Thomas v. Prewitt
| Decision Date | 15 February 1978 |
| Docket Number | No. 49863,49863 |
| Citation | 355 So.2d 657 |
| Parties | 23 UCC Rep.Serv. 1001 Ernest G. THOMAS v. Betty M. PREWITT et al. |
| Court | Mississippi Supreme Court |
Ellis, Ellis & Bost, William M. Bost, Jr., Vicksburg, for appellant.
James W. Newman III, Jackson, for appellees.
Before PATTERSON, C. J., BROOM and BOWLING, JJ., and IDOM, Commissioner.
O. GUYTON IDOM, Commissioner for the Court: 1
Complainants, Betty M. Prewitt and Norma Ruth Kellum, brought an action for specific performance for an alleged contract to sell securities in the Chancery Court of Warren County, Mississippi, against defendant, Ernest G. Thomas. Defendant, by way of answer, specifically denied that he entered into an agreement to sell his stock in the corporation and, in his amendment answer, affirmatively pleaded that the alleged contract between defendant and complainants was void and unenforceable by virtue of Mississippi Code Annotated, Section 75-8-319 (1972) (Investment Securities Statute of Frauds section).
A special stockholders meeting of Belmont Realty, Inc., a small Mississippi corporation with real property holdings in Vicksburg, was held on August 18, 1975. The meeting was called for the purpose of discussing a proposal to sell all of the stockholders' stock (1200 shares) in the corporation. Financial woes had plagued this corporation from its inception and, for that reason, the stockholders were eager to rid themselves of the financial burden that became associated with the corporation. Seven (7) of the twelve (12) stockholders, including Ernest G. Thomas, hereinafter referred to as "Seller", attended the meeting.
At this meeting, John Prewitt, the corporation's attorney and himself a stockholder, informed those present that Betty M. Prewitt and Norma Ruth Kellum, hereinafter referred to as "Buyers", were interested in purchasing all the stock of the corporation, assuming an acceptable agreement could be reached. After much discussion regarding what would constitute acceptable terms for the proposed sale, an apparent understanding was reached. The stockholders made an offer to sell their stock to the buyers, based upon that prior understanding. Several days later and prior to any revocation of the offer, buyers notified the stockholders of their acceptance of the offer. All of the stockholders except defendant seller, transferred their stock to buyers in accordance with the agreement. Seller refused to do so because he maintained that there was no "meeting of the minds" between himself and buyers, in that his offer to sell was contingent upon buyers agreeing to sell to him certain real property which belonged to the corporation.
This action for specific performance was commenced after extensive correspondence between seller and buyers failed to resolve the dispute. At trial, buyers called witnesses to show that the agreement in question was absolute and not subject to any contingency. Seller testified that he agreed to sell the stock upon the condition that buyers agreed to sell to him a certain piece of real property. The only writing evidencing the existence of the alleged contract to sell stock is the minutes of the special stockholders' meeting.
The chancellor in his findings of fact and conclusions of law held that the contract was not within the statute of frauds because ". . . it was a complete contract made by the corporation in which these two ladies bought the entire stock and the entire property of the corporation." Furthermore, the chancellor held that even if the statute of frauds did apply, that seller was "equitably estopped" from relying on the statute.
The first question presented is whether the agreement in the case at bar was within the purview of the statute of frauds (Miss.Code Ann. Sec. 75-8-319 (1972)). This statute provides:
A contract for the sale of securities is not enforceable by way of action or defense unless
(a) there is some writing signed by the party against whom enforcement is sought or by his authorized agent or broker sufficient to indicate that a contract has been made for sale of a stated quantity of described securities at a defined or stated price; or
(b) delivery of the security has been accepted or payment has been made but the contract is enforceable under this provision only to the extent of such delivery or payment; or
(c) within a reasonable time a writing in confirmation of the sale or purchase and sufficient against the sender under paragraph (a) has been received by the party against whom enforcement is sought and he has failed to send written objection to its contents within ten (10) days after its receipt; or
(d) the party against whom enforcement is sought admits in his pleading, testimony or otherwise in court that a contract was made for sale of a stated quantity of described securities at a defined or stated price.
We are of the opinion the Investment Securities Statute of Frauds by its terms is applicable to this transaction.
The question remains, however, whether the provisions of the Investment Securities Statute of Frauds were satisfied in the instant case. Four elements are required to satisfy this statute:
(1) A writing;
(2) Signed by the party to be charged, or his agent or broker, providing for the sale of;
(3) A stated quantity of described securities; and
(4) At a defined or stated price.
See Tripp v. Pay 'N Pak Stores, Inc., 268 Or. 1, 518 P.2d 1298 (1974).
The only writing which evidences the contract in the instant case is the minutes of the special stockholders' meeting, prepared by the corporation's attorney, John Prewitt, and signed by the president, Jerry Derivaux and secretary, Gene Calhoun, of the corporation. These minutes were prepared a week to ten (10) days subsequent to the stockholders' meeting and include, inter alia, (1) the offer to sell made by the stockholders and, (2) the purported acceptance of the offer by the buyers. It should be noted that the actual acceptance by the buyers did not occur until two days after the meeting.
Buyers contend that the corporate minutes satisfy paragraph (a) of the statute of frauds. With this we do not agree. The minutes of the meeting were not signed by appellant, nor were they signed by an authorized agent or broker of the seller. In Konsuvo v. Netzke, 91 N.J.Super. 353, 220 A.2d 424 (1966), one Peter Konsuvo brought an action for specific performance of an alleged contract to sell stock. The parties stipulated that the contract came within the Investment Securities Statute of Frauds provision. The only writing evidencing the contract was the corporate minutes, signed by the secretary of the corporation, and taken at the meeting where the alleged agreement was reached. Konsuvo contended that the minutes constituted all the essentials of a valid contract, and, as a result, the statute of frauds was satisfied; that the secretary of the corporation was an agent of the defendant stockholders for the purpose of reducing the agreement to writing. The Court held that no agency relationship was created, citing as authority Section 15 of Restatement of Law, Agency, page 50 (1933), which provides:
An agency relationship exists only if there is a manifestation by the principal to the agent that the agent may act on his account, and consent by the agent so to act.
Before the secretary or president of a corporation can be classified as a stockholder's agent when signing the minutes of a special stockholders' meeting, there must first be a showing that he signed the minutes as the duly authorized agent of the stockholders, and not merely as an agent of the corporation. Asbury v. Mauney, 173 N.C. 454, 92 S.E. 267 (1917).
In 5 Fletcher Cyc Corp, § 2206 (Perm.Ed.1976), it states:
The corporate records are not sufficient, however, to satisfy the statute as against a stockholder who did not sign them or where they do not show any understanding or agreement but merely show circumstances from which some kind of an understanding might be inferred.
Assuming arguendo that the facts in the instant case give rise to an implied authorized agency, even so, this agency would be limited solely to taking down what transpired at the meeting. In other words, events which occurred subsequent to the meeting could not be included in the minutes of the meeting. As stated earlier, the acceptance of the offer occurred subsequent to the meeting. That being so, it...
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