Source: http://il.findacase.com/research/wfrmDocViewer.aspx/xq/fac.19610406_0040150.C07.htm/qx
Timestamp: 2017-01-16 15:11:19
Document Index: 430425904

Matched Legal Cases: ['§ 78', '§ 78', '§ 78', '§ 78', '§ 78', '§ 78', '§ 78', '§ 78', '§ 3', '§ 1474', '§ 2']

BANKERS LIFE AND CASUALTY COMPANY, PLAINTIFF,v.BELLANCA CORPORATION, DEFENDANT. BELLANCA CORPORATION, COUNTER-CLAIMANT-APPELLEE, V. BANKERS LIFE AND CASUALTY COMPANY, COUNTER-DEFENDANT-APPELLANT. BELLANCA CORPORATION, COUNTER-CLAIMANT-APPELLANT, V. BANKERS LIFE AND CASUALTY COMPANY, COUNTER-DEFENDANT-APPELLEE.
Bankers Life and Casualty Company*fn1 commenced a state court action against Bellanca Corporation*fn2 seeking declaratory judgment as to the ownership of 500,000 shares of common stock of Automatic Washer Company.*fn3 Bellanca answered and filed a counterclaim which, as amended, seeks recovery of $4,000,000.00 from Bankers for 500,000 shares of Automatic it delivered to Bankers. After amendments in the pleadings the case was removed to the District Court on grounds of diversity. Motions for summary judgment and judgment on the pleadings were denied Counts I to IV inclusive of its counterclaim; and the cause proceeded to trial without a jury on the amended counterclaim (Counts V and VI) and the amended answer thereto.
The District Court after entering findings of fact, conclusions of law, and filing a written opinion granted judgment for Bellanca on Count VI of the counterclaim in the amount of,1,250.000.00 plus interest from August 8, 1956 at 5% per annum. Both parties appealed.
The defense by Bankers to Bellanca's counterclaim for recovery for the 500,000 shares it delivered and Bankers elected to retain is grounded on Bankers' assertion that the contract of sale and Bellanca's conduct with respect thereto violated Section 16(c) of the Securities and Exchange Act, 15 U.S.C.A. § 78p(a) and (c),*fn4 and consequently by reason of the provisions of Section 29(b) of the Act, 15 U.S.C.A. § 78cc(b), it need not pay for the 500,000 shares.
We do not deem it necessary for the purposes of this case to review the findings of fact or conclusions of law of the District Court in so far as they bear on the question of whether the agreement of May 8, 1956 or Bellanca's conduct with respect thereto constitutes a violation of either clause (1) or clause (2) of 15 U.S.C.A. § 78p(c). Under the provisions of § 78cc(b) the consequence of a violation is that the contract shall be void "as regards the rights of any person who, in violation of any such provision, rule, or regulation, shall have made or engaged in the performance of any such contract, * * *". It is only the contract rights of the party in violation which are voided. The party in violation can not enforce his or its rights thereunder. But no rights of the party not in violation are impaired. And where, as in the instant case, the party charged with being in violation of § 78p(c) has by default in a material matter breached the contract, after having partially performed, and because of this breach is precluded from enforcing the contract against the other party, the presence or absence of a § 78p(c) violation is without material legal effect. The rights of the other party are the same in either event. The purchaser's rights are neither impaired nor regulated by § 78cc(b). That the rights of the purchaser are accompanied by correlative duties to the seller does not impinge upon the declared purpose and effect of the federal statute, where it applies, to void the contract rights of the seller.
Whether the seller's rights under the contract have been voided by § 78cc(b), or have become unenforceable because of its breach of the contract, the rights of the purchaser are to be measured by the law of the jurisdiction involved. Here the contract was made in Illinois. Bankers' election to retain the shares delivered was made in Illinois. The law of Illinois governs.
In United States for Use of Judson River Stone Supply Co. v. Molloy, 2 Cir., 144 F. 321, 324 the court quoted Oxendale, as above, with approval and added:
"'With us also it has been frequently held, in conformity with Oxendale v. Wetherell, that if part of an entire order for goods is accepted and retained after or with knowledge that the whole will not be furnished, an implied contract arises to pay pro rata, subject in some courts to a counter claim for damages for noncompletion. Bowker v. Hoyt, 18 Pick. (Mass.) 555, an excellent illustration; Richards v. Shaw, 67 Ill. 222; Flanders v. Putney, 58 N.H. 358; Harralson v. Stern, 50 Ala. 347; Sentell v. Mitchell, 28 Ga. 196; Goodwin v. Merrill, 13 Wis. 658; Booth v. Tyson, 15 Vt. 518; Shaw v. Badger, 12 Serg. & R.(Pa.) 275; Rulz v. Norton, 4 Cal. 355, 60 Am.Dec. 618; Saunders v. Short, [9 Cir.], 86 Fed. 225, 30 C.C.A. 462 and cases cited.'
"'It is a rule supported by the weight of modern authority, that, if the buyer of a specified quantity of goods sold under an entire contract, receive a part thereof, and retain it after the seller has refused to deliver the residue, there is a severance of the entirety of the contract, and the buyer becomes liable to the seller for the price of such part; but he may reduce the seller's laim by showing that he has sustained damage by the seller's failure to fulfill his contract.' R. N. Benjamin's Principles of Sales, p. 146, § 3, and cases cited."
Whatever difficulties may exist in accommodating abstract and formal concepts of contract law to the formulation of the rule evolved and recognized by the cases and authority above cited, and applied in Illinois, should be resolved by the "overriding general policy, as Mr. Justice Holmes put it, 'of preventing people from getting other people's property for nothing when they purport to be buying it'". Kelly v. Kosuga, 358 U.S. 516, 520-521, 79 S. Ct. 429, 432, 3 L. Ed. 2d 475.
Under Count V of its counterclaim Bellanca seeks to recover $4,000,000,00 as the "contract price" of the shares delivered. Under Count VI it seeks to recover $4,000,000.00 as the "reasonable value" of the shares at the time of delivery.*fn5
The District Court found the reasonable value of the stock on the date of Bankers' election to retain it, August 8, 1956, to be $2.50 per share - the lowest market value on that date. The principal sum of the judgment is computed on that basis. In our opinion the District Court did not err in measuring the recovery by such market value on the date of Bankers' election.
The $8.00 per share figure recited in the contract, and claimed by Bellanca to govern, cannot be wrested from its context. At the most, it was the price Bankers was willing to pay for 1,112,500 shares if it obtained such additional shares at $6.75 per share as would give it 51% stock ownership of Automatic and, if it could make payment for the 1,112,500 shares by transfer of stocks it owned in four other corporations at the agreed valuation. Under these contractual provisions consideration of $8.00 per share as the "contract price" would be wholly unjustified and unrealistic.*fn6 In addition, insofar as the market price on the date of delivery ($6.75 per share) is concerned Bellanca's default and breach, which made it impossible for Bankers to complete the contract, did not occur until August 8, 1956, when it failed to make delivery of the balance of the shares as required under the contract. Under the facts here involved we are of the opinion that the measure of Bankers' liability should be restricted to the value it received - the value of the stock at the time it exercised its election to retain it. See Williston on Contracts, § 1474, supra. It could have returned the 500,000 shares and recovered any damages it sustained by reason of Bellanca's breach. But it elected to retain the shares and it makes no claim for damages.
Whether or not a party is entitled to interest under Ill.Rev.Stat. Ch. 74, § 2 because of "unreasonable and vexatious delay" depends upon the circumstances of each particular case. People ex rel. Carpentier v. Central and Southern Truck Lines, Inc., 17 Ill.2d 120, 124, 160 N.E.2d 777. Here the value of the shares retained was readily ascertainable by reference to a generally recognized standard - the market price on August 8, 1956 - and the amount payable a simple matter of computation. Cf. Harvey v. Hamilton, 155 Ill. 377, 380, 40 N.E. 592, 593; Kelley, Maus & Co. v. Caffrey, 79 Ill.App. 278, 279.