Goetzinger v. Donahue

| Wis. | Feb 16, 1909

Siebecker, J.

The parties by stipulation enlarged the issues originally presented by the -petition and answer so as to present the question of their legal and equitable rights arising-under the facts and circumstances of the transaction, whereby Donahue bought Goetzinger’s interest in the corporation, the unpaid purchase price due Goetzinger was to be secured by a pledge of most of the shares of stock, and Goetzinger, by remaining in the positions of director, officer, and employee at a stated salary, had such a participation in the conduct of the corporate affairs as would enable him to properly protect his interests.

The principal controversy is whether Donahue or Goetzin-ger has the right to vote the stock assigned to Goetzimger as collateral. Both parties claim this right under the facts and circumstances of the case. In the light of the agreement of the parties, whether the right to vote stock in a corporation, transferred by indorsement by the owner of the certificate as collateral to secure performance of the pledgor’s obligation, is vested in the pledgor or pledgee, need not be determined in this action. The court found that it was understood between them that Donahue, as owner of nearly all of the corporate interests, should have the general management of the corporate business and the right to vote the stock transferred as collateral to secure his indebtedness to' Goetzinger after the reorganization of the corporate affairs in the manner agreed upon by them and the transfer of Goetzmger’s interest to Donahue pursuant to such arrangement. No question of public policy or voting power secured from stock ownership being involved, it is not questioned but that the parties might determine by agreement who should have the right to vote such stock. Upon examination of the case we are led to the conclusion that the trial court is sustained in its finding that, by arrangement and understanding of the parties, Donahue has the right to vote the stock transferred to Goetzinger as collateral, though it is not expressly so stipulated in the written contract. The evidence of Donohue is clearly and definitely that it was understood and agreed between them that he was to vote the stock; that before the reorganization of the corporate affairs and the sale of the stock to Donahue, Goetzinger expressly recognized this right by acknowledging that Donahue could so vote the stock under his right as owner as to prevent Goetzinger from holding the office of director; that because' Goetzinger recognized the right he demanded that the contract contain a stipulation that he should be elected a director for the ensuing six years; and that he acquiesced in Donahue’s voting this stock at stockholders’ meetings. Goetz-inger testifies to the effect that the right of voting this stock was not expressly considered by them in their negotiations.

Considering these facts and circumstances in the light of the expressed purpose that Donahue was to buy out Goetz-ingers interest in the corporation; have the general management of the corporate affairs; that Goetzinger was to be relieved of such responsibility and was to retain but one share of stock to enable him to hold a directorship and an office for the purpose of putting him in such a position that he could keep informed of the business affairs and protect his securities, — it is obvious that the trial court’s conclusion that it was understood and agreed between the parties that Donahue was to vote the stock he transferred to Goetzinger as collateral to secure payment of his debt is justified by a clear and satisfactory showing in the evidence, and the court, therefore, properly adjudged that he was entitled to exercise this right, but that Goetzinger was entitled to have the stock so pledged as collateral transferred to him upon the books of the corporation by the issuance of a new certificate showing such transfer and that it so issued pursuant to the judgment of the court.

On defendants’ appeal it is contended that the court erred in decreeing that Goetzinger was entitled to hold all of the' stock pledged as security until the notes were fully paid. The agreement of September 27, 1905, contains a stipulation covering this question, which provides that the stock so pledged as collateral is “to secure the payment of said notes, the same to be held by the party of the first 'part until said notes shall be fully paid.” The evident intent of this agreement is that no portion of the pledged stock need be surrendered until the indebtedness evidenced by the notes is fully paid.

The defendants further claim that the judgment is erroneous in providing that Goetzinger is entitled to hold the stock so pledged as collateral to secure payment to him of any damages he may be awarded by reason of any breach by Donahue of the agreements of September 27, 1905, and of January, 1906. We find nothing in the written agreement or in the negotiations warranting the inference that the parties agreed that the stock pledged should secure any demand for damages Goetzinger might have for breach of these contracts. All of the written stipulations and the negotiations show that the parties intended this transfer of the stock should secure only the payment of the notes. The terms of the contract clearly indicate an intent bv the parties that the transfer should be limited to securing the payment of the unpaid purchase money, and it contains nothing which could be construed as securing payment of damages for breach of contract in not keeping Goetzinger in the employ of the corporation. The provision in the judgment declaring that Goetzinger is to hold the stock as security for the payment of damages resulting from any alleged breach of contract in this respect is erroneous and must be reversed.

These considerations dispose of the questions specifically presented in argument. It is, however, apparent from the proceedings in the course of the trial that the parties are desirous of having all questions embraced in the issues passed upon and determined. This, in our opinion, is not fully accomplished by the judgment as entered. It is manifest that one of the controlling considerations which induced Donahue and Goetzinger to enter into the agreements they made was that Goetzinger"s security was to be maintained by a provident administration of the corporate affairs and a diligent and faithful prosecution and conduct of its business. To accom-plisb and promote this result the continuance of Goetzinger as -a director, officer, and as an employee of the corporation was -of paramount importance to him. It is manifest from the ■stipulations of the contract providing for these matters that both parties so considered it. It is also important that the ■corporate business be continued in such maimer and under •such conditions as to properly preserve it as Goetzinger’s se-•eurity. These circumstances entitled Goetzinger, under his contract with Donahue, to have it adjudged that the status- and -contractual relation created by them should be maintained by securing his reinstatement in the position of director and in ■the office of treasurer and financial manager and by his retention in the employ of the corporation at the stipulated salary until the debt evidenced by the notes should be paid, upon the ■condition that he perform the duties of these respective offices and positions. The judgment should also provide that Goetz-■inger’s interest in the property should be protected against any transfer’, mortgage, or other incumbrance of the property, and that the corporation be restricted in contracting liabilities to ■such current loans as may be necessary for the proper conduct •of its business. "We call attention to these as some óf the ■questions properly within the issues presented which should be provided for in the final judgment in order to pibtect the rights and interests of the parties.

The judgment entered must be reversed, and the cause remanded to the trial court to award judgment which shall determine and adjudicate all matters necessarily embraced in a final determination of the issues as presented by the parties.

By the Court. — Judgment reversed, and the cause remanded to the lower court with directions to enter judgment ns indicated in this opinion. Neither party will recover costs in this court, and the plaintiff will pay the clerk’s fees on appeal.