232 Minn. 187 | Minn. | 1950
This is an action to compel specific performance of a contract relating to the sale of corporate stock. Findings and order for judgment were for plaintiff. Defendant moved for amended findings and conclusions of law or in the alternative for a new trial. Both motions were denied. The case is before this court on appeal from the whole order denying the alternative motions.
This suit is by a Minnesota business corporation against one of its common shareholders. Of 3,984 common shares outstanding
“It is further agreed that in the event that any holder of- any of the common shares of Henry Simons Lumber Company desires to dispose of the same or any part thereof, he shall not transfer or dispose of the same to any person, firm, or corporation unless or until he has first complied with the provisions hereof, and given to the party of the second part and to the remaining first parties an opportunity to purchase the stock as herein provided.”
The contract makes the following provisions for fixing the sale price of stock sold under the agreement:
“The purchase price of said stock shall in all cases be the fair value of said shares as mutually agreed upon by and between the parties, but in the event that the fair value of said shares cannot be mutually agreed upon by and between the parties, then said purchase price shall be fixed and determined as being the book value of said shares on the December 31st immediately preceding the date when said shares are purchased, less any dividends declared since said December 31st.”
By a letter of March 19, 1948, defendant offered to sell his 743 shares of common stock in plaintiff and his one share of stock in Simons, Inc., a subsidiary of plaintiff, at prices of $224 and $124.53 respectively.
July 20, 1948, the board of directors of plaintiff met and passed a resolution to tender to defendant the book value of his stock in plaintiff and to demand that he assign this stock to plaintiff pursuant to the 1935 agreement. July 27, 1948, in accordance with this resolution, plaintiff tendered to defendant the price of $170.84 per share for his common stock in plaintiff, or a total of $126,934.12 for the 743 shares. Defendant refused this tender and refused to surrender his stock. Plaintiff then brought the present action on the theory that the two letters referred to above constitute an offer to sell and a notice of election to purchase under the provisions of the agreement entered into in May 1935. Relying on these letters as placing the 1935 contract in operation, plaintiff seeks specific performance of the agreement with reference to defendant’s 743 shares of common stock.
In this case, counsel on both sides have devoted a great amount of time and space in their oral arguments and briefs to a discussion of whether the 1935 agreement is or is not invalid as an unreasonable restraint on alienation of corporate stock. Because of ambiguities in the agreement, this matter is fairly debatable. Those provisions of the agreement which specify proceedings to be taken after a shareholder has made an offer to sell under the agreement are so far ambiguous that it is left uncertain as to how long the corporation can restrict the alienation of the offered shares before it must make a final binding commitment to purchase. We do not, however, consider it necessary or desirable to resolve these ambiguities and to pass upon the validity of the agreement in this decision,
At the outset, it will be helpful to recognize that the manifest purpose of the 1935 agreement, as stated in the briefs of both parties, is to preserve to the Simons family the ownership of the common stock in plaintiff corporation. The agreement manifests no design to serve as a method whereby any of the shareholders can be forced to sell their shares for a consideration less than they are willing to accept. The agreement was obviously designed to prevent a sale to an outsider so long as the corporation or its remaining shareholders were willing to buy at an agreed fair value or at book value. So long as a shareholder is unwilling to sell for the price offered by plaintiff, be it book value or otherwise, no purpose of the agreement calls upon the shareholder to sell. By the terms of the agreement, shareholders are precluded from selling to an outsider until such time as they have made an offer to the corporation and its other shareholders and such offer is made in terms of the agreement. Therefore, no purpose of the agreement is defeated if a shareholder makes an offer not in accordance with the agreement and the corporation or its shareholders reject such an offer expressly or by counteroffer. A leading decision in this state on agreements of the kind involved in this case holds that unless a shareholder makes an offer to the corporation within the provisions of the agreement a rejection of the offer or failure to accept it does not entitle the offering shareholder to sell to an outsider, and that any sale made under such circumstances can be set aside as against a non-bonafide purchaser of the stock with notice of the agreement. Model Clothing House v. Dickinson, 146 Minn. 367, 178 N. W. 957.
With these considerations in mind, we turn to the specific negotiations which have taken place in this case. The letter relied upon by plaintiff as constituting an offer by defendant to sell under the 1935 agreement, so far as it is pertinent here, reads as follows:
*192 “Henry Simons Lumber Company Minneapolis, Minnesota
“Gentlemen:
“I hereby submit my proposition on the value of the Common Stock I hold in the Simons, Inc. and Henry Simons Lumber Company as of December 31, 1917 for your consideration.
“The value proposed is fair and just to all concerned and I will surrender my stock on this basis. [Then follows a mathematical computation of the share value of stock in the two corporations.]
“If we cannot agree on the value of plants, etc., I will agree to select an experienced lumberman to act as appraiser and you to do likewise; then, if they cannot agree they to select a thrid [sic] party and their decision to be final.”
As we interpret defendant’s letter, it contains a statement of the basis on which he was willing to surrender his stock in the two corporations, one of which was not covered by the 1935 agreement.
It is clear from defendant’s letter that he did not make an unconditional offer to sell his stock with a mere suggestion as to price, as plaintiff contends. We need look only to the words “I will surrender my stock on this basis” to determine that defendant was not offering to sell his stock in any event, but only in the event that he could sell on the basis stated in his letter. Certainly, he was entitled to negotiate to determine whether he could sell to the corporation on terms satisfactory to him and, in the course of negotiations, to state the basis on which he would be willing to sell. If he could not reach an agreement with plaintiff as to the value of his stock, he was entitled to keep it. Plaintiff’s vice president expressed defendant’s rights correctly and concisely during the negotiations which followed the exchange of letters between defendant and plaintiff. He said that plaintiff was willing to pay book value and that defendant could “take it or leave it.” Plaintiff cannot be allowed to seize upon defendant’s first mention of willingness to sell and, in complete disregard of the terms of the offer, treat it as an offer to sell under the 1935 agreement. Nothing in the language or purpose
Now, since plaintiff cannot treat just any offer or any negotiations looking toward a sale as an offer within the 1935 agreement, the question presented is whether defendant’s letter can be construed as an offer within the agreement. A mere reading of defendant’s letter discloses that it was not an offer in terms of the agreement, because it differed from the offer required by the agreement in two material respects. First, it was not an offer to sell at “book value” in the absence of agreement on price. One basis of defendant’s offer was that, in the absence of agreement, price be determined by third-party appraisal. This was more than an offer with a suggestion as to price. Although a price was suggested, the whole offer was conditioned upon a method of price fixing which differed from that prescribed in the agreement. Second, defendant’s offer was to sell stock covered by the agreement, with a tie-in sale of stock not covered by the agreement, namely, the share in Simons, Inc. Since the price of the two kinds of shares was stated separately in defendant’s offer, plaintiff contends that defendant’s letter contained two separate offers, either of which could be accepted alone. Plaintiff has cited no rule of law in support of this contention, and the court has found none. There is some law bearing on the subject of severability of contracts. Whether a contract is severable is said to depend, as in other contract matters, upon the intention of the parties.
From the foregoing discussion, it can readily be seen that the court has no reliable indication of what defendant intended regarding the severability of his offer. In the absence of a more specific indication that defendant intended to make two separate offers, we must follow the rules governing offer and acceptance, which require that the offer be accepted according to its terms.
Plaintiff next contends that, even though the offer is outside the agreement, the Model case does not hold that an offer made outside the agreement cannot be accepted as one made under the agreement. Plaintiff contends that the lump-sum price in the Model case was the only thing that prevented such an acceptance. What plaintiff failed to note was that the agreement in that case contained a price-fixing provision similar to the one in the present case. The agreement involved in the Model case provided that price would be fixed at “current value,” and “current value” was described in terms which indicate that it was roughly what is designated as “book value” in the present agreement. Therefore, if the rule which defendant urges here had been applied in the Model case, the Model corporation would have been entitled to ignore the terms of the offer and to respond to the shareholder’s letter by offering “current value” for the Model corporation stock, and the shareholder would have been required to sell. If plaintiff’s theory were correct and had it been followed in the Model case, the court could not have held that the offer was outside the agreement, because the
In light of the foregoing, we conclude that defendant’s offer was outside the 1935 agreement; that plaintiff’s counteroffer could not and did not bring defendant’s offer within the agreement; that plaintiff’s counteroffer was an implied rejection of defendant’s offer; and, consequently, that plaintiff’s suit for specific performance of the 1935 agreement should have been denied.
Order reversed with directions to enter judgment for defendant.
See letter p. 192, infra.
“E. J. Simons:
“Your offer of selling your common stock in Henry Simons Lumber Co. and Simons, Inc., has been given due consideration by the Board of Directors.
“We hereby offer, as per signed agreement of May 18, 1935, book value of $170.84 per share for Henry Simons Lumber Co. stock and book value of $124.53 per share for Simons, Inc., stock now on record in your name on corporation books.
“Payment in full for stock and delivery of same to be made within 30 days of March 19, 1948.
“Henry Simons Lumber Company “Simons, Inc.
“By A. H. Simons L. R. Simons Henry Simons, Jr.
“Accepted:
Since plaintiff’s letter above states terms of sale differing from defendant’s offer, it is a counteroffer, and by well-established rule is an implied rejection of the offer. West v. First Nat. Bank, 165 Minn. 143, 205 N. W. 949; Lewis v. Johnson, 123 Minn. 409, 143 N. W. 1127, L. R. A. 1915D, 150; Johnson v. M. J. O’Neil, Inc. 182 Minn. 232, 234 N. W. 16; Crabtree v. St. Paul Opera-House Co. (C. C.) 39 F. 746.
Although defendant was also a member of the board of directors of plaintiff, he did not aet in that capacity in any of the negotiations which led to the present dispute.
Mulcahy v. Dieudonne, 103 Minn. 352, 115 N. W. 636; E. Edelman & Co. v. Queen Stove Works, Inc. 205 Minn. 7, 284 N. W. 838.
In some cases a separate statement of price makes a contract severable (cf. Spear v. Snider, 29 Minn. 463, 13 N. W. 910), but in others it does not. Cf. Johnson v. Fehsefeldt, 106 Minn. 202, 118 N. W. 797, 20 L.R.A.(N.S.) 1069.
Langellier v. Schaefer, 36 Minn. 361, 31 N. W. 690; Johnson v. M. J. O’Neil, Inc. 182 Minn. 232, 234 N. W. 16.
See footnote 7, supra.