Rees v. Pellow

• Decision Date: 23 October 1899
• Docket Number: 675.
• Citation: 97 F. 167
• Parties: REES v. PELLOW.
• Court: U.S. Court of Appeals — Sixth Circuit

97 F. 167

REES v. PELLOW.

No. 675.

United States Court of Appeals, Sixth Circuit.

October 23, 1899

This was an action brought by the defendant in error, Thomas Pellow, against William D. Rees, the plaintiff in error, to recover commissions claimed to have been earned under an option contract for bringing about the sale of 9,000 shares of stock owned by the said Rees. There was also a count upon a quantum meruit. Upon the trial of the cause the court instructed the jury to find for the defendant upon the count in contract, upon the ground that the plaintiff, Pellow, had not made the final sale of said stock, but that same had been sold by the owner, said William D. Rees. So far as the action was one to recover the reasonable value of services rendered by said Pellow in procuring a purchaser for the said shares the court instructed the jury as follows: 'But the case will be submitted to you upon the claim of the plaintiff for the value of his services. If the jury are satisfied by the evidence that the negotiations commenced by Pellow for the sale of defendant's stock to Corrigan, McKinney & Company were not broken off until the stock was finally sold by Rees to those parties in November, but were continuous throughout and while defendant's authority to Pellow in the so-called 'option contract' continued the defendant stepped into the pending negotiations, and assumed the control of them for himself, and succeeded in conducting them to an advantageous sale, and you further find that the defendant derived advantage from Pellow's efforts in the negotiations, in that they were efficacious in bringing about the sale which was finally reached, then the plaintiff having been interrupted in conducting the negotiations he had begun, and prevented from earning the commission that he might have earned but for the intervention of the defendant is entitled to recover what his services were reasonably worth to the defendant. ' There was a verdict and judgment in favor of the defendant in error for the sum of $2,430, and a writ of error has been sued out by the plaintiff in error.

The undisputed evidence established:

First. That William D. Rees and Samuel Mitchell were owners of a large majority of the shares of the capital stock of the Blue Iron Mining Company, an iron-mining corporation of the state of Michigan, whose mines were situated at Negaunee, Mich., and that Pellow was the owner of a small number of shares. Mitchell, who as the uncle of Pellow, was the president of the corporation, and Pellow its secretary and treasurer. Rees was a director in the company. Mitchell and Pellow resided at Negaunee, and Rees at Cleveland, Ohio. The corporation was organized for the purpose of operating an iron mine under a lease, by the terms of which a royalty was paid upon the ore mined. Active operations had ceased some time prior to the transactions out of which this suit arose on account of the inability of the company to profitably carry on mining operations under the terms of the lease. Fruitless efforts had theretofore been made to secure a reduction in the royalty, that operations might be resumed. In this condition of affairs there arose a strong desire to make a sale of the property through a sale of all or a majority of the shares. Under these circumstances Pellow sought to obtain from both Rees and Mitchell authority to sell their holdings of stock for the sake of the commissions. Mitchell readily agreed to sell his stock to Pellow, or through him, at two dollars per share, and Rees orally agreed to place his stock in his hands to be sold with that of Mitchell on the same terms. The agreement with Rees was confirmed by a letter dated August 5, 1896, in the following words:

'Mr. Thomas Pellow, Negaunee, Mich.-- Dear Sir: I shall be glad to hear from you whenever you have anything of interest to say with regard to your prospects of disposing of the stock of the Blue mine. Confirming my verbal agreement, I will join Capt. Mitchell in selling to you, or through you, my stock in the Blue mine at $2.00 per share, and if, during your negotiations, Capt. Mitchell should be willing to take less than that for his stock, I will agree to the same reductions on my shares.

'Yours, truly,

W. D. Rees.'

Pellow had, in a prior state of the negotiations, with Rees, applied by letter for an option for the definite term of 60 days. This Rees declined, but gave the option above set out, in which no time is fixed.

Second. No sale of the stock having been consummated, Rees, on November 6, 1896, revoked his option by a letter in the following words:

'Mr. Thomas Pellow, Negaunee, Mich.-- Dear Sir: Three or four months ago I joined Capt. Mitchell in an option to you on my stock in the Blue Iron Ming. Co., about which we have had some correspondence. I extended the option from time to time, but it has now been running so long that I feel justified in withdrawing it entirely. That the trade has not gone through has been through no fault of mine, for I have done all I could to further it; in fact, have done more to promote the trade than any one else. You will therefore please consider the option canceled.

'Yours, truly,

W. D. Rees.'

Third. On November 24, 1896, Rees sold both his own stock and that of Mitchell to the firm of Corrigan, McKinney & Co. for three dollars per share. The terms of sale were: Cash, $10,000; $30,000 in four months, with security; balance payable in installments for which the notes of the firm were taken, secured by the stock as collateral. The purchasers also agreed to take the stock of all others at the same rate if offered within 30 days. Pellow put his own stock into the sale, as did all other stockholders. The proceeds of sale as they came in, the payment of deferred notes having been anticipated by the buyers, were distributed by Pellow among the stockholders in his character as secretary and treasurer. When the last of the purchase money had been distributed, Pellow for the first time presented a claim for the commissions alleged to be due him as for bringing about this sale. This claim was for 75 cents per share for the sale of Rees' 9,000 shares. This reduction from a commission of one dollar on each share was in consequence of a modification of the original option contract of August 5, 1896, averred to have been made about September 24, 1896, and came about, as the evidence tended to show, as follows: Immediately upon securing the option, Pellow opened negotiations for the sale of the stock of the company to Corrigan, McKinney & Co., the same firm who ultimately bought through Rees. That firm owned and operated an iron mine adjoining that of the Blue Iron Mining Company, having a lease on the property from the same persons owning the fee in the mines worked by the latter-mentioned company. Each mine produced the same character of ore, and they were competitors in business. All the members of the firm of Corrigan, McKinney & Co. lived at Cleveland, the residence of Rees. Pellow's negotiations were opened with and conducted through the manager of the Corrigan, McKinney & Co. mines, who resided at Negaunee, the residence, also, of Pellow and Mitchell. Pellow offered the stock at $2.50 per share. This price was apparently satisfactory, though the purchasers were unwilling to pay cash, but expressed a willingness to pay a small sum in money as an evidence of good faith, and give the firm's notes secured by the stock for deferred payments. Pellow advised Rees of the attitude of Corrigan, McKinney & Co., the price at which he had offered the stock, the willingness of the purchasers to pay part cash, and asked Rees as to the solvency of the firm, and as to his willingness to sell upon the credit proposed. Rees, under date of August 19th, expressed confidence in the financial ability of Corrigan, McKinney & Co. and his willingness to accept their paper, but deferred the matter to Mitchell. This letter was mailed to Mitchell, to be delivered to Rees if Mitchell approved the sale on the credit desired. Rees further expressed the notion that the sale should reserve to the stockholders certain money in the treasury of the company, which he thought should be distributed as a dividend to the shareholders before the sale. To this Pellow demurred, saying that he had stated to the purchasers that this money would be an asset acquired by them. He also stated, in reply to Rees, that he had required the buyers to pay one dollar cash on each share, and the balance upon a credit, and that this proposition had been forwarded by Mr. Cole, the local manager for Corrigan, McKinney & Co., to the firm at Cleveland, and that he was in daily anticipation of a favorable reply. Under dates of September 20th and 21st, Pellow wired and wrote Rees that Corrigan, McKinney & Co. wanted to discuss the deal with him (Rees) at Cleveland, and gave him to understand that they wished to obtain from him some collateral promises in reference to outside matters, and to arrange amount of cash payment and time to be given on deferred payments. He urged Rees to stand firmly by $2.50 as the price for the stock, as he was sure they would pay that price, and wanted the property. He also notified Rees that he had asked Mitchell to go to Cleveland to consult with him (Rees) as to the sale, and to represent him (Pellow) in concluding the transaction. According to an understanding with Rees, Mitchell did go to Cleveland, and several interviews took place there between Rees and Corrigan, representing Corrigan, McKinney & Co., and between Rees and Mitchell. During these negotiations at Cleveland, Rees wrote Mitchell, under date of September 24, 1896, as follows:

'Since I saw you last night, I have been thinking over the 'Blue' matter. It must be apparent to you, as

...