Court Opinion

ID: 8789204
Source: CourtListenerOpinion
Date Created: 2022-11-26 13:45:06.744901+00
Date Added: 2024-06-11T17:03:15.231126
License: Public Domain

ALDRICH, District Judge
(dissenting). In this case it is unmistakable and beyond question—indeed it is conceded—that the interested'parties intended and sought through a written agreement to establish an equality between certain creditors of the corporation; and under the agreement of September 12, 1908, it was provided that Fessenden’s $330,000, which, as recited, stood under a former agreement as a deferred payment, -without interest, be put upon an equal basis with the money advanced by Mr. Given and Mr. Walker, for which they held promissory notes payable on demand, with .interest.
That putting the claims of the three parties against the corporation upon an equal basis was the sole or paramount idea underlying the agreement of September 12, 1908, is a thing established. This being so, the rule of liberal construction applies, because the law seeks for all reasonable ways in which to establish and furnish a remedy for carrying out what parties intended. It is true the agreement was signed by Walker and Fessenden only, but it was signed by them as an agreement which should furnish a basis for going along with the corporate enterprise, and it had reference to the internal affairs of the corporate business, and in no sense contemplated anything ultra vires.
Questions of authority, the question of consideration, questions of ratification on the part of the corporation, and all parties interested, were comprehensively submitted to the jury under proper instructions.
The action is in contract, and Mr. Fessenden seeks to recover an undisputed amount, with interest, based upon what he was to receive for his patents and for incidental expenses in the field of wireless telegraphy.
The point is taken that Fessenden can have no recovery because the contract contemplated satisfaction of the claim through issuing preferred stock. The grievance back of Mr. Fessenden’s insistence that his claim should he placed upon an equal basis with that of Given and AA'alker was that Given and Walker held demand notes, with interest, while his claim was not founded upon notes, and was without interest. Fessenden's relation to the corporate situation was based upon consideration of the assignment of inventions and patents, and the value was fixed, while that of Given and Walker was based upon money advances. and that amount was fixed. In this respect the one consideration is as potent as the other.
It must always he borne in mind that in the broad sense, if not in the technical sense, the corporation was indebted to Fessenden from *926the moment of his assignments—indebted to him for the' rights which he surrendered, as well as to Given and Walker for their money advances. It is quite true that the original agreement contemplated payments to Fessenden out of profits, but this was changed, and the consideration for changing or advancing Fessenden’s claim to an interest-bearing debt was the recognition of the fact that it should be placed upon a basis like that of Given and Walker’s, and upon the further consideration of certain engagements on the part of Fessenden which were of important benefit to the corporation. Under any reasonable construction of the agreement of September 12, 1908, it is certain that the purpose was to equalize the claims of Given and Walker and that of Fessenden. There is nothing in any of the agreements or in the record which reasonably warrants the conclusion that Given and Walker waived or surrendered their attitude of indebtedness, while the evidence tended to show, and the verdict must have been based upon the grounds, that the relations of the parties were equalized by advancing Fessenden’s claim to an interest-bearing debt.. In the event of 'the recovery of Fessenden’s indebtedness, his right to stock and his right to receive payments from profits would be merged in the judgment based upon recoverable indebtedness created by the scheme for equalizing these claims against the corporation.
Gnder the contract, or agreement, known as Exhibit C, dated September 12, 1908, entered into with a view to' carrying out the intentions of the parties as to placing them upon an equal footing, the provision in respect to preferred stock, under reasonable construction, ^should only be accepted as an expression by the parties that that was the preferable way of carrying out the contract, or, in other words, quoting from the contract, Mr. Walker says, speaking for himself: “I * * * think the best way to do this is by an issue of six per cent, per annum preferred stock of that date,” referring to the contract with the Fruit Company. The paragraph which follows this expression as to the preferable way and the short addendum, having reference to preferred stock, as well, in view of the terms of the double aspects of the contract and the subsequent acts of the parties with reference to the transaction, should be accepted as provisional, and as describing what should happen in case the parties adhered to the scheme of issuing preferred stock as the best way of placing their interests upon an equal basis.
But the parties holding these claims, and the corporation, saw fit not to adhere to what in this agreement of double aspects was suggested as the best way, but devised another and what subsequently seemed a better way for effectuating the original purpose, and that was to establish the claim of Mr. Fessenden .for his $330,000 and the claims for the money advanced by Mr. Given and Mr. Walker for which they held notes, on the books of the company as indebtedness, under corporate action which contemplated that interest should be charged up every half year. One of the reasons for this, as expressed by Mr. Walker, according to the testimony of Mr. Fessenden, was that, while the scheme of satisfaction through preferred stock was at first thought the best one, yet it was subsequently thought that by dealing with the *927claims as corporate book indebtedness they could avoid the payment of taxes on nearly a million dollars. It was this act of the corporation, acquiesced in by all parties in interest, and. in practical construction of the agreement to be performed under its double aspects, in furtherance of the original and sole purpose of the parties and within the reasonable scope of the agreement, that advanced Fessenden’s claim to the recoverable position of corporate indebtedness. It was perfectly legitimate, under the double aspects of the agreement, to which reference has been made, for the corporation and the parties interested in the corporation, to change to that kind of corporate indebtedness, provided the parties holding the claims assented to it. According to the testimony of Mr. Fessenden, such was the fact; and, while there was a conflict of testimony upon this point, the instructions were full and complete, and the jury found for the plaintiff. The instructions upon this question were as follows:
“You have heard the evidence fully detailed, fully commented on. It is for you to draw what conclusions you think the preponderance of the evidence warrants. As to either Given or Wolcott, if you should find that, having knowledge that the company had undertaken to agree as expressed in Exhibit 0, either of them said to the plaintiff that that was all right, or If after such knowledge either of them remained silent and said nothing, knowing all the time that the plaintiff was going on In reliance upon Exhibit 0—that you would be at liberty to regard as evideuce warranting a finding on your part that Given and Wolcott, as the case may be, had approved and accepted the contract, provided you will have found that such a contract was made. In that you will, of course, consider the conflicting evidence regarding the plaintiff's statement that something was said to him about his $300,000 being put on the books and drawing interest or as to any admission of Braun, the secretary. either by words or by looks or by silence, that it was the fact that that $300,000 or $330,000, whatever it was, had been in fact put on the company’s books, and that lie was led to believe that; anything of the kind was true.”
Under the instructions as a whole, and under the paragraph quoted, the jury must have found, not only ratification of the agreement .of September 12, 1908 (Exhibit C), by all parties interested and by the corporation, but that the corporation, with the acquiescence of the parties interested, established the claims, not only of Given and Walker, but of Fessenden, upon the books of the corporation as a corporate indebtedness, with interest. Indeed, under the instructions this, in substance and effect, was made a condition of recovery; and, as the jury found for the plaintiff, and as the transaction related not only to 'the affairs of the corporation, but to its existence and the development of its enterprise, there is no reason for disturbing the verdict.
The primary and fundamental idea was to place the claim oí Mr. Fessenden upon an equal basis with those of Given and Walker with respect to interest and the right of recovery. That idea being clear and unequivocally expressed in the agreement which was ratified, it should be established, and a remedy should be furnished for the enforcement of the right, unless, under the rule of liberal construction in its favor, which should hold in a case of this kind, it is made impossible by the terms of the agreement.
As already said, satisfaction through issuing preferred stock was only set out as the best way, and the paragraph which follows the ex*928pression as to the best way, as well as the addendum, had reference to how it should be done provided it should be accepted as the best way and adhered to by the parties. But the corporation and parties devised what seemed to' them to be a better scheme. This was a thing perfectly open to them under the nonconclusiveness, and double aspects, in respect to ways and means, and it being open to them to do so they subsequently put their own practical construction upon the agreement, and devised what seemed to be a better way than that first thought of.
Under ambiguity or under double aspects, the parties are bound by their acts and sayings in respect to a practical construction of the purposes, terms, and possibilities of a contract. Thomas v. Barnes, 156 Mass. 581, 31 N. E. 683; Lovejoy v. Lovett, 124 Mass. 270; Stone v. Clark, 1 Metc. (Mass.) 378, 35 Am. Dec. 370; Choate v. Burnham, 7 Pick. (Mass.) 274, 278; Clark v. Munyan, 22 Pick. (Mass.) 410, 33 Am. Dec. 752; Frost v. Spaulding, 19 Pick. (Mass.) 445, 31 Am. Dec. 150; Cambridge v. Lexington, 17 Pick. (Mass.) 222; Waterman v. Johnson, 13 Pick. (Mass.) 261; Mann v. Dunham, 5 Gray (Mass.) 511; Howard v. Fessenden, 14 Allen (Mass.) 124; Morris v. French, 106 Mass. 326; Stevenson v. Erskine, 99 Mass. 367; Shaffer v. Sawyer, 123 Mass. 294; Company v. Perley, 46 N. H. 83, 103.
“Where the,parties to a contract have given it a particular construction, such construction will generally be adopted by the courts in giving effect to its provisions.” 11 Century Digest, 755, § 753, and numerous cases cited.
“The parties áre bound by the interpretation which they themselves give to the contract.” Id., p. 757.
See, also, 1 Fed. Rep. Digest, 2291, § 87. These propositions are so well established that it would seem unnecessary to set out the au-¶ thorities.
The instructions in this case were full and complete, and all that were necessary, in respect to the consideration for the contract, its ratification by the corporation, and as to acquiescence by all parties interested, and a right which the parties intended to establish will be overthrown, and justice will be defeated, unless the judgment and the verdict stand.
Though we are considering the rights of the parties in an action at law, where certain questions of fact were submitted to the jury under proper instructions, and where a verdict under such circumstances is ordinarily accepted as conclusive in respect to such facts, the reasoning of the majority opinion would seem to have reference more to a situation in which there had been no jury trial, or to one in which the court is at liberty to deal with all the questions involved de novo, with the result, as it seems to me, of finding facts not only as to the claim of Fessenden, but as to those of Given and Walker as well, which neither of the parties, contemplated in the final adjustment of their rights under the double aspect agreement of September 12, 1908.
In the view which I take of this case it requires strained and extremely refined and technical reasoning to overthrow the verdict and .judgment reached after a long and comprehensive trial.