Kuhn v. Groll

• Decision Date: 12 January 1922
• Docket Number: 16741.
• Citation: 203 P. 44,118 Wash. 285
• Court: Washington Supreme Court
• Parties: KUHN v. GROLL et al.

203 P. 44

118 Wash. 285

KUHN v. GROLL et al.

No. 16741.

Supreme Court of Washington

January 12, 1922

Department 1.

Appeal from Superior Court, King County; Otis Brenker, Judge.

Action by Joseph H. Kuhn against J. S. Groll and others. From a judgment for defendants, plaintiff appeals. Reversed and remanded, with instructions.

R. H Coshun and Preston, Thorgrimson & Turner, all of Seattle, for appellant.

Dan Earle, of Seattle, for respondents.

PARKER, C.J.

The plaintiff, Kuhn, seeks recovery from the defendants and their communities upon three promissory notes, which are in form unconditional and negotiable, executed by defendants J. S Groll and E. B. Burwell on September 30, 1918, whereby they promised to pay to the plaintiff $500 on October 7, 1918 $800 on October 10, 1918, and $1,550 on December 1, 1918, and also seeks foreclosure of his claim of lien upon 70 shares of the capital stock of the San Juan Canning Company, the certificate for which he alleges, being the property of the defendants, was by them delivered to and left in his possession, at the time of the execution of the notes, as a pledge to secure the payment of the indebtedness so evidenced.

The defendants Groll and wife, while admitting the execution of the notes, separately pleaded, in substance, that the notes were given merely to evidence the amount of the unpaid balance upon the purchase price of a contract for the sale of the shares of stock to them by the plaintiff, whereby it was agreed that 'the title to and possession of said stock certificate was to remain in the plaintiff until the payment of the entire purchase price'; that they had, before the execution of the notes, paid to plaintiff $3,000 upon the purchase price of the stock, and that after the execution of the notes the contract for the sale of the stock had been rescinded by mutual agreement between them. This answer concludes with a prayer for an affirmative judgment against the plaintiff in the sum of $3,000, and that the notes be canceled.

The defendants Burwell and wife, while admitting the execution of the notes, separately pleaded, in substance, that the defendant E. B. Burwell signed the notes only as an accommodation maker, without other consideration, as plaintiff was fully advised; that material extensions of time for the payment of the notes had been granted without his knowledge and consent; and further pleaded a mutual rescission of the contract for the sale of the stock substantially as separately pleaded by the defendants Groll and wife. This answer concludes with a prayer for judgment absolving Burwell and wife from liability upon the notes.

The plaintiff's replies put in issue all the affirmative facts so pleaded in these answers. Upon the issues so made, a trial was had in the superior court for King county, which resulted in findings and a judgment denying to the plaintiff recovery upon the notes, and also denying to the defendants Groll and wife recovery upon their claim of $3,000 made by them against the plaintiff. From this disposition of the cause in the superior court, the plaintiff has appealed to this court. The defendants Groll and wife did not appeal, but submitted to the judgment denying them recovery upon their claim of $3,000 rested upon their claimed mutual rescission of the contract.

It is apparent, from the record of the trial of the case in the superior court, that counsel for respondents not only presented their case in that court upon the theory of mutual rescission of the stock sale contract, as pleaded, but also upon the theory that the contract was in legal effect a conditional sale, giving to appellant the right of forfeiture of all rights of respondents therein, including the $3,000 paid upon the purchase price, which right of forfeiture appellant elected to exercise, and thereby waived his right to recover upon the notes evidencing the balance of the purchase price. The latter is the theory here principally relied upon by counsel for respondents to sustain the judgment, though it seems somewhat inconsistent with and a departure from the theory of the pleaded defense of mutual rescission. The trial court also rested its judgment upon the theory that the contract was in legal effect a conditional sale, with right of forfeiture in appellant upon failure of payment of the purchase price, and that he had elected to exercise such right, and thereby waived his right to sue upon the notes.

In view of the contentions here made, it seems necessary to go back to the beginning of the dealing of these parties between each other, touching the sale of this stock. The evidence is not free from conflict, but we think the following facts are fairly well established thereby: In the year 1916 respondents Groll and Burwell were the owners of shares of stock in the San Juan Canning Company, and were financially interested in the success of that company. While they were so interested, appellant Kuhn purchased the 70 shares of stock here in question. Just what Groll and Burwell had to do with the bringing about of that purchase, or who it was from--though there is a hint of its being from so-called treasury stock of the company--is not made plain; but that they were interested in having appellant make the purchase, and that, as an inducement for his doing so, they promised to repurchase the stock from him if he so desired, and thus induced him to make the purchase, is made to appear with fair certainty. The purchase was so made by Kuhn, and a certificate for the shares caused to be issued to him accordingly, on May 16, 1916. Kuhn thereafter having requested that the stock be repurchased by Groll and Burwell, they made a contract with him accordingly. Soon thereafter they made two cash payments, of $1,000 each, on the purchase price. The certificate of stock was retained by appellant, evidently as security for the payment of the balance of the purchase price. The record is silent, however, as to any express agreement as to appellant then retaining possession of the stock, or as to the purpose of such retention of possession; but that the sale then became completed, except as to the payment of the balance of the purchase price, we think is certain. There was then no express agreement as to time of payment of the balance of the purchase price; so of course the entire purchase price became immediately due. The two $1,000 payments were made by Burwell by his own checks delivered to appellant. After repeated fruitless demands for payment of the balance of the purchase price, made by appellant upon both Groll and Burwell, they all met together with a view of making a final settlement with reference to the payment of the balance of the purchase price. This occurred on September 30, 1918. Appellant supposed that he was then going to receive the payment of the entire purchase price in cash, and brought the stock certificate with him for delivery to Groll and Burwell. He was then informed that they could pay only $1,000 in cash at that time, but would give him their notes for the balance. This appellant felt obliged to accept for the time being. The $1,000 was then paid to appellant, and Burwell then computed the balance due, including some interest, the total of which was found to be $2,850. Burwell then drew up these notes in his own handwriting, and signed them; they being also then signed by Groll, and delivered to appellant. They then all agreed that appellant should retain the stock certificate until the notes were paid. There was no express agreement then made as to whether appellant should hold the stock certificate as a pledge, as security for the balance of the purchase price evidenced by the notes, or as upon a conditional sale, with right of forfeiture on his part. If this were all the information we had touching that question, it would seem to follow, allmost as a matter of course, that the stock was left with appellant as a mere pledge to secure payment of the notes.

It is the acts and the words of the parties following the events above related which counsel for respondents argue put a construction by the parties themselves upon the contract for the sale of the stock which made it in legal effect a conditional sale, rather than a mere pledge of the shares of stock to secure the notes. Thereafter appellant made repeated demands upon Groll and Burwell for the payment of the notes. Being unsuccessful in such demands, he expressed his intention of selling the stock, and indeed seems to have gone so far as to offer it for sale. He did not, however, sell the stock, or come anywhere near doing so. He ceased his efforts in that behalf on being advised that he had no right to sell the stock, or cause it to be sold, except through legal foreclosure proceedings. According to Groll's testimony appellant told him, at about the time appellant was attempting such sale of the stock, that the deal was 'all off with us,' and that he (Groll) assented thereto. This testimony, however, we regard as quite unsatisfactory in the light of other testimony, and the fact that thereafter, upon further demands made by appellant upon respondents for payment of the notes, such prior rescission of the contract was never asserted or claimed by either of them, but further time requested for payment of the notes. The notes were...