Burnham v. Borden Co.

• Decision Date: 17 October 1938
• Docket Number: No. 10.,10.
• Citation: 3 A.2d 151,121 N.J.L. 435
• Parties: BURNHAM v. BORDEN CO.
• Court: New Jersey Supreme Court

3 A.2d 151

121 N.J.L. 435

BURNHAM

v. BORDEN CO.

No. 10.

Court of Errors and Appeals of New Jersey.

Oct. 17, 1938.

Appeal from Supreme Court, Essex Circuit.

Action by Johnsie B. Burnham, administratrix of the estate of Charles H. Campbell, deceased, against the Borden Company for breach of contract. Judgment for plaintiff, and defendant appeals.

Affirmed.

Merrit Lane, of Newark, for appellant.

Arthur T. Vanderbilt, of Newark, for respondent.

PERSKIE, Justice.

Appellant, defendant below, and so hereafter referred to, appeals from a judgment of the Supreme Court, in the sum of $113,630.88 in favor of respondent, plaintiff below, and hereinafter referred to as either plaintiff or as Campbell.

The trial of this cause began before then Circuit Court Judge Porter and a jury. But as the case was tried it developed that the admissions in the pleadings together with the proofs adduced raised no dispute as to the facts. Accordingly, the cause was submitted, with apparent consent of both parties, to Judge Porter, as a Supreme Court Commissioner, for his consideration and determination. Counsel for defendant invoked Supreme Court rule 113. Thus the trial judge included in the postea his findings of fact and conclusions of law. Upon those findings the judgment under review was entered. The propriety of that judgment is challenged. The answer to that challenge depends upon our determination as to whether the learned trial judge correctly construed the agreement which allegedly gave rise to plaintiff's cause of action. Did the defendant, as it is claimed, breach its undertaking with plaintiff? Two agreements are involved; they are rather lengthy and necessarily so; they are comprehensive; they give every indication of having been drawn with great skill and care. We find no difficulty in ascertaining and in giving effect to the intention of the parties as manifested by the language employed and the objects sought to be accomplished. Corn Exchange Nat. Bank & Trust Co. v. Taubel, 113 N.J.L. 608, 609, 175 A. 55. There is no necessity to detail all of the provisions of these instruments.

Suffice it presently to state these agreements disclose that on May 14, 1914, defendant (then known as Borden's Condensed Milk Company) entered into a written agreement with the then National White Cross Milk Company (it has since changed its name to Federal Milk Products Company), which we shall hereafter refer to (as it was referred to below) as the White Cross Company. This company had an authorized capital stock of $10,000,000 of which $8,000,000 was issued and outstanding, the remaining $2,000,000 being treasury stock, no part of which, by agreement, was to be sold, issued or otherwise disposed of by White Cross Company. Campbell owned $3,000,000 par value or three-eighths of the outstanding stock. Defendant under this agreement agreed, among other things, that, in consideration of the assignment and transfer to it of certain inventions and patent rights by White Cross Company, it would pay to the said White Cross Company royalties under said letters patent upon every pound of powder milk sold by defendant until the expiration date of the letters patent, namely, August 19, 1930. It was further agreed that the royalty payments should not be less than $20,000 in each and every calendar year beginning with the year ending April 30, 1916; and that the whole of any royalties paid after October 31, 1916, by defendant should from time to time when and as the same were received by White Cross Company forthwith be distributed and paid by the latter to its stockholders as dividends less certain deductions not here material. This agreement (generally stated) is characterized by the parties as the "royalty agreement".

On the same day, May 14, 1914, defendant also entered into a written agreement with Charles H. Campbell, plaintiff's intestate, who was then president of White Cross Company. The preamble to this agreement recites the execution of the "royalty agreement" and the fact that Campbell desired to borrow $150,000 from defendant. In consideration of the premises the provisions as to the loans are then set down. Under these provisions defendant agreed to and did in fact make loans to Campbell in the sum of $150,000. These loans were evidenced by his two promissory notes, one dated May 14, 1914, for $100,000 and the other dated May 15, 1915, for $50,000. Both notes contained a reference to this agreement and the agreement also contained a reference to the notes. In order further to secure the payment of these notes Campbell pledged with defendant all of his stock ($3,000,000) in the White Cross Company.

It was further agreed between the parties that the loans to Campbell should not bear interest, and should be repaid only out of the moneys received as dividends declared from royalties, or in lieu of dividends on the pledged stock; that the moneys received by defendants as dividends, or in lieu of dividends, on the pledged stock should be paid to Campbell, whenever requested by him, until the aggregate of the royalties paid to the White Cross Company should amount to $400,000. Campbell in turn guaranteed that after this sum of $400,000, as aforesaid, had been paid, the total of all dividends thereafter declared and paid upon the pledged stock (out of royalties paid subsequent to the first $400,000 thereof) should at all times amount to three-eighths of all royalties paid to White Cross Company, and in case such total dividends did not at any time amount to at least such three-eighths Campbell should personally pay to defendant a sum equal to such deficiency.

The agreement further provided that when the aggregate royalties paid to the White Cross Company should amount to at least $400,000, thereafter all dividends or moneys in lieu of dividends on the pledged stock should be applied by defendant to the principal of the loans made to Campbell until they should be paid. Campbell in turn again guaranteed that when the aggregate of all royalties paid by defendant to White Cross Company amounted to $800,000, the total dividends declared and paid to defendant which it could apply towards the payments of the loans of Campbell should amount at least to $150,000, and in case the total of such dividends did not amount at least to $150,000, Campbell should personally pay a sum equal to such deficiency. And Campbell further guaranteed defendant that, upon payment of the last royalty, as of August 19, 1930, the total of all dividends declared and which could be applied towards his loans, should amount to at least three-sixteenths of the aggregate of all royalties paid to White Cross Company; and in case the dividends declared, paid or applied should not then amount to three-sixteenths of all royalties paid he, Campbell, should forthwith personally pay a sum equal to such deficiency.

We desire especially to mark the fact that this agreement also contained the following provision: "* * * that after the payment of the last royalty due under the royalty agreement as of August 19, 1930, and after declaration and payment on the pledged stock of the dividend in respect to such last due royalty, and if the said Campbell shall have duly and fully observed and performed all the terms and conditions of this agreement, then, notwithstanding that the principal of said loans shall not have been fully paid, this agreement shall terminate and the Borden Company shall reassign, transfer and deliver the pledged stock to said Campbell and shall redeliver the notes to him." (Italics supplied.)

This is the agreement (again generally stated) that is characterized by the parties as the "loan agreement".

During the period covered by the royalty agreement, White Cross Company received $306,082 in royalties from defendant. Out of this sum it paid to defendant, on Campbell's pledged stock, the sum of $78,937.50. In addition thereto, about a year after the death of Campbell (he died on June 3, 1917) his then personal representative (the estate has had five different administrators since his death) paid to defendant the sum of $1125. This latter sum (so it is claimed) was paid in pursuance of what has been described as the three-sixteenths clause of the loan agreement. Thus a total of $80,062.50 was received by defendant as dividends and moneys in lieu of dividends.

On February 13, 1931, the then administrator demanded from defendant the said sum of $80,062.50. Defendant refused to pay same. Thereafter, on September 27, 1935 (the summons is tested September 19, 1935), plaintiff commenced this suit for the recovery of $80,062.50 plus interest thereon from February 13, 1931, the day of the demand therefor.

Plaintiff's right to recovery is based primarily upon the loan agreement, especially the following provisions thereof:

Section Third, A. "Accordingly, it is hereby agreed that the sums received by the Borden Company as dividends or in lieu of dividends upon the pledged stock shall be applied by it as follows: A. Until the aggregate of the royalties paid to the White Cross Company under the royalty agreement shall amount to the sum of four hundred thousand dollars the Borden Company shall, whenever thereunto requested by said Campbell, forthwith pay over to him the full amount which it shall have received as dividends or in lieu of dividends upon the pledged stock, including all dividends or pro rata part of a dividend declared and paid out of the said first four hundred thousand dollars of royalty payments." (Italics supplied.)

And, Section Third, B. "When...