
    George H. Whittingham, Plaintiff, v. David H. Darrin et al., Defendants.
    (Supreme Court, New York Special Term,
    December, 1904.)
    A contract to control corporate management is not a partnership agreement.
    In an action for dissolution of an alleged partnership between stockholders of a corporation the contract provided that the stock held by .them could be sold to other persons only by mutual consent, and that stock so sold should be drawn equally from the shares held by the parties to the contract and that, in the event of a sale by either party, the other should have a prior right of purchase. The object of this agreement, as therein set out, was to keep the holdings of the parties “ equal at all times, except when either party desires to reduce his holdings voluntarily ”.
    Held, such contract does not create a partnership and lacks every essential of copartnership articles;
    That, it is nothing more than a personal contract by majority stockholders to control corporate management;
    That a demurrer to the complaint, upon the ground that it did not state a cause of action, must be sustained, and incidental relief against the corporation for an accounting and injunction be refused;
    As the incidental relief for accounting, etc., asked against the corporation, was proper on the theory of the complaint, a demurrer by such defendant corporation, on the ground that the Complaint improperly united different causes of action, should be overruled.
    Action by plaintiff against defendant Darrin, demanding a judgment annulling an alleged copartnership agreement and dissolving the copartnership. Demurrer to complaint.
    
      Taylor More, for plaintiff.
    Clarence E. Thornall, for defendants David H. Darrin and D. H. Darrin Company.
    Hansen, Zinsser & Power, for defendant Automatic Switch Company.
   Blanchard, J.

The plaintiff claims in this action that a copartnership exists between himself and the defendant Darrin in relation to the stock of the defendant, the Automatic Switch Company, and he demands a judgment annulling the alleged copartnership agreement and dissolving the copartnership. As incidental relief the plaintiff seeks a further judgment directing that the assets of the copartnership, consisting of said corporate stock, be sold and an accounting had between the plaintiff and defendant Darrin of all their transactions; that an injunction issue restraining the several defendants from proceeding with certain actions and proceedings now pending in this court and in the courts of the State of Maryland; that the defendant, the said Automatic Switch Company, a Maryland corporation, be dissolved; that its property be sold for the benefit o.i its creditors (if any there shall be) and for the benefit of its stockholders, including the plaintiff; that a receiver be appointed of its property; that its assets be divided among the parties as their interests may appear; and finally, that an injunction be granted enjoining the Automatic Switch Company and its directors and agents from arbitrating, settling or compromising the alleged differences between the Automatic Switch Company and the defendant, the Darrin Company, a New York corporation. The Automatic Switch Company has demurred to the complaint upon the ground that it does not state facts sufficient to constitute a cause of action against it for its dissolution or .for the appointment of a receiver of its property; also upon the further ground that several causes of action have been improperly united. The defendants David Hi Darrin and the D. H. Darrin Company have demurred upon the ground that causes of action have been improperly united. The facts stated in the complaint clearly indicate that the real controversy in this action arises out of a contest between the plaintiff and other stockholders of the Automatic Switch Company for the control of the management of the company. The plaintiff contends that the defendant Darrin has secured such control by fraudulent means. The alleged copartnership agreement in respect to the stock of the company which the plaintiff seeks to have annulled is between the plaintiff on the one part and the defendants David H. Darrin and the D. H. Darrin Company on the other part. Such agreement is, in effect, that any stock of the company held by the plaintiff or the defendants Darrin and the D. H. Darrin Company may be sold to other parties upon the mutual consent of the parties to the agreement; that the stock so sold shall be drawn equally from the stock owned by the plaintiff and the defendants Darrin and D. H. Darrin Company, and that in the event of such sale of stock by either party, the other party shall have the prior right to purchase the stock at the same price offered by the outside intending purchaser. This agreement also contains the following provisions: “ The object of this agreement being to keep the holdings of George Herbert Whittingham and- David H. Darrin by mutual agreement equal at all times, except when either party desires to reduce his holdings voluntarily. It is further agreed that so long as David H. Darrin and George Herbert Whittingham hold the same amount of stock and perform equal duties they shall each draw the same rate of salary.” The terms of this agreement appear to have been performed, as the complaint states that in October, 1903, the plaintiff held 952 shares of the stock and the defendants Darrin and the D. H. Darrin Company (represented by the defendant Darrin) also held 952 shares. The entire balance of the stock, amounting to 1096 shares, was owned by other parties. It is not possible to give a construction to this agreement which will create a partnership relation between the parties to it. It lacks every essential 'of articles of copartnership. It does not show a joint business venture in which the parties are to share in the profits and bear the liabilities thereof. It is evidence of nothing more than an attempt by two parties holding the majority of the stock of a corporation to perpetuate, by their personal contract, their joint control of the management of the corporate affairs. The parties may have intended by this to manage the corporation as a mere copartnership, but such attempts are apt to result in failure sooner or later, as this case clearly shows. The plaintiff does not attack this agreement for fraud or mistake, and it appears that it was executed, in so far at least as the division of the slock between the parties to it was concerned. The plaintiff has shown no reason calling for the annulment of this agreement, nor has he established the existence of any copartnership relation between himself and the defendant Darrin in respect to the stock or business of the Automatic Switch Company. Their relations in this respect were those of parties owning a controlling interest in the stock of the company, and this agreement did not alter that relation at all. Therefore, the plaintiff’s alleged cause of action fails and the incidental relief which he seeks by way of an accounting, injunction, dissolution of the defendant the Automatic Switch Company (a foreign corporation), and receivership and distribution of its assets, .must be denied, for the right to- such relief is concededly based upon the theory that the plaintiff has a cause of action for the dissolution of a copartnership and for a partnership accounting in relation to the business and stock of the Automatic Switch Company. As to the demurrers that causes of action have been improperly united, it will be -sufficient to state that a careful analysis of the complaint leads to the conclusion that the plaintiff has attempted to state but one cause of action, viz., for a dissolution of the alleged copartnership between himself and the defendant Darrin, and for a partnership accounting in respect to the business and stock of the defendant, the Automatic Switch Company. The demurrer to the complaint upon the ground that no cause of action is stated is sustained, with costs. The demurrers that causes of action have been improperly united are overruled, with costs.

Ordered accordingly.  