174 Pa. 519 | Pa. | 1896
Opinion by
The fund in court represents tbe estate of John Brooks in the land sold under proceedings in partition, and it is admitted that tbe first lien on it is the judgment of the Mantua Hall and Market Company. The question therefore is who is the real plaintiff in that judgment, the company in its corporate character represented by the receiver, or the company as a general term used to comprehend all the stockholders in their individual rights ? This depends on the agreement which gave the cause of action on which the judgment was founded. Before taking up the consideration of the writing itself, a summary of the circumstances which led up to it will be instructive.
The facts as found by the master show that the company was about to dissolve. It had no debts except certain bonds secured by mortgage upon its land. It had cash on hand, in round figures $2,300, and it determined to sell the land subject to the mortgage, and distribute the cash among its stockholders. Of course this could not be done without the consent of the bondholders, and some proceedings in equity were begun to prevent any such distribution of assets. The consent however was subsequently given, and the land was sold to Brooks subject to the mortgage, he agreeing with the company to purchase and cancel the bonds and satisfy the mortgage before the time of settlement. In fact the bondholders had already agreed with Brooks to sell him their bonds at 75 per cent of their face value and accrued interest. Brooks next desired to have the deed delivered to him before his performance of the condition to purchase the bonds, but this the counsel for the grantors refused to do unless performance of the condition was secured. This was accordingly done by the writing of February 8, 1892, which gives rise to this controversy. Much stress was laid by the learned master, and in the argument here, on the question whether Mr. Simpson was counsel for the company or for the individual stockholders, but the contention is quite immaterial. He was counsel for both, and there was no reason why he should not be. Their interests were identical at that time, to wit, that
Taking up now the writing of February 8,1892, we find it is an agreement by Brooks, reciting his purchase from the Mantua Company, the making of the deed to him, the withholding of delivery until his performance of the condition to purchase and cancel the bonds, and the pendency of two bills in equity “which hinder a distribution of the funds of said company among the stockholders thereof,” and then in consideration of the present delivery of the deed, he agrees “ to indemnify and save harmless said company, and each and every of the stockholders thereof .... of and from all claims and demands by the holders of said bonds and mortgage,” that the lien of the mortgage and claims on the bonds shall be restricted to the land, “ and that the money now in the treasury of said company, or which may hereafter be in the treasury shall not be made subject to or liable for any claim on the part of said bondholders.”
This instrument is so clearly intended for the protection of the individual interests of the stockholders that Mr. Simpson was quite justified in saying that in drawing it he was acting solely for them. The master was led to give it a different construction by the argument that “ the stockholders taken collectively as holders of stock are the corporation, and the words quoted in the instrument amount to nothing more than a reiteration of the promise made already to said company.” It is true that for many if hot most purposes the stockholders in their aggregate capacity are the corporation, yet each as an individual stockholder may have individual rights as regards the corporation, or his co-members, or other parties. The whole tenor of
The suit was brought upon this view. It was necessarily in the name of the company as the legal plaintiff but “ to the use and for the benefit of the stockholders,” and was for the specific loss of the $2,300 in the treasury which Brooks had -agreed to protect from any claim on the part of the bondholders and which if he had done so would have been distributed to the stockholders individually. If the action had been on behalf of the company it would have been on the contract of sale in December, 1891, and the claim for damages would have been for $5,200, the difference between Brooks’ contract and the price for which the land was sold under the mortgage. The cause of action however on which this judgment rests was not the contract with the company for the sale of the land, but the special and different contract with the stockholders to protect the money in the treasury from all claim of the bondholders so that it might reach the stockholders individually. Under this judgment the bondholders as represented by-the receiver have no claim. It is the product of Brooks’ indemnity to the stockholders for the money in the treasury. The creditors have already got that money and they have no legal right to the indemnity fund also. Nor have they any equity. They agreed with Brooks to sell him their bonds at seventy-five per cent, and have already received nearly ninety, and are thus the only parties who have profited by his failure to perform his contract.
There is no necessity to reform the writing of February 8, 1892, nor to add new parties to the judgment. It is clear on the writing itself that it was intended for the protection and benefit of the stockholders individually, and the suit having
Decree reversed, and distribution of the fund directed to be made to the individual stockholders in accordance with the views herein expressed. Costs to be paid by the appellee.
