Case Name: ELBERT A. JONES vs. MARIA R. BOARDMAN, Administratrix, et al.
Court: Court of Appeals of Maryland
Jurisdiction: Maryland
Decision Date: 1925-04-15
Citations: 148 Md. 147
Docket Number: 
Parties: ELBERT A. JONES vs. MARIA R. BOARDMAN, Administratrix, et al.
Judges: 
Reporter: Maryland Reports
Volume: 148
Pages: 147–153

Head Matter:
ELBERT A. JONES vs. MARIA R. BOARDMAN, Administratrix, et al.
Decided April 15th, 1925.
The cause was argued before Boxn, C. J., Pattisox, ITbweb, Adkiks, Oebutt, Digges, Pabke, and Walsh, JJ.
J ann.es Mor fit Mullen, for the appellant.
J ames Clark and J ames J. McGrath, for the appellees.

Opinion:
Bond, C. J.,
delivered the opinion of the Court.
The appellant was patentee of a device for the saving of waste yarns in cotton mills, called a "bunch builder," and he made a contract with T. V. Boardman to> sell the patent rig'hts to Boardman "and associates" for .$25,000, upon the condition that in case a corporation was formed for the manufacture and sale of the device he, Jones, should accept in full payment of his patent rights $10,000 of the $25,000 in money "to be paid to me from fifty (50%) per cent, of the first cash received from the sale of securities of said corporation," and the remaining" $15,000 of the price of $25,-000 in common stock of the corporation at par. And as part of the arrangement Jones agreed to act as an incorporator, and as viee-president and director after organization.
The corporation was organized a few months later, with Boardman as president and Jones as vice-president and director according to arrangement, and, in addition, as secretary; and Boardman formally turned over the patent rights to it for, 1498 shares of the common stock of a total par value of $149,800, out of an authorized total of 1500 shares of an aggregate par value of $150,000. When the stock was issued, Boardman and Jones, as officers, issued a certificate for 150 shares of it, of a par value of $15,000, to Jones, in accordance» with the contract-
Of the payments to he made "from fifty (50%) per cent, of the first cash received from the sale of securities of said corporation," Jones later received a total of $6,000 in installments, paid, as he says, as Boardman "sold the stock."- This was not all paid in cash; because» of Boardman's need of the money, $1,000 was paid in preferred stock of the corporation and $1,000 in a Jfiherty bond. The remainder was paid in money. There were still unpaid $4,000 of the $10,000 to he paid from the sale; of securities. 'Boardman has since elied, and in a proceeding to subject his real estate to the payment of his debts, Jones has filed a; claim as creditor of Boardman personally for the $4,000; and that claim has been disallowed on exceptions of other creditors, because it does not appear tha! any more of the stock received by Boardman for the patent rights has been, or could have been, sold and converted into money for further payments. Jones appeals from this disallowance of his claim.
Testimony taken in the lower court showed statements by Boardman before his death that there was a balance due from him to Jones, on account of the purchase of the bunch builder, of $4,000, and, again, that he still owed Jones more of the whole $10,000. There was testimony, too, that, under a special authorization of the directors, preferred stock of the corporation was sold by Boardman, on commission; that shares to a total par value of $130,000 or more were thus sold by him, and that his commission amounted to about $20,000.
The question to be decided, then, is whether Jones was relegated to the money to he received from the sale of the common stock in Boardman's hands for payment of the $10,000 in money, or the remainder of it unpaid, or whether Boardman was personally liable to pay it, either from his commissions from the sale of preferred stock or otherwise.
There is no obscurity in the arrangement which the parties decided upon for themselves in the contract, and nothing invalid about it. Their agreement was that, on the formation of the projected corporation, the $10,000 in money should be paid from cash received from the sale of securities, and, deferring for the moment any discussion as to the meaning of the words, that is now the sole source from which the appellant may claim payment. Such a designation of the source of payment is regularly subject to the qualification that if the person who is to pay from that source is shown to have defeated the arrangement (Rumsey v. Livers, 112 Md. 546, 553), he may be held personally liable for the debt; but nothing of the sort has been shown by the appellant here. The contract arrangement, on the facts before us in this record, is in full force and effect. The claimant chose to commit $10,000 of the valuation placed on the patent for the transaction to the chance of success in selling securities of the exploiting corporation, and the court cannot, of course, substitute and enforce another arrangement for him. Payment is made dependent upon a condition precedent, and recovery could be had only upon fulfillment of the condition, or defeat of it by the party in control of the source of payment. Rumsey v. Livers, supra, 552; Pistel v. Imperial Ins. Co., 88 Md. 552, 562; Ordeman v. Lawson, 49 Md. 135, 158; Cline v. Miller, 8 Md. 274, 282; 2 Williston, Contracts, sec. 675. In Rumsey v. Livers, supra, 552, this Oourt, deal ing with an undertaking by a principal contractor to pay a subcontractor as and when the principal contractor received payments from the owner, said: "But as the agreement contained the unusual provision that the debt should be due when payments were received by the defendants under the principal contract, it was essential to the plaintiff's recovery that he should aver and prove not only the existence of the debt, hut also that it had become payable either on account of the actual receipt by the defendants of the sums due them from the company or as a result of such conduct on the part of the defendants as would preclude them from relying upon the provisions suspending the maturity of the plaintiff's claim." And even when the defendant stands in the position of agent for the plaintiff to receive money or property on his account, the principal must prove the receipt of the money or property before he can require an accounting by the agent or recover against him personally. 1 Mechem, Agency, see. 1344; Harr v. Rome, 28 App. D. C. 214.
For determining the meaning of the reference for payment to the cash received from the sale of corporate securities, we have some possible meanings eliminated at the outset. Under their arrangement in organizing the corporation, the parties had obtained from it full consideration for the patent rights to ho exploited, in the 1498 shares of the common stock. They transferred the rights for that stock, and duly issued the stock to Boardman in full payment. Therefore, the corporation cannot he looked to for any further payment for the patents, and the appellant cannot demand payment out of any money which might come to it from other subscriptions to its stock, that is, to the preferred stock, which remained after payment for the patent. And as it does not appear from this record that Boardman received any preferred stock which might under arrangement .with Jones be looked to as an additional source of payment, it would seem to he from the sale of the common stock issued in payment of the patent rights that the appellant's money is to come — unless, indeed, the money which it is testified Boardman received as commissions on the sale of the preferred stock may also be treated as within the meaning of "cash received from the sale of securities of said corporation." According to the direct, ordinary meaning of the words, however, "cash received from the sale of securities" would he the cash proceeds of sale, and not commissions earned by selling the securities. And at the time of the making of this contract Boardman had no right to commissions. The hoard of directors which later authorized 'the commissions, and fixed the rate, was, of course, not then in existence. For these reasons the intention of the parties when making that contract would seem, as far as this record goes, rather to have been that the money payments for the patent rights were to come to Jones only from the proceeds of sale of the common stock distributed to Boardman in consideration of their transfer to the corporation. Our conclusion is, then, that the construction placed upon the contract by the court below was correct on the evidence before it.
As to the reported statements of Boardman that "there was a balance due from him to Mr. Jones on account of the purchase of the bunch builder," and "that he still owed him some'more," our conclusion is that these fragmentary statements were not alone sufficient to justify the court's finding in the present record that there was any undertaking other than that set forth in the contract, which appears to have been the whole actual basis of the relation between the two parties, and that, therefore, they must be taken to refer to the conditional obligation already discussed, and to add nothing to the appellant's rights under it.
This Court is impressed with the fact that, in the proceedings below, the parties took no evidence on sales of securities from which payments might he made to Jones, and made little' or no reference to that source to which, as we find, payments were restricted. It may he that the facts were fully known to the claimant, and there was no controversy on that element. But we have concluded that before finally disposing of the claim, the coxu't below should give the claimant an opportunity to open the inquiry and adduce proof, if he elects to do so, on the disposition hy Boardman or his representatives of securities which he held, as a possible source of payment to Jones under the arrangement between the two of them. With this end in view, we will remand the case without affirming or reversing the order.
Case remanded, without affirming or reversing the order, to the end that further proceedings may he had in accordance with this opinion, if the appellant so elects; costs to he paid hy the appellant.