Clark v. Dodge

199 N.E. 641 (1936)

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Nature of the Case

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Facts

Clark (P) had a secret formula to manufacture medicinal preparations. P and Dodge (D) formed corporations to take advantage of that method. P and D were the sole owners of the stock of the companies used to market and manufacture the medicine; Bell & Co., Inc. and Hollings-Smith Company, Inc. P owned 25%, and D owned 75% of the companies. On February 15, 1921, P and D entered into an agreement whereby P would spill his guts as to the formula and D would use his stock while alive and after his death by trustee to ensure that P remained a director of Bell and should also continue as its general manager so long as he was faithful, efficient and competent and always receive 1/4 of the net income by way of salary or dividends and that no unreasonable or incommensurate salaries should be paid to other officers or agents that would materially affect payments to P. The same agreement was reached for the Hollings corporation. P agreed to disclose the formula to D's son and did so. P then sued D for the failure to use his stock to control ensure that P was a director and general manager and has prevented P from receiving his proportionate income while taking his own (D) and employing incompetent persons at excessive salaries. P asked for reinstatement and an accounting for waste and an injunction against further violations. The court refused, and P appealed.