Smith v. Stowell

• Decision Date: 14 January 1964
• Docket Number: No. 51176,51176
• Parties: Maree E. SMITH and Phil Morris, Appellants, v. Harold A. STOWELL, Defendant-Appellee, Jane Biddick, Executrix under the Will of Matt H. Biddick, Deceased, Appellee.
• Court: Iowa Supreme Court

Page 795

125 N.W.2d 795

256 Iowa 165

Maree E. SMITH and Phil Morris, Appellants, v. Harold A. STOWELL, Defendant-Appellee, Jane Biddick, Executrix under the Will of Matt H. Biddick, Deceased, Appellee.

No. 51176.

Supreme Court of Iowa.

Jan. 14, 1964.

Rehearing Denied March 10, 1964.

DeWitt H. Smith, Marion, for appellants.

Fisher & Pickens, Cedar Rapids, for defendant-appellee.

GARFIELD, Chief Justice.

This is a controversy over the right to own 30 shares of stock in the First National Bank of Marion, Iowa, issued to defendant Stowell in the summer of 1958 as part of a stock dividend, following a transfer of $150,000 from the bank's surplus of $450,000 to its capital of $50,000. After the transfer, the surplus was $300,000 and the capital $200,000. Three shares of new stock or multiple thereof were issued to each holder of one share of old stock or multiple thereof. (At the direction of the comptroller of the currency the transfer was first from surplus to undivided profits and then to the capital account. We regard this, however, as unimportant.)

Plaintiff Morris held a written option agreement signed by defendant in January, 1956, under which Morris was entitled to repurchase 10 shares of the stock at $305 a share at any future date that defendant disposed of it. Five of the 10 shares originally belonged to plaintiff Maree E. Smith and the other five to plaintiff Matt H. Biddick. The 10 shares were sold to defendant at $290 a share about the time the option was signed, as part of an arrangement under which defendant came to the Marion bank from one at Fairfield to act as executive vice-president and cashier--chief executive officer--as well as a director of the Marion bank. Biddick died during pendency of this action and his executrix was substituted as a plaintiff, a circumstance we ignore.

When defendant came to Marion, Morris was assistant cashier there. He was acquainted with defendant and suggested to the board of directors that defendant might be available for the Marion position. For some reason which is unimportant here Mrs. Smith and Biddick sold their stock to Morris to be by him transferred to defendant, taking from Morris an option to repurchase it at $305 a share at any future date that defendant disposed of it. Morris in turn took the option agreement from defendant, previously referred to, for the benefit of Mrs. Smith and Biddick. Rights of the parties are the same as if sale of the 10 shares had been direct from Mrs. Smith and Biddick to defendant with the option to repurchase running from him to them without the intervention of Morris.

When Morris was in the act of purchasing a majority of the stock in 1961, a move which succeeded, defendant decided he wanted to leave the Marion bank. He did so, according to Morris, about October 1, 1961. Defendant offered to resell to Morris at $305 a share the 10 shares acquired by him when he came to Marion. However, the three plaintiffs, Morris, Mrs Smith and Biddick, insisted they were entitled under the option agreement signed by defendant to his 40 shares (the 10 shares first acquired and the 30 acquired as a stock dividend) for $3050.

When defendant, who sold the 30 shares for $9000 to a Waterloo banker in August, 1961, refused to comply with their demand plaintiffs brought this action in equity September 8, 1961, to have their right to repurchase the 40 shares for $3050 established and enforced. Upon the trial Morris and defendant were the principal witnesses. The court held plaintiffs were entitled to repurchase for $3050 only the 10 shares first acquired by defendant and that the option agreement did not include the 30 shares acquired by him as a stock dividend in the summer of 1958. Only plaintiffs Morris and Mrs. Smith have appealed.

It is obvious the terms of the option agreement defendant signed are of vital importance. The documents were prepared by Mr. Smith, husband of Maree. He was a stockholder and director in the bank and its attorney. The first paper was a signed offer by Morris, dated January 9, 1956, to purchase from Mrs. Smith and Biddick, accepted by them, 10 shares of the stock (five from each) at $290 a share. It provided, 'I give you an option to resell to each of you five shares * * * at $305 a share, to be exercised by each of you at any future date that the said Harold A. Stowell * * * make disposition of the ten shares of stock which you will have assigned by delivery to him, * * *.'

Defendant then signed an option agreement which quotes the above and other language from the paper Morris signed and adds this vital provision: 'I will fully protect and indemnify you in the performance of your obligation under said option agreement, by not selling said ten shares of stock assigned to me, without first granting you the option to reacquire the same at * * * $305 in order that you may in turn reassign the same to said (Mrs.) Smith and Biddick under your offer and acceptance agreement of January 9th, 1956' (emphasis added).

I. It is apparent the agreement defendant signed expressly obligates him to reassign to Morris at $305 only the ten shares assigned to defendant. It contains no express agreement that defendant would also assign to Morris any stock the former might acquire as a stock dividend during his ownership of the shares. The agreement signed by Morris, accepted by Mrs. Smith and Biddick, also grants them an option to reacquire only 'the ten shares of stock which you will have assigned by delivery to him' (defendant).

The paper signed by defendant is even more definite. He agrees therein not to sell 'said ten shares of stock assigned to me, without first granting you the option to reacquire the same at * * * $305 in order that you may in turn reassign the same to said (Mrs.) Smith and Biddick under your * * * agreement * * *' (emphasis added).

'Said' is a word of reference and means 'before mentioned,' 'already spoken of,' 'aforesaid'; it refers to an appropriate antecedent. The expression 'the same' also refers to something previously mentioned. Baird v. Johnston, 230 Iowa 161, 164, 297 N.W. 315, 316. See also Holland v. State of Iowa, 253 Iowa 1006, 1011, 115 N.W.2d 161, 164. All such references in these agreements are plainly to the ten shares.

Neither Morris' agreement nor defendant's contain language to indicate any party in interest contemplated more than an option to acquire any stock except the ten shares assigned to defendant. There is no evidence defendant suspected, at the time he paid for the ten shares on January 7, 1956, there might be a stock dividend during his ownership of such shares. (Defendant accepted the Marion bank's offer for him to go there, 'provided the situation is as I understand it,' on December 19, 1955.)

There is evidence, however, that Mr. Smith, the attorney who acted for plaintiffs, had some idea on January 10, 1956, there might be a 'stock split' in the foreseeable future. He then wrote defendant a letter which included this: 'We hope to inaugurate a plan for the reduction of dividends before any stock split, to see if it will not establish a greater movement of the stock, and at lower prices.' (Plaintiffs insist the effects of a stock split and stock dividend are the same.) If the option agreement defendant signed were intended to include stock issued as a dividend, the agreement should have so provided.

II. The parties agree this action is for specific performance of the option agreement defendant signed which plaintiffs say they exercised. We think they seek to compel performance of an agreement the parties did not make. Plaintiffs, in effect, ask us to make a contract for them and then enforce it. This we may not do. Precedents in support of this view are numerous, not only our own but those of other states.

Incorporated Town of Wahpeton v. Rocklin, 254 Iowa 948, 119 N.W.2d 880, 884, contains this: 'At best, the agreement is uncertain on this point; and uncertainty is a compelling reason for refusing specific performance. * * * 'Contracts, to be specifically enforced, must be so certain and definite in their terms as to leave nothing to conjecture or to be supplied by the court.'' Several earlier decisions are cited. See also citations in Down v. Coffie, 235 Iowa 152, 157-158, 15 N.W.2d 216, 219.

Pazawich v. Johnson, 241 Iowa 10, 14, 39 N.W.2d 590, 592, states: '* * * it is also well settled that specific performance will not be decreed unless the terms of the contract are so expressed that the court can determine with reasonable certainty what is the duty of each party * * *.' (citations).

Fairgrave v. Illinois Bankers Life Ass'n, 211 Iowa 329, 336, 233 N.W. 714, 717, says: '* * * this court may not change that language and read into the contract other terms which were not agreed upon at the time of the making of such contract.'

From Lockie v. Baker, 206 Iowa 21, 24, 26, 218 N.W. 483, 484-485: 'The minds of the parties must fully meet on the terms of the contract sought to be specifically enforced. (citation) * * *.

'* * * a court of equity does not undertake to make a contract for the parties or to supply any essentials thereof.' See also Marti v. Ludeking, 193 Iowa 500, 502-503, 185 N.W. 476. Lockie v. Baker and Marti v. Ludeking are among the cases Incorporated Town of Wahpeton v. Rocklin, supra, 254 Iowa 948, 119 N.W.2d 880, 884, cites with approval.

81 C.J.S. Specific Performance § 35 a, pages 494-495, states: 'A contract, in order to be specifically enforceable, * * * must be capable of being performed without adding to its terms * * *. The court cannot supply an important omission or complete a defective contract for the purpose of specific performance.'

49 Am.Jur., Specific Performance, section 22, pages 35-36, contains this: 'Whenever it appears that material matters are not clear, certain, and complete, but are left by the parties so obscure or undefined that the court cannot say whether or not the minds of the parties met upon all the...