Lichtenberger v. Newhouse

123 P. 624, 41 Utah 22, 1912 Utah LEXIS 37

• Court: Utah Supreme Court
• Decided: April 26, 1912
• Docket: Nos. 2256-7-8
• Status: Published

Opinion

McOABTY, J.

(after stating the facts as above.)

1 The contract of January 7, 1909, secured to appellant “the ■sole, exclusive and prior right or option to purchase and take up two hundred and fifty thousand shares of the treasury stock of the Commercial Mining Company.” On January 13, 1909, appellant assigned to Catrow, Mathez, and Howson each an undivided one-fourth interest in the option contract of January 7th. On January 15, 1909, Catrow, Mathez, and Howson entered into a contract in writing with appellant giving him the sole and exclusive right or option to purchase 250,000- shares of the treasury stock at the rate of thirty-five cents per share, out of which twenty-five cents per share was to be paid to the mining company as provided in the contract of January 7th, and the remaining ten cents per share was to be paid to the parties to-the contract in equal proportions. That is, Catrow, Mathez, and Howson each was to receive from appellant two and one-half cents for -each and every share of stock purchased by him under the contract. The court, in its findings of fact, found that appellant, under the contract of January 15th, purchased 60,000 shares of stock and that Mathez and Lioh-tenberger each, and Howson and Ziegler jointly, were entitled to recover from appellant a “sum equal to one-sixth of $6000, to wit, one thousand dollars.” The court also found that appellant, under the contract of Hay 12th, the provisions of which are substantially the same as those contained in the contract of January .15th, purchased during the months of June and July 40,000 shares, and that he thereby became indebted to Mathez and Lichtenberger each and to Howson and Ziegler jointly “in a sum equal to two-ninths of $4000' or, to wit, in the sum of $888.88.” Appellant assails these findings on the ground that they are not supported by evidence. His counsel contends that he, C’atrow, Mathez, and Howson were tenants in common in the contract of January 7 th, and that this relation continued to exist after the contracts of January 15th and May 12th, respectively, were executed. In their brief they say: “The first and most important question (. . . to determine is, under which option the shares purchased were purchased by appellant, that of January 7th alone, or those of January 7th and 15th and January 7th and May 12th.” And' by way of argument they say: “His (appellant’s) right to purchase the treasury shares pursuant to the terms of the option of January 7th alone was in no' way abridged” by the options of January 7th and May 12th, which, they contend, were merely “offers obtained from his co-owners, offers obtained by contract and nothing more.” And it is further insisted that, as no evidence was introduced tending to show that appellant intended! to or did exercise the option of January 15th, or that of May 12th, respondents have totally failed in their proof on that issue.

Upon the other hand, counsel for respondents contend that after the options of January 15th and May 12th, respectively, were granted to appellant, he could no' longer purchase any shares at all under the option of January 7th alone, but must of necessity exercise the options of January 15 th and May 12th in connection with that of January 7th in the purchase of shares of stock, and that this result followed as a matter of law. In other words, they insist that the contractual rights •and obligations of appellant and respondents, respectively, were defined and fixed by tbe contracts, and the question of whether appellant, when he purchased the shares of stock mentioned, intended to exercise the option contained in the contract of January 7 th alone, or intended to exercise that option in connection with the option contained in the contract of January 15th, or that of May 12th, was not a matter of proof.

We are clearly of the opinion that respondents’ position regarding this phase of the case is sound.

2 Counsel for appellant have devoted much space in their printed brief to the discussion of some of the general principles of law concerning the rights and reciprocal obligations of tenants in common in the management or disposition of the common property. As we view the case, much that is said by counsel for appellant in this regard has but little, if any, bearing upon the questions presented on this appeal. The rule is elementary that tenants in common may contract with each other regarding the management or the disposition that shall be made of the common property.' One tenant may malee a valid contract with his cotenants for the exclusive right to sell and dispose of the common property. (12 A. & EL Ency. L. [2d Ed.] 672.) The general rule in this regard is tersely illustrated in 38 Qyc. 72, in the following language:

“Tenants in common may contract with each other concerning the use of the common property, and agreements between them, their heirs, personal representatives, and assigns, are as binding as' if between strangers, if they do not otherwise conflict with the relationship of tenancy in common, and the rights of the respective parties are held to be enforceable either at law or in equity, for purposes of offense or defense.”

In the case at bar, appellant, by virtue of the contract of January 15th, acquired from Oatrow, Howson, and Mathez “the sole, exclusive, and prior right or option to purchase and take up the two hundred and fifty thousand shares of the capital stock of said Commercial Mining Company, denominated treasury stock in said option contract with the Corn-mercial Mining Company.” This was a completed contract, and was not a mere “offer and nothing more,” as counsel seem to contend, and SO' long as it continued in force neither Catrow, blowson, nor Mathez could, as against appellant, legally purchase any of the shares of stock covered by the contract of January 7th. After the contract of January 15th was executed, the relationship' of the parties was changed from what it was under the former contract, and appellant alone had the right to purchase the stock mentioned in blocks of 20,000 shares per month by paying, in the language of the contract, “thirty-five cents (35c) per share out of which twenty-five cents (25c) per share should be paid to the mining company as provided in the option agreement (contract of January 7th) and ten cents (10c) per share should be paid to the parties hereto in equal proportions.” In other words, appellant was to pay twenty-five cents per share to the mining company and two and one-half cents per share to each of the other three parties and"retain two and one-half cents per share for himself. Suppose, for the purpose of illustration, that this business venture had been a success and the hopes and anticipations of all concerned had been fully realized, and that appellant had continued after the contract of May 12th to purchase the stock in blocks of 20,000 shares per month until the entire capital stock of the mining company had been taken up1 as provided in the contract of January 7th, and had been disposed of by appellant on the market for one dollar or more per share, would it be seriously contended that appellant would have been under any legal obligation to account to respondents for more than ten cents per share on the treasury stock and fourteen cents per share on the issued capital stock of the mining company? We think not, because, under the plain provisions of the contracts mentioned, all that appellant was required to pay for the stock was thirty-five cents per share for the treasury stock and fifty cents per share for the issued stock, and all that each of the' respondents could legally demand was that appellant account to him for his pro rata share of ten cents per share on the treasury stock and his proportion of fourteen cents per share on the issued stock. And that, too, regardless of the amount for which appellant might have sold the stock on the open market, or that he might have realized for it in any “deal” that he might otherwise have made.

Furthermore, we think that appellant’s conduct — what he did in the premises — clearly shows that he intended to and did purchase 45,000 shares of the stock under the contract of January 15th for himself only, and, as stated by counsel for respondent in their brief, “he dealt with and exercised dominion over it the same as any other person would-deal with and control his own property.” On April 23, 1909, appellant, who was in New Tork, sent a telegram to respondent Mathez which was in part as follows: “I hereby release and cancel O'. M O’o. option.” And on June 24, 1909, he wrote Mathez a letter in which he said: “I shall not buy any more stock in the property unless those in interest join with me. This is to notify you so that you can act accordingly.” Moreover, appellant, in November, 1909, sold 1050 shares of the stock and retained all of the proceeds. In his testimony he said: “I sold 1050 shares. They attempted to make a market in New York, and I jumped in and sold. I think I got thirty-nine cents, and then I could not sell any more.” Me further testified that he never reported this sale to any of the respondents. But, independent of appellant’s intention and his conduct as shown by the record, the contracts of January 15th and May 12th were binding and enforceable, and the record shows that all the stock purchased by appellant was purchased during the life of one or the other of these contracts, and he cannot escape their legal effect .by claiming that he intended to and did exercise the option of January Ith alone in making the purchases of stock hereinbe-fore mentioned. He could not purchase stock under that agreement alone so long as the contract of January 15th or that of May 12th remained in force. obligations, if any, be was under to account to these parties in a sum equal to ten cents per share of stock purchased by him. The document, so far as material

3 It is further contended on behalf of appellant that the execution of' a certain writing by Lichtenberger, Catrow, Mathez, and Howson, which was in the form of a communication from) them to appellant, released appellant from the here, is as follows:

“We have entered into an agreement with you dated May 12th giving you an option on the Commercial Mining Company’s shares. It is understood that until you make a deal, and so long as you have to personally pay out the cash, you are only to pay at the rate of twenty-five cents per share for the treasury shares.”

It will be noticed that this document refers to the contract of May 12th only. It is a modification of the terms of that contract and relieved appellant from the payment to respondents of ten cents a share on all treasury stock thereafter purchased by him until he should succeed in “making a deal,” and so long as he had “to personally pay out the cash” for the stock purchased. The legal effect of the document upon appellant’s liability to account to each of the respondents for any part of the purchase price of the stock as fixed by the May 12th contract will be referred to later.

We are of the opinion, however that the court erred iu holding that respondents were entitled to recover from appellant on the entire 60,000 shares of stock comprising the installments of 20,000 shares each that were purchased and taken up during the months of February, March, and April, 1909. The evidence, without conflict, shows that appellant, at the time of the malting of the January 15th contract, gave Catrow, Howson, and Mathez the privilege of buying a portion of the treasury stock at twenty-five cents per share, and that the offer was not withdrawn during the life of that contract, nor during the time the May 12th contract was in force. Catrow was called as a witness by respondents, and testified on this point as follows:

“Of the capital stock of the Commercial Mining Company purchased for the month of February, .1909, under the contract with that company, Mr. J. B. Bisk received 5000 shares, Mr. Newhouse 5000 and 110,000. ... At the time the option of January 15th was given, Mr. Mathez said he had promised to sell Mr. Risk 5000- shares of the stock and Mr. Newhouse said that would be all right.”

Later on in the trial Oatrow was called as a witness by appellant and testified:

“On almost every occasion, whenever there was any question raised about what was to be done, Mr. Newhouse did offer us — permitted us — he said he would like to have us come in and take our share of the stock. There is no doubt about that . . . Mr. Newhouse would say something like this: ‘Now, I will be very glad to have any of you gentlemen that care to come in and take your stock at twenty-five cents.’ . . . He said they (respondents) might take their stock any time they wanted it.”

Taking advantage of appellant’s offer to all parties interested to take a portion of the stock on which he held an option, respondent Mathez took 5000 shares at twenty-five cents per share. This stock Mathez sold to one Bisk, and realized a profit of $500 from the sale. Catrow took 10,000 shares of the stock at twenty-five cents per share. That is, Mathez and Oatrow purchased' 15,000 and appellant 45,000 of the 60,000 shares of stock received from the mining company during the three months of February, March, and April, 1909. Respondent Howson also availed himself of this opportunity to speculate on the stock covered by the option and entered into negotiations with parties in Portland, Ore., for the sale of the stock represented by his interests in the contracts mentioned. Upon this point appellant testified in part as follows:

“He (Howson) asked me would there be any objection if he could make a deal with people in Portland for the whole amount. . . . The amount of shares on which he had an option, which, of course, we named. I said ... he had the privilege of doing it; he had the right to do it and make a profit on it just the same as Mr. Mathez had. . . . That was mentioned, I believe, before the April payment was made. . . . The people in Portland evidently didn’t buy, because he never came back to me.”

Howson was called as a witness by respondents and testified in part as follows:

“I remember a certain occasion on which I spoke to Mr. Newhouse about the possibility of selling some of the stock he had, and it was virtually as Mr. Newhouse mentioned. . . . He told me I could do it if I didn’t peddle it. . . . Mr. Newhouse knows nothing about the price I offered it at. I offered it at the price of fifty cents.”

It thus appears that while appellant had acquired from these parties “the sole, exclusive and prior right or option to purchase and take up” the stock at a certain price per share, he gave them and each of them the privilege of purchasing, during the life of the option, the amount of stock, or any part thereof, represented by their respective interests in the contracts mentioned, at the same price per share for which he (appellant) obtained it from the mining company. And it further appears that at least two of the parties availed themselves of the privilege accorded them by appellant. While respondent Howson did not purchase any stock, he nevertheless accepted' appellant’s offer permitting him to do so, and, as herinbefora stated, he entered into negotiations with other parties for the sale of the portion of the stock represented by his interest in the contracts. And his failure to dispose of the stock was not due to any act or omission of. appellant.

Under these circumstances, we are unable to- understand upon what theory of the law or principle of justice it can be successfully claimed that appellant should be compelled to account to respondents for any part of the contract price of the stock purchased by either Mathez or C'atrow. We are clearly of the opinion, however, that appellant should be compelled to account to respondents for their proportion of ten cents a share for each and -every share of the 45,000 shares purchased by appellant under the contract of January 15th. We think that the court erred in holding that appellant must account to respondents for any portion of the purchase price (as fixed by the contract of May 12th) of the 40,000 shares of stock received from the mining company during the months of June and July. Soon after the making of the contract of May 12th, a controversy arose between appellant and respondent Mathez regarding the stock purchased by appellant during the months of February, March, and April. Mathez claimed appellant was indebted to each of the respondents for his proportion of the ten cents per share which the contract of January 15th provided should be paid to the parties thereto in equal proportions. Appellant denied that he was indebted to respondents or any of them in any sum, and announced t-hat if he were compelled to pay more than twenty-five cents per share for the stock before he could make a “deal” with other parties or satisfactorily dispose of the stock, he would withdraw from the enterprise and would have nothing more to do with it. And it was for the purpose of inducing appellant to continue with them in the enterprise or business venture that respondents executed the instrument of May ,18th hereinbefore set out, modifying the contract of May 12th. We do not agree with counsel for respondents in their contention that there was no consideration for the document of May 18th. It was provided in the contract of May 12th that the failure of appellant to make the payments therein provided would terminate the contract “without notice.” In other words, it was optional with, appellant as to whether or not he would continue the contract in force by making the payments as therein provided. On the occasion last referred to, appellant announced that he intended to and would withdraw from the enterprise unless he was relieved from paying respondents the ten cents per share provided for in the contract, and, as a consideration for the modification, he continued his efforts to make a deal with other parties for the sale or disposition of the stock. Now the contract, as modified, provided that appellant would not be required to pay more than twenty-five cents per share, for the treasury stock until he made a “deal,” or so long as he had “to personally pay out the cash.” This was something more than “an extension of time” when he should pay or account to respondents for the ten cents provided in the contract, as contended for by counsel for respondents'. When this modification was made, appellant’s liability to pay respondents any money depended upon a contingency. If appellant succeeded in making a deal, he would be liable; if he failed, he would not be. The evidence, however, shows that he made no deal, and that at the time of the trial he was still holding the stock. True, he induced Schrimer to purchase and take up the July installment at twenty-five cents per share; but we think that the record shows he did this to keep alive the contract with the mining company dated January 7th, and that the transaction was in no sense a “deal” as contemplated by the May 12th contract as modified.

As the record1 now stands, respondent Lichtenberger and respondent Mathez each, and the respondents Howson and Ziegler jointly, are entitled to recover from appellant their pro rata of ten cents a share for each and every share of stock purchased by appellant under the contract of January 15th, with interest thereon at the rate of eight per cent per annum from June 24, 1909, the date on which appellant announced his intention of withdrawing from the enterprise. That is, Lichtenberger and Mathez each, and Howson and Ziegler jointly, are entitled to recover one-sixth of $4500, to wit, $750, and interest.

The three causes of action are remanded to the lower court, and the plaintiff, or plaintiffs, as the case may be, are given twenty days from the date of the filing of the remittitur in that court in which to elect in writing whether the judgment shall be modified in accordance with the views herein expressed or a new trial granted. Should the plaintiff in any one or more of the cases fail to elect within the time allowed, the court, in such case, is directed to set aside the findings of fact and vacate the judgment therein made and entered and to make findings and render judgment thereon in accordance with the views herein expressed. Should the plaintiff in one or miore of the cáses, within the time allowed to make an election as aforesaid, remit of the judgment all in excess of $750 and interest, the court may file and enter of record the writing containing such remission as a modification of the judgment. In the cases, if any, in which the judgments are modified, each party will be required to pay bis own costs; and in tbe cases, if any, in which new trials are granted, ap’-pellant shall be entitled to costs.

FRION, C. J\, and STK1A.UP, J., concur.