Maytag Co. v. Alward

• Decision Date: 09 January 1962
• Docket Number: No. 50442,50442
• Parties: , 96 A.L.R.2d 162 MAYTAG COMPANY, Appellee, v. George L. ALWARD, Appellant, Willis Steinberger and Jasper County Savings Bank, Defendants-Appellees.
• Court: Iowa Supreme Court

Page 654

112 N.W.2d 654

253 Iowa 455, 96 A.L.R.2d 162

MAYTAG COMPANY, Appellee, v. George L. ALWARD, Appellant Willis Steinberger and Jasper County Savings Bank, Defendants-Appellees.

No. 50442.

Supreme Court of Iowa.

Jan. 9, 1962.

Korf, Diehl, Swanson & Clayton, Newton, for appellant George L. alward.

Campbell, Campbell & Caldwell, Newton, for appellee The Maytag Company.

Cross, Hamill, Selby & Updegraff, Newton, for appellee Jasper County Savings Bank.

Brierly, McCall & Girdner, Newton, for appellee Willis Steinberger.

GARFIELD, Chief Justice.

This is an action in equity brought by The Maytag Company against George L. Alward, a key employee at the time he resigned on April 1, 1960, to accept employment with The Brunswick-Balke-Collender Co. in Muskegon, Michigan. Plaintiff seeks to rescind option agreements under which defendant acquired 600 shares of its corporate stock and claims 400 additional shares which plaintiff refused to deliver. Restitution and cancellation of the stock are also asked. The action is based on the claim that when the options were exercised defendant did not intend to complete his agreed period of service with plaintiff, had accepted employment with the Brunswick company, defendant fraudulently concealed his intent, breached his contract and the consideration therefor failed.

Two stock option agreements are involved. A later one, dated March 10, 1960, is merely incidental. They are identical except for dates and number of shares optioned. Pursuant to the first agreement, exhibit 5, dated August 27, 1957, defendant acquired 600 shares of Maytag stock. The option was exercised February 22, 1960. Pursuant to the second agreement, exhibit 6, dated December 18, 1958, 400 shares were issued to defendant but plaintiff withheld delivery of them when it learned defendant was leaving plaintiff's employ. This second option was exercised March 24, 1960. Exhibit 5 required defendant to remain in plaintiff's service until August 27, 1960, exhibit 6 until August 27, 1963. The agreements were signed by both plaintiff and defendant.

The trial court rescinded the option agreements and decreed cancellation of all 1000 shares upon repayment by plaintiff of the amounts defendant paid in exercising the options, less the amount of a dividend he received on the 600 shares before this action was commenced. The decree is based on a finding that defendant's volvuntarily quitting his employment constituted a material and irrevocable breach, going to the essence, of the stock sale contracts and causing a substantial failure of consideration as to each contract.

As to the 400 shares defendant claims under the second agreement, the court also found that at the time defendant exercised this option on March 24, 1960, he intended to leave plaintiff's employ, did not communicate such intent to a proper official of plaintiff and therefore was guilty of fraud. The court did not find fraud in acquisition of the 600 shares under the first option because he found defendant did not then intend to leave plaintiff's employment.

Under each option agreement defendant had ten years from its date, subject to earlier termination as therein provided, to exercise it. Defendant borrowed all the money to exercise both options. The $7800 paid for the 600 shares was borrowed from Steinberger, also a Maytag employee, at 7 per cent interest payable quarterly. This loan was secured by pledge of 400 of the 600 shares. To exercise the second option defendant borrowed $5000 from a bank in Newton, where plaintiff's main plants are located, and the rest of the $8650 from his mother and wife's family. The loan to the bank was secured by pledge of the remaining 200 shares acquired under the first option.

Steinberger and the bank, as pledgees of the 600 shares, are joined as defendants. However, for convenience we refer to Mr. Alward as the only defendant.

I. Defendant's main contentions upon this appeal are based upon what he says is the proper construction of the last sentence in paragraph 7 of each option agreement, exhibits 5 and 6. The paragraph first contains defendant's agreement to remain in plaintiff's service at least three years from the later of the date of the contract or the date to which he is otherwise obligated to remain and that he will, during such employment, devote his entire time, energy and skill to the service of plaintiff and promotion of its interests. Also that such employment shall be at the pleasure of plaintiff.

We quote the last two sentences of paragraph 7: 'Any termination of the Employee's employment during such period that is either (i) for cause or (ii) voluntary on the part of the Employee * * * shall be deemed a violation by the Employee of such agreement. In the event of such violation, any option or options held by him under the Plan, to the extent not theretofore exercised, shall forthwith terminate.' We italicize the words on which defendant particularly relies.

Defendant argues the plain meaning of the last quoted sentence is that in the event of 'such violation' any option or options and the stock thereunder, to the extent theretofore exercised, do not terminate. In other words, that it is agreed defendant may keep any stock acquired under an option exercised by him prior to a violation of the agreement. This is said to result from applying the rule expressio unius est exclusio alterius--the expression of one thing of a class implies the exclusion of others not expressed.

We have held the rule referred to applies in the construction of contracts as well as statutes. Beck & Sons v. Economy Coal Co., 149 Iowa 24, 30, 127 N.W. 1109; In re Trusteeship of Barnett, 217 Iowa 187, 190-191, 251 N.W. 59; Carson v. Great Lakes Pipe Line Co., 238 Iowa 50, 55, 25 N.W.2d 855, 857. See also 17 C.J.S. Contracts § 312; 12 Am.Jur., Contracts, section 239, page 769.

Defendant also contends the last sentence of paragraph 7 of the option contract is a waiver by plaintiff of its right to damages and rescission for a violation of the contract and precludes any such relief by promissory estoppel.

We think defendant claims too much for the last sentence of paragraph 7. He construes it to mean not only that options not exercised prior to a violation of the agreement terminate upon such violation, but also that plaintiff is thereby deprived of any remedy otherwise available to it to obtain restitution of the stock issued prior to such violation. The sentence referred to certainly does not expressly deprive plaintiff of such remedy and we hold it does not do so impliedly.

The last sentence of paragraph 7 purports to apply only to any option or options which have not been exercised at the time the optionee is discharged for cause or voluntarily quits. It provides such an option may not thereafter be exercised. The sentence does not purport to apply to options which have been exercised prior to such a violation by the optionee of his agreement to serve. Indeed a so-called option which has been exercised is no longer an option. It ceases to exist as such. It then becomes a contract mutually binding upon the parties. Western Securities Co. v. Atlee, 168 Iowa 650, 661, 151 N.W. 56; 12 Am.Jur., Contracts, section 27, page 526; Id., section 37.

An option is a continuing offer which the offeror may not withdraw until the time fixed has expired because the offer is based on a consideration. Sargent & Co. v. Heggen, 195 Iowa 361, 364, 190 N.W. 506, and citation; 12 Am.Jur., Contracts, section 27; 17 C.J.S. Contracts § 50a, page 397.

It is true these option agreements contain no provision as to the effect upon stock acquired when an option is exercised of a subsequent violation by the optionee of his agreement to serve his employer. Of course they might have done so. It was not necessary, however, for the agreements to specify the remedies available to plaintiff for such a violation. Nor does the failure to do so deprive plaintiff of any recognized equitable remedy.

Even where a contract specifies a remedy which will lie for a breach thereof it is generally held that other legally recognized remedies are not thereby excluded. Westervelt v. Huiskamp, 101 Iowa 196, 201, 70 N.W. 125; Kettering v. Eastlack, 130 Iowa 498, 503, 107 N.W. 177; Heinz v. Roberts, 135 Iowa 748, 752-753, 110 N.W. 1034; Satchell v. Alsop, 215 Iowa 161, 165-166, 244 N.W. 838; Strauss v. Yeager, 48 Ind.App. 448, 93 N.E. 877, 882; McMillen v. Strange, 159 Wis. 271, 150 N.W. 434, 440. See also Hamlen v. Rednalloh Co., 291 Mass. 119, 197 N.E. 149, 152, 99 A.L.R. 1230, 1234.

17 C.J.S. Contracts § 312, says of the expressio unius rule, 'It has been held that the principle above stated does not apply to a case in which the contract expresses a specific remedy for its enforcement, and that in such case other remedies available under the law, independently of the contract, may be resorted to.'

Strauss v. Yeager, supra, cited in support of what is just quoted, is persuasive authority for our conclusion. There a land sale contract provided for the right of specific performance or an action for damages in case of default. It was held this did not preclude the vendor's right of action for an installment of the price when due. This is from the opinion (page 882 of 93 N.E.): 'Doubtless a contract could, by specific provisions, limit the remedies to be pursued in case of default, but that is not the question presented by the one before us. This is a question of implied exclusion. We have sought diligently for authority upon the application of the principle that 'the express mention of one person or thing is the exclusion of another,' to remedies named in a contract, and have found none. The reason of the rule excluding things not mentioned fails when applied to a contract specifying remedies available under the law independent of the contract. * * * A contract which excludes some remedy given by law should be so definite and positive in its terms as...