Court Opinion

ID: 3510530
Source: CourtListenerOpinion
Date Created: 2016-07-05 22:21:13.093427+00
Date Added: 2024-06-11T13:18:47.052964
License: Public Domain

AFTER REHEARING.
On September 18, 1925, the following opinion was filed:
A reargument of this cause has convinced us that the result first arrived at was wrong. We are of the opinion that there should be a reversal for reasons the formulation of which will now be attempted.
The sole issue concerns the rights and obligations arising from the stock dividend declared by the Brunswick Company, in 1923, *Page 40 
all of the new stock coming to him being issued to and retained by Mr. Andrews and none of it pledged with the trustee for the benefit of Mrs. Andrews.
It appears from the complaint and so must be taken for fact that the stock dividend reduced substantially, and well below $50,000, the value of the 514 shares of the original stock pledged with the trustee to secure the payment of the income assured Mrs. Andrews by the trust agreement. There is no attempt to fix the exact amount, but if it is true, as alleged, that after the dividend the stock was worth but $80 per share, the reduced value of that trusteed for Mrs. Andrews was about $41,000. What obligation was imposed on Mr. Andrews and what resulting right conferred on Mrs. Andrews under decree and contract by the stock dividend? It is on the claim of such an obligation and right that this action is predicated.
The trust agreement supplements and is in execution of the decree so they may be considered as one instrument, having the force of both judgment and contract. Counsel for appellant are right in saying that "the only issue here involved is as to the meaning" of those documents, but they err in basing their construction on too little of the area covered by the judicial and contractual expression, all of which must be resorted to for enlightenment on the question of intent, which when ascertained must control decision.
Briefly, the claim for appellant is that: (1) Mr. Andrews was entitled to none of the new and dividend stock; (2) in consequence it automatically "followed" that already pledged; and (3) went to Mrs. Andrews absolutely when she demanded, as under the contract she had the right to demand after the passing of Mr. Andrews, that the securities then in the trust be turned over to her, freed from all restriction of the trust or otherwise.
Examining the elements of the proposition in their order, we agree in substance with the first and consider that Mr. Andrews was not entitled, without further action of the kind hereinafter dealt with, to take and hold all of the new stock. But we cannot follow the next step, the argument that thereby the new stock became automatically a part of the pledge. If that were so, the third *Page 41 
and last step would be easy, for, if the new stock did become part of the pledge, there is no denying that it so remained until after the death of Mr. Andrews and should have gone to Mrs. Andrews on her demand.
Mr. Andrews was not entitled at once and absolutely to the new stock because of the provisions of the contract giving him "the right to collect and enjoy for his own use" only the "dividends and earnings payable on said stock or collateral which can be paid without impairing the value thereof" and because "the rights and privileges of the owner of said stock," the exercise of which was reserved to him by the contract, were only those "not inconsistent" with its provisions.
But it does not follow that because Mr. Andrews was not entitled, at once and without further procedure on his part, to the new stock, that it became automatically, without further action by anyone, a part of the pledge. That results from the fact that there had been no default, and, so far as appears, there was none during his lifetime, in the obligation imposed upon Mr. Andrews, personally, to pay Mrs. Andrews $250 per month, that being the primary undertaking to which the pledge of the stock was collateral. In the absence of such default, it was provided by the contract that Mr. Andrews should have the right to "take down" the pledged stock and replace it with other collateral of the actual value of $50,000 which, if other than United States bonds or other authorized securities, would meet with the approval of Mrs. Andrews. Mr. Andrews, in that connection, was subjected to the ultimate obligation "at all times and in all events (to) maintain said collateral to the actual value of $50,000" and no less.
Suppose, in that connection, he had announced in advance of its issue his intention to claim all of the new stock, but, recognizing its alleged effect of reducing the value of that pledge below $50,000, say to $40,000, he had tendered additional government bonds or other approved securities sufficient to restore and maintain the minimum $50,000 value demanded by the contract. Is it not clear that he would have been within his right and that in such case it could not have been required on behalf of Mrs. Andrews that all *Page 42 
or even any of the new stock should become a part of the pledge? Certainly that must be so for the contract provides particularly for "the event of the depreciation" of the collateral. It expressly provides that in such event "other or additional securities approved by or on behalf of the second party shall be deposited to maintain the required amount," i.e., the minimum actual value of $50,000. In that connection a possible "misunderstanding or controversy" over the value of the "deposited securities" is provided for and Mr. Andrews given the right in such case to "withdraw said securities and deposit in place thereof United States Government bonds or cash money or other securities authorized by the laws of the State of Minnesota * * * to the amount of $50,000 actual value."
It is upon that feature of the contract that we base our conclusion that, although Mr. Andrews was not entitled to have the new stock come to him automatically and at once, it does not follow that it automatically became a part of the pledge. Mrs. Andrews' rights are to be enforced, but the contract, instead of giving her the right to have the new stock become automatically a part of the pledge, gave her only the right to have its resulting depreciation in value made good in the manner indicated. That right and that right only has been violated. It should be made good, and to that extent the complaint states a cause of action, and, if found true, will entitle plaintiff to appropriate relief.
It is true that the contract declares, as claimed by plaintiff, that all of the stock remaining in the trust at the death of Mr. Andrews became plaintiff's upon her demand. The contract does not declare and it does not follow, as claimed for plaintiff, that "any stock dividends declared out of capital also belong" to Mrs. Andrews or that "James Andrews, taking them, acted wrongfully and illegally." He did so act but only to the extent that he failed to make good the depreciation of the collateral resulting from the stock dividend, his obligation being to maintain that value at $50,000 and not less.
It is not questioned but that stock dividends, declared as was this one, ordinarily follow the original stock. That is the result where there is no applicable provision of contract or trust requiring a different one. We do not apply the rule invoked, for the simple *Page 43 
reason that here the contract substitutes another which gave Mr. Andrews the right to take the dividend if he should make good the resulting impairment of the value of collateral.
We indicated at the outset that, in our judgment, the construction put upon the contract by counsel for plaintiff took too narrow a view in asserting that because Mr. Andrews was not entitled, unconditionally, to stock dividends, the one here in question automatically followed the stock into the trust for Mrs. Andrews. That construction might follow from a view limited to the provisions of the contract expressly qualifying the rights of ownership and to dividends which were reserved to Mr. Andrews notwithstanding the trust. It cannot follow, however, from any construction which is the result of a comprehensive view of the whole contract — and none other is permissible. The purpose was not primarily to assure Mrs. Andrews' ownership of any particular
securities upon her survival of her husband. The provisions which now have resulted in so vesting ownership in her are secondary and incidental to the main purpose, which was to assure her a constant income during her life, whether she survived her husband or not. To that end his personal obligation was to pay her a stated income as long as they both lived. But to secure her, independently of his promise and if she survived him, the trust was created and gave to Mrs. Andrews not the ownership of the stock but a first lien upon it, such rights of ownership as wouldnot impair its value being reserved to Mr. Andrews. Among the rights so reserved was that to appropriate to himself, absolutely, so much of any stock dividend on the old stock as he could take without reducing the value thereof below $50,000. That was a minimum figure fixed by the parties and by them thought necessary to assure to Mrs. Andrews, during her lifetime, a monthly income of $250. The dominant purpose of a contract being ascertained, no construction of a subsidiary provision is permissible, unless required by the whole contract, which runs counter to the main purpose and is in frustration of a right otherwise clearly reserved to either of the parties.
Equity regards that as done which should have been done and at this juncture, concerning this contract, equity cannot say, *Page 44 
however much it may criticise whatever lack of frank disclosure attended the stock dividend, that Mr. Andrews should have done anything more than to take such steps under the contract as would have maintained the value of its pledge at a figure not less than the stipulated minimum. To the extent that he failed in that obligation, it was a contractual default which must now be made good, by a judgment if one is required, having the effect of giving Mrs. Andrews the benefit she would have had if the securities pledged had been maintained at the required minimum actual value.
In this connection, we observe in the contract language indicating that the monthly payments should continue to be made Mrs. Andrews "from the earnings of said collateral or from the first party's estate" pending the determination of any controversies that might arise. It may be that the provision in question was not intended to apply to the precise situation now presented, but its spirit as well as that of the entire contract has not been obeyed, unless the payments to Mrs. Andrews have been made continuously. If they have not, the provisions of the contract require that the omission should be made good as well as the restoration of the actual value of the securities pledged under the contract, as of the date of the declaration of the stock dividend, to an actual value of not less than $50,000.
It would seem to follow from the primary purpose of the contract, to insure Mrs. Andrews a monthly income of $250, that the securities pledged for her benefit would be maintained at a sufficient amount to maintain the earning power necessary for that purpose. And so it would if the contract were to that effect instead of to the precise point of fixing an irreducible minimum on the basis of actual value (and at $50,000), instead of an earning power of $3,000 per annum. There is a provision in the contract, of which much is attempted to be made for appellant, which entitled Mr. Andrews, at his option, to be relieved during his lifetime from further personal obligation by pledging, under the contract, other securities "in an amount sufficient to pay" Mrs. Andrews $250 per month, net, out of the income and "without using or invading the principal" of such securities. That provision applied only "during the lifetime of *Page 45 
both of the parties" and only in case Mr. Andrews desired to be relieved "from the liability for any further payments." There was no intention to make this provision applicable to the situation which now confronts us.
We cannot go at all with the argument of respondent that the doctrine of election applies and that Mrs. Andrews is now without any remedy because, after her husband's death, she exercised her contract right to demand for her own the stock then subject to the trust. She demanded all that was coming and the only question is whether she got it. We hold that she did not. It is not a case of a choice between two inconsistent or alternative rights or claims where there is a clear intention of the person from whom they are derived that only one should be enjoyed. See Dun. Dig. § 2909 and cases cited. It is rather a case where the plaintiff has demanded all of a given benefit and has received only a part of it and is now suing for the remainder.
The demurrer interposed below attacked separately each of the three causes of action stated in the complaint. Insofar as the order appealed from sustains the second and third, it has not been challenged or reviewed here. To the extent that the order sustains the demurrer to the first cause of action, it is reversed. So much of our former opinion as is inconsistent with this one is withdrawn.
So ordered. *Page 46