Court of Appeals of New York
199 N.E 641 (N.Y. 1936)
Clark (plaintiff) owned 25 percent of each of two corporations. Dodge (defendant) owned the other 75 percent of each. Clark was a director and the general manager of Bell & Co., Inc. (Bell), one of the corporations. The corporations manufactured medicinal preparations by secret methods and formulas known only to Clark. Dodge and Clark entered into an agreement that provided that Clark would disclose the secret formula to a son of Dodge and in return, Dodge would vote his stock so that (1) Clark would continue to be a director of Bell; (2) Clark would continue to be the general manager of Bell as long as he was “faithful, efficient and competent;” (3) during his lifetime, Clark would receive ¼ of the net income of the corporations; and (4) no unreasonable salaries would be paid to other officers of the corporations which would reduce the net income. Clark brought suit, claiming that Dodge did not use his stock to maintain Clark as director and general manager and that Dodge hired “incompetent persons at excessive salaries” so as to reduce the portion of net income paid to Clark. The appellate court dismissed the complaint. Clark appealed.
Rule of Law
Holding and Reasoning (Crouch, J.)
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