Havens v. Hoyt

Where, it appeared that a contract made with a corporation to do certain work, was fulfilled to the satisfaction of the board of directors managing the concerns of the corporation, and that such work was done on favorable terms, and was beneficial to the company, it was held that a court of equity would not, on the allegation of one of the corporators that there was a secret agreement between one of the directors and the contractor to -divide the profits, enjoin the payment of the stipulated compensation.

Appeal from an interlocutory order of the Court of Equity <of Beaufort county. The bill is filed by the plaintiff, as a stockholder in the “Washington Gas-Light Company,” in behalf of himself and the other corporators of the said company, against the defendants, as president and directors of the said company, and against James E. Hoyt, individually. The bill alledges that the directors appointed James E. Hoyt, one of their number-, to make a contract in behalf of the company with some competent and responsible person, for the erection of the necessary gasworks, and laying the necessary pipes, in order to effectuate the purpose of the company, and that the said Hoyt did make a contract for the constructing of the said gas-works and appurtenances, with one Samuel Merrill 5 and that he was, at the time, secretly, a partner with the said Merrill, and was to have two-thirds of the profits arising from the fulfillment of the undertaking, and that he fraudulently, and by combination with Merrill, and for their mutual gain and profit, put the amount of compensation at a higher sum than the work was worth 5 and at a higher price than the said Merrill had previously offered to do it at; that the work was nearly finished, and that the directors were about to pay to Merrill and bis secret partner, Hoyt, the last payment due for the construction of the said works; that the portion of the said Hoyt’s profits is $800, and thirteen shares of the capital stock of the company. The prayer is, that the Court will declare the share of the said profits coming to Hoyt, to belong to the company, and direct an injunction to the president, secretary, treasurer and directors of the said company, forbidding them from paying over the said sum of $800, and from giving certificates for the said thirteen shares of stock to the said James E. Iioyt, and for general relief. The answers of both Hoyt and the directors, say that Merrill was the lowest bidder ; that his bid was $1000 less than the only other bid made for the work, and that this bid was made to the directors themselves, and not to James E. Hoyt, as their agent, and by them, as a board, accepted; and that all that Hoyt had to do with it, except as a director, was to have the contract with Merrill formally executed according to the terms offered and accepted. They both say that the terms were reasonable; and that the work lias been done satisfactorily, and the company express their willingness to pay the compensation agreed upon, whenever released from the injunction. Hoyt, in his answer, says that he recommended Merrill to the board, and informed them that, as he was without means, he expected to assist him in the execution of the contract, both as to advancing the money necessary to buy materials, and in procuring him security to perform his part of the obligation ; that these assurances were made as inducements for the company to employ Merrill; and he believed that it was understood by the company that he would participate in Merrill’s contract; that he did enter into an agreement with the said Merrill to furnish all the money necessary, and to carry on the work, to go on to the cities where gas-works were in the most successful operation, and obtain information as to the best and most economical manner of constructing and using them; that he not only, according to this contract, advanced the money necessary to begin the undertaking, but he went to the northern and other cities, and examined diligently into the several modes of erecting and working gas-works, and obtained an amount of information which enabled Merrill to do the work cheaper and better than it otherwise could have been done; and, besides this, he gave constant attention to the work as it was going on, and he says his part of the profits, (two-thirds) was by no means unreasonable. The company, however, say they were not aware that Hoyt was to be a partner with Merrill 5 but they say the work was well, judiciously and cheaply done. On the coming in of the answers, on motion, the injunction was ordered to be dissolved, and the plaintiff appealed.