Thompson-Starrett Co. v. E. B. Ellis Granite Co.

• Decision Date: 11 November 1912
• Citation: 86 Vt. 282,84 A. 1017
• Parties: THOMPSON-STARRETT CO. v. E. B. ELLIS GRANITE CO.
• Court: Vermont Supreme Court

84 A. 1017

86 Vt. 282

THOMPSON-STARRETT CO.

v. E. B. ELLIS GRANITE CO.

Supreme Court of Vermont. Washington.

Nov. 11, 1912.

Appeal in Chancery, Washington County; E. L. Waterman, Chancellor.

Suit by the Thompson-Starrett Company against the E. B. Ellis Granite Company. Exceptions to the master's report having been overruled and a decree entered foreclosing complainant's mortgage, defendant appeals. Affirmed and remanded.

Argued before ROWELL, C. J., and MUNSON, WATSON, HASELTON, and POWERS, JJ.

Plumley & Plumley, of Northfield, and George W. Wing, of Montpelier, for appellant.

Henry L. Clark, of Castleton, and W. B. C. Stickney, of Rutland, for appellee.

POWERS, J. This was a statutory petition in common form for the foreclosure of a certain mortgage dated July 24, 1905, and conditioned for the payment of $200,000 in two years from that date. The defendant filed an answer, therein alleging that at the time of the execution and delivery of this mortgage, and as a part of the consideration therefor, the petitioner executed and delivered to the defendant a written contract, wherein it was provided, among other things, that the petitioner should not demand payment of any part of the debt secured by said mortgage, nor foreclose the same until the completion of certain contracts then in force between said parties, and such other contracts for furnishing granite as might thereafter be entered into between them. And tbe defendant alleged that at the time the petition was brought and served there was such a contract in force between the parties which was not fully completed. And that for this reason the suit was premature. Thereupon the petitioner amended his petition by inserting therein copies of certain sections of said contract numbered 1, 3, 5, 6, and 7, and alleging full performance, on its part, of all the requirements of this contract. The amendments also showed that the unfinished contract referred to in the defendant's answer was one for six monolithic statues which were to be placed on the Union Station at Washington, the price of which was fixed at $40,000. It was also alleged that these had not been delivered on account of the defendant's unwarranted delays, and that the defendant had received the full contract price therefor. The amendments further alleged that the defendant had broken the contract, and deprived the petitioner of the benefit thereof by repudiating the voting trust arrangement provided for in section 6 thereof. The defendant again answered, and alleged that certain sections of the contract were omitted from the amended petition, and making the whole contract a part of the answer by reference.

The petitioner filed a replication, and the cause was referred to a special master to find and report the facts bearing upon the question whether the suit was prematurely brought. A report was filed, from which it appears that the contract for the six statues was not then completed, that this was through no fault of the defendant, and that the petitioner had, before suit, credited the defendant with the full contract price thereof. The master also reported that the defendant refused to allow the trustee referred to in section 6 of the contract to vote the stock at a meeting of the stockholders, that there was no fraud practiced on the defendant in the selection of the trustee, and that it was the purpose of the petitioner in creating the voting trust to control, if necessary, the selection of officers and the management of the defendant corporation, to the end that the money loaned to it should be secured, and that this provision was one of the essential provisions of the contract. Both parties filed exceptions to this report, and on hearing the chancellor, after expressing his views on some of the questions submitted but without making any further order, recommitted the cause to the master for a full hearing on all questions, reserving to the defendant the right to raise the question whether the petition was prematurely brought at the final hearing. A full hearing was then had, and another report was filed by the master. The defendant filed a motion to recommit this report, and also filed exceptions thereto. Both the motion and the exceptions were overruled, and a decree was entered for the petitioner with a short day of redemption. The defendant appealed.

If the rights of these parties depended wholly on section 1 of the contract, the suit was plainly premature; for it is therein expressly provided that the mortgage shall not be foreclosed until all contracts for furnishing granite are completed, and it is expressly found that one of such contracts was not then completed. The petitioner does not avoid the effect of this provision when it asserts that the credit given the defendant for the full contract price is tantamount to a completion of the contract. This is not what the parties stipulated for—either in terms or effect. If we were to say that this is what they meant, we should largely eliminate the advantage which this provision afforded the defendant; for it would then lie in the power of the petitioner to fix at its pleasure the time when its mortgage should be ripe for foreclosure. All it would have to do would be to place the amount of the contract price to the credit of the defendant, and proceed. This might leave the defendant wholly unable to complete, not only this, but his other contracts, while if the petitioner waited for the event specified in the contract, the completion of the statues, the defendant would have a considerable time, a year probably, in which to meet the requirements of its contract with the petitioner and to enjoy the beneficial use of its property.

But the petitioner says its right to foreclose is established by section 2 of the contract, which, while not set forth in the petition, is made a part of the pleadings by the answer. This section provides that, if the mortgage should be foreclosed prior to the completion of such contracts, the petitioner should fully reimburse and indemnify the defendant for any damage suffered thereby. We are not called upon to determine the effect of this provision, for the petitioner is not in a position to take advantage of it even if its effect is what is claimed for it. An orator must stand or fall upon the case made by his bill, and any fact admitted or shown by the answer cannot avail him, unless that fact is alleged in the bill. The reason is that the court "pronounces its decree secundum allegata et probata." This rule is fully established, not only here (Thomas v. Warner, 15 Vt. 110; Nye v. Stewart, 83 Vt. 521, 77 Atl. 340), but elsewhere (16 Cyc. 311; 1 Dan. Ch. 335, n. 4; Story, Eq. Pl. § 257; James v. McKernon, 6 Johns. [N. Y.] 543; Jackson v. Ashton, 11 Pet. 229, 9 L. Ed. 698).

The petitioner also claims that his right to foreclose is restored by the defendant's breach of the provisions of sections 5 and 6 of the contract. It appears from the report that by previous arrangements the petitioner had become the owner of a large number of the shares of the capital stock of the defendant company, and that it had acquired a large number of shares of this stock as collateral security. By section 5 it was provided that all of such stock then held by the orator as collateral should be released and surrendered; and by section 6 it was provided that the petitioner, E. B. Ellis, Goldwin Starrett, and Roger Sherman should transfer all their stock in the defendant company to the Title Guaranty & Trust Company of New York, as trustee, and take its certificates therefor; that the trustee should hold the stock and vote it as the certificate holders directed, so long as they agreed; that, if the certificate holders disagreed, the trustee should vote the stock as it deemed proper. It is alleged in the petition that this provision was an essential and necessary feature of the contract, and that the defendant willfully violated the same, and deprived the petitioner of the benefit thereof by repudiating it and preventing the trustee from acting thereunder, thereby preventing a fair and impartial management of the business of the defendant, and enabling it to continue in practices of delay and improvidence to the detriment of the petitioner's interests. The answer admits that the defendant at its annual meeting in January, 1909, repudiated this voting agreement, and that it has ever since refused to be bound by it. The excuse given for this action is that at the time the contract was made the defendant supposed the trustee was wholly disinterested; but that it afterwards discovered that the trustee was then interested in the stock of the petitioner, represented on its board of directors, and that it had now become the owner of a majority of the stock of the petitioner, and that the petitioner knew all the time of the trustee's interest and fraudulently concealed the same from the defendant.

The master finds that the trustee was not allowed to vote the stock at a certain meeting of the stockholders. This refers probably to the annual meeting of 1909, though the master does not say so. He finds, in effect, that the trustee was at the time the contract was made interested as stated, but that there was no fraud unless such facts of themselves amount to fraud. He does not find that the petitioner concealed this fact from the defendant, or, indeed, that the defendant was ignorant of it.

But assuming the defendant's ignorance, and assuming that the orator failed to disclose the interest of the trustee, we cannot say that these facts amount to fraud. There was nothing in the situation of these parties when this contract was entered into that required that the trustee should be without interest. One of the purposes for which the contract was made, as expressed in the preamble, was "that further security may be furnished" to the petitioner for its advances to the defendant. The mortgage given at the time was for $200,000, and there was...