Court Opinion

ID: 5191937
Source: CourtListenerOpinion
Date Created: 2022-01-06 15:37:28.85038+00
Date Added: 2024-06-11T08:25:56.317318
License: Public Domain

Laughlin, J.:
The action was brought' to reform a written agreement on the ground of mutual mistake. On the 15th day of September, 1899, the plaintiff was the business manager of the American Queen, a corporation organized' under the laws of West Virginia, having its principal office in the city of New York and engaged in the publication of a monthly magazine called the American Queen. The capital stock of the corporation consisted of 10,000 shares of preferred stock and 10,000 shares of common stock-of the par value of $10 each. The plaintiff was a large owner of this stock and the defendant owned 4,626 shares of the common stock and 4^950 shares of the preferred stock. It was agreed that the defendant should sell his stock to the plaintiff for the sum of $5,000. In fulfillment of this agreement the plaintiff delivered to the defendant his five promissory notes for $1,000 each, all bearing date on that day, and falling due in twelve, eighteen, twenty-four, thirty and forty-two months respectively. The certificates of stock held by the defendant were surrendered and new certificates issued in the name of the plaintiff, which were delivered to the defendant as collateral security for the payment of the notes. The understanding was tlia-t payments of $500 might be made on the notes at any time, and that upon each payment the defendant should surrender to the plaintiff 514 shares of the common stock and 550 shares of the preferred stock.
Subsequently the plaintiff desired to have the agreement formally reduced to writing by an attorney. The defendant acceded to his request in this regard and gave the plaintiff a letter to Mr. White, who was defendant’s attorney. The plaintiff called on the attorney and gave the information from which a formal agreement, dated October 18, 1899, was drafted, which was signed by the parties. It does not appear that the defendant made any suggestion to the attorney with reference to the agreement. The plaintiff testified concerning his interview with the attorney ; “ I asked Mr. White to draw up a contract and gave him such memoranda as I thought was necessary to make it up.” The agreement as thus prepared and signed is the one sought to be reformed. The plaintiff contends *501that it was the understanding between him and the defendant that, if the magazine did not pay, lie would not be obliged to pay the notes, and he desires to have the agreement reformed by incorporating a provision to that effect. The plaintiff testifies that such was the agreement, and in this he is corroborated by his wife; but he does not testify that he communicated that part of the agreement to the attorney. The testimony of the plaintiff and his wife in this regard is controverted by the defendant. This is the only testimony bearing on that issue.
Whether the plaintiff’s apparently absolute liability was to become unenforcible, in the event that the magazine was not a financial success, thus became a question of fact, 'which the trial court has determined in favor of the defendant. It appears that the plaintiff paid $500 on one note and $1,000 on another, when, according to his own testimony, the magazine was not on a paying basis. In this state of the testimony, and in view of the fact that the plaintiff gave the sole information upon which the agreement was prepared and subsequently signed it after hurriedly reading or glancing over it, it is manifest that the court would not have been warranted in reforming the agreement.
It appears that the formal contract in writing does not embody the entire contract of the parties according to the undisputed testimony.; but the provisions omitted were for the benefit of the defendant, and were not put in issue. According to the defendant’s testimony, he was not to hold the plaintiff upon the notes for any deficiency if the assets of the corporation were not sufficient to pay the same, but this was not the agreement as contended for by the plaintiff, and the plaintiff made no request to amend his complaint by demanding a reformation of the contract in accordance with the testimony of the defendant. <
It appears that the plaintiff defaulted in the payment of the note . maturing March 15, 1901, and the defendant in his counterclaim alleges that the plaintiff failed to make a complete delivery of the stock as collateral, in that no assignment of the stock in blank or otherwise was made to the defendant, and the defendant demanded that the plaintiff be ordered and adjudged to indorse and properly assign the certificates remaining in the defendant’s hands as collateral to the notes remaining unpaid. The formal agreement of *502October 18, 1899, recites that the plaintiff has deposited the stock in question with the defendant as collateral security for the payment' of the notes, hut it was therein expressly agreed that the defendant should not “ dispose of, hypothecate or pledge said stock or any portion thereof in any manner whatsoever.” The plaintiff contends that in consequence of this provision the defendant is not entitled to dispose of the stock even after default in payment of the notes. The trial court has decided otherwise, and has found that this clause was designed to operate before and not after default. In this we concur. The plaintiff having defaulted, it is manifest that it was the understanding and intention of the parties that the defendant might have recourse to the pledged stock for payment of the indebtedness. It is evident that- without a formal assignment by the plaintiff the defendant will be unable to dispose of the stock. The decree requiring the plaintiff to execute such assignment was, therefore, warranted. This will enable the defendant to give good title to a purchaser of the stock, and he will be under obligations to account to the plaintiff for any surplus of the proceeds of the sale.
It follows, therefore, that the judgment should be affirmed, with . costs.
Van Brunt, P. J., Pattebson and Ingkaham, JJ., concurred; Hatch, J., dissented.