Arnold v. Scharbauer
| Decision Date | 16 June 1902 |
| Docket Number | 2,596. |
| Citation | 116 F. 492 |
| Parties | ARNOLD v. SCHARBAUER et al. |
| Court | U.S. District Court — Western District of Missouri |
Hugh C Ward, for plaintiff.
Samuel W. Moore, for defendants.
This is an action for breach of the following contract which is set out in haec verba in the petition:
'Whereas Jno. T. McElroy, of Reeves county, Texas, and John Scharbauer, of Fort Worth, Tarrant county, Texas, parties of the first part, and Jas. H. Arnold, or the Western Cattle Brokerage Company, of Kansas City, Mo., parties of the second part, this day entered into the following agreement: The said parties of the first part are the owners of the following tracts of land, located near the town of Beaumont, Jefferson county, Texas, containing about five hundred (500) acres, which they agree to put into a corporation under the laws of the state of Texas, the said corporation to be known as the Pennsylvania and Texas Oil Company, with offices in Kansas City, Mo., and Beaumont Texas. The said Jas. H. Arnold, or the Western Cattle Brokerage Company, is to put the stock of the said Pennsylvania and Texas Oil Company on the market for the purpose of selling and disposing of said stock at a par value on shares of ten cents (10 cts.) and one dollars ($1) per share, each share to represent a par valuation. One and one half million dollars ($1,500,000.00) is to be the capital stock of the said company. The said Jno. T. McElroy and John Scharbauer are to furnish one representative man in addition to themselves as incorporators for the state of Texas. The other portion of the directory, amounting to ten or eleven in number, is to be selected at Kansas City and other eastern points by John T. McElroy and Jno. Scharbauer. It is hereby agreed and understood that the said Jas. H. Arnold, or the Western Cattle Brokerage Company, is to have the exclusive sale of the said stock; but if, for any reason, the said McElroy and Scharbauer desire to take the stock off the market, they shall have the right to do so by paying said Jas. H. Arnold a reasonable compensation for his services. It is agreed and understood that parties of the first part are to furnish 100,000 dollars in stock to be disposed of among shareholders and directors of said company, and are to pay ten per cent. (10%) on the capital stock as a brokerage, and ten per cent. (10%) to said Jas. H. Arnold for his services, and $10,000 (ten thousand dollars) for newspaper and other advertisements. Jas. H. Arnold, or the Western Cattle Brokerage Company, is to furnish an office in a centrally located building in Kansas City, Mo., and is to bear the expenses of bookkeeper, stenographers, and assistant of the Kansas City office. The expenses of literature, stamps, and other necessary expenses is to be borne by the said parties of the first part. In all cases where such expenses are expended by the said Jas. H. Arnold, a voucher for the full amount is to be taken and exhibited to the said parties of the first part. It is the purpose of this contract to place the stock of the Pennsylvania & Texas Oil Company on the market as speedily as possible, and it is agreed and understood that the said parties of the second part are not to handle any other oil stock during the time they are handling the stock of the said parties of the first part. It is the purpose of this contract and understanding that all parties to this contract are to act in good faith, each with the other; and it is also understood that this contract cannot be changed or altered unless it is done in writing, signed by Jno. T. McElroy, Jno. Scharbauer, and Jas. H. Arnold, and attached hereto and made a part of this instrument. Proceeds from sale of stock is to be deposited in bank to the credit of the Pennsylvania & Texas Oil Co.; bank to be designated by McElroy and Scharbauer.
John Scharbauer. 'John T. McElroy. 'Jas. H. Arnold.'
The petition undertakes to eke out the omission in the contract to give the numbers of the land by averring what the particular lands were intended to be included therein. The petition then makes the general averment that the plaintiff has duly performed all the conditions of said contract to be performed by him, put that the defendants have wholly failed to perform their part of said contract, to the damage of said plaintiff in the sum of $325,000, for which judgment is prayed. To this petition the defendant McElroy, the only defendant served with summons herein, interposes a general demurrer.
The court quite agrees with the statement of plaintiff's counsel in his brief that when this contract was drawn 'the lawyers were out of town. ' It is so vague and indefinite in some material respects that the court attempting to construe it has the same embarrassment as a housebuilder would feel who was directed to erect and furnish a house under general plans, but without specifications. The court is of opinion, however, that the contract is not void under the statute of frauds for failure to describe the 500 acres of land by metes and pounds or section lines. It is not a contract for the sale of land between the plaintiff and defendants as vendor and vendee. It is an agreement merely that the defendants, who represented themselves to be the owners of 500 acres of land near Beaumont, Tex., would put it into a corporation to be formed; presumably to make it the basis of the corporation assets for issuing and selling shares of stock thereon. The undertaking of the parties of the second part was to exploit and sell the stock of the corporation for a per cent. Browne, St. Frauds, Sec. 263a; Snyder v. Wolford, 33 Minn. 175, 22 N.W. 254, 53 Am.Rep. 22; Carr v. Leavitt, 54 Mich. 540, 20 N.W 576; Watters v. McGuigan (Wis.) 39 N.W. 382. Reading the contract by its four corners, with a view of giving it operation and effect if reasonably consistent with the entire scope of its terms, the court is further of opinion that it is clearly enough implied that the then owners of the land were to see to the matter of bringing into existence and organizing the corporation, as the express understanding was to put said lands 'into a corporation under the laws of the state of Texas. ' The defendants were to...
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