Hamil v. Flowers

63 So. 994, 184 Ala. 301, 1913 Ala. LEXIS 631

• Court: Supreme Court of Alabama
• Decided: June 11, 1913
• Status: Published

Opinion

de GRAFFENRIED, J.

— We gather from the pleadings in this case that while the Flowers Lumber Company was in process of organization it was understood that John J. Flowers, who is now dead, would be a large owner of the capital stock, and that he would therefore have a large influence in the management of the affairs of the corporation. We also gather from the pleadings that after the corporation was organized and when its capital stock was actually issued, a large interest in the stock was issued to John J. Flowers, and that said John J. Flowers had much to do with the management, of the affairs of the corporation up to the time of his death, which occurred in 1905. We also gather from the pleadings that while the process of organizing the said corporation was in progress, John J. Flowers employed one J. M. Bivings to do certain work for the said corporation with the understanding that when a sufficient amount of the net income of the corporation had been, in the shape of dividends, distributed to the stockholders of the corporation to repay them the amounts which they had subscribed in cash or its equivalent to such capital stock, then that the said John J. Flowers would transfer and assign unto the said Bivings enough of his stock in said corporation, in payment for said work, as would be sufficient to make Bivings the owner of - an undivided 1/32 interest in the capital stock of said corporation. Bivings died before the period arrived when, under the terms of the agreement, he would have been entitled to demand the stock of said John J. Flowers, but after his death the period did arrive when, if he had been living, he would have been so entititled. This being the situation, John J. Flowers, so one of the replications to the pleas alleges, accepted the following proposition from three of the heirs of said Bivings: “You allow us to share in all net dividends declared by the Flowers Lumber Company at Jakin, Ga., after January 1, 1905, to the amount of 1/32 of said dividends, we to share in the dividends coming from the purchase or sale of all lands or timber, or the purchase or'sale of all machinery, steels rails, etc. In other words, we to receive 1/32 of the net earnings of said business, this to be divided equally between we, the undersigned, and the heirs of Mrs. Mary E. Fry, deceased. We hereby waive the issuing of stock certificates to us and consent for you to hold same in your name and vote •same at all meetings of stockholders. This proposition, if accepted, to be full and satisfactory settlement of all claims or demands to this date, December 31, 1901.” This replication to the plea, after setting out the above proposition, alleges that the said Flowers, after accepting said proposition, paid to the heirs “the amount which he admitted he had collected as dividends on said stock; that said Flowers continued to hold said stock and pay to the heirs of said Bivings, until the time of his death the sums which he claimed to have collected as dividends thereon; that after the death of said Flowers, the trustees constituted by his will, continued to make said payments to said heirs until, to wit, 1907, when plaintiff filed his suit in Georgia for possession of said stock, whereupon said trustees, including the defendants, refused to pay to plaintiff the dividends thereafter collected by them upon said stock, and for which said suit was brought.”

1. When John J. Flowers made the above contract with J. M. Bivings the Flowers Lumber Company had not been formed, and the contract related to stock which the parties expected to be issued in a corporation which was not then in existence. The true legal effect of the transaction was that John J. Flowers employed J. M. Bivings to do certain work, and agreed to pay him in full for that work by making to him a transfer, at the time we have above stated, of an undivided 1/32 interest in the capital stock of a. corporation which was to be incorporated in the future. While the law does not make a contract for parties, it carefully looks into the contract which parties make. It does this for the purpose of ascertaining from the words used by them in making the contract what the real purpose of the parties was when they made the contract, and what substantial thing the parties agreed to when they made it. Having done this, the law then says what the contract actually was. The substance of the thing agreed upon is the thing to which the law looks when it is called upon to construe a contract, and is the thing which determines what the contract really is. — Union Mut. Ins. Co. v. Wilkinson, 13 Wall. 235, 20 L. Ed. 617. So construed, the true contract between Flowers and Bivings was as we have above stated it to be.

“Things not in esse, actual or potential, cannot be the subject of sale,” but “they may be the subject of an agreement to sell.” — Robinson v. Hirschfelder, 59 Ala. 503; 4 Mayf. Dig. p. 744, subd. 27.

“If, by agreement, payment is to be made in specific articles, they must be actually tendered within or at the time specified, or within a reasonable time if none specified; otherwise the debt becomes payable in cash.” —Benjamin on Sales (7th Ed., Bennett’s) p. 776, subd. 6.

“All agreements to pay in specific articles are presumed to be made in favor of the debtorj and he may, in all cases, pay the amount of the debt in money, in lieu of the articles, which, by the terms of the contract, the creditor had agreed to receive.” — Abner B. Roberts v. Willimi Beatty, 2 Pen. & W. 63, 21 Am. Dec. 410; George G. Smith v. H. O. Coolidge, 68 Vt. 516, 35 Atl. 432, 54 Am. St. Rep. 902.

2. An executory, contract of sale of personal property is a chosen action, and upon the death of its owner passes to his legal representatives. When J. M. Bivings died the agreement which he had with John J. Flowers passed into the administrator of his estate. The agreement which the heirs of J. M. Bivings made with John J. Flowers and which we have above set out, was a matter with which the administrator of Bivings, in so far as the question now under consideration is concerned, certainly had nothing to do. That agreement was not binding upon the administrator and was, as between the heirs of Bivings, the said John J. Flowers and the said administrator of Bivings, an agreement which the said heirs and the said John J. Flowers had no power or right to make. The heirs of Bivings. had in law no title whatsoever to this chose in action of the estate, and no right, as against the administrator, to compromise, settle, or adjust that claim. This claim of Bivings, as already stated, at the time of his death was an executory — not an executed — contract of sale, and the title to the claim vested in his administrator, just as the title to all the other personal property of Bivings which was subject to administration passed into the administrator.

“Where, by the terms of the contract, the property has not passed to- the buyer in- the thing which the vendor has agreed to sell, it is obvious that the buyer’s remedy for the breach of the vendor’s promise is the same as that which exists in all other cases of breach of contract. He may recover damages for the breach, but he has no special remedy growing out of the relations of vendor and vendee — 1 Benj. on Sales, (7th Ed., Bennett’s) p. 920, § 870.

3. Section 2590 of the Code of 1907 provides as follows: “All claims against the estate of a decedent, other than the claims referred to in the preceding section, must be presented within twelve months after the same have accrued, or. within twelve months after the grant of letters testamentary or of administration; and if not presented within that time, they are forever barred, and the payment or allowance thereof is prohibited.” The above was the law Avhen the cause of action now under discussion arose. In the appellant’s brief we find the following: “The decisive question in this case is Avhether the appellant’s claim is barred by the statute of nonclaim. That proposition is asserted by appellees’ plea numbered 2, and upheld by the rulings of the lower court. Appellant contends that it is not so barred.” In another place in appellant’s brief we find the following: “Apparently appellant has two separate' and distinct claims or demands or rights of action against the appellees as trustees” : First, for the shares of stock; and, second, for dividends thereon. This suit is for part of the latter, and not for the stock itself. From 1898 till Bivings. died, John J. Flowers held 1/32 or 25 shares of $2,500 par value of said stock for said Bivings and Avith his consent. There was not, and could not have been, a breach of that contract by failure of FIoavers to transfer the stock to Bivings .before the latter’s death, because the stock was not yet paid for, and Bivings was not yet entitled to it. It nowhere appears that there was anyone legally authorized, after the death of said Bivings, to demand the stock until the appointment of appellant. It does not appear that he ever demanded the stock, or that its delivery was ever refused by appellees or their testator. Therefore we see no basis for a claim for damages for the breach of the original contract, and no such claim, if timely presented, could have been allowed against the Flowers estate.” We have quoted extensively from appellant’s brief and italicized certain portions of it for the purpose of fully explaining the attitude of appellant in this litigation. This suit was brought by appellant for the dividends on the stock in an attempt, we presume, to evade the operation of the above statute of nonclaim. We find nothing in the books which authorizes us, however, to adopt as the law of this state any portion of the above-quoted argument of appellant.

For the breach by the seller of such a contract as we now have under consideration the buyer may recover of the seller, as a general rule, only the market value of the property at the time and place fixed by the contract for the delivery, and, in all such cases, damage's only are recoverable, under the law, for such breach.— Benjamin on Sales (7th Ed., Bennett’s) p. 920, § 870. Certainly, as no stock was in existence when the contract in the instant case was made, in no sense could there have been an executed contract of sale when the contract was made, and when, under the terms of the contract, the debt which Flowers owed to Bivings, and which he had a right to discharge in stock, Flowers or his executors failed to pay that debt either in money or in stock, then the administrator of Bivings became entitled to his action of damages and was furnished by the law with no other remedy. In onr opinion, therefore, the only right which, at lam, has ever resided in the administrator of Bivings is the right which the law gave to him to sne John J. Flowers, or, if dead, his legal representatives, for damages for the breach by Flowers of an executory contract. That right of action was subject to the bar of the statute of nonclaim under the provisions of the above-quoted section 2590 of the Code of 1907.

Plea 2, which is a plea of the statute of nonclaim, was filed to each count separately and severally. The appellant’s various grounds of demurrer to this plea raised for our consideration one question only viz.: Whether, under the facts alleged in that plea, the appellant’s demand against the estate of John J. Flowers, as the plea alleged that claim to be, was subject to the bar of the statute of nonclaim. In other words, the appellant’s demurrer to said plea went to the merits of this controversy, and we have confined our discussion to the question presented by the demurrer.

4. In a certain limited class of cases an executory contract of sale of stock of a corporation may be specifically enforced by bill in equity filed for that purpose. In all such cases equity furnishes relief because the law cannot, by its action for damages for the breach of the contract — the only remedy known to the law — furnish to the injured party adequate relief. The instant case is an action at law; and, while an action for money had and received is an action which is equitable in its nature, it cannot be converted into a bill for the specific performance of a contract, or be made to furnish relief obtainable only in a court of equity upon a bill filed for the purpose of specifically enforcing a contract. Whenever equity furnishes to a party the right to specifically enforce an executory contract of sale, the law furnishes to him the right to sue, if he elects so to do, for damages for a breach of that contract, the inadequacy and not the entire absence of a legal remedy being the ground upon which, in such cases, the jurisdiction of equity may be invoked. To hold, under the facts set up in plea 2, that a suit at law could not have been maintained by Bivings or his administrator against John J. Flowers for damages on account of the failure of John J. Flowers to perform his part of the contract, viz., to transfer and assign unto Bivings the stock in accordance with the agreement, Avould be to hold for naught all the learning in the books upon the subject which we have above discussed. If the appellant possesses a remedy whereby he can obtain the stock and the dividends on the stock, that remedy exists in a court of equity, and not in a court of law.

The judgment of the court below is affirmed.

Affirmed.

All the Justices concur, except Dowdell, O. J., AArho dissents.