Brookings v. Scudder

• Decision Date: 06 December 1922
• Parties: ROBERT S. BROOKINGS, EDWARD HIDDEN and ALBERT N. EDWARDS, Trustees Under Will of SAMUEL CUPPLES, v. C. R. SCUDDER, JAMES ROGERS and SAMUEL CUPPLES ENVELOPE COMPANY, Appellants
• Court: Missouri Supreme Court

246 S.W. 201

295 Mo. 494

ROBERT S. BROOKINGS, EDWARD HIDDEN and ALBERT N. EDWARDS, Trustees Under Will of SAMUEL CUPPLES, v. C. R. SCUDDER, JAMES ROGERS and SAMUEL CUPPLES ENVELOPE COMPANY, Appellants

Supreme Court of Missouri

December 6, 1922

Appeal from St. Louis City Circuit Court. -- Hon. Victor H Falkenhainer, Judge.

Affirmed.

Lehmann & Lehmann for appellants.

(1) The contract was one of sale in praesenti of the stock by Cupples to Rogers. The considerations for the sale were the obligation assumed by the execution of Rogers's note, the payments thereon, and Rogers's continuation in the employment of the company. In re Desnoyers Shoe Co., 224 F. 372, 376. (2) There has been no breach of the contract by Rogers. (a) Rogers is still in the employment of the company. (b) Rogers being the owner of the stock had the right to authorize Scudder to vote the stock. Capen v Garrison, 193 Mo. 342; 10 Cyc. 334; Blevins v Riggs, 110 Ill.App. 37, 48; Bjornard v. Goodhue County Bank, 49 Minn. 483, 487. (c) The contract did not prohibit Rogers from assigning his interest in the stock to Scudder. (3) The trustees had no right to forfeit the contract and take to themselves the stock bought by Rogers. The contract does not give the trustees the right to forfeit the stock. Forfeitures are not favored and neither in law nor in equity will the right of forfeiture be given unless the contract expressly so provides. Alberts v. Merchants Exchange, 140 Mo.App. 449; Studdard v. Wells, 120 Mo. 29; Gratz v. Scenic Railway Co., 165 Mo. 211, 217; Swofford Brothers v. Randolph, 151 Mo.App. 385, 398; Trendley v. Railroad, 241 Mo. 73, 96. (4) Even though Rogers has breached the contract the trustees cannot rescind it. Courts of equity will not rescind a contract for a breach thereof in the absence of fraud, mistake, or other independent grounds, of equitable jurisdiction, nor where there is another adequate remedy less drastic, nor in any case, unless there has been a complete failure of consideration. 9 C. J., 1181; Shafer v. Shafer, 190 S.W. 323; In re Desnoyers Shoe Co., 224 F. 376. (5) The option to Cupples was personal to him and could be exercised only by him. It ceased with his death and did not pass to his trustees or their assigns. Arkansas Smelting Co. v. Belden Co., 127 U.S. 379, 387; Delaware County v. Diebold Safe Co., 133 U.S. 473; Odell v. Wells, 171 N.Y.S. 349, 352; Redheffer v. Leathe, 15 Mo.App. 12; Hardy Implement Co. v. Iron Works, 129 Mo. 222; Moore v. Thompson, 93 Mo.App. 336, 347; Afflick v. Streeter, 125 Mo.App. 703; Boyken v. Campbell, 9 Mo.App. 495; Landsen v. McCarthy, 45 Mo. 106. (6) Where it appears from the nature of a contract that the rights under it may not be assigned, the contract is not made assignable merely because it provides that the privileges may be exercised by the parties or their assigns. Foster Woolen Co. v. Wollman, 87 Mo.App. 658; Wooster v. Crane Co., 73 N. J. 30; Montgomery v. De Picot, 153 Cal. 509; Jetter v. Scollan, 96 N.Y.S. 274; Pollack on Contracts (4 Ed.) 425. (7) An option is usually a personal privilege to be exercised only by him who holds the option. Newton v. Newton, 11 R. I. 390; Rease v. Kittle, 56 W.Va. 269, 278; Boyken v. Campbell, 9 Mo.App. 495; Myers v. Stone, 128 Iowa 10; Sweezer v. Jones, 65 Iowa 272; Bostwick v. Hess, 80 Ill. 138; Kadish v. Lyon, 229 Ill. 35; Wheeling Car Co. v. Elder, 170 F. 215. (2) If the contract prohibits a sale by Rogers of his interest in the stock it is to that extent void as in restraint of trade. Fisher v. Bush, 35 Hun, 641; American v. Struthers, 131 U.S. 246; Steel v. Bankers Association, 148 P. 661; Moses v. Scott, 84 Ala. 608. (9) In so far as the contract gave Cupples an option to re-purchase the stock when Rogers's employment by the company ceased, it was against public policy as being detrimental to the interest of the other stockholders of the company. Timme v. Kopmeyer, 162 Wis. 571; Guernsey v. Cooke, 120 Mass. 501; Noyes v. Marsh, 123 Mass. 286; Noel v. Drake, 28 Kan. 265; Singers Bigger v. Young, 162 F. 82; West v. Camden, 135 U.S. 507; Odell v. Wells, 171 N.Y.S. 345; Wilbur v. Stoepel, 82 Mich. 344. (10) Any present stockholders may now object to the trustees exercising the option to re-purchase the Rogers stock. Odell v. Wells, 171 N.Y.S. 345, 351. (11) The legal and illegal portions of the contract are separable. 9 Cyc. 569; Pelz v. Eichle, 62 Mo. 171; Wright v. Railroad, 141 Mo.App. 519; Prestbury v. Fisher, 18 Mo. 50; Lowenstein v. McElroy, 181 Mo.App. 406; Rosenblatt v. Townsley, 73 Mo. 536. (12) Rogers had the right at any time to pay his note in full and get an absolute title to the stock. (13) A contract should not be interpreted to give one party an unfair advantage over another. Conqueror Zinc Co. v. Aetna Co., 152 Mo.App. 332; C. & E. I. Co. v. Carterville C. Co., 176 Mo.App. 407; McCartney v. Guardian Trust Co., 274 Mo. 224. A written contract should be construed most strongly against the party formulating the contract. Belch v. Scholtz, 171 Mo.App. 357; Interior Linseed Oil Co. v. Becker-Moore P. Co., 273 Mo. 433, 443.

Jeffries & Corum and Jesse McDonald for respondents.

(1) The contract did not constitute an absolute sale. Wright v. Crockett, 7 Mo. 125; 35 Cyc. 41; 26 Cyc. 1215; Halbert v. Halbert, 21 Mo. 277; Berry v. Berry, 31 Iowa 415; Miles v. Miles, 168 Iowa 153; Conkling v. City of Springfield, 39 Ill. 98; Siner v. Flatt, 177 P. 545; Stamm v. Easterly, 8 Pa. Dist. 330; Williams Estate, 11 Pa. St. 636; 13 C. J. 325; Philpot v. Gruninger, 14 Wall. 570; Simpson v. Van Langingham, 267 Mo. 286. (2) The contract has been breached by defendants. 15 C. J. 650; Powell v. Batchelor, 192 Mo.App. 67; McNamara v. Dyer, 176 S.W. 1101; Armstrong v. Henley, 182 Mo.App. 320; Laclede Power Co. v. Stillwell, 97 Mo.App. 258; Gibson v. Pub. Co., 28 Mo.App. 450, Murphy v. St. Louis, 8 Mo.App. 483; Lyle v. McCormack Harvesting Machine Co., 108 Wis. 81, 51 L. R. A. 906. (3) Plaintiffs are not seeking to enforce a forfeiture. Harrington v. Neville, 83 Mo.App. 589; Williams v. Maryland Glass Corp., 134 Md. 320; Lincoln Trust Co. v. Nathan, 175 Mo. 32; Lindeke v. Realty Co., 146 F. 630; United States v. Railroad Co., 186 F. 861; Cherokee Const. Co. v. Bishop, 86 Ark. 489; Callahan v. Shotwell, 60 Mo. 398; Farmers Trust Co. v. Galesburg, 133 U.S. 156; 9 C. J. 1181; Hayden v. Railroad, 222 Mo. 126. (4) The interest of Samuel Cupples in the contract passed to and is enforcible by plaintiffs. 21 L. R. A. (N. S.) 915; Siboni v. Kerkman, 1 Mees. & M. 423; Yerrington v. Greene, 7 R. I. 589, 84 Am. Dec. 578; Harrison v. Conlan, 10 Allen (Mass.) 85; 1 Corpus Juris, p. 181, par. 326; 18 Cyc. 239; Woerner American Law of Administration (2 Ed.) par. 328, p. 729; Bambrick v. Webster Groves Presbyterian Church, 53 Mo.App. 225; Arkansas Smelting Co. v. Belding, 127 U.S. 379. (5) The contract is valid: (a) The contract is not against public policy. Douglas v. Aurora Daily News Co., 160 Ill.App. 506; Oregon R. & N. Co. v. Demaus, 181 F. 781; Bonta v. Gridley, 78 N.Y.S. 961; Strodl v. Farrish-Stafford Co., 130 N.Y.S. 35; Malcolmson v. Realty & Inv. Co., 139 N.Y.S. 405; Fremont Carriage Co. v. Thompson, 91 N.Y. 376. (b) The contract is not void as in restraint of trade. Clark & Marshall on Corporations, p. 1732; Skrainka v. Scharringhausen, 8 Mo.App. 522. (6) To void a contract as against public policy the party seeking such voidance must place the other party in statu quo. Wiggins Ferry Co. v. Railroad, 73 Mo. 389; Whitwell v. Aurora, 139 Mo.App. 597; Tel. Co. v. Tel. Co., 236 Mo. 114, 136; Porter v. Gold Mining Co., 74 P. 938. (7) Defendants knew of, consented to and acquiesced in said contract and are estopped from repudiating it. Sauerherring v. Rueping, 119 N.W. 184; Jones v. Williams, 139 Mo. 1, 32; Fletcher, Cyc. on Corporations, p. 675, par. 473; Brooker v. Trust Co., 254 Mo. 125.

RAGLAND, C. Small, C., concurs; Brown, C., absent. Woodson, C.J., and Higbee, J., dissents in opinion filed.

OPINION

In Banc.

RAGLAND C.

Shortly prior to July, 1903, the capital stock of the Samuel Cupples Envelope Company, a Missouri corporation, with its principal place of business in St. Louis, was $ 100,000, and its surplus, $ 150,000. A stock dividend was declared making the authorized capitalization $ 250,000, this amount equaling the net asset value of the company at that time, there being 2500 shares of the par value of $ 100 per share.

At the time of the increase of the capital stock Samuel Cupples was president and the defendant C. R. Scudder was vice-president and treasurer of the company; Cupples owned approximately two-thirds of the stock and Scudder one-third. The defendant James A. Rogers, and John J. Hamilton, James H. Hewitt and Frank M. Kimbark, had been in the service of the company a number of years and were valued employees. The question of raising their salaries was discussed between Cupples and Scudder; they came to the conclusion that it would be best, in Mr. Scudder's language, to "give these men an interest in the company, rather than just raise their salaries," and to that end they would "give them stock from which they could draw their dividends." Accordingly on July 9, 1903, Samuel Cupples entered into a contract with each of the employees just named. The contracts were identical in terms, the one with defendant Rogers being as follows:

"St Louis, Mo., July 9, 1903.

"This Instrument Witnesseth: That Samuel Cupples, first party, has this day sold and delivered to James A. Rogers, second party eighty shares of stock of Samuel Cupples Envelope Company at the price of one hundred dollars per share, for which purchase price said second party has this day made and delivered to said first party his promissory note for eight thousand dollars, payable on or before...