G.S. Johnson Co. v. Nevada Packard Mines Co.

• Decision Date: 20 November 1920
• Docket Number: 2440.
• Citation: 272 F. 291
• Parties: G. S. JOHNSON CO. v. NEVADA PACKARD MINES CO.
• Court: U.S. District Court — District of Nevada

272 F. 291

G. S. JOHNSON CO. v. NEVADA PACKARD MINES CO.

No. 2440.

United States District Court, D. Nevada.

November 20, 1920

Augustus Tilden, of Reno, Nev., for plaintiff.

Cheney Downer, Price & Hawkins, of Reno, Nev., for defendant.

FARRINGTON District Judge.

Plaintiff brings this action at law to recover damages in the sum of $79,010.76 for an alleged breach of a contract. The case comes before the court at this time on defendant's demurrer to, and motion to strike certain portions of, the complaint. Plaintiff alleges that at San Francisco, March 14, 1914, defendant entered into an oral contract with plaintiff, wherein plaintiff agreed to--

'immediately institute and continuously prosecute to its utmost capacity a campaign to stimulate public interest in said shares and thereby procure purchasers for 400,000 shares thereof at the following prices net to defendant: Ten cents per share for 100,000 shares, 12 1/2 cents per share for 100,000 shares, 15 cents per share for 100,000 shares, and 17 1/2 cents per share for 100,000 shares; said sales to be so effected as to enable defendant to realize the following sums at the following times: $4,000 on or before May 10, 1914; $5,000 on or before June 10, 1914; $6,000 on or before July 10, 1914 $7,000 on or before August 10, 1914; $8,000 on or before September 10, 1914; $9,000 on or before October 10, 1914 $10,000 on or before November 10, 1914; and $6,000 on or before December 10, 1914; that, notwithstanding the specification of amounts and dates as aforesaid, plaintiff would not be strictly bound thereby, but would be strictly bound only to keep defendant in sufficient funds to enable it to accomplish its said purpose; that in no other respect would time be deemed to be of the essence of plaintiff's performance.'

On the same day, March 14, 1914, the defendant company adopted a resolution, which, in so far as it is material, reads as follows:

'On motion, duly made, seconded, and carried, it was resolved: That the Nevada Packard Mines Company sell to the G. S. Johnson Company of San Francisco, California, 400,000 shares of treasury stock on the terms, prices and conditions as follows: One hundred thousand shares at the rate of 10 cents per share; one hundred thousand shares at the rate of 12 1/2 cents per shares; one hundred thousand shares at the rate of 15 cents per share; one hundred thousand shares at the rate of 17 1/2 cents per share. That the said stock be paid for by G. S. Johnson Co. as follows: $4,000 on or before May 10, 1914; $5,000 on or before June 10, 1914; $6,000 on or before July 10, 1914; $7,000 on or before August 10, 1914; $8,000 on or before September 10, 1914; $9,000 on or before October 10, 1914; $10,000 on or before November 10, 1914; $6,000 on or before December 10, 1914. Stock to be escrowed with the Merchants' National Bank of San Francisco, with instructions to deliver as requested by the G. S. Johnson Company upon receipt of payments as above set out.'

Three days later, in pursuance of the oral agreement and resolution, the defendant company executed the following option in writing:

'For and in consideration of one ($1.00) dollar and other valuable considerations to the undersigned corporation in hand paid, the receipt of which is hereby acknowledged, the undersigned corporation, acting through its officers hereunto duly authorized, does hereby give and grant to the G. S. Johnson Company, a corporation, an option to purchase one hundred thousand (100,000) shares of the treasury stock of the Nevada Packard Mines Company at ten (10¢) cents per share net to the said company, provided the same is purchased and paid for as follows, to wit: 40,000 shares on or before May 10, 1914; 50,000 shares on or before June 10, 1914; and 10,000 shares on or before July 10, 1914.

'And in the event the said the G. S. Johnson Company purchases all of the said one hundred thousand (100,000) shares as hereinbefore provided and pays for the same as herein provided, the Nevada Packard Mines Company does hereby give and grant to the said G. S. Johnson Company an option to purchase an additional one hundred thousand (100,000) shares of the treasury stock of said company at and for the sum of twelve and one-half (12 1/2) cents per share, provided the same is purchased and paid for as follows, to wit: 40,000 shares on or before July 10, 1914; 56,000 shares on or before August 10, 1914; and 4,000 shares on or before September 10, 1914.

'And in the event the said the G. S. Johnson Company purchases all of the said two hundred thousand (200,000) shares as hereinbefore provided and pays for the same as herein provided, the Nevada Packard Mines Company does hereby give and grant to the said the G. S. Johnson Company an option to purchase an additional one hundred thousand (100,000) shares of the treasury stock of said company at and for the sum of fifteen (15¢) cents per share, provided the same is purchased and paid for as follows, to wit: 50,000 shares on or before September 10, 1914; and 50,000 shares on or before October 10, 1914.

'And in the event the said the G. S. Johnson Company purchases all of the said three hundred thousand (300,000) shares as hereinbefore provided, and pays for the same as herein provided, the Nevada Packard Mines Company does hereby give and grant to the said the G. S. Johnson Company an option to purchase an additional one hundred thousand (100,000) shares of the treasury stock of said company at and for the sum of seventeen and one-half (17 1/2) cents per share, provided the same is purchased and paid for as follows, to wit: 8,571 shares on or before October 10, 1914; 57,142 shares on or before November 10, 1914; and 34,287 shares on or before December 10, 1914.

'It is agreed that the undersigned shall deliver stock to the said the G. S. Johnson Company in such amounts and at such times within the dates above stated as the said the G. S. Johnson Company shall direct, and that the said the G. S. Johnson Company shall pay for all stock as and when issued.

'It is agreed and made a part of this contract that so long as the terms of this contract are complied with by the said the G. S. Johnson Company that Augustus D. Cox shall be and remain superintendent of the Nevada Packard Mines Company, with full power to direct the development of the property, at a salary of one hundred and fifty ($150.00) dollars per month, unless mutually agreed by and between the said the G. S. Johnson Company and the Nevada Packard Mines Company to the contrary.

'Should the said the G. S. Johnson Company fail, neglect, or refuse to purchase stock as hereinbefore provided, or to make said payments or any thereof as herein provided, such failure, neglect or refusal shall work a forfeiture of this option to purchase, and the same shall be null and void as to all amounts of stock mentioned herein unpurchased at the time of such forfeiture.'

Thus by the terms of the contract plaintiff was granted an option to purchase 40,000 shares of stock by paying $4,000 therefor on or before May 10th. Plaintiff, however, took but 29,890 shares, and paid defendant only $2,989 prior to that date. Plaintiff was also permitted to buy 50,000 shares additional, by paying therefor $5,000 on or before June 10th. Instead of doing so, only enough stock was taken to yield $3,407.50. This sum, and no more, was then paid by plaintiff to defendant. Thereafter, and on or before July 13th, plaintiff had taken stock from defendant to the amount of $1,164.40, which it paid to defendant, instead of the $6,000 required on or before July 10th. July 13th the Nevada Packard Mines Company notified plaintiff that the option of March 17, 1914, was canceled.

The oral contract of March 14th and the written option of March 17th provided for the sale of 400,000 shares of treasury stock. The oral agreement required plaintiff to endeavor to procure purchasers for the stock. The written agreement gave plaintiff no more than an option to purchase. Time is of the essence of the written contract, and it would be of the oral contract also, but for the provision that, notwithstanding the specification of amounts and dates, which are the same in both contracts, the plaintiff would not be strictly bound thereby, but would be strictly bound only to keep defendant in sufficient funds to enable it to accomplish its purposes; that in no other respect would time be deemed to be of the essence of plaintiff's performance.

We are bound to assume that the two contracts related to the same 400,000 shares of stock. There is no allegation to the contrary, and it appears that defendant owned, all told, no more than 500,000 shares. There is nothing in the complaint which indicates defendant was bound to furnish plaintiff 400,000 shares of stock for its customers, and also another 400,000 shares under the option. The two agreements relate to precisely the same shares, fix the same prices, and specify the same dates prior to which purchases of the same number of shares are to be made and paid for. There is nothing in the complaint which lends any countenance to the theory that if plaintiff failed to purchase, or lost its right to purchase under the option, it could still proceed under the oral agreement, procure purchasers, and compel defendant to issue stock.

The allegation of the complaint is that 'defendant in performance of its part in said campaign (referring to the oral agreement) caused' the above resolution to be adopted by its board of directors. The resolution authorized the sale to plaintiff. The stock was to be placed in escrow and delivered to plaintiff upon receipt of payments in the amounts and prior to the dates set out. Again, it is alleged:

'That on, to wit, the 17th day of March, 1914,

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