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Globe Woolen Co. v. Utica Gas & Electric Co.

Supreme Court of New York, Appellate Division

May 29, 1912

GLOBE WOOLEN COMPANY, Respondent,
v.
UTICA GAS AND ELECTRIC COMPANY, Appellant.

APPEAL by the defendant, the Utica Gas and Electric Company, from part of a judgment of the Supreme Court in favor of the plaintiff, entered in the office of the clerk of the county of Oneida on the 14th day of August, 1911, upon the decision of the court rendered after a trial at the Oneida Special Term.

This is an action in equity commenced on the 12th day of November, 1910, to compel the continued specific performance by the defendant of two certain contracts during the periods specified in such contracts and of any extension thereof made pursuant to their terms, entered into by and between the parties to this action and which are alleged by the plaintiff to be valid, legal and binding in all respects, and to obtain a permanent injunction restraining the defendant from discontinuing performance thereof, it being alleged that the plaintiff has no adequate remedy at law.

The defendant by its answer admitted making the contracts, denied that plaintiff did not have an adequate remedy at law to obtain the relief, if any, to which it was entitled, and alleged, in substance, that such contracts were grossly inequitable and unconscionable as to the defendant; that it was induced to enter into the same by unfair means, resulting from the fact, among

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others, that the plaintiff's president, who was its principal stockholder, and, therefore, largely interested in it financially, and who negotiated said contracts for the plaintiff, was at the time and during all the times in question a director of the defendant, chairman of its executive committee, actively participated in the conduct of its business and was influential in the control and management of its affairs, and so although he had practically no financial interest in the defendant, he being the owner of only one share of its capital stock.

It is further alleged that such contracts were negotiated for and on behalf of the defendant by the general manager of its electrical department, and, in substance, that close and friendly relations existed between him and plaintiff's president; that such general manager usually attended the meetings of the executive committee, of which the plaintiff's president was chairman and presided over; that the data which he first obtained in respect to the operation of plaintiff's plant and business was the result of investigation which he made at the instance and request of the plaintiff's president while in defendant's employ and without its knowledge or consent, and that he was paid for such investigation $150 by the plaintiff through its president.

It is further alleged, in substance, that because of the relations existing between such negotiators, because of the position which the plaintiff's president occupied in defendant, the office which he held and the relations which he thereby sustained to the members of its board of directors and to the other members of its executive committee, of which he was chairman, he was able to and did very largely influence the action of the defendant in the premises, and, in substance, that the plaintiff's president in negotiating the contracts in question was seeking and willing to obtain great advantage to the plaintiff and, indirectly, to himself, and that either in ignorance of or not caring what the result of such contracts would be to the defendant, in which he had no financial interest, he permitted them to be approved, notwithstanding that by virtue of his office and position therein he was required to be vigilant in protecting its interests.

It is further alleged that such contracts were entered into

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because of a mutual mistake as to the facts and that the plaintiff's president failed to disclose to defendant's executive committee certain material facts which were then within his knowledge and which had they been disclosed would have prevented the consummation of such contracts by the defendant.

It is further alleged that such contracts are illegal and void because against public policy, and that their continued performance would be in violation of law.

The defendant demands judgment that the contracts in question be declared null and void and that the complaint be dismissed, with costs.

The issues thus raised by the pleadings were tried at the February, 1911, Special Term of the Supreme Court. A decision was rendered, consisting of findings of fact and conclusions of law, upon which judgment was entered and which decreed, in substance: (1) That the contracts which are the subject of this litigation are 'valid and binding contracts; ' (2) that by the service of certain notices upon the defendant 'said contracts were extended for a term of five years; ' (3) 'That a decree for the specific performance of said contracts be and the same is hereby refused; ' (4) 'That the temporary injunction granted herein on November 12, 1910, be and is hereby continued in force and effect for thirty days after the entry of this judgment; ' (5) 'That neither party is entitled to costs of this action as against the other.'

From such judgment this appeal is taken.

COUNSEL

Pardon C. Williams, for the appellant.

James F. Hubbell, for the respondent.

MCLENNAN, P. J.:

From the opinion of the learned trial court (75 Misc. 539) we learn that specific performance of the contracts in question, although adjudged to be valid and binding upon the defendant, was refused because 'The contracts are burdensome to the defendant. It is largely a public service corporation, furnishing for the use of the people at large gas and electric power. Under its contracts ...


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