Hendrick v. Green

• Decision Date: 18 March 1993
• Docket Number: No. 90-CA-0865,90-CA-0865
• Citation: 618 So.2d 76
• Parties: H.J. HENDRICK v. William T. GREEN.
• Court: Mississippi Supreme Court

Page 76

618 So.2d 76

H.J. HENDRICK v. William T. GREEN.

No. 90-CA-0865.

Supreme Court of Mississippi.

March 18, 1993.

Rehearing Denied June 3, 1993.

Matthew Harper, Harper Braham & Associates, Laurel, for appellant.

John L. Jeffries, Laurel, for appellee.

Before HAWKINS, C.J., and SULLIVAN and McRAE, JJ.

HAWKINS, Chief Justice, for the Court:

H.J. Hendrick appeals from a judgment entered in the chancery court of Jones County dismissing his complaint against William T. Green for specific performance or alternatively, damages for breach of contract to purchase corporate shares from Hendrick. Because the chancellor was manifestly wrong as a matter of law in holding the contract was impossible to perform, we reverse.

FACTS

Around the first of April, 1989, Hendrick, a retired businessman living in Baton Rouge, Louisiana, contacted Green, a resident of Laurel, Mississippi, regarding the sale of 45,000 corporate shares in Southeastern Savings Bank of Laurel (Southeastern) owned by Hendrick. Green was a major shareholder and member of the board of directors of Southeastern. Following discussion between the two, on April 5, 1989, Green wrote Hendrick:

It is my understanding that you have entered into an agreement with Larry V. Glorioso and/or Mildred F. Glorioso whereby the Gloriosos have agreed to provide you with 45,000 shares of common stock in Southeastern Savings Bank as security for a loan held by you from Larry V. Glorioso.

In the event such stock is forwarded to you, I hereby offer to pay you the sum of two and no/100 Dollars ($2.00) per share for the entire 45,000 shares, or a total of Ninety Thousand and no/100 Dollars ($90,000.00). I do not desire to purchase any less than the full 45,000 shares.

I will purchase this stock from you on or before April 24, 1989, in one of the following manners:

a) Cash in full paid on or before April 24, 1989;

b) Thirty Thousand and no/100 Dollars ($30,000.00) cash together with my promissory note in the amount of Sixty Thousand and no/100 Dollars ($60,000.00) at 12% per annum from date. Principal of Three Thousand and no/100 Dollars ($3,000.00) plus interest being payable in quarterly installments over a period of five (5) years. No penalty for prepayment. I will provide security agreeable to you.

In the event you accept this offer, please notify me on or before April 14, 1989.

The purpose of Green's acquiring Hendrick's shares was to become a majority shareholder in Southeastern. When Green wrote Hendrick, he was aware that approval was required from both federal and state regulatory agencies. Green thought that he had already obtained approval from the Federal Home Loan Bank (F.H.L.B.), a federal regulatory agency, to become a majority shareholder and have control of the corporation. ¹

Apparently Green recognized that approval would not be promptly forthcoming, and on April 24, 1989, Green again wrote Hendrick, enclosing a check for ten thousand dollars ($10,000.00):

Pursuant to our agreement of today, enclosed is my check in the amount of Ten Thousand and no/100 Dollars ($10,000.00).

This check is given to you in partial payment for Southeastern Savings Bank stock, and it is to be deducted from the amount of cash referred to in my letter of April 5, 1989.

As you have been advised, before I can purchase all of the stock, it is necessary for my attorneys to clear this matter with the state regulatory agency.

By acceptance of these funds, you have agreed to cooperate with me in procuring state approval, after which time we will consummate this transaction. Your acceptance also extends the April 24, 1989, deadline to a reasonable time not to exceed ninety (90) days hereafter to clear this matter with the state.

Hendrick accepted this offer by cashing the check.

On April 27, 1989, Green wrote a letter to F.H.L.B. in Dallas, seeking approval for obtaining the controlling interest through purchasing various shares. In pertinent part, the letter stated:

My attorneys have reviewed this matter and have come to the initial conclusions that additional change of control applications do not appear to be necessary as I have already been approved. It is my understanding that your department has also reviewed my present situation, taking into regard the previous change of control, and has determined that no further application or notice is required of me. I will appreciate your acknowledging this understanding by signing, dating and returning a copy of this letter to me in the enclosed stamped, self-addressed envelope.

F.H.L.B. never acknowledged receipt of this letter.

On August 23, 1989, Green filed his plan with F.H.L.B. seeking approval to become a majority shareholder.

Recognizing that he was having difficulty obtaining approval, Green sought to amend the terms of the two previous letters through an escrow agreement which his attorney prepared and dated September 19, 1988, but Hendrick refused to sign.

On September 20, 1989, the Office of Thrift Supervision (O.T.S.) wrote Green a detailed letter stating that Green's application was materially incomplete pursuant to 12 C.F.R. 574 (1989). This letter also discussed the areas where additional information was needed. O.T.S. determined that the business plan, compensation plan, the stock acquired through foreclosure, and capital restoration plan needed to be expanded and detailed. As a result of these omissions, the application was withdrawn.

The record does not contain any evidence concerning what, if any, additional steps were taken by Green in order to conform with the guidelines set forth by the O.T.S.

On December 8, 1989, Hendrick filed a complaint against Green for specific performance of the contract, or in the alternative damages for breach of contract. On April 18, 1990, Chancellor John Shannon Clark of the Chancery Court of Jones County heard testimony from H.J. Hendrick, William T. Green and Susan Wood.

At trial, Green maintained that Hendrick abstained from voting his 45,000 shares at the February 13, 1990, meeting of the shareholders of Southeastern for the purpose of increasing the authorized number of corporate shares from one million (1,000,000) shares to six million (6,000,000) shares. ² Green further claimed that this abstention removed any possibility of his obtaining the majority of shares.

Hendrick on the other hand, testified that he offered to give Green his proxy to vote the 45,000 shares provided that interest was paid on the amount due under the contract.

As above noted, the shareholder meeting was subsequent to suit having been filed.

Following trial on July 17, 1990, the Chancellor ruled that the contract was unenforceable due to the fact that its implementation was prohibited by law and dismissed the complaint. Hendrick has appealed.

LAW

The letters of April 5th and April 24th, 1989, along with Hendrick's accepting the offer by cashing the check constitute the contract in this case. Hendrick raises several issues on appeal, but we find only one requiring discussion, namely: whether the contract is unenforceable. We find that the Chancellor was manifestly in error in holding the contract unenforceable as a matter of law.

The mere fact that a contract becomes burdensome or even impossible to perform does not for that reason alone excuse performance. Browne & Bryan Lumber Co. v. Toney, 188 Miss. 71, 194 So. 296 (1940), involved delivery of railroad ties for a certain commission price. Subsequently, the means for delivering the entire amount of the ties became impossible. We addressed the contract language and determined that even though it became impossible for the goods to be shipped by water, that fact did not relieve the defendant from performing his contract.

When all the testimony in this case is analyzed, it means Tony made a contract with the railroad, which he did not fulfill for the reason that it became apparent to him he would incur a loss.... This Court said in the case of Piaggio v. Somerville, 119 Miss. 6, 80 So. 342, 344 [1918]: 'when a party by his own contract creates a duty or charge upon himself he is bound to discharge it, although to do so should subsequently become unexpectedly burdensome or even impossible; the answer to the objection of hardship in all cases such being that it might have been guarded against by proper stipulation'. [Citations omitted.]

In the case of Harmon v. Fleming, 25 Miss. 135, 142 [1852], this Court said: 'We find the common law rule, on this subject, stated in the following manner: [w]here the law casts a duty on a party, the performance shall be excused, if it be rendered impossible by the act of God. But where a party, by his own contract, engages to do an act, it is deemed to be his own fault and folly, that he did not thereby expressly provide against contingencies, and exempt himself from liability in certain events; and in such case, therefore, that is, in the instance of an absolute and general contract, the performance is not excused by an inevitable accident or other contingency, although not foreseen by, or within the control of the party'.

In the case of Piaggio v. Somerville, supra, three exceptions are recognized: 1. A subsequent change in the law, whereby performance becomes unlawful. 2. The destruction, from no fault of either party, of the specified thing, the continued existence of which is essential to the performance of the contract. 3. The death or incapacitating illness of the promisor in a contract which has for its objective the rendering of personal services.

Browne, 188 Miss. at 82-83, 194 So. at 298.

Other jurisdictions have addressed the issue of impossibility of performance. In Ruff v. Yuma County Transp. Co., 690 P.2d 1296, 1298 (Colo.App.1984), the Supreme Court of Colorado enumerated the following:

Impossibility of performance is determined by whether an unanticipated circumstance has made performance of the promise vitally different from what should reasonably have been within the contemplation of both...