Emerson v. Labor Investment Corporation
Decision Date | 08 December 1960 |
Docket Number | No. 6333.,6333. |
Parties | Joe Bailey EMERSON, Appellant, v. LABOR INVESTMENT CORPORATION, a corporation, Appellee. |
Court | U.S. Court of Appeals — Tenth Circuit |
Charles R. Nesbitt, Oklahoma City, Okl., for appellant.
James E. Grigsby, Oklahoma City, Okl., for appellee.
Before PHILLIPS, LEWIS and BREITENSTEIN, Circuit Judges.
Appellant brought action for damages for breach of an option contract for the sale and purchase of appellee's capital stock, alleging federal jurisdiction by reason of diversity of citizenship. Appellee, by answer, admitted the breach in that it refused to issue stock under the stock option, but asserted that the agreement in its inception was violative of 18 O.S.A. § 1.461 and further alleged both a lack of consideration and an accord and satisfaction.
The District Court for the Western District of Oklahoma found the stock option valid and in full compliance with the Oklahoma statute, but found that contract rights were compromised for consideration and that the failure of appellant's promised performance was so substantial as to justify rescission by the appellee. Appellant asserts on appeal that the evidence does not justify the court's rulings against him and that appellee is precluded by its failure to take a cross-appeal from seeking affirmance of the judgment by appellate examination of the ruling concerning the Oklahoma statute.
In view of our conclusion that the stock option rights granted to the organizers of appellee were in fact and law violative of the Oklahoma statute, we deem it unnecessary to delineate evidence of occurrences subsequent to the execution of that contract or examine the value of the consideration promised or given.
Labor Investment Corporation was organized March 26, 1956, for the purpose of raising capital for the formation of a life insurance company to be managed as a wholly-owned subsidiary. Appellant, one of seven organizers, subscribed for 5,000 shares of stock, for which he paid $5,000 in cash. With the qualifying 28,000 shares subscribed by the incorporators, the company through its shareholders elected its board of directors, including appellant, and proceeded to pass resolutions which would enable it to make public offering of its stock.
At this first meeting, it was resolved that the corporation should enter Stock Option Agreements2 with each of seven incorporators. The consideration given and to be given by all individuals was therein recited to be "the time, effort and expense incurred by said persons in the pre-organization and organization of the Corporation and other considerations," and additionally as to the four men charged with the sales of the corporate stock, among whom was appellant, "the consummation of the said Securities Sales Agreement."
Some of the stock option rights have been exercised and stock issued under the Emerson agreement. Also, portions of the option rights were assigned to various individuals and the assignments were accepted and recorded by the corporation.
Disharmony among the directors brought about the resignation of appellant and another and resulted in the repudiation of the option agreement by the corporation and the present suit.
Although the appellee did not take a cross-appeal, it urges that the clear reading of the Oklahoma statute, cited supra footnote 1, justifies the court's dismissal of the cause although the court specifically decided that the options were granted in conformity to 18 O.S.A. § 1.46. Appellant contends that since the issue was decided adversely to appellee in the findings and judgment of the District Court the company cannot attack the findings and decree of the lower court without having filed a cross-appeal.
Appellant relies upon the rule that without a cross-appeal, an appellee may not seek to enlarge his own rights nor diminish the rights of appellant but must content himself with argument to justify the findings in his favor, citing Timken-Detroit Axle Co. v. Alma Motor Co., 3 Cir., 163 F.2d 190; Hall v. Keller, 5 Cir., 180 F.2d 753, certiorari denied 340 U.S. 818, 71 S.Ct. 48, 95 L.Ed. 601; Morley Construction Co. v. Maryland Casualty Co., 300 U.S. 185, 57 S.Ct. 325, 81 L.Ed. 593. With ipse dixit assertions that appellee is here trying to overthrow findings by the trial court and enlarge its own rights without proper hearing on the matter, appellant ignores the distinguishing language of the Morley case at 300 U.S. at page 191, 57 S.Ct. at page 327:
The judgment here is not divisible; its sole effect was to dismiss the plaintiff's action and discharge the defendant with its costs. Further, the findings of fact are complete and in accord with the evidence and the issue raised by the appellee is concerned with the application of the facts to the law as indicated in the court's conclusions.
The appellant views the trial court's short analysis of the law, conveyed by letter to counsel but not incorporated in its entirety into the findings, as setting in conflict the findings of the final judgment. The trial court wrote:
The findings as signed by the trial court show, at least by inference and in accordance with the evidence, that the stock of the organizers was subscribed prior to the date of the stock option agreements, March 28, 1956. If there be conflict between these two statements of the court, the formal findings must control in the absence of an indication of fraud perpetrated on the court or other unusual and extenuating circumstances. The sole question, therefore, is whether the grant of stock options, subsequent to incorporation and authorized by the corporation to reward...
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...original judgment. Morley v. Maryland Casualty Co., 300 U.S. 185, 191, 57 S.Ct. 325, 327, 81 L.Ed. 593 (1937); Emerson v. Labor Investment Corp., 284 F.2d 946, 948 (10th Cir.1960). See also, 15 Charles Wright et al., Federal Practice and Procedure § 3905 (1990 Supp.). Were we to affirm the ......
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