Pantages v. Grauman

• Decision Date: 02 October 1911
• Docket Number: 1,967.
• Citation: 191 F. 317
• Parties: PANTAGES v. GRAUMAN et al. PANTAGES THEATER CO. v. SAME.
• Court: U.S. Court of Appeals — Ninth Circuit

191 F. 317

PANTAGES v. GRAUMAN et al.

PANTAGES THEATER CO. v. SAME.

No. 1,967.

United States Court of Appeals, Ninth Circuit.

October 2, 1911

[191 F. 418]

The appellants, as plaintiffs, instituted this suit to compel the specific observance and performance on the part of defendants of a certain agreement entered into October 20, 1909, between Alexander Pantages of the first part and David J. Grauman of the second part. The agreement is as follows:

'That the party of the second part will sell and party of the first part will buy ten thousand shares, being fifty per cent. of the capital stock of the New York & San Francisco Amusement Company, at the agreed price of fifty thousand dollars ($50,000), payable as follows:

'Twelve thousand five hundred dollars ($12,500) cash to be paid when said stock has been properly assigned and placed in escrow with some substantial bank or trust company in the city of San Francisco. The remaining thirty-seven thousand five hundred dollars to be paid therefor is to be retained out of the net earnings or profits on said ten thousand shares or fifty per cent. of said capital stock.

'It is agreed that stock shall be transferred free and clear of all liens and incumbrances and on which party of the first part will not be subject to any further liability or assessment thereon.

'Party of the first part being the owner of a large majority of the capital stock of the Pantages Theater Company, hereby agree that said New York & San Francisco Amusement Company shall be entitled to and have the first call on the vaudeville acts or performances which it shall or may book in the city of San Francisco and known as the Pantages Circuit Acts, for a term of ten years from the date of the opening of the theater, which is to be managed and controlled by said New York & San Francisco Amusement Company,

'The parties hereto shall have equal representation on the board of directors of said New York & San Francisco Amusement Company, and it is agreed that Sid Grauman shall be general manager thereof as long as he shall prove satisfactory to said corporation.

'For the furnishing of the vaudeville acts as heretofore provided for, it is agreed that said New York & San Francisco Amusement Company shall pay a franchise of five thousand dollars ($5,000) per year to the Pantages Theater Company, which shall be payable in weekly installments of ninety-six dollars and nineteen cents ($96.19) each, and it is further agreed that an additional five per cent. commission be deducted from the salary of each of the acts or actors while this agreement shall be in force, unless otherwise authorized by the Pantages Theater Company, and shall be paid by said New York & San Francisco Amusement Company to said Pantages Theater Company.

'It is agreed that the parties hereto shall equally advance or pay any sums necessary in furnishing the said theater.

'Party of the first part, as manager aforesaid and owner of the majority of the capital stock of the Pantages Theater Company, agrees that in the event of the sale or transfer of said stock, that such transfer or sale shall be subject to all the obligations of its contract to furnish the talent of the Pantages Vaudeville Circuit to said New York & San Francisco Amusement Company as heretofore provided for.

'It is agreed that party of the first part shall have the right to at all times have a representative who shall confer with the manager of said theater to be operated by the New York & San Francisco Amusement Company.

'In the event either party hereto should at any time desire to sell his capital stock or any portion thereof, then the other party shall have the first option to purchase the same at the original cost thereof to each party.'

The bill alleges, in so far as it is essential to an understanding of the controversy, that David J. Grauman and Sid Grauman are copartners doing business under the firm name of David J. Grauman; that the New York & San Francisco Amusement Company is a corporation with an authorized capital stock of $200,000, divided into 20,000 shares, with a par value of $10 each; that 10,000 shares of stock have been issued to Sid Grauman, 9,999 shares to David J. Grauman, and 1 share to Maurice Asher, the attorney for the Graumans, who holds the same as trustee only to enable him to act as a director in the corporation; that David J. Grauman in entering into the agreement with Pantages was acting for the copartnership; that some time prior thereto, namely, on August 4, 1909, the defendant David J. Grauman, acting for said copartnership, entered into an agreement with Claus A. and Rudolph Spreckels, executors of Claus Spreckels, deceased, whereby the Spreckels agreed to construct a certain building on Market street, in San Francisco, designed in part for theater purposes, and David J. Grauman to lease the same for a term of 10 years, under certain conditions and restrictions, and that Grauman, acting for the copartnership, has, as plaintiffs believe, assigned the said agreement to the amusement company; that Alexander Pantages is engaged in the business of owning, leasing, and conducting theaters, and managing and presenting theatrical performances, and that the location of said building is peculiarly adapted for theatrical purposes; that the defendants Grauman, though often requested, have refused and now refuse to perform their part of the agreement with Pantages; that on March 12, 1910, Pantages tendered to David J. Grauman $12,500, also an offer on his part to perform all the terms and conditions of the agreement required to be performed, together with an agreement duly executed by the Pantages Theater Company, whereby said company obligates itself that the amusement company shall have the first call on all theatrical acts or performances known as 'Pantages Circuit Acts,' which the said theater company shall or may book in the city of San Francisco for the said term of 10 years; that Pantages furthermore tendered to the amusement company a like agreement on the part of the theater company; that the consideration moving to Pantages in said agreement was the obtaining of a one-half interest in the amusement company; that, if the said 10,000 shares of stock cannot be transferred as agreed, plaintiffs can be compensated by the conveyance to them of a onehalf interest in said theater and the lease thereto; that, as plaintiffs are informed and believe, the Graumans intend selling the stock which they agreed to sell to Pantages, and the amusement company intends, unless restrained, to assign the agreement with Spreckels' executors to some person unknown to plaintiffs.

The prayer is for an injunction against transferring said stock or assigning said agreement or the lease therein provided for, and for a specific performance of the agreement on the part of the Graumans, or that, if it be found impracticable to decree a specific performance of the agreement, then that Spreckels' executors be required to execute a lease to an undivided one-half of said building to Pantages for the term specified.

Subsequently a supplemental bill of complaint was filed setting forth that the Graumans were threatening to sell the remaining one-half of the capital stock of the amusement company in disregard of Pantages' first option thereon to purchase, that Pantages has declared his election to purchase on the terms stipulated, and prays, further, that the court require a transfer of said stock also to Pantages.

Demurrers were in due season interposed to these two bills of complaint by the defendants other than the Spreckels' executors, which, on hearing, were sustained by the circuit court, and decree entered dismissing the cause. The appeal is from such decree.

Charles S. Wheeler and Nathan Moran, for appellants.

Garret W. McEnerney, Walter Rothchild, Charles W. Slack, Charles L. Cushing, and O. K. Cushing, for appellees.

Before GILBERT and MORROW, Circuit Judges, and WOLVERTON, District judge.

WOLVERTON District Judge (after stating the facts above).

The honorable Circuit Court sustained the demurrers and dismissed the bills of complaint on the ground of a want of mutuality in remedy upon the agreement which forms the basis of the suit. While this court is not confined in its investigation to the one ground considered, we have concluded that it is determinative of the cause. The solution of the problem depends in large measure upon a proper rendition or construction of the agreement between Pantages and Grauman. If it be conceded, as it must be in view of the demurrers, that David J. Grauman assigned his lease with Spreckels' executors to the amusement company, and that such fact was an inducement for entering into the agreement in question, it may as well be premised that the purpose of the agreement was to give the parties an equal interest in the amusement company's theatrical business, in which it purposed engaging. One-half the amount of money required to be advanced by Grauman to enable him to carry the lease was to be repaid to him under the agreement. This probably accounts for the suggestion of the cash payment. The balance of the purchase price, it will be noted, is to be paid to Grauman out of the net profits of the 10,000 shares of the capital stock of the amusement company agreed to be sold to Pantages. In other words, Pantages' stock was to pay for three-fourths of its agreed value from its net earnings from the theater business.

Further than this, it will prove of assistance to outline what the agreement is in its ultimate analysis. It is as follows:

(1) Grauman agrees to sell and transfer to Pantages 10,000 shares, being 50 per cent. of the capital stock of the New York & San Francisco Amusement Company, free and clear of...