, or restrict his recovery to nominal damages. In Stanton v. New York & Eastern Railroad Co.,31 the promoters of the defendant corporation had before its organization made a contract with one Hungerford that he should procure for the proposed company certain rights of way and be paid for his services in the shares of the company. The company upon its organization assumed the obligations of this contract, but, being unable to obtain the necessary authority to build a bridge across the Housatonic River, abandoned the enterprise and called in the stock that had been issued. The court below, on the theory that the stock which he was to receive for his services never had any market value, allowed Hungerford only nominal damages. The Supreme Court of Errors, however, held that the reason that this stock never had any market value was that the corporation had decided not to issue it, that it could not take advantage of its own wrong and that Hungerford was entitled to substantial damages.

Where no market value of the shares is established the plaintiff's recovery is measured by the intrinsic value of the shares. He cannot recover their par value.32 He must prove the value of the contemplated properties and assets of the projected corporation, the amount of the bonded and other indebtednesses to which the shares were to be subject, the amount and different classes of shares to be issued, and from these facts the jury must determine to the best of their ability the probable value of the shares had they been issued in accordance with the agreement. 38 It would ordinarily be impossible, and the plaintiff is not called upon, to prove such value to any degree of certainty, but he must, in order to recover, adduce facts from which some fair estimate of the intrinsic value of the shares can be made.34 A recovery may, of course, be defeated by proof that the contemplated scheme was wholly impracticable, and that the shares could in no event have had any value.35

31. 59 Conn. 272, 22 Atl. 300, 21 Am. St. Rep. 110.

32. Beaty V. Johnston, 66 Ark.

529, 52 S. W. 129; Kirschmann v. Lediard, 61 Barb. (N. Y.) 573; Pitt v. Kellogg, 33 N. Y. St. R. 894, 11 Supp. 526.

§ 44. Action to recover property conveyed, or value thereof.

Parties, complaining of the breach of agreements to organize a corporation to take over their properties and deliver a certain part of its share capital in payment, realizing the very obvious difficulty of proving what the shares would have been worth had the corporation been organized in accordance with the agreement, frequently seek some other remedy, or, at least, some other basis of recovery. Where the plaintiff's property has been conveyed to the promoters it is sometimes sought to recover the property conveyed, or to hold the promoters liable for the value thereof, instead of suing them for the rather uncertain value of the shares which they agreed to deliver to the plaintiff.

In Manistee Lumber Co. v. Union National Bank,36 the plaintiff had assigned its claim of $39,000 against an insolvent corporation

33. Crichfield v. Julia, 147 Fed. to submit to the jury the question Rep. 65, 73–74, 77 C. C. A. 297, and of the value of the shares which cases cited; Beaty v. Johnston, 66 should, under the contract, have Ark. 529, 52 S. W. 129; Dyer v. been delivered to the plaintiff, Rich, 1 Metc. (Mass.) 180.

where the value of such shares de 34. Curran v. Smith, 149 Fed. pended entirely upon the value of Rep. 945, 952-953, 81 C. C. A. 537; certain mineral rights, and there Eisenmayer V. Leonardt, 148 Cal. was no evidence whatever as to the 596, 84 Pac. 43.

value of such mineral rights. It was held in Eisleben v. Brooks, 35. Eisenmayer v. Leonardt, 148 170 Fed. Rep. 86, 102 C. C. A. 380. Cal. 596, 84 Pac. 43. that it was error for the trial court 36. 143 Ill. 490, 32 N. E. 449.

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