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which Sully should receive one part. Fordyce Company stock, or that the It also provided for the payment out Securities Company was to obligate of the gross profits of $100,000 to itself to pay $250,000 of the ThomHammond for the purpose of reim- as-Fordyce Company's debts. bursing him for expenses thereto- In the early part of October, Sully fore incurred, as well as for any had an interview with Hammond, expenses which he might subse- in which the latter insisted upon quently incur on account of the having a further test made of the syndicate. Sully was without finan- Doremus gin before a prospectus of cial means.
the Securities Company was issued, In February, Hammond accused and offered to pay the expenses of Sully of having obligated him per- the test up to $10,000. As they were sonally to the payment of the about to separate Sully renewed a $1,600,000 to the Securities Com- request which he had made for pany, by the agreement of January $1,500 on his personal account, 7 with that company. This Sully which Hammond refused. A short denied.
time afterwards, but on the same Sully entered actively upon the day, Sully informed Hammond that work of trying to dispose of the he would issue the prospectus just stock. He interested many persons as soon as he got back to Washingof financial importance, but made ton, in order that he might sell stock no sales until the latter part of Sep- for the purpose of raising funds, tember, 1910, when he, acting for Hammond having refused to adhimself and assuming to act as the vance any more; to which Hamsyndicate manager and for the Se- mond replied: "If you do, Mr. Sully, curities Company, entered into a I will repudiate you and your procontract with S. W. Fordyce of St. spectus in every newspaper in the Louis, who owned the majoriy of country. . the stock of the Thomas-Fordyce The next day Sully wrote to MilManufacturing Company, by which ler that, in view of Hammond's rehe was to make certain expendi- fusal to advance the money which tures for the purpose of demonstrat- he had requested, he wished to notiing the commercial adaptability of fy him that he had used his best enfive cotton gins of the Doremus- deavors to sell the stock, but that, Fordyce type, and, if they were owing to Hammond's failure to cofound to be satisfactory to Fordyce, operate with him, he was unable to the Securities Company was to de- do so, and that he would, on demand liver to him $250,000 of its pre- from Miller, turn back to the latter, ferred stock at $90 per share, and to so far as he was able to do, all his accept in payment preferred stock rights or interest under the contract of the Thomas-Fordyce Company, of December 28, 1909. Miller, on at a valuation of $100 per share, and November 23, accepted the proposialso to pay in cash the outstanding tion, and so notified Sully, and deaccounts of the Thomas-Fordyce manded the return to him of the Company in an amount not to exceed capital stock of the National Cot$250,000. The contract also recited ton Improvement Company which that all the parties thereto under- he, Miller, had delivered to Sully stood the minimum value of the as- and Hammond under the contract of sets of the Thomas-Fordyce Com- December 28, 1909. pany was $500,000.
The same day on which Sully A few days afterwards, at a meet- wrote the letter to Miller, he tening between Sully, Hammond, and dered his resignation as vice presiothers, Sully outlined the Fordyce dent, general manager, and director contract to them, but did not say of the Securities Company to Hamthat shares of the Securities mond, who was then president of the Company which he had sold were to company. be paid for by shares of the Thomas- Sully wrote to "Fordyce on No(48 App. D. C. 320.) vember 16 not to give Hammond, or under the contract of December 28, anyone representing him, any ink- was laid before the meeting; also a ling of the terms of the contract be- letter from Hammond to Miller, tween Fordyce and himself.
which was joined in by other memOn the same day on which this let- bers of the syndicate, making subter was written there was a meeting stantially the same offer as that of the board of directors of the Se- made by Sully. Miller stated that curities Company, which Sully at- he had written to Sully, assenting to tended. At this meeting Hammond his proposition of October 12, and said to Sully, “You are trying to then demanded the redelivery to stick me for $1,600,000,” to which him of the National Cotton ImproveSully replied, "I am not trying to do ment Company's stock which he had anything of the kind, and you know placed in the hands of the syndicate better than that;" and further re- under the agreement of December marked that he had proved to him, 28. Hammond, on behalf of the Hammond, that there was no lia- syndicate, offered to return to the bility on the part of the syndicate Securities Company the stock which for the $1,600,000, so long as the the syndicate had received from it members “used good faith.” Not- for sale, except a few qualifying withstanding Sully's assurance, the shares held by the directors of the board at this meeting so changed company. The board accepted the the minutes of the January meeting Hammond offer, rescinded the conas to make it appear that the prop- tract of January 7, whereby the osition by Sully which the board syndicate was to purchase the stock had accepted did not obligate either of the Securities Company, accepted Sully, Hammond, or the other mem- a return of all the stock which the bers of the syndicate to pay the company had placed in the hands of $1,600,000, unless they sold the the syndicate, directed that it be stock.
canceled and that the stock of the On November 19, Sully wrote National Cotton Improvement ComHammond to the effect that he had pany be returned to Miller in acchanged his position with respect to cordance with his request. Thus, the latter's liability to the Securities all the stock of the Securities ComCompany for the $1,600,000, and pany which the syndicate was to called upon him to make arrange- sell, and from the sale of which ments to take care of the payment Sully and the other members exof that sum, in case the syndicate pected to reap a profit, was canceled.
, was asked for it or any part thereof. But this is what Sully desired to ac
Later he admitted that, in Oc- complish when, on October 12, he tober, he had been advised by his said to Miller: "I will, on your decounsel that he and Hammond were mand, proceed as far as I can to jointly liable for that sum of money turn back to you legally all and any to the Securities Company under of the rights or interests that I may the agreement which he, Sully, had have under this contract” [of Demade with the company in the pre- cember 28]. Miller, during the life vious January
of the offer, made the demand reOn November 23 the board of di- ferred to. The action of the board rectors of the Securities Company of directors of the Securities Commet again. A quorum of the di- pany just mentioned enabled the rectors was present, but all the parties to satisfy the demand; and others, including Sully, had notice thus what Sully desired, if we are to of the meeting. Hammond presided. credit his statement, was brought to
Sully's letter to Miller of October pass. 12, to which reference has already Sully asserts that the resolution been made, in which he offered to do passed by the board on November all in his power to turn back to Mil- 23 was born of a conspiracy to inler all rights which he might have jure him, and not of a desire to addecision, liability.
vance the interests of the corpora- W. 116; Girard v. Moore, 86 Tex. tion.
675, 26 S. W. 945; Stacy v. PortAt the close of all the evidence, land Pub. Co. 68 Me. 279, 287; WilHammond moved for a directed ver- son v. Vaughn, 23 Fed. 229; Press dict, which was overruled.
Pub. Co. v. Monroe, 51 L.R.A. 353, The learned trial justice, after a 19 C. C. A. 429, 38 U. S. App. 410, careful review of the evidence, said 73 Fed. 196, 201. But we do not to the jury: "When we boil this case find it necessary to decide the point. down to its last analysis, in my opin- Whatever its solution may be, it ion it turns on the motive which in- would appear that in any event there duced the action of the board of di- must be proof of a tortious act. rectors on the 23d of November, This brings us to the second ques1910, in the passage of the resolu- tion. In our view it would be a tion which they adopted.” He dangerous doctrine to announce that charged that there was no evidence a party may be punished for doing of actual damage, and that unless that which is legal, if, in the judgthe jury found that Hammond and ment of a jury, his motive was unhis associates, in the passage of the worthy. Neither the diligence of resolution of November 23, were counsel, nor our own researches, actuated by a malignant purpose, have uncovered any their verdict must be for the de
authority, either sinister act of fendant.
text or The jury was bound to follow which approves these instructions (Kuhn v. Chicago, such a principle. Nor is it in conso
M. & St. P. R. Co. Trial-instruc
nance with reason. The motive of tion-duty of 74 Iowa, 137, 140,
an act, as a general thing, has to do jury.
37 N. W.116: Bart- with its ethical value, not with its ling v. Behrends, 20 Neb. 211, 29 N. juristic character, and is immaterial W. 472; Moore v. Hinkle, 151 Ind. where the act itself is legal. To 343, 50 N. E. 822), and we must condemn a legal act because of the presume that they did so (Shreve- motive which inspired it would be port v. Cole, 129 U. S. 36, 42, to subordinate the legal to the ethi32 L. ed. 589, 591, 9 Sup. Ct. cal, would be to condition the validiRep. 210), and were governed ty of acts upon the motive which by them in formulating their called them into existence. This is verdict. If there was vice in the in- not within the province of jurisprustruction, it inheres in the verdict. dence. Until ethical principles are Two questions, then, are presented adopted by the law, they lie in a dofor solution: (a) May the members main apart from the field in which of a board of directors, under any jurisprudence operates. “As long circumstances, be subjected to puni- as a man keeps himself within the tive damages because they voted for law by doing no act which violates a resolution which resulted in no it, we must leave his motives to Him actual damage to the plaintiff, and
who searches hearts." Chambers v. (b) if so, may they be amerced in Baldwin, 91 Ky. 121, 11 L.R.A. 545, damages for passing a perfectly le
34 Am. St. Rep. 165, 15 S. W. 57. gal resolution, if it be found that
This is in harmony with many decitheir motives in doing so were
sions of the Federal courts. We sinister.
cite a few: Evans v. Sioux City Concerning the first question, the
Service Co. 206 Fed. 841, 844; Jaauthorities are by no means in har- cobson v. Chicago, R. I. & P. R. Co. mony, as a study of the following 176 Fed. 1004, 1005; Enos v. Kenwill show; 2 Sutherland, Damages,
tucky Distilleries & Warehouse Co. 3d ed. $ 406, p. 1129; Hanewacker 189 Fed. 342, 347; Warax v. Cinv. Ferman, 152 Ill. 321, 325, 38 N. cinnati, N. 0. & T. P. R. Co. 72 Fed. E. 924; Kuhn v. Chicago, M. & St. 637, 640; Welch v. Cincinnati, N. 0. P. R. Co. 74 Towa, 137, 141, 37 N. & T.P.R. Co. 177 Fed. 760, 764; Chi.
(48 App. D. 0. 320.) cago, B. & Q. R. Co. v. Willard, 220 age. Hollinberger v. Stewart, 41 U. S. 413, 427, 55 L. ed. 521, 527, App. D. C. 197, 199. 31 Sup. Ct. Rep. 460; Chicago, R. I. But the deliberations of the jury & P. R. Co. v. Schwyhart, 227 U. S. were not limited by the court to the 184, 193, 57 L. ed. 473, 477, 33 Sup. conspiracy charged. After stating Ct. Rep. 250; Adler v. Fenton, 24 that a party has a right to rescind How. 407, 410, 16 L. ed. 696, 697; a contract "which threatens to turn Illinois C. R. Co. v. Sheegog, 215 U. out disastrously for him, S. 308, 316, 54 L. ed. 208, 211, 30 subject, however, to being mulcted Sup. Ct. Rep. 101; Chicago, R. I. & in damages by the other party to the P. R. Co. v. Dowell, 229 U. S. 102, contract for whatever loss he may 113, 57 L. ed. 1090, 1095, 33 Sup.
(might) suffer," the court said: “So Ct. Rep. 684.
that, in reaching a conclusion in this In the Warax Case, Judge Taft said: “If the right exists, the mo
case, you are to consider ail the eletive for its exercise cannot defeat
ments which entered into the con
sideration of the defendant and his it.” The court announced in the Adler
associates on the board of directors Case that "an act legal in itself, and
in passing the resolution which took violating no right, cannot be made
away the rights of the plaintiff unactionable on account of the motive der these contracts, on the one hand, which superinduced it. It is the
and if the motives that inspired that province of ethics to consider of ac- action, if the purposes which they tions in their relation to motives, had in view, were for their own probut jurisprudence deals with actions tection, or were bona fide, to release in their relation to law, and for the them from an obligation which most part independently of the seemed to be a menace to the commotive."
pany, or to the individuals connectMr. Justice Holmes, speaking for ed with the company, or in good the court in the Sheegog Case, said: faith was to terminate an agreement “In the case of a tort which gives which apparently had no possibility rise to a joint and several liability, or no probability of being carried the plaintiff has an absolute right to out by the other party to it, or for elect, and to sue the tort-feasors
any other reason involving good jointly if he sees fit, no matter what faith on their part, then Mr. Sully his motive."
is not entitled to recover in this All the foregoing decisions deal
case. On the other hand, if the thing with cases in which the element of
was done maliciously, if this resoluconspiracy was lacking. If the jury tion was passed maliciously, for the in the present case had been told by sake of injuring the property rights the court that they could not find for the plaintiff unless the damages other motives which I have de
of the plaintiff, and not for these of which he complained were the result of a conspiracy between Ham
scribed, then he is entitled to a vermond and others, the above authori
dict at your hands, to be measured ties would not be in point, because
by a rule or an instruction which I in the case of a con
will give you later." Conspiraeyuse of lawful spiracy the means
Thus, the jury were told, in effect, means-effect. by which the wrong
that the resolution of November 23, is accomplished, whether lawful or by which the contracts referred to unlawful in themselves, are imma- therein were rescinded, was legal, terial. United States v. Rintelen, and if Hammond and his associates 233 Fed. 793, 796; United States v. were liable to Sully on account of Moore, 173 Fed. 122, 132; State v. the passage of that resolution, it Buchanan, 5 Harr. & J. 317, 9 Am. must be upon the assumption that Dec. 534; 12 C. J. $ 3, p. 545. The their motive in passing it was gravamen of the action lies in the vicicus. By this instruction the conspiracy and the resulting dam- question of conspiracy was put out
of sight. Guided by it, the jury him irrespective of the conspiracy. could have found that there was no In no place were they admonished conspiracy, and yet returned a ver- that they could not return a verdict dict against Hammond on account for Sully unless they found a conof the motive which actuated him spiracy. in doing what the court had said We are satisfied that the court was in itself entirely legal. True, erred in giving the
Corporationthe jury were advised in another instruction quoted. liability of place that if they found that plain- The judgment is retiff was injured through the con- versed, with costs,
motive. spiracy charged, they might find for and the cause rehim; but this detracts nothing from manded for a new trial in harmony the fact that, under the above in- with the views expressed herein. struction, they could have found for Reversed.
directorsrescission of contract
Motive as affecting personal liability of directors in voting for acts not in
That directors of a corporation are personally liable in a civil action in damages, for injury to an individual caused by an act of the corporation for which they voted at a directors' meeting, if they voted in pursuance of a conspiracy to cause the injury, and not to benefit the corporation, seems to be a necessary implication from the decision and procedure of the court in the reported case (HAMMOND V. SULLY, ante, 160). The case seems to be one of first impression upon this point. Other points discussed incidentally, infra, are not exhaustively annotated.
No search has been made for cases like Martineau V. Foley (1918) 231 Mass, 220, 1 A.L.R. 1145, 120 N. E. 445, considering the question of liability of members of a labor union for concerted action that injures a contractor's business, it being presumed that the union was not incorporated.
It has been held that a corporation may be liable in damages to one injured by its act, brought about by a conspiracy among its directors or stockholders (Dorsey Mach. Co. v. McCaffrey (1894) 139 Ind. 545, 47 Am. St. Rep. 290, 38 N. E. 208), or by their conspiracy with other persons or corporations (Aberthaw Constr. Co. v. Cameron (1907) 194 Mass. 208, 120 Am. St. Rep. 542, 80 N. E. 478; Buffalo Lubricating Oil Co. v. Standard Oil Co. (1887) 106 N. Y. 669, 12 N. E. 825; West Virginia Transp. Co. v. Standard
Oil Co. (1902) 50 W. Va. 611, 56 L.R.A. 804, 88 Am. St. Rep. 895, 40 S. E. 591); but the question of maintaining a suit for damages against the directors personally, instead of against the corporation, does not seem to have been decided.
If the proposition that such action may be maintained against the directors personally is assumed to be correct, the further question that arises, when the ultimate act that caused the injury is not in itself illegal, would appear to depend upon the general principles underlying liability for conspiracy, such question not being peculiar to directors of corporations. And it may be well to observe that, upon this hypothesis, the existence of malice does not always seem to be the criterion. Some courts hold that, even though an act done in pursuance of an agreement is done with a malicious motive and results in injury, it is not actionable if the act is such that if done by an individual, it would not have been actionable. Watkins v. Perry (1914) 25 Colo. App. 425, 139 Pac. 551; Cohen v. Nathaniel Fisher & Co. (1909) 135 App. Div. 238, 120 N. Y. Supp. 546; Prospect Park & C. I. R. Co. v. Morey (1913) 155 App. Div. 347, 140 N. Y. Supp. 380. But the weight of authority is to the effect that an act done with a malicious motive (that is, the dominant purpose of the act is to do the injury, so that the