McEachin v. Kingman

A promoter, when he assumes to act on behalf of a projected corporation, and not for himself, is to be treated as an agent of the corporation to be formed, even though not yet in existence, and he will not be personally liable on the contract where it shows on its face that the other party agreed to look to the corporation for payment. The contract in the present case, under which the plaintiff was to install and operate a plant of a corporation to be organized and financed by the defendant promoter, shows that the plaintiff agreed to look to the corporation for his compensation. It was therefore not error for the court to sustain the general demurrer to the petition.

DECIDED NOVEMBER 15, 1940. ADHERED TO ON REHEARING, DECEMBER 18, 1940. W. A. McEachin brought suit against R. H. Kingman to recover $2913.02 and interest from September 1, 1939, by reason of the following alleged facts: On or about August 23, 1937, the defendant made a contract with the plaintiff which provided as follows: "This letter confirms agreement on the part of the writer to immediately form a corporation and charter same for the purpose of bottling drinks in Macon, Georgia, said corporation to be known as Kingman Distributing Co. Inc., to fully finance the formation of said corporation, costs and installation of all machinery and equipment, materials and ingredients necessary for bottling drinks, and to finance the operation of said corporation. The said corporation does hereby employ you to install and operate the plant of said corporation, for a period of not less than two years from date of first operation, and to pay you for such services a salary of sixty ($60) dollars a week, beginning with your severance of your present work, and in addition to such salary to pay you a bonus of two cents for each case of 24 bottles of all drinks bottled by you, when sold by said corporation. Said bonus of two cents per case to run for the period of two years from beginning of operation. Said corporation agrees to push sales in every way it thinks profitable, and to cooperate with you in every way it thinks profitable. In case there should be a shortage of ingredients and the corporation found it impossible to obtain same, or to bottle and sell their products profitably, or if for any other unforeseen reason the operation of said plant should become unprofitable, then said corporation shall not be bound to pay you any unearned salary. The corporation is to have the full benefit of your time, knowledge, and experience, and in consideration of the expense said corporation will have to go to, in purchase of equipment, machinery, materials, ingredients, rents, etc., you are to write out and turn over to said corporation such information pertaining to the processing of its products that would enable it to operate in case you are providentially hindered from carrying out your part of this agreement;" that in pursuance of said contract the plaintiff moved from Atlanta, where he was then living and working, to Macon, and began his duties under said contract; that the defendant organized said corporation, which engaged in the bottling business, and whose plant the plaintiff installed and thereafter operated from September 1, 1937, to September 1, 1939; that the corporation paid to the plaintiff all the salary due him under said contract during said two-year period, and paid him also the bonus in said contract provided for all drinks bottled by said corporation, except that it did not pay the plaintiff for beer bottled by it at said plant as hereinafter shown; that on or about April 15, 1938, said corporation began to bottle beer under a contract with the Schlitz Brewing Company of Milwaukee, Wisconsin, and from that time until September 1, 1939, said corporation, while the plaintiff was operating it under his contract as aforesaid, bottled 145,651 cases of beer, and all of said beer has been sold by the corporation; that the plaintiff, under his contract, is due two cents for each case of beer so bottled and sold, amounting to a total of $2913.02 and interest; that after said bonus in said amount became due the plaintiff demanded payment thereof from said corporation, but it failed and refused to pay the plaintiff, and said debt has never been paid to the plaintiff by said corporation or by the defendant; that the defendant, having been a promoter of said corporation, and the debt of the corporation to the plaintiff being and remaining unpaid, the defendant is liable to pay the plaintiff said amount with interest as aforesaid. By amendment it was alleged that the corporation is now insolvent and that a judgment against it would be worthless.

The defendant demurred to the petition on the ground that no cause of action was set forth against him, and that under the facts alleged the defendant had fully complied with all of his undertakings, as set forth in the contract, and that any obligation owed to the plaintiff as alleged is owed by the corporation, which was organized by the defendant, and not by the defendant himself. The court sustained the demurrer, and the exception here is to that judgment.

The contract made between the promoter, who is the defendant, and the plaintiff, before the corporation was created, recites that the "corporation does hereby employ" the plaintiff to "install and operate" the plant of the corporation for a period of not less than two years from the date of the first operation, "and to pay you [plaintiff] for such services a salary of sixty ($60) dollars a week, beginning with your severance of your present work, and in addition to said salary to pay you a bonus of two cents for each case of 24 bottles of all drinks bottled by you, when sold by said corporation," and that "said bonus of two cents per case to run for the period of two years from beginning of operation." It is this last obligation which the plaintiff is suing on, and upon which he seeks to hold Kingman, the promoter, liable. We concede that the contract is one between the plaintiff and Kingman, and not one between the plaintiff and the non-existing corporation.

The question is, is Kingman, by the terms of the contract, liable to the plaintiff for a failure of the corporation, which was afterwards created, and for which the plaintiff afterwards went to work, to pay plaintiff the agreed bonus of two cents per case on bottles of beer that were sold by the plaintiff for the corporation? The plaintiff performed the services for the corporation and has not been paid therefor. The corporation, at the time the defendant entered into his obligation, was non-existent. The provision that the corporation "does hereby employ" the plaintiff to perform the specified services in the future, after the creation of the corporation, must necessarily mean that the corporation will employ the plaintiff to perform for the corporation the required services. There is nothing in this provision of the contract expressly obligating either the defendant or the corporation to pay for the plaintiff's services to be performed for the corporation after it is created. It is not expressly agreed that Kingman is to pay for such services which the plaintiff is to perform for such corporation. The contract recites that the corporation "does hereby employ you" (the plaintiff) and "to pay you." This does not mean that Kingman is to pay the plaintiff, but must necessarily mean that the corporation is to pay the plaintiff. Therefore, there can be no liability on Kingman to the plaintiff for failure of the corporation, after employing the plaintiff, to pay him for his services, unless the contract is to be construed as an obligation or guaranty by Kingman that the corporation will pay the plaintiff for such services.

There are no words of guaranty, or obligation to pay, in the contract, except so far as may be contained in the provision quoted. In the provision quoted it is recited that the corporation is to pay the plaintiff for the services to be rendered to the corporation. The recital that the corporation will employ the plaintiff and pay him for his services is a provision whereby the plaintiff is to look to the corporation for his pay and not to Kingman. The contract contemplated that the services were to be rendered by the plaintiff to the corporation afterwards to be created, and that the corporation was to pay him for the services rendered. Chicago Building c. Co. v. Talbotton Co., 106 Ga. 84 (31 S.E. 809). We think the whole tenor of the contract is that the plaintiff is to look to the corporation for compensation for the two cents bonus, and not to Kingman, the promoter, and that the promoter is not liable to the plaintiff therefor. The provision in the contract that Kingman, was "to fully finance the formation of said corporation, costs, and installation of all machinery and equipment, materials and ingredients necessary for bottling drinks, and to finance the operation of said corporation" places no individual obligation or liability on Kingman to pay anything which the corporation might owe to the plaintiff for the services performed by him to the corporation. It only obligates Kingman to perform such services for the corporation. While it might obligate him to finance the "operation" of the corporation to the extent that the corporation would be able to meet its obligation to the plaintiff to pay for the services rendered by the plaintiff to the corporation, it does not obligate Kingman to pay the corporation's obligation to the plaintiff.

The situation here is different from that in cases where goods or services are received by the promoter and it was held that the obligation to pay therefor was his individual liability. The petition is not predicated on the theory that the defendant is liable for the reason that he failed to finance the operation of the corporation. The alleged agreement to finance the operation of the corporation is indefinite as to time, and there is no allegation in the petition as to what a reasonable time would be. Furthermore, an agreement to "finance" the operation of a corporation is itself an indefinite and uncertain term, and there is no allegation as to what it meant in the contract sued on. Neither is it alleged that the failure of the corporation to pay the plaintiff was due to the failure of the defendant to finance its operation. The petition failed to set out a cause of action against the promoter, and the court did not err in sustaining the general demurrer thereto.

Judgment affirmed. Stephens, P. J., and Felton, J., concur.