Hollister v. Fiedler

• Decision Date: 17 January 1955
• Docket Number: No. A--55,A--55
• Citation: Hollister v. Fiedler, 17 N.J. 239, 111 A.2d 57 (N.J. 1955)
• Parties: Robinson G. HOLLISTER, Plaintiff-Respondent, and Jean Hollister, Defendant on Cross-Claim-Respondent, v. Theodore FIEDLER, Executor of the Estate of William C. Fiedler, deceased, Defendant-Appellant.
• Court: New Jersey Supreme Court

Page 239

17 N.J. 239

111 A.2d 57

Robinson G. HOLLISTER, Plaintiff-Respondent and Jean Hollister, Defendanton Cross-Claim-Respondent, v.Theodore FIEDLER, Executor of the Estate of William C Fiedler, deceased, Defendant-Appellant.

No. A--55.

Supreme Court of New Jersey.

Argued Nov. 29, 1954.

Decided Jan. 17, 1955.

Joseph Bigel, Newark, for appellant(Bruck & Bigel, Newark, attorneys).

Harold D. Feuerstein, Newark, for respondent(Lester Sandles, Newark, attorney).

The opinion of the court was delivered by

HEHER, J.

The inquiry here concerns the ownership of one share of the capital stock of Fiedler & Hollister, Inc., a New Jersey corporation, determinative of majority control; and the decisive point is whether evidence adduced from the plaintiff Hollister of an asserted transaction with the deceased Fiedler bearing upon the issue transgresses the policy of N.J.S. 2A:81--2, N.J.S.A., formerly R.S. 2:97--2.

At the outset, plaintiff held as his own title to 11 of the issued shares of the corporate capital stock; the deceased Fiedler then held ten shares in his own name and an additional share, it is conceded, in the name of his wife, Martha, to qualify her for service as a director of the corporation, the now disputed share that later, upon the death of Martha Fiedler, was placed in the name of the plaintiff Hollister's wife, for the same purpose.Hollister and Fiedler had provided for continuing equal interests in the outstanding capital stock.The judgment of the Superior Court determined that the particular share of stock 'was originally held by Jean Hollister to qualify her as a director' of the corporation, 'and was held by her in behalf of William C. Fiedler,' but it was also adjudged that during his lifetime Fiedler 'did surrender and deliver to the plaintiff, Robinson G. Hollister, said share of stock for the beneficial ownership of the plaintiff in order to induce' him 'to remain in business with' Fiedler, and that ownership of the share was then in the plaintiff.This is the crux of the controversy.

The Appellate Division of the Superior Court affirmed the judgment in this regard, 30 N.J.Super. 203, 104 A.2d 61(1954); and the case is here by certification at the instance of the defendantexecutor.

Fiedler died August 29, 1950.The original complaint in this cause sought from his executor specific performance of a mutual option formulated by Hollister and Fiedler, exercisable by either in the event of the death of the other, for the survivor's purchase of the deceased's shares of the corporate capital stock at 'book value,' if the survivor be 'still in the employ of the Company,' and his assumption of an undertaking to pay the widow of the deceased shareholder 25% Of the company's net profits during her life 'or until the death of the surviving party, whichever shall first occur.'The option agreement recited that Fiedler and Hollister each was the owner of 11 shares of the corporate capital stock.Of this, more hereafter.There was also a separate agreement in writing for the employment of the plaintiff Hollister as general manager of the corporation for a term of five years.The complaint did not specify the number of shares held by Fiedler; it demanded judgment that defendant be directed to 'endorse and deliver' to plaintiff the 'shares of stock formerly owned' by the deceased Fiedler, and to answer in damages 'for the breach of the agreement.'The defendantexecutor answered denying plaintiff's continued employment by the corporation and tender of the book value of the shares, and by counterclaim alleged that plaintiff had 'unlawfully retained possession and control' of the company's 'business and affairs, property, moneys and profits,' and prayed for an accounting and restraint against plaintiff's 'continuance' of the corporate business, and the appointment of a receiver for the corporation.

The Chancery Division of the Superior Court ruled that in 'determining book value, good will is not considered as an element, unless the agreement so provides', and here 'no mention is made of good will,' and there is provision only for 'book value'; that the shares of stock in question 'had no book value at the time of Fiedler's death,' and 'the purpose of the parties to the agreement was that the survivor should have the decedent's shares of stock.'There was judgment for plaintiff.The counterclaim was dismissed.Hollister v. Fiedler, 18 N.J.Super. 171, 86 A.2d 809(Ch.Div.1952).

The Appellate Division reversed and remanded the cause for an assessment of the book value of the stock as reflected by the worth of the 'list of (insurance) expirations' and 'other assets,' taking account of liabilities.And it was also held that while the judgment awarded to plaintiff the share of stock standing in the name of his wife, Jean, who was not then a party to the suit, and 'there is some testimony concerning it,' the question of title was not raised by the pleadings, and 'neither the complaint nor the pretrial order was amended to comprehend that issue,' and so 'it was error for the court to include it in the judgment.'22 N.J.Super. 439, 92 A.2d 52(1952).

After the remission of the cause, the defendantexecutor was given leave to amend the counterclaim to include a count alleging that the share of stock in question was issued to Jean Hollister'for voting purposes only and the legal ownership of the certificate of stock was and continued to be in' Fiedler and, upon his death, passed to his estate, but that ownership is now claimed by the plaintiffRobinson G. Hollister, and also to interpose a cross-claim against Jean Hollister as a 'third party defendant,' praying that the estate be adjudged the 'legal owner' of the certificate of stock.Plaintiff and his wife Jean answered asserting the 'beneficial ownership' of the certificate to be in plaintiff.

Testimony was taken pursuant to the mandate and the issue raised by the amended pleadings; and defendant agreed to the use of the evidence adduced on the original hearing save that 'relating to any conversations or statements by the testator allegedly made or any transaction with the testator relating to the point on the ground' that the testator's personal representative 'has not opened the door'; and there was judgment, heretofore adverted to, declaring that the 'list of expirations of insurance policies' had 'no value,' and directing the defendantexecutor to 'perform the option agreement' and to 'execute and deliver' to the plaintiffRobinson G. Hollister, 'without charge or costs therefor,' an assignment of the deceased Fiedler's right, title and interest 'in the 10 shares of stock (of the corporation) belonging to' him 'during his lifetime,' and holding the plaintiff to be the 'true and lawful owner' of the certificate of stock here in countroversy.

The Appellate Division, in the judgment referred to, 30 N.J.Super. 203, 104 A.2d 61(1954), ruled that the plaintiff had not 'clearly and conclusively established his right to the judicially enforced acquisition of the stock without the payment of any compensation whatever'; that the 'shares of stock of the company at the time' of Fiedler's death 'had a value manifestly in excess of the stated deficit,' and to that extent the judgment was again reversed and an accounting directed.But it was there found that the evidence touching the beneficial ownership of the share of stock standing in the name of Jean Hollister'is in a distinctly different state,' and the judgment was in that respect affirmed.And in this, the only issue raised by the appeal, there was error.

The finding made by the Chancery Division, thus sustained by the Appellate Division, that the share of stock in dispute was transferred by Fiedler to the plaintiff Hollister 'in order to induce' Hollister 'to remain in business with' Fiedler has nothing whatever to sustain it save the testimony of the plaintiff himself, given on the original hearing, of a parol agreement to that end; and plaintiff was not a competent witness in this regard by force of N.J.S. 2A:81--2, N.J.S.A., citedsupra, providing, Inter alia, that when 'one party to any civil action is a lunatic suing or defending by guardian or when one party sues or is sued in a representative capacity, no other party thereto may testify as to any transaction with or statement by the lunatic while of sound mind or with or by the decedent,' unless (a) the guardian of the lunatic or the representative of the decedent offers himself as a witness on his own behalf, and testifies to any transaction with or statement by his testator, intestate or ward, in which event the other party may be a witness on his own behalf as to all transactions with or statements by the lunatic while of sound mind or by the decedent, which are pertinent to the issue, or (b) the 'action is founded upon any allegation of fraud, breach of trust, willful default or undue influence, in which casesthe defendant may be sworn and examined as a witness on his own behalf as to transactions with or statements by the lunatic or decedent.'

Here, we have testimony by the survivor of a transaction with the deceased invoked to sustain the action against the latter's personal representative, absent which the action would fall.The insistence is that 'fraud is charged,' and so the action is within the excepted category delineated by subsection (b) of the statute, in that the second count of the defendantexecutor's counterclaim embodies an allegation that defendant'has made a demand for this share of stock of Robinson G. Hollister and Jean Hollister, his wife, and they have refused to turn over this share of stock to the defendant,' but on the contrary they have from the date of Fiedler's death 'fraudulently and wilfully withheld said certificate of stock from the defendant for the purpose of assuming complete control over the affairs' of the corporation, and 'by reason of their said actions and conduct, aforesaid, the...