Deibler v. Chas. H. Elliott Co.
| Decision Date | 27 June 1951 |
| Parties | DEIBLER v. CHAS. H. ELLIOTT CO. et al. |
| Court | Pennsylvania Supreme Court |
Mark T Deibler sued the Chas. H. Elliott Co., Harry V. Elliott, and others, to compel the defendant Harry V. Elliott to deliver to plaintiff 828 shares of stock in the defendant company registered in the name of Harry V. Elliott, and to permanently enjoin Elliott the pledgee of the stock, from voting the shares at any meeting of the stockholders of the company. The Court of Common Pleas, No. 3 of Philadelphia County, at No. 6752, December term, 1949, Per Curiam rendered a decree for plaintiff and defendants appealed. The Supreme Court, No. 142, January term, 1951, Jones, J., held that where stock was sold by defendant Elliott to plaintiff pursuant to an agreement whereby shares were to be held by Elliott as collateral for performance of plaintiff's undertaking to pay purchase price, to insure that Elliott would be employed by corporation for his lifetime and that Elliott would have voting right to stock in question for life and agreement provided that any delivery of shares to plaintiff was to be made at death of defendant Elliott defendant Elliott was entitled to retain possession of stock for his lifetime and the proxy to him was not revocable but was coupled with an interest.
Decree reversed with directions to dismiss the bill.
Where stock sold to plaintiff by defendant was by terms of agreement pledged to defendant as collateral for payment by plaintiff of the cost of the stock, to assure defendant that he would be employed by corporation for his lifetime at a salary of $135 per week and to enable defendant to have voting right to stock for life, proxy to defendant was coupled with an interest and was not revocable.
Francis Hopkinson, Henry S. Drinker and Drinker, Biddle & Reath, all of Philadelphia, for appellant.
Philip C. Herr, Philadelphia, for appellee.
Before STERN, STEARNE, JONES, BELL, LADNER and CHIDSEY, JJ.
This appeal is from a decree in equity ordering the defendant, Harry V. Elliott, to deliver to the plaintiff, Mark T. Deibler, 828 shares of stock in the defendant company (a Delaware corporation) registered in the name of Harry V. Elliott with attached executed power of attorney authorizing the sale, assignment and transfer of the certificates for such shares, and permanently enjoining Elliott, the pledgee of the stock, from voting the shares at any meeting of the stockholders of the company. The appeal is joint by the defendants indicated who claim that the purpose of the pledge has not yet been served and that Harry V. Elliott is entitled to possession of the stock for the remainder of his lifetime and the right to vote it.
The question involved was raised in the court below on preliminary objections by the plaintiff, under Equity Rule 55, 12 P.S. § 1221, to the defendants' answer to the bill of complaint, including new matter. The objections do not seem to fit any of the seven specifications in Equity Rule 48 adopted by reference in Rule 55. All of the material facts appear by the pleadings; none is in dispute. The matter was apparently submitted for the court's final disposition on bill and answer. At least the learned court below evidently so apprehended, as indicated by its entry of the definitive decree for the plaintiff on the merits merely upon preliminary objections. In any event, the controversy involves no more than a question of law which requires for its solution the proper interpretation of a written agreement whose provisions need be recited with considerable detail.
In 1938, Elliott, then sixty years old, was president of the defendant company for which he had actively worked all of his adult life; he was the owner of 1937 shares of the common stock of the company which was in excess of 80% of its total outstanding stock. Desiring to increase the interest of two employees, namely, Deibler, the plaintiff, and W. Alfred Streamer, in the company by enabling them to purchase a controlling interest in the stock of the company at a low figure and upon convenient terms, Elliott entered into a written agreement with Deibler and Streamer to that end on March 25, 1938.
Thereby, Elliott agreed to sell 828 shares of his stock to Deibler at $5 per share for a total of $4140 to be paid in installments of specified amounts at the end of each three-month period thereafter until paid in full. Deibler completed payment in full for his stock in January 1943. Elliott likewise agreed by the writing to sell to Streamer 552 shares of his stock at the same price ($5) per share for a total of $2760 to be paid for similarly in installments. Deibler and Streamer, on their part, severally agreed to pay Elliott the sums respectively owing for the stock which had a ten actual value of $92.38 per share and is now worth $120 per share. The agreement further provided that the shares so sold by Elliott to Deibler and Streamer would be transferred to them and would then ‘ immediately be delivered by Deibler and Streamer to Elliott, together with powers of attorney in blank for the transfer of said shares to be held by Elliott as collateral security for the performance by Deibler and Streamer of the terms of this agreement.’ From the time of the execution of the agreement in 1938 until 1950, Elliott voted the pledged stock without question or complaint from either Deibler or Streamer; and all of the shares so sold to them have at all times been, and still are, registered in the name of Harry V. Elliott.
On February 28, 1950, Deibler filed his bill of complaint in the instant suit praying (1) that The Chas. H. Elliott Co. and Harry V. Elliott, individually and as president, and W. Alfred Streamer, secretary of the corporation, be directed to cancel the 828 shares of stock in the company registered in the name of Harry V. Elliott and re-register such shares in the name of Deibler and turn them over to him, (2) that an injunction issue enjoining and restraining Elliott from voting such shares, and (3) for other and further relief. The final decree now under review resulted. Neither Streamer's stock nor Elliott's right to vote it is in any way involved in this proceeding.
One of the most important terms of the agreement is that Elliott was to be continued in the employ of the corporation for life at a salary of $135 per week. As the agreement provided,-‘ To secure the performance on their part of this agreement Deibler and Streamer hereby irrevocably vest in Elliott for the term of his life the right to vote said 1380 shares of stock at all meetings of the Corporation in such manner and for such purposes as Elliott may desire [Emphasis supplied]. Deibler and Streamer shall be entitled to receive all dividends on the shares purchased by them * * *. At the death of Elliott his personal representative shall, subject to the payment of any balance of the purchase price which may then be due, deliver to Deibler and Streamer the number of shares purchased by them respectively.’ Incidentally, an average yearly dividend of approximately $5.50 per share was paid on the stock from 1942 to 1949 for a total of $36,822 in dividends to Deibler on his 828 shares.
The agreement covered the possibility that Deibler or Streamer or both might fail to pay in full for their stock purchases. For such a contingency the agreement provided that Elliott ‘ shall have the option either (a) to return to the party in default all payments theretofore made by him,’ whereupon the shares of the defaulting party were to revert to and become the absolute property of Elliott, ‘ or (b) Elliott may consider the party in default as having completed the purchase of such number of shares as the payments theretofore made by such party in default would purchase at $5. per share, and...
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