Korn v. Eick

114 S.E. 144, 91 W. Va. 763, 1922 W. Va. LEXIS 180

• Court: West Virginia Supreme Court
• Decided: October 3, 1922
• Status: Published

Opinions

Ritz, Judge:

Plaintiff instituted this suit to recover from the defendant a certain sum of money which he contends was paid to the defendant out of the earnings of certain stock in the Belmont Brewing Company, which the said defendant, by the terms of the contract for the sale of said stock, agreed to pay to the plaintiff when the same should be paid to him by said company. The case was submitted to the court in lieu of a jury upon the evidence introduced by the plaintiff, and judgment rendered in favor of the defendant, to review which this writ of error is prosecuted.

The facts shown by the record, so far as they are material to the determination of the questions involved, are not at all in dispute. In the month of July, 1919, and prior thereto, the plaintiff was the owner of forty shares of stock, of the par value of $4,000.00, of the Belmont Brewing Company, operating a brewery at Martins Perry, Ohio. The total capital stock of this company was two thousand shares, of the total par value of $200,000.00. The defendant desired to secure the plaintiff’s forty shares of stock in order that he might control the destinies of the corporation. The National Prohibition Amendment had at that time already been adopted,- and would soon go into effect, and the defendant desired to get control of this property, with the view of converting it into some- other kind of plant. The brewery had been operating for a number of years in a very successful manner. At the time the contract was entered into between the plaintiff and the defendant the assets of the brewery consisted of its plant and other properties used in connection therewith in the manufacture of beer, and $144,000.00 in money or other securities which had been earned by the company from the operation of the business in the past. This being the situation, the parties entered into a contract as follows: “THIS AGREEMENT, made this 26th day of July, 1919, by and between Jacob Korn, of Warwood, W. Va., First Party, and A. W. Eick, of Martins Ferry, 0., Second Party:

WITNESSETH: That, for and in consideration of the sum of four thousand dollars ($4,000.00) to him in hand paid by Second Party, receipt whereof is hereby acknowledged, First Party hereby agrees to sell and transfer unto Second Party, his heirs and assigns, forty (40) shares of the Capital Stock of The Belmont Brewing Company, of Martins Ferry, O., a corporation existing under the laws of the State of Ohio.

Second Party agrees that, in event he is' successful in acquiring ownership of sufficient shares of stock of said The Belmont Brewing Company to insure a control and organizes a new company for the purpose of establishing a new enterprise at the plant of said The Belmont Brewing Corn-party, he will resell to said First Party said forty (40) shares for the sum of four thousand dollars ($4,000.00) and engage him as general superintendent of the new company, and admit him to a seat in its Directorate; provided, that same shall meet with the approval of First Party.

Second Party further agrees that he will hold himself liable for, and pay to First Party, all dividends on said forty (40) shares of stock which may in the future be declared and paid out of earnings prior to the date of this agreement.

IN WITNESS WHEREOF, the parties hereto have hereunto set their hands the day and year first above written.’'' In accordance with the terms of this contract the plaintiff’s forty shares of stock were transferred to the defendant, and this gave him the control of the company. Shortlythereafter it was determined to discontinue business and to wind up the company’s affairs. The $144,000.00 of earnings above referred to were distributed at several different times to the stockholders, and the property of ■ the company directed to be sold, and it was sold, but it appears that at the time of the trial of this case all of the proceeds had not been distributed, if in fact they had been collected. Upon discovering that the brewing company had determined to wind up its business and had directed the distribution of the $144,000.00 to the .stockholders, the plaintiff called on the defendant to pa,y him the share of such distribution received on the forty ■shares of stock. The defendant declined to do this, contending that the plaintiff was not entitled to receive anything on "that which was paid to him by virtue of the forty shares of :stock, inasmuch as the corporation had decided to go out of business, and the action of the board of directors in paying •out the money then on hand was the distribution of essets, .and not the declaration of a dividend. This suit was thereupon brought for the purpose of recovering the amount received by the defendant out of the $144,000.00 because of dhe transfer of said forty shares of stock to him.

The question for solution is easily determined if we consider the contract from the standpoint of the parties at the ■time, and not from th estandpoint of the corporation. The •defendant, as well as the court below, has considered the contract all the time from the standpoint .of the corporation ■being wound up. The plaintiff was the owner of forty shares of stock of the brewing company, but stock is an intangible thing. What he really owned was one-fiftieth equitable inter - ost in the assets of the brewing company. Being the owner of -such one-fiftieth equitable interest, the next inquiry naturally is, what did he sell to the defendant? The assets of the brewing company consisted of two things, its plant and prop•erties which had been used in carrying on its business, and •certain monies or funds which had been earned by it in the prior conduct of that business. The plaintiff was the equitable owner of a one-fifieth interest in each of these items. It is perfectly clear from the contract that what he sold to the •defendant was his one-fiftieth equitable interest in the plant --and properties used in conducting the business, and that he -did not sell the equitable interest which he owned in the funds on hand already earned, but not distributed. The -parties, as is apparent from the contract, recognized that he -could not obtain this interest in these funds until the eorpo-Tation distributed them, and that when it did distribute them, •so far as the corporation was concerned, they would be paid do the holder of the stock, so that it was necessary to provide in the contract that while the stock was transferred to the ■defendant for the purpose of allowing him to control the .affairs of the corporation, he would, when these earnings were distributed, pay them to the plaintiff in order that the plaintiff might receive the property which he had not, in fact, sold, and which the defendant had not, in fact, bought .and paid for. It is immaterial whether this company had profits or losses. These people had a right to contract just us they did contract, that is, for the sale of the full equitable interest of the plaintiff in the corporation, or for only a part of that equitable interest, and when they have so contracted the court will require the parties to observe the obligations nf the contract. We are of the opinion that the plaintiff has uhown a clear right to recover the one-fiftieith part of $144,-<000.00 of prior earnings which had been distributed to the stockholders.

We will, therefore, reverse the judgment of the circuit .court, set aside its findings, and find for the plaintiff the sum ■of $3,215.20, being a one-fiftieth of the $144,000.00 of prior .earnings, with interest on each item thereof from the time .such items were respectfully paid to the defendant to this date, with interest on this aggregate sum from this date until paid.

Reversed, and judgment for plaintiff.