Gause v. Commonwealth Trust Co.

111 A.D. 530, 97 N.Y.S. 1091, 1906 N.Y. App. Div. LEXIS 212

Opinion

Ingraham, J.:

To the original complaint in this action the defendant demurred, which demurrer was sustained by this court (100 App. Div. 427). In pursuance of the leave granted the plaintiff amended the complaint, to which the defendant again demurred, which demurrer was overruled, and -the sufficiency of the amended complaint is now before us.

The action is brought upon a contract, a copy of which is annexed to the complaint. By that contract the defendant was the party of the first part and the plaintiff the party of the second part. It recites "that “ It is the mutual desire of the parties hereto that the securities of the United States Shipbuilding Company shall be sold to the best advantage, both parties being interested in same; ” that a selling syndicate had been formed to arrange for such sales, and for other purposes, under an agreement providing for the deposit of all of said securities of the United States Shipbuilding Company, except those of the plaintiff, with the defendant, for such purposes, and that both parties would in good faith co-operate with the said syndicate in furthering such object and that the agreement was intended to be an aid to the same. It was then agreed that the plaintiff should deposit with the defendant all of his bonds and shares of preferred and common stock- of the United States Shipbuilding. Company under the terms and conditions of the agreement ; that .the defendant would use and dispose of said securities of the plaintiff .as ill its judgment should be necessary to further the purposes of the.syndicate, and in so doing, would, do whatever, was . necessary to insure equal benéfits to the plaintiff pro rata _ to his ■ holdings of said securities that were enjoyed at any timé by the vendors who should.be or become parties to the agreement with' said syndicate in connection with the sale and disposition of said securities or the proceeds of thesale of the same) and it (defendant) “ hereby guarantees to the party of the second part (plaintiff) the sale of all of his said securities on or before August 25,1903, whether through the efforts of said syndicate or otherwise, and the party of the first part agrees to account to the party of the second part, on or before the 25th day of August, 1903,’ and that the'prices thereof shall be on a basis which will realize to the party of the second part" not less than 95 per cent of the par value" of the bonds and 68 per cent of the par value of the said preferred stock and 25 per cent of the par valué of the said common stock, less brokerage'expenses, as hereinafter stated, and the party of the first part hereby agrees to' pay to the party of the second part the interest on the bonds as and when received from the United States" Shipbuilding -Company during the period* of "this agreement; and in case of their sale or any of them during, the period of this agreement, and if under such circumstances .it elects to retain the proceeds of the sale- of the same, under the provisions hereof, until the final ..acúounting hereunder, the party of the first part agrees to pay to the party of the second part the accrued interest on such bonds.as may be sold up to the dates of their sale,, and also interest on th.e proceeds .of the sale of same, at the same, rate that the bonds would have earned if same had not been deposited under the terms of this agreement, said" payments of interest to be made January 1st and July 1st,, 1903, if this agreement is not sooner" terminated, but at its termination at any time payment is to be made in full.” , ■ '

The ■ agreement further provides that the defendant is accorded the exclusive right, to sell the said securities of the plaintiff during the period of the agreement, and that the defendant shall have the authority from time to time, and at any time, to pay the usual brokerage and brokers’ expenses, if any, in connection with the sale of the securities of the plaintiff; and that “ No obligation or liability in addition to those herein expressed shall be implied against the said party of the first part; it being the spirit and intent of this agreement that said securities are deposited as named under a guaranty - of sale at not less than the minimum figures hereinbefore mentioned, and all proceeds of sales are to be accounted for at the figures at which such sales shall be made, and the same with all incidental net profits in connection with the same.”

In construing this agreement, in connection with the allegations of the original complaint, this court held : “ It is clear that under the contract alleged in the complaint the defendant had no right to become the purchaser of these securities. It undertook to sell the same and was bound to sell for the best price that could be obtained, and if a higher price than that named in the agreement had. been received upon their sale the defendant would have been required to account for the same to the plaintiff, and its obligation under the contract would not have been satisfied by the mere payment of the sum mentioned in the complaint. * * * The cause of action, if any, alleged was not á breach of a covenant to pay a certain sum of money,- but to perform a certain duty, namely, to sell these securities, and a covenant that they would realize a certain sum at least. There were no allegations whatever contained in this complaint tending to show that by reason of the breach of this covenant of sale, the plaintiff has suffered any damage whatever.” (100 App. Div. 429.)

Accepting this construction of the contract,', as we must on this appeal-, the -question is whether the plaintiff has now alleged facts which show that by reason of the failure of the defendant to sell theke securities witliin the year, the plaintiff has sustained damage. There can be no question but that under this agreement the defendant agreed to sell these securities, owned by the plaintiff, within one year from the date of the agreement at a price not less than that specified therein,, and undertook that the plaintiff should receive at the end of the year the price specified. The .complaint alleges that at the time of the making of this agreement the securities themselves were not actually engraved and made out, but that as soon as this was accomplished, to wit, in January, 1903, the plaintiff notified the- defendant that, the securities were in his possession, and offered to deposit them bodily with the defendant pursuant to .the terms of- the agreement; that the defendant requested that the plaintiff hold them in his possession, but at its. use and disposal, subject to the terms of the agreement, and this, ■the plaintiff did; that the securities had been, ever since the date of the agreement and during the entire period thereof, at .the disposal of. the-defendant, held for its use, at its request and subject-to its order; ■ and that the/plaintiff repeatedly tendered the securi-. ties to the defendant prior to August 25,. 1903, and since that date had been and was then ready and willing to turn the same over to the defendant, and-offers to do so. This allegation is admitted by the demurrer. The plaintiff still having the possession of the securities, However, and the action being in form one to recover the damages sustained by the plaintiff in consequence of a breach of the agreement by_thé defendant to sell the securities at a price not less than that fixed in the agreement before August 25, 1903, it is obvious that'the damages that the plaiptiff sustained in consequence of a breach of this agreement by.the defendant was the difference , between the value of the securities on August 25, 1903, and the, minimum price at which the defendant agreed that they should be sold. Upon this point, the complaint alleges that “ The. defendant failed to'make any sales of the■ securities aforementioned, as plain- ' tiff has- been informed and believes; Certainly the defendant-failed to account to the plaintiff .as provided in the agreement. It has never accounted to the plaintiff ir; regard to any of the securities,, nor paid nor caused to be paid to the plaintiff any' sum whatever for or on sale of the .same,” and that the above has. been to the plaintiff’s damage, in ■ the sum of $404,630) with interest from. August 25, 1903. ■'

It is a familiar rule that where a contract and a breach thereof by the defendant is alleged, the plaintiff is- at least "entitled to Bomb nal damages; and although a complaint should fail to allege damages, the" plaintiff being entitled to nominal.damages, the complaint. ■is not demurrable. "It- is in substance alleged that on the 25th day of August, 1903, the securities' which the defendant undertook to sell at a price named had become valueless, and that thereby the' plaintiff had sustained damage to an amount specified. This, upon demurrer, is clearly a sufficient allegation of damage to entitle the plaintiff upon facts conceded by the demurrer to a judgment for the amount specified. The learned counsel for the defendant, however, contends that by virtue of the 7th clause of the agreement after the 25th day of August, 1903, there was no obligation, upon the defendant." That clause is as follows: “ This agreement and all it contains shall become null and void on August 25', 1903, or at any time prior thereto coincident with the sale of and settlement for all of the said securities of the party of the second part or the termination of the said syndicate by the fulfillment of its agreement with the other vendors and underwriters of the said securities.” This clause must be read in connection with the balance of the agreement. By the agreement the defendant was not required to account to the plaintiff for the proceeds of the securities sold by it until August 25, 1903. If the defendant’s contention is sustained, then no matter what price the defendant had received from the sale of the plaintiff’s securities prior to that time, it would be under no. obligation to account for them. It is quite clear that what was intended was that the defendant agreed to sell the securities prior to August 25,1903, and to account to'the plaintiff for the proceeds. It further guaranteed that it would sell the securities at a price named within that period. Thus, on the 25tli day of August, 1903, the defendant would either have in its hands The proceeds of the sale of the securities named or would be under an obligation to pay to the plaintiff the amount which it had guaranteed the securities would be sold for prior to the 25th day of August, 1903. Its obligation to the defendant would, therefore, become fixed at that date. It would be under no obligation to hold the securities and sell them at a subsequent period, although they should then be salable at a higher, price. It was certainly not intended to relieve the defendant from its obligation to account to the plaintiff for the value of the securities that it had sold, or for the amount that the securities would realize at the price named which the defendant had guaranteed should be realized prior to that time. While the intention of the parties is not clearly expressed, there is, I think, no doubt of what was intended. The defendant was to sell the securities prior to August 25, 1903, at a price not less than that named in the con tract. If the. securities were soldi it was to account to the .plaintiff for the amount realized. It, however, guaranteed that it would sell the securities at the specified prices prior to that date, and if on that . date the securities had not been, sold, the plaintiff would be entitled to Recover for a breach of its contract. On" the 25th.day of A ugust,. 1903, the contract was to become null and.void, but the obligation of the defendant to the plaintiff, as fixed upon that date, was not affected by this clause. In construing contracts, of this kind,'we are ,td ascertain the intention of the- parties and give it dué effect; and to hold that this 7th clause of the agreement terminated all' liability of the defendant on the contract on the 25th day of August.,' 1903, would in effect nullify, the whole arrangement between the-parties, a result which certainly was not contemplated by either party when the agreement was made. ^ " ■

I think that the complaint set forth a gopd cause of action and that the demurrer was properly overruled. ' .

It follows that the judgment appealed from should be affirmed, with costs, with leave to the defendant to withdraw the demurrer and answer 'within twenty days on payment' of costs in this court and in the court-below. ;

■ 'O’Brien, P.J., Patterson,.Laughlin and Clarke,' JJ., concurred.

Judgment affirmed, with costs, with leave to defendant to withr draw demurrer and to answer on payment of costs in this court and in the .court below. Order filed. ■