Court Opinion

ID: 8193667
Source: CourtListenerOpinion
Date Created: 2022-09-09 23:16:49.496335+00
Date Added: 2024-06-11T16:40:41.425286
License: Public Domain

The following opinion was filed February 7, 1922:
Owen, J.
Plaintiff’s cause of action is founded upon the contracts between himself and Pawling and himself and Harnischfeger under date of July 10, 1911, by which Pawl-ing and EJarnischfeger severally agreed to sell to the plaintiff eighty-three shares of the capital stock of the Pawling & Harnischfeger Company for the sum of $12,450, the purchase price of which was to be paid by the application of all dividends declared in favor of said stock by the company. These contracts are set forth in the statement of facts, and *98more extended reference Mali not be made to them at this time.
The trial court, upon the contention of the respondent, held that these contracts were void for want of mutuality; that upon their face they appear to be gratuities from Har-nischfeger and Pawling to the plaintiff; that they did not obligate the plaintiff to do anything; and that if there was any consideration to support them it must be found in evidence dehors the contracts. Evidence offered by respondent was therefore admitted to show the prior dealings between the parties relating- to this stock, which evidence included the contract of February 10, 1911, between Pawling and the appellant. The judgment is assailed here principally upon the alleged error committed by the court in so construing the contracts and in the reception of such extrinsic evidence.
We are therefore immediately confronted with the proper construction of the contract of July 10th. It provides “that the said party of the first part does hereby agree to sell to the said party of the second part” eighty-three shares of the capital stock of the Pawling & ITarnischfeger Company. “The purchase price for said stock it is agreed is the sum of $12,450. It is agreed that such purchase price shall be paid by the said party of the second part to the said party of the first part by the application of all dividends declared in favor of said stock by the Pawling & Harnischfeger Company annually or at any time when such dividends are declared; such dividends to be paid to the said party of the first part directly b}>- said corporation.” This certainly looks like a generous contract. It is an arrangement by which the party of the first part agrees to sell certain shares of stock to the party of the second part, such stock to be paid for out of dividends accruing thereto. It amounts to an agreement to give to the party of the second part the shares of stock therein mentioned when the dividends accruing thereon shall amount to the purchase price therein fixed. The contract *99•does not provide that any interest on the purchase price shall be charged or paid. Thus far the contract has every earmark of a mere gratuity.
But attention is called to the fact that the contract further provides that “in any event the entire purchase price for said stock shall be paid within ten years from and after July 1, 1911, and if such dividends declared by said Pawling & Harnischfeger Company are insufficient to pay the entire purchase price, as aforesaid, the balance shall be paid by the said party of the second part within the time above limited.” Appellant contends that this obligates the party of the second part to pay the purchase price stipulated in the contract within ten years from the date thereof whether or not any dividend be declared, thus furnishing an adequate consideration for the contract. Respondent contends that this provision merely amounts to an option to be exercised by the party of the second part at his discretion, and means that if the dividends do not amount to the full purchase price within ten years, and the party of the second part desires the stock, he must at that time pay the difference between the accrued •dividends and the purchase price; otherwise the stock is forfeited. The pertinent language is: “in any event the entire purchase price for the stock shall be paid within ten years.” Plainly this fixes the duration of the contract. But does it amount to the assumption of any responsibility on the part of the party of the second part ? Perhaps under some circumstances it would be so construed. But language is always to be construed with reference to the context, and in the interpretation of contracts they are to be taken by the four corners, and the intent of the parties discovered from a consideration of the entire document. The language is not inapt to constitute the option privilege for which respondent contends. It does not comport with the language employed to bind the party of the first part. It will be observed that the contract starts out by stating “the said party of the first part does hereby agree.” There is no *100doubt concerning the meaning of that language. It is significant that the contract contains no similar language binding the party of the second part. From beginning to end there is no language whereby the party of the second part expressly agrees to do anything. It cannot be said that the language, “in any event the entire purchase price of the stock shall be paid within ten years,” is consistent only with an obligation on the part of the party of the second part, to make such payment. As already stated, it is appropriate language to express the idea that the duration of the contract is ten years; that the opportunity of the party of the second part to acquire the stock in the manner specified expires in ten years, at which time he must pay the difference in cash if he wants the stock.
A generous spirit pervades the contract. It seems to have been the purpose of the party of the first part to extend to the party of the second part an easy opportunity to acquire stock in the corporation. It is said that this is not necessarily true, and for all that appears the contract might have been a beneficial one to tile owner of the stock, in that he secured a substantial price for the stock in ten years. It is readily appreciated that such a contract would be an advantageous one for the owner of worthless stock — so advantageous in fact that no one with the slightest business sagacity would become a party of the second part thereto. But such chimerical hypothesis affords neither a safe nor reasonable test in ascertaining the intention of the parties to this contract. There is ample evidence that the stock dealt with had substantial value. It is indicated by the price stipulated, by the mutual assumption that it would pay dividends, and by the allegations of the complaint that the dividends accruing thereto in nine years were more than eighty per cent, of the stipulated purchase price. We cannot avoid the conviction that the contract was a beneficent rather than a harsh bargain, and that it was the intention and purpose of the party of the first part to deal generously with the party of *101the second part, and to provide an easy way for him to acquire an interest in the corporation, and that the opportunity was in the nature of an option of which the party of the second part was required to avail himself within the ten-year period. We agree with the lucid observation of the learned trial judge, made during the course of the trial, when he said:
“I have read this contract through several times, and you cannot escape — at least I cannot — the conclusion as you finish it, that either it is lacking in mutuality — either the contract existing between them is lacking in mutuality, or else this isn’t the whole of the contract. It might be analyzed in'a number of ways, but, on the face of it, it seems that $12,500 worth oí property is being turned over to Mr. Squier, he does not have to pay for it for ten years, no interest to be charged against him in any event, and if the dividend in the meantime amounts to the sum of $12,500 he has that property. Now it in itself suggests that we must look somewhere else for the rest of the bargain.”
This results in the conclusion that .the contract is void and unenforceable for the reason that it lacks mutuality and is in the nature of a mere gratuity. The respondent might well have rested his case upon this proposition, but he chose to offer evidence showing, the entire transaction and the relation between the parties, which was received by the court. While this was objected to on the part of appellant, in view of our construction of the contract of July 10th the reception of that evidence was not prejudicial to him. The respondent offered evidence which constituted appellant’s only resort to establish a valid contract. This included the contract between Pawling and Squier under date of February 10, 1911. We need refer to but two items of that contract to conclusively indicate the intention of the parties in the respect we have been discussing. Item 9 thereof provides that if the appellant voluntarily discontinues his service with the corporation, then the agreement is to be utterly void, and item 11 provides that the agreement shall not be con*102sidered a sale of said stock, “but as an option on the part of said Samuel H. Squier to acquire and purchase said stock.”
When Pawling negotiated with Harnischfeger for the sale of his interest in the corporation to the latter, it was agreed between the two partners that the burden of this contract, and those of a similar nature with the other two employees, should be borne equally by Pawling and Harnischfeger. It seems that Harnischfeger knew of the contract of February 10th when it was made, and that Squier knew of the negotiations between Pawling and Harnischfeger. It is unnecessary for us to discuss at length all of the extrinsic evidence received in the case to indicate the purpose and intention of the parties in the contracts of July 10th. The conclusion of the court to the effect that the rights of the parties are referable to the contract of February 10, 1911, finds most satisfactory support, if indeed it is not conclusively established, by such evidence.
It follows that the contracts of July 10th were not contracts of absolute sale, but that they partook of the option character of the contract of February 10th, and that for the appellant to enjoy the benefits arising from that contract it was necessary for him to remain in the employ of the corporation during the term thereof. It being a conceded fact in the case that he voluntarily quit the service of the company November 1, 1916, long before the purchase price of the stock had been paid in the way of accumulated dividends or otherwise, the contract was terminated and his rights thereunder ceased. Thereafter he was not entitled to have the accrued dividends applied on the purchase price, nor was it his privilege or right after that time to tender the balance of the purchase price and demand delivery of the stock.
By the Court. — Judgment affirmed.