Court Opinion

ID: 3600145
Source: CourtListenerOpinion
Date Created: 2016-07-05 23:46:47.110288+00
Date Added: 2024-06-11T09:22:51.893996
License: Public Domain

I cannot agree with the construction placed upon this contract by the majority of the court. *Page 717 
We are now dealing with the defendant's counterclaim, and the plaintiff is in the position of a defendant. It is well to recall the situation of the parties before we enter upon the construction of this contract.
It is stated in the brief of plaintiff's counsel that at the time of the contract a serious quarrel existed between Read and the plaintiff, Edward S. Stokes. Whether this was so or not it is quite apparent that the plaintiff and the defendant contemplated a joint venture in the corporation known as the "Hoffman House."
Prior to the execution of the contract the plaintiff owed defendant $34,300, represented by four notes, and among other collateral defendant held $125,000 of the "Hoffman House" bonds deposited with him by plaintiff.
Read also owed defendant $25,000, represented by two notes, which were indorsed or guaranteed by plaintiff.
Read had deposited with defendant 1,963 shares of Hoffman House stock as collateral. Thus it appears that, before the execution of the contract, plaintiff was obligated to pay defendant absolutely or conditionally $59,300.
It was under these circumstances that defendant was to purchase, if possible, the 1,963 shares of Hoffman House stock owned by Read, which would require an expenditure, if the stock could be obtained, of nearly $40,000, thus swelling defendant's loans and investments to an aggregate of nearly $100,000.
In the light of these facts, the construction of the contract is not difficult.
I shall refer only to the points about which there is a difference of opinion.
The first and most important point in the contract is its sixth subdivision, which reads as follows, viz.:
"And as a security for these guarantees, for a loan of about $32,000, and for any obligation of said Edward S. Stokes to W.E.D. Stokes connected with said Read, and against any foreclosure of said mortgage, said Edward S. Stokes hasdeposited with said W.E.D. Stokes bonds of said Hoffman House to the par value of $150,000." *Page 718 
It is admitted that the sum here stated of $32,000 should be $34,300, the amount of plaintiff's notes held by defendant.
This clause of the contract follows several others wherein plaintiff has covenanted to do certain things and is declaratory of the new situation.
It will be observed that the collateral in the defendant's hands has been increased from $125,000 to $150,000 of Hoffman House bonds; the contract specifically declares that this increased collateral "has been" deposited. It will also be observed that the collateral is held to secure additional obligations. The $125,000 in Hoffman House bonds was held prior to the contract to secure only plaintiff's indebtedness to defendant of $34,300, but the $150,000 in bonds is held to to secure the guarantees of plaintiff under the contract, the loan made plaintiff by defendant, any obligations of plaintiff to defendant with Read and against any foreclosure of the Hoffman House mortgage.
The declaration in the contract that the new collateral has been delivered is of paramount importance in this case.
It was within the contemplation of the parties, by the very letter of the contract, that the additional $25,000 of Hoffman House bonds should be delivered by plaintiff to defendant contemporaneously with the execution of the contract.
At the trial the defendant testified that plaintiff stated at the interview when the contract was signed: "Sign it as if you had received the $150,000 worth of bonds; the other $25,000 of bonds are down stairs in the safe, and I will give them to you."
The defendant then swears they went down stairs, the bonds were not there and plaintiff said that he had forgotten that he had deposited them in the Safe Deposit Company.
The plaintiff was afterwards upon the stand and did not contradict this testimony.
Defendant also swore that he never received the additional twenty-five thousand dollars of bonds, although he repeatedly demanded them of plaintiff by letter and otherwise.
The importance of all this will be apparent presently.
In the seventh subdivision of the contract defendant agrees *Page 719 
to sell and transfer to plaintiff one-half of the whole or of such portion of said 1,963 shares of common stock as he may purchase from Read at the price he pays and interest, taking his note at twelve months, with a privilege for one renewal for a like term.
In the introductory recitations of the contract it is stated that defendant is about to purchase from Read the remainder of his stock, to wit: 1,963 shares of common stock, or a portion thereof, with the intent that they may together be the owners of the whole of the stock of said corporation.
It will be observed that in the above clause and also in the seventh subdivision of the contract the defendant is referred to as purchasing the whole of this stock or a portion thereof.
The sequel proved that Read was not willing to part with the entire amount of his stock and although defendant repeatedly applied to him he only succeeded in purchasing five hundred shares.
It is now contended by plaintiff when defendant seeks to enforce the contract, that the principal object of the agreement was to secure all of Read's stock and that defendant having failed to secure all of it he is in default and cannot compel the delivery to him of the additional $25,000 of bonds and that the contract is abandoned.
It has already been pointed out that this $25,000 in bonds should have been delivered at the time the contract was executed and that their delivery was in no manner conditioned upon defendant's subsequent performance of the contract.
It remains to be considered whether the principal object of the contract was to secure all of Read's stock. It was no doubt the intent and desire of both parties to secure Read's entire stock if possible, but it was clearly recognized by them that the consummation of this result was doubtful and so both in the recitation and seventh subdivision of the contract defendant is to purchase all of the stock or a portion thereof. The defendant insists he has carried out his contract to the letter by purchasing such stock as Read would sell and that the words in the contract indicating the possibility of securing less than the whole of the stock were inserted to protect him, *Page 720 
as it was not known whether Read could be induced to part with all of his stock.
On the other hand, the plaintiff, who is bound to give force and effect to these qualifying words, says that they were inserted to cover the possible event of plaintiff buying a portion of the stock.
This suggestion has no foundation in the contract or in the situation of the parties.
The seventh subdivision shows that plaintiff was not obligated to buy a share of the stock even if defendant had succeeded in purchasing all of it; he is vested with a mere option to take such stock as he chose, giving for it his note at a year with privilege of a renewal for a like period.
This shows very clearly that plaintiff was looking to the defendant to furnish the capital to carry out the purchase of the stock, and it also shows that defendant realizing that he might be tying up $40,000 for two years if he should succeed in getting all of Read's stock and was taking the risk of a new investment, demanded before the contract was drawn that he should have additional collateral for the purpose already pointed out.
When this position of the parties is considered I think the principal object of the contract was to secure all of the outstanding stock that could be obtained and that both plaintiff and defendant realized that the relations existing between plaintiff and Read rendered the acquisition of the whole of the latter's stock very doubtful.
I think there was abundant consideration for this contract; that it has not been abandoned, but is in full force and effect, and that defendant is entitled to receive from plaintiff as collateral security the additional $25,000 in Hoffman House bonds.
The order below should be affirmed, and judgment absolute ordered for the defendant, with costs in all courts.
ANDREWS, Ch. J., GRAY and MARTIN, JJ., concur with HAIGHT, J., for reversal.
O'BRIEN and VANN, JJ., concur with BARTLETT, J., for affirmance.
Order reversed. *Page 721