Court Opinion

ID: 6905788
Source: CourtListenerOpinion
Date Created: 2022-07-23 22:00:05.813477+00
Date Added: 2024-06-11T16:06:20.550524
License: Public Domain

Mr. Justice Burnett
delivered the opinion of the court.
The plaintiffs assign as errors: (1) The judgment was erroneous because the facts stated in the answers are not sufficient to constitute a defense; and (2) the court erred in overruling their motion for a directed verdict. The principal ground for this motion was that the contracts, the execution of which is admitted, are void for *574uncertainty in that the nature of the security mentioned was left open for future determination.
There is but little dispute, if any, about the substantial facts of the case. It appears that after signing the contract the plaintiff Max Holtz went to New York to arrange for funds with which to carry out the contract and returned to Portland some time in June, 1911. Negotiations were then taken up between the parties on the subject of security for the subsequent purchase of the remainder of the defendants’ preferred stock yet to be issued, but they were unable to agree on that feature and after protracted discussions, covering some ten days, all further proceedings were abandoned and later on this action was commenced.
1. It is disclosed by the testimony that aside from the deposit by the plaintiffs with the defendants of $20,000, nothing was done by either party about performance of the contract after its execution, except to engage in fruitless discussions about the collateral designed to guarantee the purchase of the remainder of the preferred stock held by the defendants prior to July 15, 1921. It was the evident intention of the parties that the plaintiffs should purchase all the holdings of the defendants in the preferred stock of the concern yet-to be issued. In order to arrive at the basis upon which that stock should be called into existence it was necessary to take an inventory of the property of the concern, value it according to rules laid down in the stipulation and lastly deduct therefrom the liabilities of the firm. This duty rested upon the defendants and was to be performed before the plaintiffs were required to make the first payment. We note that this was what was required to be paid for the one third of the holdings of the defendants in the preferred stock. Making the inventory was necessarily a condition *575precedent because without it there was no basis within the contemplation of the contract upon which the amount of preferred stock could be calculated. The obligation imposed upon the plaintiffs to deposit the purchase price of one third thereof in escrow was not required to be performed until the inventory had been taken and the net value of the assets ascertained.
The next step in the process of performance of the contract would have been to augment the stock and to deliver the preferred part thereof to the stockholders of the corporation, for it is said in the contract, after speaking of the deposit to be made in escrow, that “then and in that case the parties of the first part” will increase the capital stock and distribute the same among the stockholders. The next in order of time was the purchase of a third of what was owned by the defendants, for we find in the contract “that after such capital stock shall be issued to the present stockholders” the defendants agreed to sell and the plaintiffs to buy that portion of the total number of shares of preferred stock held by the defendants and to pay for the same in cash or New York exchange on or before July 15, 1911. If we should consider the agreement as solely for the purchase of one third of the stock, the defendants were clearly in default in performance of their part of the contract for, after the execution thereof, the first thing to be done by them was the making of the inventory which they utterly failed to perform. The principle is well settled that where something is to be done by the first party before the other is called upon to act it is an independent covenant to be performed before that other can be said to be in default: Couch v. Ingersoll, 2 Pick. 292; Dey v. Dox, 9 Wend. 129 (24 Am. Dec. 137); State v. Winona etc. R. R. Co., 21 Minn. 472; Mill Dam Foundry Co. v. *576Hovey, 21 Pick. 417; Standard Gas Light Co. v. Wood, 61 Fed. 74 (9 C. C. A. 362). The plaintiffs are entitled to consider the failure of the defendants to perform their part of the contract at the time and in the order required thereby as a breach of the covenant upon which an action will lie in favor of the plaintiffs to recover the money deposited.
2. But further, as stated, if anything is plain in the contract it is that all parties intended that it should culminate in the purchase by the plaintiffs of all the holdings of the defendants of the preferred stock yet to be issued by the corporation at the latter’s behest. Confessedly, by the testimony on behalf of the defendants, the rock upon which the scheme perished was the stipulation about the security to be posted guaranteeing the purchase of the remainder of their holdings on or before July 15,1921. This was an integral part of the contract but it is plain that the writing leaves a wide gap between mere negotiations of the parties and the actual formation of the contract as to that feature. The language used in that respect contemplates that there shall be guarantors accompanying the plaintiffs in the execution of what is there called a supplemental agreement. These underwriters are not specified by name or qualification and unknown though they were, the document required them to deposit collateral security of a “kind and character satisfactory to the parties of the first part but to be hereafter determined.”
Passing the question of whether a stipulation for satisfactory security is sufficiently definite to be binding, we note that there is not a hint about the amount of such security. Indeed, the quantity thereof could not be well specified in advance, because at that time the net value of the assets of the corporation to be ascer*577tained by tbe procedure laid down in the contract was yet unknown and consequent upon that fact was the circumstance that the amount of preferred stock of the concern was not yet determined, and still further, it was not disclosed what amount thereof would be apportioned to the individual defendants. "With all these factors in mind it is plain why the amount of collateral required by the, terms of the guaranteeing contract could not be stated beforehand under the other terms of the agreement as written. That provision is therefore void for uncertainty.
3. In St. Louis & S. F. R. R. Co. v. Gorman, 79 Kan. 643 (100 Pac. 647, 28 L. R. A. (N. S.) 637), it was held that an agreement to make a contract in the future is not binding unless all the terms and conditions are agreed upon and nothing is left for future negotiations. In Butler v. Kemmerer, 218 Pa. 242 (67 Atl. 332), it was held that an agreement must contain all the terms necessary to determine whether the contract had been performed or not; that price is as essential as any other of the terms of the stipulation and that without this agreed upon no contract exists. In the United Press v. N. Y. Press Co., 164 N. Y. 406, 412 (28 N. E. 527, 529, 53 L. R. A. 288), Mr. Justice Gray speaking for the court said:
“I entertain no doubt that, where work has been done, or articles have been furnished, a recovery may be based upon quantum meruit or quantum valebant; but, where a contract is of an executory character and requires performance over a future period of time, as here, and it is silent as to the price which is to be paid to the plaintiff during its term, I do not think that it possesses binding force. As the parties had omitted to make the price a subject of covenant, in the nature of things, it would have to be the subject of future agreement, or stipulation, and, to use the language of *578the opinion in Buckmaster v. Consumers’ Ice Co., 5 Daly, 313, if the price each week was to he by fntnre agreement, the contract was not legally binding on either party, as neither could be compelled to agree with the other.”
Other precedents pertinent to this point are Shepard v. Carpenter, 54 Minn. 153 (55 N. W. 906); Sibley v. Felton, 156 Mass. 273 (31 N. E. 10); Foot v. Webb, 59 Barb. (N. Y.) 38; Dayton v. Stone, 111 Mich. 196 (69 N. W. 515); Gaines v. Vandecar, 59 Or. 187 (115 Pac. 721, 1122); Jackson v. Alpha Portland Cement Co., 106 N. Y. Supp. 1052; Somers v. Musolf, 86 Ark. 97 (109 S. W. 1173);. Edmondson v. Fort, 75 N. C. 404. As stated in Clark on Contracts (3 ed.), p. 52:
“An agreement to be finally settled must comprise all the terms which the parties intend to introduce into the agreement. An agreement to enter into an agreement upon terms to be afterwards settled between the parties is a contradiction in terms. It is absurd to say that a man enters into an agreement till the terms of that agreement are settled. ’ ’
It is indeed competent for parties to enter into a preliminary agreement looking to the execution of a. consequent one in the future. We have daily examples of that kind in bonds for deeds or in contracts for insurance, the policies of which are yet to be issued. But in all cases the minds of the parties must meet on the terms not only of the present convention, but also as to those of the covenants yet to be executed. If this rule be not observed in the stipulation and a substantial part is left open for further settlement without a canon by which the subsequent negotiations may be controlled there is no aggregatio mentium so essential to every contract. Tested by this standard, under the authorities cited, the admitted document was void for *579uncertainty in a material particular and was devoid of obligatory force upon tbe parties. Under these circumstances, independent of the default of the defendants in failing to make the inventory mentioned, the plaintiffs were entitled to disregard the terms of the document and to recover the money they had deposited with the defendants. The Circuit Court should have directed a verdict in favor of the plaintiffs for $20,000 and rendered judgment thereon. Under the doctrine of Sargent v. Am. Bank & Trust Co., 80 Or. 16, 38 (156 Pac. 431), and Carnahan Mfg. Co. v. Beebe-Bowles Co., 80 Or. 124 (156 Pac. 584), the plaintiffs are not entitled to recover interest on the deposit. The judgment of the Circuit Court will therefore be reversed and the cause remanded with directions to enter a judgment for the plaintiffs against the defendants for $20,000, together with the costs and disbursements of both courts.
Reversed and Remanded With Directions.
Mr. Chief Justice McBride, Mr. Justice Benson and Mr. Justice Harris concur.