Court Opinion

ID: 4498562
Source: CourtListenerOpinion
Date Created: 2020-01-23 18:16:00.976265+00
Date Added: 2024-06-11T14:54:09.229540
License: Public Domain

Tyson,
dissenting: I agree with the majority opinion in its holding that petitioner’s charter is not a contract restricting the payment of dividends within the purview of section 26 (c) (1) of the Revenue Act of 1936.
However, I disagree with the holding in that opinion that the resolution adopted at the stockholders’ meeting and thereafter approved by the board of directors did not constitute a written contract executed by petitioner restricting the payment of dividends under the cited section.
The majority opinion predicates its latter holding primarily upon the conclusion that the agreement between the petitioner and its bondholders was oral and that the embodiment of that oral agreement in the resolution set out in the minutes of the stockholders’ meeting was a mere recitation for the purpose of corporate records; and the opinion seems also to imply that the latter holding might also be additionally based upon the fact that the minutes of the stockholders’ meeting at which the resolution was adopted were signed by the chairman of that meeting rather than by the president of the corporation.
In my opinion, the embodiment in the resolution of the only oral agreement shown by the record, i. e., that between the bondholders’ committee and the stockholders’ committee, was not a mere recitation for the purpose of the corporate records, but constituted the only contract between the parties after its adoption; and I do not think that at the time of the adoption of the resolution it is correct to state, as is done in the majority opinion, that “it does not appear that there was any intention that a contract be executed by petitioner at that time.”
The undisputed evidence, not all of which is shown in the majority opinion, discloses: That the bondholders’ committee, with full authority to act for the bondholders, and a committee of the stockholders met together and made an oral agreement containing the same terms and provisions as are set out in the resolution in question; that after this oral agreement was made the bondholders’ committee appeared in person at the meeting of the stockholders on January 19,1934, for the purposes of making a report of the petitioner’s defaults in payment of interest on its bonds and of requesting the stockholders to confirm the oral agreement made by the two committees for the protection of the bondholders; and that after the report of the bondholders’ committee to the stockholders’ meeting, and while that committee was present, the resolution in question was adopted in response to the request of that committee.
Under the facts as above stated it seems clear that at the time of the adoption of the resolution it was the intention of the bondholders’ committee and the stockholders to execute the contract here in question and it seems equally clear that the contract was so executed by incorporating in the written resolution the terms of the precedent oral *384agreement between the bondholders’ committee and the stockholders’ committee.
From all the facts and attendant circumstances, I can reach no conclusion other than that the oral agreement previously made by the two committees became merged in the written resolution under the elementary principle stated in 17 Corpus Juris Secundum, p. 872, § 381, as follows: “* * * in the absence of fraud, a written contract merges all prior and contemporaneous negotiations on the subject, together with all prior oral contracts * *
In concluding that the oral agreement made by the two committees was merged in like provisions of the resolution, I do so by applying the principle that a resolution embracing the terms of an oral request or proposal made by the other party to an agreement, or embracing terms orally accepted by or acquiesced in by such other party, constitutes a binding obligation and a written contract of the corporation when adopted by it and spread in writing upon its minutes. This principle is established by the following authorities: Schlens v. Poe, 97 Atl. 649 (Md.); Sears v. Kings County El. R. Co., 25 N. E. 98 (Mass.); Bankers Trust Co. v. Economy Coal Co., 276 N. W. 16 (Iowa) ; Lafean v. American Caramel Co., 114 Atl. 622 (Pa.); Soffer v. Coatesville Boiler Works, 101 Atl. 744 (Pa.); Alabama Lime & Stone Co. v. Adams, 119 So. 853 (Ala.); cf. Altavista Cotton Mills v. Lane, 112 S. E. 637, 641, (Va.); Indiana Bermudez Asphalt Co. v. Robinson, 63 N. E. 797 (Ind.); Beach & Clarridge Co. v. American Steam G. & V. Mfg. Co., 88 N. E. 924 (Mass.) ; Mountain Waterworks Const. Co. v. Holme, 113 Pac. 501 (Colo.).
The implication in the majority opinion that its holding might be additionally based upon the fact that the minutes of the meeting of the stockholders were signed by “E. T. Steed, Chairman” of that meeting rather than by the president of the corporation is, in my opinion, unsound. The minutes show that Steed was duly selected as chairman thereof and in signing the minutes with the secretary was properly performing the functions of such a position. The minutes were binding on the corporation, under the controlling principle as stated in 18 Corpus Juris Secundum, pp. 1233,1234, §545: “While provision is frequently made that the president shall preside at stockholders’ meetings, where no provision is made, a chairman may be selected by the stockholders.”
In my opinion the resolution in question constituted a written contract executed by the petitioner corporation which restricted payment by it of dividends in the taxable year.
ARuNdell, Muepock, Black, Leech, and HaRkon agree with this dissent.