Whitney v. Whitney Bros.

152 Wis. 453 | Wis. | 1913

TimliN, J.

Whitney Bros. Company is a stock corporation organized under tbe laws of Wisconsin with a nominal capital of $200,000, divided into 8,000 shares of tbe face value of $25 per share. Its headquarters are in tbe city of Superior and its business consists of general contracting, dredging, pile-driving, dock building, towing, lightering, etc. Tbe corporation succeeded to tbe property and business of a copartnership, and tbe plaintiff was an employee of said co-partnership for some years prior to the formation of the corporation. On March 1, 1904, when the corporation came into existence, the plaintiff executed to two of the members of the former copartnership, then stockholders of the corporation, his promissory note for $5,000, payable on or before five years after date, with interest at six per cent, per annum payable annually. A certificate for 200 shares of the corporate stock was issued to plaintiff and he immediately hypothecated the same as collateral security to his note. An agreement as follows was made by and between the plaintiff and said two shareholders:

“We, the payees named in the above note, do hereby agree that if the above named W. W. Whitney continues in the service of Whitney Bros. Company, by whom he is now employed as foreman, for the period of five years and shall pay interest on the aforesaid note during that time, at the end of said period the said note shall be deemed to be paid in full, and shall be surrendered together with the stock thereby hypothe-cated to the said maker of said note. We further agree that if, at any time before the said five-year period shall elapse, the said maker of said note shall desire to quit and withdraw from the position he holds in the said corporation of Whitney Bros. Company, he may do so, and surrender his said stock to us and receive back the aforesaid note. He shall be entitled to receive on his stock all dividends which the same shall have earned up to the time of such surrender of said stock.”

On June 15, 1904, the plaintiff quit the employment of the Whitney Bros. Company voluntarily. On January 1, 1905, he again entered its service and continued in such service until February 23, 1907, when he again quit said service, and during all the period of his service there was paid to him by the corporation a salary of $100 per month. He never paid any part of the said note or the interest thereon nor gave any indication of his intention to surrender his stock and receive back the note. March 1, 1909, a dividend of forty per cent. was declared upon tbe stock of tbe corporation, payable in cash or in stock as eaeb shareholder might elect. Plaintiff made no election. The payees in the note and pledgees of the stock elected to take the stock dividend and eighty additional shares of stock were accordingly issued to them. No other or further dividends have been declared. About March 1,1908, without the knowledge or consent of plaintiff, the pledgees attempted to cancel plaintiff’s certificate for 200 shares of stock by surrendering it up and having reissued to each of them ninety-nine and one-half shares and one share to one E. L. Baum. On the trial of the case they offered to surrender up the pledged stock, including the stock dividend for eighty shares, upon payment of the note and interest.

Error is assigned because the circuit court refused to find that the plaintiff went to work pursuant to the contract. We cannot see that that finding would make any difference in the result. We may assume that he did. But the contract consisted of the written contract relative to the purchase of stock and the oral contract of the corporation to pay him $100 per month for his work. The first was between the plaintiff and the two Whitneys, the second between the plaintiff and the corporation. The case of Strait v. Northwestern S. & I. Works, 148 Wis. 254, 134 N. W. 387, is distinguishable in that there the consideration for the purchase of the stock went to the corporation and the latter was to issue its shares in payment. Here the written contract is wholly collateral to the contract between plaintiff and the corporation. The written contract for purchase of stock provided for the manner of performance. It might be performed by payment of $5,000 with interest at six per cent., or it might be performed by continuing in the service of Whitney Bros. Company as foreman for the period of five years and paying interest on the $5,000 during that time. It also provided what should be done in case the plaintiff quit the service of the corporation before five years. The plaintiff failed to perform in either manner, and tbe judgment gives bim tbe right to perform in tbe first mentioned way. Tbe suit is brought for an accounting, and tbe prayer of tbe complaint is that tbe amount due on plaintiff’s note, if anything, be ascertained, and tbat be be allowed to redeem bis stock on payment of sucb amount, and for cancellation of tbe stock certificates issued upon surrender of tbe certificate representing tbe pledged stock. He seems to bave been awarded all tbe relief to wbicb be was entitled.

Tbe appellant’s contention is tbat be was entitled to sucb proportion of tbe $5,000 as tbe time of bis service bore to tbe five years wbicb be agreed to serve, and was also entitled to tbe value of tbe stock dividend instead of tbe stock dividend itself, and tbat tbis sum should be set off against tbe amount of $5,000 and interest and tbe plaintiff required to pay only tbis difference in order to redeem. We think tbis would be making a contract between tbe parties wbicb they never assented to.

There was no agreement to give plaintiff $5,000 or any other sum of money beyond bis salary of $100 per month. Tbe agreement was to give bim 200 shares of corporate stock, wbicb be might pay for with $5,000 and interest at six per cent per annum up to tbe time of payment or by five years’ service to tbe corporation as foreman, be paying also $300 a year interest. He actually worked for tbe corporation only about two years and five months, and tbe whole period from tbe time be first commenced to work for tbe corporation until be finally quit was about three years. Tbe first contract, viz. that be might have tbe stock by paying tbe $5,000 note and interest, arises from tbe execution and delivery of the note, tbe pledge of the stock certificate for 200 shares as collateral thereto, and tbe provision in tbe writing of even date that upon payment of tbe note tbe transfer of tbe shares to tbe pledgee should be null and void. Tbe second contract obligation is independent of tbis and presents tbe case of two shareholders in a corporation contracting to make over to an •employee of the corporation 200 shares of the corporate stock, their individual property, if such employee shall continue in the service of the corporation as foreman for five years and pay them a sum equal to the annual interest at six per cent, on $5,000'.

Hildebrand v. American F. A. Co. 109 Wis. 171, 85 N. W. 268, is not in point. That case declares and applies a rule applicable to the relation of master and servant, which relation does not exist between the plaintiff and the payees in his note. There the contract did not expressly provide what the rights of the plaintiff should be in case he quit the service, here it does. By the terms of this contract performance on the part of the plaintiff by continuing in the corporate employment for five years must precede performance on the part of the shareholders, and such performance goes to the consideration upon which the promise of the shareholder defendants rests. The loss to these defendants by breach on the part of the plaintiff is almost impossible of ascertainment. It does not follow at all that where a foreman engages for five years’ continuous service for a fixed sum that each year of the five is worth one fifth of that sum. Experience and cumulative effort and continued policy count for much, and the difference in the value of the services of a foreman who has a stake in the result and those of one who has no interest beyond his salary is well recognized. This contract to transfer the shares in consideration of five years’ services to the corporation is wholly collateral to the contract of service, is not between master and servant, and falls within and is governed by the rule of Collat v. Gottschalk, 142 Wis. 503, 125 N. W. 957, and the agreement to make over the shares to plaintiff is contingent and dependent upon full and complete performance by the plaintiff. Part performance is insufficient to confer any rights upon him. The contract itself expressly recognizes this. We find no waiver of this full performance on the part of the defendants.

Second. The plaintiff should not be allowed to redeem from tbe original pledge of 200 shares and at tbe same time treat tbe issue of tbe stock dividend tbereon to tbe pledgees during tbe period of tbe pledge as a conversion. Tbis would be inconsistent with tbe equity of a redemption suit. Tbe plaintiff comes into equity to redeem and be is allowed to redeem bis pledge with all increment. If tbe increment had been disposed of by tbe pledgee so that it could not be returned, then equity would no doubt decree compensation; but where tbe increase with the original pledge is still in tbe bands of the pledgee, redemption is equity. Eecovery for conversion of tbe increment may not be equity in case tbe stock dividend has decreased in value during tbe period of plaintiff’s delay.

By the Court. — Judgment affirmed.