Court Opinion

ID: 9680053
Source: CourtListenerOpinion
Date Created: 2023-08-24 07:18:13.222564+00
Date Added: 2024-06-11T18:17:25.114310
License: Public Domain

RONNIE L. WHITE,
Judge, dissenting.
I respectfully dissent. The majority creates a factual and legal fiction resulting in a $15 million windfall to a sophisticated investor. Weinstein’s shares were extinguished by a federal bankruptcy court at a time when he, as shareholder, bore that risk. When Weinstein later attempted to exercise the option, the shares no longer existed, resulting in a total failure of consideration.
The majority correctly notes that the adequacy of consideration is assessed at the time of the option agreement, not at the time of the exercise of the option.1 However, in the cases cited by the majority and others discussed in FletcheR Cyclopedia,2 the consideration diminished in value but continued to legally exist. Po-linsky involved an option contract in which consideration consisted of corporate stock that had significantly depreciated but still legally existed. In Union Pac. R. Co. v. *418KC Transit Co.,3 the consideration was the construction of transportation facilities. In Air Vermont, the consideration was a depreciated airplane. In Vorchetto v. Sap-penfield,4 the consideration was depreciated land. The common denominator of the foregoing cases is that consideration, though perhaps severely diminished in value, still legally existed when performance became due.
The problem, however, is not the adequacy but rather the very existence of consideration at the time of the attempted put. The majority pretends that “the shares, though worthless, do in fact exist.” On the contrary, the shares were, in law and in fact, extinguished by a federal bankruptcy court and, therefore, no longer in existence.5 Only the paper certificate remains, and, by order of the bankruptcy court, it represents nothing at all. The majority’s disregard for this reality causes one to wonder under what circumstances it would ever recognize shares as cancelled, if not by order of a federal court.
Williston on ContRacts explains the difference between worthless and non-existent: “Although many courts would undoubtedly draw the line and hold that the surrender of a worthless paper, having neither present nor potential intrinsic value, is not consideration, most courts, even today, would follow the rule that surrender of a paper, though it turns out factually to be valueless, can serve as consideration for a promise, so long as there is some possibility, though dubious or completely uncertain, that it might have at least some value ” (emphasis added).6 Weinstein’s claim does not succeed using either of these approaches. Under the first, Wein-stein’s paper certificate, which the majority recognizes as worthless, is not consideration. Under the second, because the shares were legally extinguished by a federal court, there is no possibility — dubious, uncertain, or even theoretical — that the shares have any value whatsoever. Ninety years ago, this Court instructed as follows:
“Where the failure of consideration is total, as where nothing of value has been received by the defendant under it and the plaintiff cannot perform it ... the defendant may plead want or failure of consideration. However, mere inadequacy in the value of a thing bought or paid for is not a want or failure of consideration. This covers only total worthlessness to all parties or subsequent destruction, total or partial” (italics in original, bold emphasis added).7
In short, the majority ignores this Court’s own precedent and treats as nonbinding the judgment of a federal bankruptcy court. Respecting the intended legal effect of both, one must conclude that a failure of consideration occurred. The majority’s discussion of the law of adequacy of consideration is correct but not applicable to this case. The circuit court’s judgment should be affirmed.

. In re Air Vermont, Inc., 44 B.R. 440 (Bankr.D.Vt.1984); Polinsky v. Vaughan, 268 Cal.App.2d 183, 73 Cal.Rptr. 764 (Cal.App.1968); 12A Fletcher Cyclopedia of the Law of Private Corporations, s5575.

. In Malloy v. Short, 1991 WL 86205 (Conn.Super. May 9, 1991), the insolvent company and its stock still legally existed, and the purchase agreement had already been executed, therefore the buyer was not excused from paying the balance of the note. In Napoli v. Cavalier, 163 A.2d 824 (D.C.App.1960), the insolvent company and its stock still legally existed, therefore, the buyer (also joint owner) could not claim lack of consideration. Also see Johnson v. Dodgen, 451 N.W.2d 168 (Ia.1990), where a buyer of stock in a bank that closed 15 years after the transaction could not claim lack of consideration to avoid remaining payments on the promissory note.

. 401 S.W.2d 528 (Mo.App.1966).

. 223 Mo.App. 460, 14 S.W.2d 685 (1929).

. Black’s Law Dictionary defines "extinct” and "extinguished” as "no longer in existence or use,” leaving no doubt regarding the legal effect of the bankruptcy court's order.

. 3 Williston on Contracts section 7:21 (4th ed.).

. Lindsay v. Sonora Gold Min. & Mill. Co., 196 S.W. 764, 766 (Mo.1917).