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to prevent the transfer of its business, and that, even if it be guilty of a breach of the contract, only nominal damages are recoverable.

The plaintiffs were commission agents engaged in selling cotton and woolen goods in the city of New York. Shortly prior to the 1st day of January, 1899, the president of the defendant applied to the plaintiffs to become its agents in selling cotton wadding, which it was about to manufacture. There existed at this time a cotton wadding trust known as the Union Wadding Company. The plaintiffs evidently surmised that the defendant might be engaging in this line of business for the purpose of selling out to the trust, and they accordingly asked whether this was "a knock at the trust," to which the president of the defendant replied, in substance, that it was not; that the business was profitable, and they were taking it up for the purpose of making money on the manufacture and sale of the goods. The plaintiffs were offered a commission of 5 per cent., and informed that they would have the sal: of all the wadding manufactured by the defendant, except wadding for the carriage trade, concerning which they were already under a contract with other parties, as stated. The plaintiffs agreed to take the business for the year 1899. The business was continued on these terms during the year 1900, during which time the plaintiffs were energetic in introducing the defendant's wadding to the trade and obtaining customers therefor. The sales during the year 1899 aggregated $10,211.81, all of which, except $96, was during the last half of the year, which was the season in which the demand was greatest. The plaintiffs gave evidence tending to show, and sufficient to warrant the jury in finding. that on the 2d day of January, 1900, the president of the defendant called upon them, expressed satisfaction with the way they had handled the business during the previous year, stated that they should have the business for the year 1900 on the same terms as for the first year, and that as soon as the existing contract for the sale of carriage wadding expired, which would be on the 1st day of August, they should have that business also, which he represented amounted to $30,000 during the previous year; that the question concerning the defendant's selling out to the trust arose again at this time, and the president of the defendant stated that "they would not sell out"; and that plaintiffs accepted this proposition on the express condition that they should have the carriage wadding business as offered.

Assuming that both parties acted in good faith in entering into this contract, it is evident that it was intended to continue for a year, and that the defendant should continue business, and that the plaintiffs should continue to represent it as in the past. Moreover, the plaintiffs accepted the employment upon condition that they should have the sale of the carriage wadding after August 1st, and defendant sold out and discontinued the manufacture prior to that time, except to fulfill the existing contract, as already stated. We think it clear that in making| this contract there was an implied agreement on the part of the defendant to continue manufacturing throughout the year, and that in suspending manufacture and transferring its business it was guilty of a breach of the contract. Sterling v. Maitland, 5 Best & Smith, 840; Wells v. Alexandre, 130 N. Y. 642, 29 N. E. 142, 15 L. R. A. 218; Booth v. Cleveland Rolling Mill, 74 N. Y. 15; Jaquin v. Boutard, 89

Hun, 437, 35 N. Y. Supp. 496, affirmed 157 N. Y. 686, 51 N. E. 1091; Genet v. Delaware & Hudson Canal Co., 136 N. Y. 593, 32 N. E. 1078, 19 L. R. A. 127. It is true that there was no express agreement as to the quantity of goods that the defendant was to manufacture, nor can it be said that there was an implied agreement that it should manufacture any particular quantity of goods; but I think there was an implied. agreement that it was to continue the manufacture in good faith. If it had done so, and did not manufacture as much during the year 1900 as it did during the preceding year, undoubtedly the plaintiffs would be. limited in their commissions to the goods actually manufactured and sold by them; but here the defendant has broken its contract by suspending the manufacture altogether. In these circumstances, plaintiffs are entitled to recover such damages as they are able to show flowing from defendant's breach of the contract. That damages to the plaintiffs resulted is reasonably certain. The evidence fairly warranted the inference that if the defendant had continued the manufacture of cotton wadding it would have manufactured as much, if not more, in the year 1900, as it did in the previous year, and that the plaintiffs would have been able to sell at least as much that year as they sold the preceding year, exclusive of the carriage wadding, which branch of the business. would likely have been as profitable as in the year before. This evidence of the probable profits that would have been realized by the plaintiffs, if the defendant had fulfilled its contract, afforded a sufficient basis for the recovery of damages, and sustains the verdict. Wakeman v. Wheeler & Wilson Mfg. Co., 101 N. Y. 205, 4 N. E. 264, 54 Am. Rep. 676; Dickinson v. Hart, 142 N. Y. 183, 36 N. E. 801; Dart v. Laimbeer, 107 N. Y. 664, 14 N. E. 291; Bagley v. Smith, 10 N. Y. 489, 61 Am. Dec. 756.

It is claimed that this is not the theory on which the question of damages was submitted to the jury, and that the learned trial judge charged, in effect, that there was an implied contract on the part of the defendant to manufacture as much cotton wadding during the year 1900 as it had manufactured during the previous year, but we do not so read the charge. The learned judge drew the attention of the jury to the figures showing the sales during the year 1900 and for the previous year, so far as made, and in doing so distinctly stated that the plaintiff's could not recover on the theory that more goods would have been manufactured and sold in the year 1900 than in the year 1899, but that the amount manufactured and sold during the previous year would be the maximum basis of recovery. The jury were not instructed, as a matter of law, that the plaintiffs were entitled to recover the maximum amount of commissions figured on the theory that the manufacture and sales would have equaled those of the previous year; and we think they must have understood from the charge that they were to determine what amount of goods, not exceeding, however, the amount manufactured during the previous year, defendant would have manufactured during the year 1900, which the plaintiffs would have sold, were it not for the suspension of business, and to award as damages the plaintiffs' commission on this amount.

It follows, therefore, that the judgment and order should be affirmed, with costs. All concur, except PATTERSON, J., who dissents.

(89 App. Div. 627.)

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WORTHINGTON et al. v. HERRMANN.

(Supreme Court, Appellate Division, Second Department. December, 1903.) 1. SALES-FRAUD-OFFICERS OF CORPORATION-SALE OF STOCK-REPRESENTA

TIONS.

Where the executive officers of a corporation gave an option to purchase their stock, covenanting to permit the purchaser a full examination of the company's affairs, and their statement as to the company's affairs, which was made a part of the option, though erroneous, was secured from the company's bookkeeper and an expert accountant, they were not chargeable with deceit, in the absence of any evidence of actual fraudulent intent. 2. SALES-OPTION-OFFER-EFFECT.

An instrument executed by the owners of corporate stock, whereby they agree to sell to another person within a specified time for a specified price, is not an agreement between such parties, but a mere offer, revocable by the owners at any time before acceptance.

3. SAME-OPTION-REPRESENTATION.

Where an option for the purchase of corporate stock, which was a mere offer and executed only by the owners of the stock, recited that the corporation was the owner of the assets and indebted to the amount shown in an annexed schedule, the recital and schedule amounted to a representation, and could not be regarded as merely descriptive, as showing the understanding that led up to the agreement.

4. SALES-OPTION-CONSTRUCTION-WARRANTY.

The owners of stock in a very large and growing corporation gave an option for the purchase of the stock. The option was given on February 24, 1899, and was dated February 1, 1899, and recited that the corporation was the owner of the assets and indebted to the amount shown in an annexed schedule; but appended to the schedule was a paper entitled "Explanatory Notes," which stated that the schedule was prepared from the balance sheet of April, 1898, and corresponded therewith, except that the bills payable had been increased and might thereafter be increased according to the requirements of the business, and except as to the statement of the values of certain stocks and good will, and as to the value of certain patents belonging to the company. There was evidence that the sellers had stated, before the option was accepted, that they could not and did not intend any warranty of the floating indebtedness. Held, that the recital, schedule, and the explanatory notes did not amount to a warranty.

5. SAME CONSTRUCTION OF WARRANTY.

If there was a warranty, it did not apply to the indebtedness of the corporation on February 1, 1899.

Hooker, J., dissenting.

Appeal from Judgment on Report of Referee.

Action by Charles C. Worthington and others against Theodore L. Herrmann, impleaded with the Colonial Trust Company and William L. Bull. From a judgment in favor of plaintiffs, defendant Herrmann appeals. Affirmed.

The following is the opinion of Referee Odell:

All of the allegations of fact contained in the amended complaint, except the allegations of performance by the plaintiffs, and that $70,000 of the purchase price of the stock in question have not been paid by the defendant, are admitted by the amended answer. So far as material at present, they may be summarized as follows: Henry R. Worthington, was a corporation with a share capital of $7,500,000, of which $5,500,000 consisted of common stock of the par value of $100 per share. The plaintiffs owned or controlled 50,098 shares of this common stock. On February 24, 1899, they, without any consideration, delivered to the defendant Bull a writing, signed only by them and dated February 1, 1899, which purported to be an agreement between

them and Bull, by which they jointly and severally granted unto Bull, his "nominees or assigns," an option for 60 days from the date last mentioned for the purchase of the common stock owned by them, respectively, at $55 per share, and which provided that in case the said Bull, his "nominees or assigns," should accept said option, they (the plaintiffs) would deposit the stock with the said Bull as trustee, "to be held and dealt with pending the acceptance of the option and the completion of said purchase as may be arranged between the party of the second part [Bull] and his nominees or assigns." It was further provided that, at the request of Bull, "his nominees or assigns," the plaintiffs would procure the right to an examination by the purchaser of all property and assets of the corporation, and "submit to expert accountants all books of account, vouchers, bills receivable, and papers pertaining to the business heretofore conducted by the said company, and will afford such expert accountants every facility for acquiring information as to the character of the business of and the property of the company." In one of the recitals of said paper or agreement it was stated that "Henry R. Worthington is the owner of the assets and is indebted in the amount shown in the statement annexed hereto, marked 'Exhibit A,' which is embodied in this agreement as a part thereof." Exhibit A showed various assets, amounting to $7,648,355.64, and various liabilities, including the preferred stock, amounting to $2,401,342.85. Appended to this statement of assets and liabilities, and forming part of the exhibit, was a paper with the heading “Explanatory Notes." In this it was stated, among other things, that the "foregoing statement" was prepared from the balance sheet of April 1, 1898, and corresponded therewith, except in the statement of the values of certain stocks and the good will, patents, and patterns belonging to the company; that the bills payable had been increased by about $130,000 since the date of said balance sheet, and "may hereafter be increased or decreased according to the requirements of the business, but, if increased, the new balance sheet will show a corresponding increase in assets"; and that in the balance sheet of 1899 the outstandings and inventories and value of the tools would be corrected. On February 28, 1899, Bull delivered to Samuel Untermyer a paper signed by him and by Untermyer also, in which he was designated as vendor and Untermyer as purchaser, and in which it was recited that he was the holder and owner of the above-mentioned option, in connection with which he held 50,098 shares of the common stock of the Henry R. Worthington corporation, indorsed in blank, and by which he assigned and set over unto Untermyer, “his nominees and assigns, and to any corporation that may be organized to acquire the shares of stock referred to in said option or the property of the company, all the rights of the vendor under the accompanying agreement"-being the option agreement received by Bull from the plaintiffs. It was stipulated that the said stock should be deposited with the defendant the Colonial Trust Company, to be delivered to the purchaser or his nominee on the full payment of $55 per share to the plaintiffs and $1 per share to Bull within 30 days after acceptance of the option, and, in case the purchaser or his nominee should fail to make and complete such payment, the stock should be forthwith returned to Bull. Thereupon the plaintiffs deposited with said trust company the said 50,098 shares of common stock. Prior to March 10, 1899, Untermyer assigned and set over to the defendant Herrmann all his rights and interests under the said two writings of February 1st and February 28th, and thereafter, and prior to the 10th day of April, the defendant accepted the said option, and notified the plaintiffs and the defendant Bull of his acceptance thereof, and that he would pay the purchase price of the said 50,098 shares of the stock into the trust company, and upon such payment would demand delivery to him of the said shares. On April 10, 1899, which was the last of the 30 days mentioned in the said paper writing of February 28th, the defendant requested of the plaintiffs an extension of time for the payment of said stock. Thereupon an agreement was made, to which the plaintiffs and the defendants Herrmann and Bull were parties, by which it was agreed that the defendant should at once pay the plaintiffs, on account of the purchase money, the sum of $500,000; that the balance should be paid on or about the 15th of April, provided that from such balance should be deducted and deposited with the Colonial Trust Company the sum

and 122 New York State Reporter

of $70,000, to be disposed of as provided in said agreement; that "no other objection or question upon the closing of the transaction shall be raised by Mr. Herrmann, except as to his right to the said $70,000 or some part thereof;" and that, as follows: "If, by reason of the debts of Henry R. Worthington existing on first February, 1899, Mr. Herrmann has, under the agreement of first February, 1899, the legal right to insist upon a reduction (not exceeding Seventy thousand dollars) of the purchase price to be paid to Messrs. Worthington and Miller, or the legal right to recover from said Worthington and Miller any part of said Seventy thousand dollars, then and in any such case there shall be paid from said Seventy thousand dollars to Mr. Herrmann the amount of such reduction or such amount Mr. Herrmann is so entitled to recover. The entire $70,000 less the amount, if any, of such reduction and recoverable amount, shall be paid to Messrs. Worthington and Miller. * * * The question of the right to such reduction or payment shall be determined by suit at law or in equity, unless the parties shall otherwise agree." Thereafter, and on the 15th of April, upon the payment by Herrmann of the balance of the purchase money, the said sum of $70,000 was deposited with the defendant the Colonial Trust Company, as provided by said agreement of April 10th, and this action was brought to determine the conflicting claims of the plaintiffs and the defendant Herrmann thereto.

as

Briefly stated, the contention of Herrmann is that the third recital of the paper of February 1st was a warranty by the plaintiffs that on that date the indebtedness of the Henry R. Worthington corporation and its book accounts and bills receivable were as set forth in Exhibit A in the said recital referred to; that the defendant accepted the said option in reliance upon such warranty; that such warranty was false, in that on February 1st the indebtedness of the corporation was much larger, and the book accounts and bills receivable were much less, than as so represented; that the said representations as to assets and liabilities were made by the plaintiffs with the intent to deceive the defendant; that he was deceived thereby, and damaged in the sum of $244,230.17, and therefore, because of both such breach of warranty and such fraud and deceit, the defendant is entitled to have paid to him the said deposit of $70,000, and also to have his action against the plaintiffs to recover the residue of the damages sustained by him. There are other facts of more or less importance which are either not disputed or clearly proved, to which reference may be made hereafter. In so far as the defendant's claim rests upon the charge of fraud and deceit, it is not supported by the proofs. The plaintiffs, when they issued the option, were the executive officers of the Worthington corporation, but it is not to be presumed from that fact that they had accurate knowledge of its financial condition or of the numerous details of its vast business. They can be charged with only a general knowledge of matters not entering into and forming part of their own personal duties in the administration of its affairs. When, in their negotiations with Mr. Untermyer, they undertook to ascertain the value of the stock which they were offering for sale, they applied for information as to assets and liabilities to the bookkeeper in the employ of the corporation, and accepted as correct the statement furnished by him and an expert accountant, and this they embodied in the option, qualifying it by the explanatory notes. It may have been erroneous, and the use of it by them may have produced damage to the purchaser for which they are liable, but direct proof of an intent by the plaintiffs to deceive, or proof of facts from which such intent may reasonably be inferred, is wholly wanting. The covenant in the option by which the plaintiffs obligated themselves to secure to the purchaser the fullest examination of the company's affairs seems to me to go far towards disproving any such intention. Upon the testimony I am unable to find as a fact that the plaintiffs were guilty of deceit or bad faith in any part of the transaction out of which this litigation has arisen. "The gravamen of the action [for deceit] is actual fraud, and nothing less will sustain it." Kountze v. Kennedy, 147 N. Y. 129, 41 N. E. 414, 29 L. R. A. 360, 49 Am. St. Rep. 651; Schwenck v. Naylor, 102 N. Y. 686, 7 N. E. 788. If the defendant has any cause of action, it is for a breach of the alleged warranty said to be found in the third recital of the option paper.