Cobb v. Library Bureau of New Jersey

• Decision Date: 22 September 1928
• Parties: COBB v. LIBRARY BUREAU OF NEW JERSEY. WASHBURN v. SAME.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

264 Mass. 431

162 N.E. 902

COBB

v.LIBRARY BUREAU OF NEW JERSEY.

WASHBURN

v.SAME.

Supreme Judicial Court of Massachusetts, Suffolk.

Sept. 22, 1928.

Report from Superior Court, Suffolk County; Marcus Morton, Judge.

Separate bills in equity by Charles H. Cobb and by Walter R. Washburn against the Library Bureau of New Jersey. Decree for defendant in each case, and case was transferred to superior court. Bills dismissed.E. A. Whitman and L. Weyburn, both of Boston, for plaintiffs.

L. Powers, of Boston, for defendant.

WAIT, J.

The plaintiffs by their bills in equity seek the specific performance of stock subscription contracts. Earlier bills for the same purpose were dismissed because brought prematurely. The decision is reported in 260 Mass. 7, 157 N. E. 46. The terms of the contracts and the material facts set out in that opinion need not be repeated here. In substance we held that, although the plaintiffs had ceased to be in the employ of the defendant after January 31, 1926, the defendant had failed in its effort to exercise the option of cancellation given it by the original agreement in that event and that the original subscription agreements dated January 2, 1925, were still in force but as modified by the so-called ‘three vice presidents agreement’ of October 27, 1925, approved and ‘adopted’ by the defendant on November 2, 1925. We held, further, that the defendant had not broken the modified contract at the time when the bills were brought, so that the rights claimed by the plaintiffs had not accrued, and the decrees dismissing the bills had been made properly.

After the final decrees after rescript in those cases were entered, the plaintiffs, on June 22, 1927, made tenders of certain amounts to the defendant at Tonawanda, N. Y., and demanded delivery of stock certificates. The demands were refused, and these bills were filed on June 23, 1927.

In the superior court the judge ruled that neither plaintiff was entitled to the relief sought, and reported the cases. If he was right, then decrees are to enter dismissing the bills with costs; if he was wrong, then a decree is to be entered for each plaintiff, directing the delivery to Cobb of 750 shares and to Washburn of 1,500 shares of the common stock of the defendant, upon payment, respectively of $12,500 and $25,000, less such of the credits and payments shown in the report as this court decides are applicable to the supplementary contracts of October, 1925.

The contracts provided that in case the plaintiffs ceased to be officers or employees of the defendant or its business successors or assigns from any cause other than death or physical disability before completion of payment for the stock, the defendant could either cancel the agreement on repaying all amounts then paid upon the purchase price, or could sell the stock or the subscription rights in specified ways, paying the overplus, if any, beyond the liquidation of any unpaid balance of the purchase price to the subscriber, who was to remain liable on the contract for any amount unpaid. No express provision was made to meet the situation if the defendant did not exercise one or other of these rights. This, however, is the situation which has happened. The plaintiffs ceased to be employees for causes other than death or disability. The defendant endeavored to use the option of cancellation, but failed to comply with its conditions. That left the plaintiffs entitled to the stock if they could meet the requirements for payment. By the original contract the subscriber agreed to purchase a definite number of shares-Cobb 250 and Washburn 500¹-and to pay $100 a share in the manner set forth, and the company agreed to issue and sell the stock and to receive payment as provided in the agreement. Each subscriber bound himself to pay from his individual resources 6 1/4 per cent. of his total subscription in each year, and to apply thereto certain extra compensation provided for while in the defendant's employ. If they failed, then the defendant, on 30 days' notice, could cancel the agreement and declare the whole unpaid balance of the principal due and payable at once, and could sell the stock or the subscription rights in specified ways; becoming itself purchaser if it wished, the subscribers remaining liable for any amount unpaid.

The agreements expressly provided that they were not contracts of employment, and did not affect the defendant's right to cease to employ at any time with or without cause; and, further, that they should not affect its right to reorganize or the right of the corporation or stockholders to take such action regarding the affairs of the company as to it or them seemed good. It seems that, under such an agreement, after employment had ceased and the option to cancel or sell had not been exercised by the defendant, the subscriber would have been entitled at any time on paying the full price to receive the stock. However that may be, it is certain that after the contract had been amended by the ‘three vice presidents agreement’ the subscribers were so entitled as to one-half the number of shares. By that modifying agreement, which was made before they had ceased to be...