Case Title: Welborne v. PERFERRED RISK INSURANCE COMPANY

Citation: 340 S.W.2d 586

Docket Number: 5-2262

State: arkansas

Court: Arkansas Supreme Court

Date: 1960-12-05T00:00:00Z

Document:
340 S.W.2d 586 (1960) W. J. WELBORNE, Appellant, v. PREFERRED RISK INSURANCE COMPANY, Appellee. No. 5-2262. Supreme Court of Arkansas. December 5, 1960. *587 Little & Enfield, Bentonville, J. R. Crocker and J. F. Robinson, Fayetteville, for appellant. Dickson, Putman & Millwee, Fayetteville, Wright, Lindsey, Jennings, Lester & Shults, Little Rock, for appellee. HARRIS, Chief Justice. This appeal results from a decree entered by the Chancery Court wherein the complaint of appellant seeking specific performance of an alleged agreement, was dismissed for want of equity. Suit was instituted by appellant on May 28, 1958, seeking to enforce alleged rights under a pre-incorporation subscription offer executed by him in favor of appellee on March 31, 1954. Prior to this time, Welborne was a stockholder and member of the Board of Directors of Preferred Risk Mutual Insurance Company. On the aforesaid date, the mutual insurance company was converted to its present status as a stock company, and known as Preferred Risk Insurance Company. Appellant was a stockholder, and served as an officer and director in the company until May 26, 1956, when he resigned from the Board of Directors. He remained an employee of appellee until February, 1957, and, as of February 27th of that year, sold all shares that he owned in the company. The subscription agreement entered into on March 31, 1954, is as follows: The stock structure of the appellee is reflected by the minutes of the meetings of the Board of Directors. On June 30, 1954, a motion was unanimously passed by the Board providing that stock subscribed to at $20 a share prior to the organization of the company, be delivered before July 20, 1954, to those paying said purchase price,[1] and that no further stock be sold at this price without further authorization of the Board of Directors. Appellant was present at this Board meeting. In subsequent meetings, par value of stock was reduced from $10 to $1 per share, and the Board unanimously passed a motion that stockholders of record a9 of Alay 1, 1956, be offered one share of stock for each three shares held, the $1 par value stock to be offered for $2.50 per share. The record reflects that appellant bought 1200 shares of this stock, apparently at the offered price of $2.50 per share. The Board, on May 23, 1956, with appellant present, unanimously voted to offer a public issue of stock at $15 per share (par value $1) and a motion was also passed unanimously providing "that all holders of *588 rights or options to purchase stock be notified that any such right to purchase stock below the Public Issue price shall be void and of no effect after June 30, 1956." Sometime during this year, the subscription instrument was returned to Welborne, according to W. M. Ritter, president of the company, at appellant's request. In June, 1957, a stock dividend on the basis of two shares for each outstanding share was declared. On March 25, 1958, Ritter directed a letter to Welborne, stating that the Board of Directors had voted to make demand upon each subscriber for the amount of stock subscribed, at $7.50[2] per share for the $1 par value stock. The letter states: Welborne replied as follows: Appellee declined to accept this proposition, and suit followed. Appellant contends that the subscription was a contract which he is entitled to enforce by specific performance, and appellee asserts five different defenses. We deem a discussion of the various contentions advanced by the parties to be unnecessary, in view of the fact that we consider this litigation to be controlled by the doctrine of laches. This defense is closely associated with estoppel, upon which doctrine the Chancellor's decision was predicated, and we might here say that this is likewise a valid defense in this case. Laches is defined by Bouvier's Law Dictionary (Third Revision) as "unreasonable delay; neglect to do a thing or to seek to enforce a right at a proper time." Also, "The neglect to do what in law should have been done, for an unreasonable and unexplained length of time, and under circumstances permitting diligence." Appellant's right to purchase common stock came into being in March, 1954. The record does not reflect the reason for appellant's failure to exercise this right at that time, or in the subsequent months and years, though appellant, as a stockholder, officer, and director, in the company, was familiar with, and had participated in, the various board meetings heretofore enumerated; no effort was ever made to enforce any purported rights under the subscription until the letter was received from President Ritter. This letter cannot be relied upon by appellant, for it was written without authority; i. e., the record reflects no authorization from the board for the proposition contained in the letter., For that matter, this proposal was entirely different from the terms of the original subscription, and, as earlier mentioned, according to the record, the subscription instrument had already been reclaimed by Welborne sometime in 1956. It is at once apparent that enforcement of Welborne's claim would be most inequitable, for it would permit appellant to stand by for an unreasonable and unexplained length of time (four years), and as far as this record reflects, under circumstances permitting diligenceyet, glean high profits through such conduct.[3] We *589 consider the language in Austin v. Hallmark Oil Co, 21 Cal. 2d 718, 134 P.2d 777, 782, to be entirely apropos: As stated in 49 American Jurisprudence, under the heading "Specific Performance", § 73, p. 89: Also, from paragraph 76, page 93: In Lacey v. Bennett, 1946, 210 Ark. 277, 195 S.W.2d 341, 346 appellant entered into a contract on January 5, 1942, for the purchase of real property, but did nothing to assert his rights until September 9, 1945, when he sought specific performance in a cross-complaint, after Bennett had instituted suit to quiet title. In upholding the trial court's decree refusing specific performance, this Court quoted from 65 A.L.R., page 53, as follows: Affirmed. [1] Originally, the par value of the stock was $10 per share, but the initial subscribers agreed to pay $20 per share. [2] Apparently the price for the public issue Lad been reduced from $15 to $7.50. [3] Appellee, in its brief, states: "It would be a monstrous result if the law were