Case Name: SHAYNE OF MIAMI, INC. Plaintiff, v. GREYBOW, INC., Defendant; In Re Ida Grand, Respondent, v. George F. Townes, as Receiver for Greybow, Inc., Appellant
Court: Supreme Court of South Carolina
Jurisdiction: South Carolina
Decision Date: 1957-12-16
Citations: 232 S.C. 161
Docket Number: 17367
Parties: SHAYNE OF MIAMI, INC. Plaintiff, v. GREYBOW, INC., Defendant. In Re Ida Grand, Respondent, v. George F. Townes, as Receiver for Greybow, Inc., Appellant
Judges: Taylor, Legge and Moss, JJ., concur.
Reporter: South Carolina Reports
Volume: 232
Pages: 161–175

Head Matter:
17367
SHAYNE OF MIAMI, INC. Plaintiff, v. GREYBOW, INC., Defendant. In Re Ida Grand, Respondent, v. George F. Townes, as Receiver for Greybow, Inc., Appellant
(101 S. E. (2d) 486)
Jack L. Bloom, Esq., of Greenville, for Appellants,
Herman E. Cox, Esq., of Greenville, for Respondent,
Jack L. Bloom, Esq., of Greenville, for Appellant,
December 16, 1957.

Opinion:
Stukes, Chief Justice.
Greybow, Inc., operated a store on Main Street in Green-ville. It is a corporation, now in the hands of a receiver, of which the capital stock was $15,000.00. Robert B. Greybow owned half of the shares, and his former wife, Ida, owned the other half for which she paid in $7,500.00 upon organization of the corporation. Personal differences, which led to their separation in December, 1953 and subsequent divorce (after which she resumed her maiden name of Ida Grand), occasioned the sale of her stock to him. An attorney of his selection prepared an agreement which was dated and executed on December 21, 1953. The parties, individually, executed the instrument which recited the desire of Ida to sell and assign her stock in the corporation to Robert, which she did for the recited consideration of $11,250.00, payable in monthly installments of $250.00, beginning Jan-' uary 30, 1954, with interest from date at five per cent per' annum and an acceleration of' maturity clause upon six months default in the payments. The amount was agreed upon by appraisal of the total worth of the corporation at $18,000.00 with the addition of $2,250.00 to the value of Ida's shares, which latter represented the unpaid balance of a loan by Ida's mother to the corporation that had been assigned to Ida. It was provided that in case of default, at Ida's election her former stock should be returned to her and the corporation liquidated or sold and from the proceeds, after payment of the indebtedness of the corporation, the balance owing Ida should be paid as a "preferred" claim; the remainder, if any, of the proceeds should go to Robert. If the indebtedness to Ida should be paid in full, then her former stock should be the unencumbered property of Robert, and Ida should have no further interest in the corporation. The note would be paid by Robert from the funds. of the corporation and he would not be personally liable in the event of default; the assets of the corporation would satisfy the indebtedness due Ida. As further security for the ' payments to Ida, Robert agreed to "place in escrow" his shares in the corporation, and also Ida's former shares, in a safe deposit box in a designated bank. An attached note was referred to and made a part of the agreement; and the bank was authorized to deliver all of the stock to Robert upon payment of the indebtedness.
The attached note, referred to in the above agreement, was dated December 1, 1953 and was executed by Greybow, Inc., by Robert, president. It obligated the corporation to pay to Ida "on order" the indebtedness of $11,250.00 upon, the terms stated in the agreement, which was referred to and made a part of the note.
The evidence establishes the solvency, indeed prosperity,' of the corporation at the time of the execution and delivery of the foreg'oing' note and agreement, but it later became insolvent and was placed in receivership by order of the trial court on June 18, 1956, and appellant is the receiver. He rejected the claim of Ida for the unpaid balance of $9,973.29 upon the indebtedness evidenced by the note and agreement. Originally he took three positions against the validity of the claim, as follows: (1) that a corporation cannot purchase its own stock, (2) that the corporation was insolvent at the time of the stock purchase, and (3) failure or absence of consideration. However, at the hearing in the lower court the receiver conceded that a corporation may purchase its own stock if it acts in good faith and there is no charter or statutory restriction and the corporation is neither insolvent nor in the process of dissolution, and such purchase is not prejudicial to the rights of creditors at the time of the purchase; and the receiver further admitted that none of these disqualifications existed; therefore, objections. (1) and (2) were withdrawn and it was so adjudged, from which there is no appeal and that is the law of this case.
The foregoing concessions left for consideration of the court only the receiver's position (3), that there was no consideration for the note of the corporation, wherefore it is not a proper claim against its assets in liquidation. In opposition, Ida's counsel contended that the inconsistency of the instruments resulted from a mutual mistake of fact because it was intended by the parties that the corporation should receive and own the stock, and it is therefore liable for the purchase price of it. There is no contention with respect to the portion of the note which represents the unpaid balance of the loan by Ida's mother to the corporation, which was assigned to Ida. Nor is there any claim of fraud or imposition upon creditors. •
Ida testified at the hearing that she and her husband agreed that she was to sell her stock to the corporation, which would pay for it. The attorney who prepared the instruments testified similarly and could not recall why the note and agreement are inconsistent in that particular. Robert did not testify although he was present at the hearing..
The court found from the evidence that the parties to the instruments had agreed that Ida would sell her stock in the corporation to it for $9,000.00 and that by mutual mistake the instruments did not embody that agreement, whereby it was held in effect that the promissory note alone expressed the true agreement.
The testimony of one Kaplan, bookkeeper of the corporation since the year 1950, was to the effect that he entered upon the books of the corporation "notes payable" to Ida for the purchase of stock, and made payments to her from the corporate funds for some months. Later the item was deleted from the balance sheet of the corporation for the purpose of improving it when efforts were made to find a purchaser, but there was no notice to Ida of the change on the books; and the altered balance sheet was not exhibited to any creditor, or for the purpose of obtaining credit.
The court concluded, as said, that there was a mutual mistake of fact from which Ida should be relieved, which was not denied by Robert. In view of that conclusion the defense of the receiver of failure or lack of consideration was rejected, wherefore the claim of Ida was allowed as filed.
The receiver has appealed and contends (1) that the obligation of the corporation, evidenced, by its promissory note, insofar as it represents the unpaid portion of the purchase price of the stock, is unenforceable for lack of consideration; and (2) that the facts do not warrant the reformation of the agreement, as adjudged by the trial court. We may limit our decision to (1) and need not consider the trial court's theory of reformation because, giving effect to the instruments as written, in the light of the testimony, there was consideration for the note of the corporation. It was not nudum pactum, as is contended by appellant. The consideration was the detriment to Ida, the promisee, which resulted from the transfer and assignment by her of her shares, then worth $9,000.00, to Robert. If the stock later became worthless, that is of no moment. Calhoun v. Calhoun, 2 S. C. 283. Blease & Baxter v. Pratt, 3 S. C. 513. Jackson v. Carter, 128 S. C. 79, 121 S. E. 559. 7 Am. Jur. 950, Bills and Notes, Sec. 252.
An age-old definition of consideration is, "a benefit to the party promising, or a loss or detriment to the party to whom the promise is made." 17 C. J. S., Contracts, § 70, p. 420. "A long series of decisions has established the rule that a benefit to the promisor or a detriment to the promisee is sufficient consideration for a contract." 12 Am. Jur. 570, Contracts, Sec. 79. For the last quoted text there are cited in the footnote our leading cases of Ferrell v. Scott, 2 Speers 344, 42 Am. Dec. 371, and Furman University v. Waller, 124 S. C. 68, 117 S. E. 356, 33 A. L. R. 615.
"Consideration may be given to the promisor or to some other person." Restatement of Contracts, Sec. 75(2). "It matters not from whom the consideration moves or to whom it goes. If it is bargained for as the exchange for the promise, the promise is not gratuitous;"Id., Comment e. "A benefit to a third person is a sufficent consideration for a promise." 17 C. J. S., Contracts, § 89, p. 436. To the same effect is 10 C. J. S., Bills and Notes, § 148(a) and (b), pp. 601, 602. "Consideration may move to the promisor or to a third person." 12 Am. Jur. 569, Contracts, Sec. 76. "Accordingly, such consideration may be said to consist in any benefit to the promisor, or in a loss or detriment to the promisee ." 7 Am. Jur. 925, Bills and Notes, Sec. 233. "Anything which confers benefit on the party promising, or is loss or inconvenience to the party to whom the promise is made, is a sufficient consideration." Fiske v. Jiidge, 2 Speers 436. "It is not controlling that the consideration should be a benefit to the promisor." Ellis & Co. v. Carroll, 68 S. C. 376, 47 S. E. 679, 680. "But loss or detriment to the promisee is sufficient as a consideration as well as benefit to the promisor." Davis v. Blum, 104 S. C. 218, 88 S. E. 465, 467.
The judgment of the 'lower court is sustained under Rule 4, Sec. 8, of this court.
There is a third contention of appellant, which has not been overlooked. It is that the payments made by the corporation on the note should have been apportioned between the amount of it which represented the purchase price of the stock and that part which was for money borrowed by the corporation. Affirmance of the judgment renders this contention irrelevant.
On the record before us in this case there is presented for decision none of the questions which frequently arise where a corporation undertakes to purchase shares of its own stock and is then, or thereby, or subsequently becomes insolvent. See the many decisions thereabout which are collected in the annotation in 47 A. L. R. (2d) 758. Nor is any such question raised by the exceptions of appellant to the judgment of the lower court; and it is not the function of an appellate court to supply a ground for reversal. 3 S. C. Dig., Appeal and Error, § 719 p. 438.
Affirmed.
Taylor, Legge and Moss, JJ., concur.
Oxner, J., dissents.