Court Opinion

ID: 5210668
Source: CourtListenerOpinion
Date Created: 2022-01-06 16:11:58.730401+00
Date Added: 2024-06-11T08:27:15.469006
License: Public Domain

Kellogg, J. (dissenting):
The referee properly finds that the contract of June 10, 1903, contains the entire contract between the parties. It is not claimed that either party was ignorant as to the language used in the contract, or that any mistake was made in reducing it to writing, and neither party has asked its reformation. It must stand, therefore, as a statement of the rights and the duties of the parties with reference to the proposed extension to Lake Placid.
The referee finds, however, that the contract was intended by the company and its officers to provide for and secure the extension of the railroad to Lake Placid, and their understanding of the writing at the time it was signed was that by its terms it imposed upon Powers and Mansfield (hereinafter called the contractors) an obligation to extend said railroad, or cause the same to be extended, and to begin actual work on such extension within three years, and sooner if practicable, and that said contractors knew that the company and its officers understood it to provide for and require such extension.
We thus see that the referee has not construed the contract made between the parties, but has in fact made a new contract, entirely different in its meaning and effect from the one which he finds the parties actually did make. There is no finding of any failure to perform this part of the contract as actually written. ' Upon the *322theory that the contract' required the contractors to build the extension to Lake Placid, and that after the contract was éxeeuted they said, when, attempting' to sell their interest in the contract to anothei-j that they were hot required to build ¡the extension, and upon the trial they took a similar- position, a. rescission of the contract has been decreed, practically forfeiting the many thousands of dollars which the contractors have expended in part performance of the contract with reference to electrifying and rebuilding the road.
Such determination is erroneous for two reasons: (1) The.contract is plain and speaks for itself, and is binding upon the parties unless in a proper action brought therefor it is reformed upon the ground that as - written it does not carry out the contract actually made. (2) The facts do not sustain the-findings of the -referee that the contractors were bound by any conclusions which the company and its officers had as to the meaning of the contract signed.
The known facts leading up to the contract, briefly stated,- are: The company- in writing had offered the contractors .all of its property for one dollar if they would electrify the road and extend it to Lake- Placid. May 8, 1903, the contractors wrote the attorney for the company, who- was also a director and secretary and who had the negotiations in charge^ that there was not the proper material upon which to form an. intelligent estimate for the extension, and that they were not' willing to put in the money for a survey for that purpose and that they, therefore, would surrender the option unless the company would turn over the property on some equitable arrangement with the stockholders and leave the question of the extension to the contractors, saying: “ I take it you would not wish this extension completed unless it would pay.” May eleventh the attorney answers asking them to come and lay before the directors the proposition they thought was proper, saying: “ You will find them ready to enter into any just and reasonable arrangement. Of course, we do not want any extension that will not pay, but putting the cost at what we know it can.be built for and! the receipts at a fair estimate we are fairly certain of its paying.” There is no suggestion that any survey or any estimate as to the probable expense of the building of -the road was thereafter made by the company or the contractors.
Pursuant to the -request in that letter the contractors met the *323directors and presented to them a draft of the proposed arrangement which said nothing about the Lake Placid extension, ■ and explained fully to them each clause of the contract and then retired from the meeting. Thereupon the directors appointed a committee, of which said attorney was one, to take up the matter of the contract with the contractors. In the evening the contractors and the attorney agreed upon several corrections to the proposed contract, which were to be written out by the attorney, and when they met the directors in the morning the proposed contract as written up by such attorney had in it this Lake Placid clause, to which the contractors objected, saying that that was put in the agreement without authority, and an interview was then had between the contractors and the attorney, aside from the directors, in which the attorney stated in substance that the directors did not want it understood that the extension project was abandoned and that they wanted this clause in the contract, to which he added that it did not obligate them to build the road and it would rest with them as the controllers of the company. The plaintiff was not present at the meeting June 10, 1903, when the contract was actually signed, but was there the previous day. On his direct examination he stated parts of the interview, and was asked : “ Q. Anything said as to when they were going to turn over the stock ? A. That was practically all the details. There was more talking than I can remember, but that was the substance of it — changing the road over, and extension to Lake Placid at their and our option.” Some days later, on cross-examination, his attention was called to this testimony arid he says if he so answered he did not intend to do it; that may be there was a mistake in the testimony; that it was furthest from his mind that •it rested in anybody’s option, and then says: “ I don’t say that I didn’t say it, but. I do say if I did say it I didn’t intend to say so. Q. It dropped out unbeknown to you then? A. You can put it as you choose.”
Adopting all of the evidence in behalf of the plaintiff as to what was said and done, the fact remains that the company and its representatives knew that the contractors had refused to take the road as a gift and extend it to Lake Placid and had refused even to pay the expense of a survey, and claimed that an estimate of the cost of the road could not be otherwise made. They knew that the Delaware *324and Hudson Company had refused the road on substantially similar terms and that both said parties felt that it was not practicable to make the large expenditure for the extension in view of the business in prospect. At the company’s request their attorney prepared this clause of the contract.1 Its language is their language and the contractors reluctantly assented to it. The contractors say that they were induced to sign the contract by reason of the statements made by the company’s attorney, who was also its director, that the contract did not obligate them to build the road. In substance the two contracting parties had disagreed. Each had presented his terms which were rejected. One of the parties prepared a modified agreement satisfactory to it and requested the other to adopt it, which they finally did. The parties were, therefore, dealing at arms length with each other. Each is at liberty to stand upon the strict letter of the agreement, and as stated before, the conversations and the intentions of the various parties are immaterial except so far as may be gathered from the instrument itself spread npon the known facts existing at the time of its execution.
If the contractors were to make the extension, clearly the agreement would have so provided, for it states particularly what the contractors agree to do and what the company is to do and then provides: “ This contract is made upon the mutual understanding that said electric railroad is to be extended through the Ausable Valley to Lake Placid as soon as practicable and work to be begun within not longer than three years.” This was the mutual understanding of all the parties interested in the company and outlined the future policy of the company and bound the good faith of the old and the new stockholders and officers to make the extension if it was found practicable so to do. Ho provision is contained for financing the extension. All were familiar with the valley and knew that it was practicable to construct a railroad to Lake Placid so far as physical conditions were concerned. A survey of the road upon which an estimate of its cost could be based had not been made, and the mooted question was whether the country served would probably have business enough to warrant the expenditure of the money required, and whether such prospects, together with the mortgaged property of the company, could be capitalized for a sum sufficient to pay for the expenditure. The words “ as soon as *325practicable ” must refer, therefore, to the ability of the mortgaged company to make the extension upon the credit of the old road and the proposed extension, for no other arrangement had been made for money or capital for the extension. The contract and the conduct of the parties show clearly an intention to surrender the stock and the bonds upon performance of the contract for rebuilding and electrifying the old road. Ho one assumed that such stock and bonds were to be used in any way in financing the proposed extension. The contractors as individuals assumed no more burden for the extension to Lake Placid than the other stockholders except so far as they would in time represent the majority interest in the company. Undoubtedly the old stockholders expected that this contract eventually was to result in the extension of the road. The language used was theirs and was the best they could get, and counseling their hopes rather than the terms of the contract they felt that the contract would bring about the desired result. Apparently they were so sure that the proposed extension was necessary to the old company and would be profitable to its owners that they were willing to leave the matter for the action of the company upon the pledge of the good faith of all parties interested that the road should be built as soon as practicable. There, is nothing to' show that the contractors had in mind that the company believed they were personally liable under this clause to extend the road to Lake Placid except so far as they might co-operate with the other owners of the property in such extension. Ho one swears to any suggestion which could be so interpreted.
The contractors were justified in saying that they were not bound to extend the road to Lake Placid because they had never agreed to do anything of the kind. The only breach of this provision in the contract is that while attempting to sell their contract to the Delaware and Hudson Company the contractors stated that they were not bound to build the extension, and upon this trial their attorney stated that Powers and Mansfield were not bound to build the extension. This cannot make a breach of contract. It was asserting their construction of the contract, and so far as they personally were concerned it was the correct construction, although they, with the other stockholders, were committed to the proposition that the company would extend its road to Lake Placid.
*326This action was brought March-5, 1905.. The three years mentioned as the time within which to begin the extension had but about one-half expired, and shortly after the action was brought steps were taken to increase the capital stock of the company for the declared purpose of enabling it to build the extension, which proceedings were stayed by the injunction issued in this case at the plaintiffs instance.
We must assume that the' contractors did not believe that they were assuming a personal obligation to build the extension and that any obligation with reference to it rested upon the company and the stockholders mutually as members of the company. If the company’s attorney represented to them that the contract did not obligate them to build the road, they had all the more reason to believe that such was the. true construction of the understanding. This is entirely immaterial except so far as it depends upon the good faith of. the contractors, and tends to show that they believe they personally were not assuming any direct obligation. If a man signs a contract and then states his honest view of its construction that cannot be turned into an abandonment of the contract or such an act of.bad faith in making it that his acts under the contract maybe forfeited, especially where he is only repeating the statement made to him by the attorney of the other contracting party by which he was induced to execute the contract. . Good.faith at least and the rules of equity require that under such circumstances a demand for performance should be made so that if not properly advised as to his rights he may act deliberately with reference to them. Plaintiff as a stockholder and one of the old directors, who was a party to the contract, has never requested that the company enter Upon or consider the matter of the proposed extension to Lake Placid, and.it does not appear that any stockholder pr officer of the old company has ever made such a request to the contractors or the stockholders of the company, He has been as dilatory in that respect as the contractors, and where the obligation is mutual as here he is hot in a position to claim that the facts make such a breach of the contract as to justify a rescission at his instance.
There is no evidence that it was practicable for this company, •with its seven miles of road mortgaged for $175,000, to build, ah extension to Lake Placid at a probable cost of $1,000,000. Ho *327suggestion has been made as to how the company could finance such an enterprise. Clearly, it would be necessary to establish the cost of the extension and to furnish reliable data as to the probable earnings of the road before financial assistance could be afforded to the extent necessary to bring about the result. Ho stockholder or director has ever suggested a plan or requested the company to seriously take the matter up for action, except so far as the defendants themselves sought to increase the capital stock of the company for that purpose, which was interrupted by the plaintiff’s injunction.
Some acts tending to a performance of the contract with reference to rebuilding and electrifying the old road took place immediately after the execution of the contract, and a large amount of money was expended. After action brought, the contractors entered actively upon the performance of the contract, and have spent large amounts of money and substantially rebuilt the road. Immediately after the contract, the contractors purchased for the company the Port Kent dock, and entered into negotiations with the Delaware and Hudson Company for the right to cross its tracks. When the the contractors became satisfied that they could not obtain the right to cross the tracks as desired, they made a formal report, Hovember 3, 1903, to the company of the situation, and asked the company to appoint an attorney, so they might be in position to force the cross- ' ing. This report whs voted on file, and the company entered into independent negotiations with outside parties to see if they could not effect an amicable adjustment with the railroad company. Ho attorney was appointed until the next spring, when the contractors elected their board of directors.
The plaintiff threatened to resign as a director if the company got into any controversy with the Delaware and Hudson Company about the crossing before the road was rebuilt down to the crossing. Probably much of the delay was caused by his trying to force his views upon the contractors and the company, when it was for them and not him to determine how the work should be done. There was much delay by the company in placing the stock in escrow as agreed; some delays were caused-by supposed or actual legal complications, some perhaps from other fault of the company, its officers or others, and some from the apparently unreasonable neglect of the contractors. The plaintiff, at the time the contract was made, owned *32820 shares of ten dollars each of the capital stock of the company. After the principal delays had occurred and before action brought, he had purchased 2,172 shares more of stock, and at the time of the trial owned 2,489 shares. The stock acquired by him since the contract was for substantially a nominal consideration.. Before lie can be allowed to speculate as to the construction of the contract and the transactions in which he was a party, he should at least be required to put the contractors upon strict performance by proper notice requiring the execution of the contract upon their part. The delays suffered, apparently acquiesced in by him and the others, require some action upon his part at least before he can enforce a forfeiture. (St. Regis Paper Co. v. Santa Clara Lumber Co., 186 N. Y. 89.) It is evident that the contractors have not fully rebuilt and electrified the road according to the terms of the original contract, and that they have obtained the bonds from the company before they were entitled to the same according to the terms of the contract. It is, therefore, proper that the injunction restraining the sale or disposition of the bonds should continue until the determination of the action, or until the further order of the court. I favor a reversal of the judgment and a new trial, with costs to the appellant to abide the event.
Chestee, J., concurred.
Judgment modified as. per opinion, and as so modified affirmed, without costs to either party.