Court Opinion

ID: 8183564
Source: CourtListenerOpinion
Date Created: 2022-09-09 23:05:42.8051+00
Date Added: 2024-06-11T16:40:19.937498
License: Public Domain

LyoN, J.
The defendant denied in his answer that any trust relation existed between himself and the Gates Iron Company, the assignor of the plaintiff, and alleged that the assignment, dated March 30, 1887, made by that company to him, of the four-fifths interest in the Miner & "Wells mining option, was absolute and unconditional, and was executed pursuant to an understanding with the company when he assigned the option to it on October 25,1886, that if, after prospecting therefor, it failed to find 20,000 tons of iron ore on the premises covered by the option, it would reassign the same to him. Such was defendant’s contention on the trial of the action. True, the court found that *421such assignment of the option to the company was without consideration. This is not quite accurate. Although the assignee paid nothing therefor at the time, yet the stockholders of the company became liable to pay assessments to develop the property covered by the option, and did pay money for that purpose. This was a good consideration for the assignment.
The trial court found that such re-assignment of the option was in trust to enable defendant to dispose of it for the company, and held him liable to account to it for the proceeds thereof. We think the testimony, especially certain letters and telegrams sent by defendant to various officers of the company after the option was re-assigned to him (the contents of which it is unnecessary to state), abundantly support such finding.
We are further of the opinion that the purchase by defendant of Miner & Wells’ one-fifth interest in the option, the organization of the Standard Iron Mining Company, and disposition of its stock, and the contracts of defendant with Noyes, Cox, Estee, Mitchell, Rahill, and Corrigan, together constitute a single transaction or deal, each portion of which was essential to a sale or disposition of the option. The court so found, and we think the finding is sustained by the proofs. Also that the defendant had authority to purchase the United Iron & Land Syndicate stock (which, for brevity, will be denominated the Syndicate Stock) to the extent of the moneys received by him for the company in the deal, for the purpose of carrying out the contract with Rahill and Corrigan. But he had no authority to run the company in debt, and hence cannot have a balance certified in his favor in this action because he purchased some of such stock with his own means after exhausting the trust fund in his hands. He did so at his own risk of ultimate loss.
The contracts by which the option in question was disposed of were fully executed by the respective parties *422thereto, except the Minnesota property was not conveyed by Kahili and Corrigan as agreed; that is to say, the defendant purchased the outstanding one-fifth interest of Miner & Wells in the option, paying therefor, of his own money, $500. The trial court correctly treated this purchase as having been made for the benefit of the Cates Iron Company. A new corporation (the Standard Company) was organized, to which defendant assigned the whole option. The whole stock of the company (40,000 shares) was issued to defendant and to Noyes, Cox, Estee, and Mitchell in equal proportions. Each of the four last-named persons paid defendant $1,040 —■ in all $4,160 — in cash or its equivalent. Each of them also purchased one sixteenth of the 32,500 shares of Syndicate stock, and defendant purchased the remainder, or three fourths thereof, for Kahili and Cor-rigan, paying therefor an average of more than sixty cents per share. Noyes, Cox, Estee, Mitchell, and the defendant each assigned and delivered to Kahili and Corrigan one fifth of 22,000 shares of the Standard stock, and also assigned and delivered to theni the 32,500 shares of Syndicate stock thus purchased by them. Kahili and Corrigan thereupon paid the other five parties to the deal $11,000, less an agreed discount of $320, which was equally divided between them, each receiving $2,136. It only required the conveyance by Kahili and Corrigan of the Minnesota property fully to complete the execution of the entire agreement of the parties. At this stage of the transactions the defendant had received on account of the option $6,296, and had paid out $500 for the outstanding one-fifth thereof, leaving in his hands $5,196. He had paid out for the Syndicate stock — 24,375 shares — at least sixty cents per share (as the court found), or $14,625, being $8,829, at least, in excess of the net proceeds of the option received by him. He also held 3,600 shares of Standard stock. Had Kahili and Corrigan conveyed the Minnesota property as they agreed to do, the Gates Min*423ing Company would have become the equitable owner of three fourths of such property, subject to a lien of the defendant thereon for the amount so paid out by him in excess of his net receipts from the sale of the option. It was also the equitable owner of the 3,600 shares of Standard stock thus held by defendant.
But Eahill and Corrigan refused to convey the Minnesota property, and claimed repayment of the $11,000, and offered to re-assign the Standard and Syndicate stocks which they had received in the deal from their associates. The defendant took legal counsel on the subject, and was advised that the agreement could be enforced against them. So far as we can learn from this record the advice was sound. No ground is alleged for repudiating or rescinding the agreement to convey the Minnesota property. It was in writing, duly executed, and the stipulated consideration was expressed therein, and fully paid. Its validity and binding force are not questioned. However, the parties to the agreement entered into negotiations for a so-called compromise, which resulted in a re-assignment by Eahill and Cor-rigan of the Syndicate stock, an assignment to them of additional Standard stock, of which defendant furnished. 2,600 shares, the retention of the $11,000 by the parties to whom it had been distributed, and the release of Eahill and Corrigan from the obligation to convey the Minnesota property. The defendant was a party to this alleged compromise. The Syndicate stock was then declining in value, or rather the price it could be sold for was declining, for it seems never to have had any real value, and at that time its speculative value had probably nearly disappeared. Hence, by the compromise, the defendant released and abandoned a most material and valuable benefit secured by the deal, without the consent or knowledge of his principal. This he had no authority to do. True, he had very ample authority to sell or dispose of the option in his discretion, but after *424Re Rad once disposed of it, and secured a valid contract for tRe payment of a valuable consideration tlierefor, he was not authorized to release the purchaser from such payment. And this is wh'at the alleged compromise amounts to. There was no basis for a valid compromise, because there was no real controversy as to the binding force of the contract to convey the Minnesota property. It was clearly the duty of the defendant to hold the contract for the benefit of his principal. The principal might "have made concessions to avoid a lawsuit; but, the right to a conveyance being clear, the agent, without the consent of his principal, could not lawfully do so. This is but an application of the rule that an agent to sell or otherwise dispose of property for value may not give it away. Meade v. Brothers, 28 Wis. 689.
The learned judge of the trial court held, in effect, that it was competent for the agent to enter into the alleged compromise, but for the reasons stated we reach a different conclusion. So far as Rahill and Corrigan are concerned, the compromise is binding upon the Gates Iron Company, because it gave the defendant an absolute assignment of the option, thus enabling him to deal with it as owner, which he did, they having no knowledge that the company was interested therein. But the company or its assignee (the plaintiff) may recover of the defendant what it has lost by reason of the unauthorized surrender of the contract of Rahill and Corrigan to convey the Minnesota property. Story, Ag. (9th ed.), § 217c, and notes. Of course, the measure of such damages is what might have been recovered of Rahill and Corrigan had the surrender not been made, and had an action been brought against them for a breach of their contract to convey. They having refused to convey without any justification or excuse, the recovery against them would be for the value of the contract to the ’ purchaser, which value is measured by the difference between the actual value of the property and the price agreed *425to be paid for it. See 1 Sedg. Dam. (Yth ed.), 406, note (a). For a full discussion of tbe rule of damages in such cases, see Id. p. 428.
Rahill and Corrigan agreed to convey the property and pay $11,000 additional for 22,000 shares of Standard and 32,500 shares of Syndicate stock. For the purpose of determining the contract price for the Minnesota property the Standard stock must be rated as it was by the parties to the deal, which was fifty cents a share, and the Syndicate stock at what it necessarily cost when purchased for delivery to Rahill and Corrigan, which was not less than sixty cents a share. For convenience of. computation we may offset the $11,000 paid by Rahill and Corrigan against the 22,000 shares of Standard stock assigned to them. This leaves the necessary cost of the Syndicate stock the agreed price of the farm. Such cost, at sixty cents a share, amounts to $19,500, three fourths of which is $14,625.
The proofs furnished no guide for ascertaining the value of the Minnesota property. Such property consists of a farm containing 960 acres, and certain personal property thereon. The description of the personal property is not found in the record. It is essential to a full determination of the rights and equities of the parties to this action that 'an account be taken of the actual necessary cost to the defendant of the Syndicate stock purchased by him for Rahill anti Corrigan, unless the defendant elect that it be estimated at sixty cents a share, which, the court found, was the price paid by his associates for that purchased by them for the same purpose. Then the value of three fourths of the Minnesota property, when the contract to convey the same was thus surrendered, should be ascertained by proofs, and if such value exceed the necessary cost of the stock so purchased by defendant, the difference is the measure of compensation for the unauthorized surrender by defendant of the contract for a conveyance of *426such property. Should the balance be the other way, it cannot, for reasons already stated, be allowed to the defendant.
Having determined that the defendant, as agent of the Grates Iron Company, was authorized to enter into the deal and make the contracts which resulted in the sale or disposition of the option in question, but was' not authorized to surrender Rahill and Corrigan’s contract to convey the Minnesota property, it follows that the rights and liabilities of these parties must be determined by the conditions existing immediately before the surrender of such contract. One of these conditions was that the Syndicate stock had then been transferred to Rahill and Corrigan, and the Gates Iron Company thereby ceased to have any interest in it. Its subsequent retransfer to the defendant in execution of his unauthorized agreement with Rahill and Corrigan did not, we think, restore such interest. Hence the judgment herein should not award such stock to the plaintiff. Another condition was that the defendant then held 3,600 shares of the Standard stock, which equitably belonged to the Gates Iron Company. The judgment should award to the plaintiff these 3,600 shares, and if the defendant fail to deliver them, he should be charged with the highest market value thereof between August, 1888 (the date of plaintiff’s demand for the proceeds of the option), and the trial.
Briefly to summarize: In stating his account with the Gates Iron Company, the defendant should be charged with the $4,160 received from Noyes, Cox, Estee, and Mitchell, the $2,136 received from Rahill and Corrigan, the value of the contract for the conveyance of a three-fourths interest in the. Minnesota property, to be determined on the principles above indicated, and the value of any portion of the 3,600 shares of Standard stock which he fails to transfer to the plaintiff pursuant to the judgment, to be ascer*427tained as before directed. He should be credited with the $500 paid for tbe outstanding one-fifth interest in the option, and with the actual and necessary cost of the Syndicate stock thus purchased by him for Rahill and Corrigan. The balance, if against the defendant, and the 3,600 shares of Standard stock, is the true measure of plaintiff’s recovery in the action.
The only matters to be hereafter litigated are the value of the Minnesota property, the necessary cost of the Syndicate stock, unless the defendant stipulates that it shall be computed at sixty cents a share, and the value of the Standard stock in case the defendant fails to assign to the plaintiff 3,600 shares thereof. All other matters are settled by the findings of the court as herein modified.
By the Court.— The judgment of the superior court is reversed, and the cause remanded for further proceedings as herein indicated.