Bacon v. Grossmann

O’Brien, J.: The issue presented by the pleadings was whether the agreement •of settlement of April 9, 1895, between Lee, Higginson & Co. and the defendant gave to plaintiff’s assignor the right to receive from the General Electric Company the benefits of the agreement of November 8, 1893, and to any moneys which might be paid thereunder. The shares were transferred “subject * * * to an agreement * * * dated November 8, 1893, concerning such preferred shares ; ” and thus it appears that both parties were entirely familiar with the agreement made with the General Electric Com [578] pany and the limitations .imposed' that no more than sixty-five dollars per share should be received and the benefit that might accrue by the, payment of ten dollars a share by that company, Can it be said that the parties intended this stock to be transferred with the limitation imposed by the agreement that no more than sixty-five dollars per share should be received thereon and with the benefit of the ten-dollar share reserved to the defendant ? The words used-are “ subject to,” but did not this mean subject- to the receipt of-benefits as well as the imposition of limitations ? What is the ordinary meaning to attach to the words “ subject to ? ” Is it not that it is subject to something which impairs its value ? The provision that the General Electric Company was to get all over sixty-five-dollars per share with the accompanying guaranty of ten dollars; per share may have been regarded as a cloud upon the full title- to the stock. Although,, therefore, the transfer was “ subject to ” the agreement, it gave to the transferee the benefits, as well as it. imposed the disadvantages, provided -for in that agreement. That seems the reasonable interpretation, and from the correspondence admitted on the trial it is conclusively shown that this was the. interpretation which the defendant himself adopted. . Thus, he replied to the General Electric Company on November 27,, 1895,, after receipt of the money, as follows : “ I beg to say that as I no-longer hold the shares I cannot sign the papers you mention and that I am holding the proceeds of the check for the benefit of Whom it may concern.” And thereafter he wrote the same comr pany, in reply to their repeated request for return of check, that-“I am * * * advised that I have, under the circumstances no-right to. deliver the amount except to the present holders * of the stock and on his presentation of same to me for indorsement of the-amount. * * * Since the holder of the stock has all -this time-not claimed -the amount, I am furthermore led to believe that for-reasons resulting from, legal complications he has decided' to relinquish his claim in my favor.” Thereafter defendant, acting on advice of his attorneys, refused upon demand to deliver the money to plaintiff. The circumstances under which the settlement agreement was [579] made are also shown by the correspondence and by the testimony ; and that there was more than a .mere assignment of shares clearly appears. The evidence is that prior to April, 1895, the defendant received from- Lee, Higginson & Co. these same 310 shares of Northwest General Electric Company, giving in exchange 200 shares of General Electric Company and the sum of $11,300. Thereafter, when the affairs of the Northwest General Electric Company were seen to be in bad shape and negotiations with the General Electric Company began, resulting in the- agreement of November 8, 1893, the defendant made claims against Lee, Higginson <fe Co., asserting that they had made false representations as to the stock and demanding reimbursement. The claims were presented by defendant’s attorney Hemenway, and the correspondence shows that Lee, Higginson & Co: resented the assertions of false representation and denied that they were in any way liable, but finally assented to transferring to Grossmann the number of General Electric shares they had received from him upon his transferring the shares he had bought from them, this to be “ by way of compromise ” and “ to end all claims by him.” Mr. Hemenway on April 6, 1895, wrote to Mr. Grossmann : “ The only thing that was left to me was to accept a proper compromise. It was the ultimatum of Lee, Higginson & Co. They would not pay a dollar or accept less than the 310 shares * * * and give you 200 shares of General Electric preferred. To-day I closed controversy on those terms:” Grossmann then wrote (April seventh): “ I have to accept the compromise under the circumstances. * * * I shall send the 310 shares N. W. Electric.” The 310 shares were accordingly indorsed and forwarded, the date being April 8, 1895. The memorandum was signed, as stated, April 9, 1895, by Hemenway and the release by the defendant April 10, 1895. Reading the terms of the agreement made by defendant’s attorney, and ratified by the execution by defendant of the release as therein set forth, in the light of the facts disclosed by the correspondence and the interpretation placed upon the contract by the defendant himself, we think it appears that what was intended was more than a mere assignment of shares, and that under the agreement plaintiff’s assignor took the shares of Northwest Electric Company, not free and unlimited, but with the limitation imposed and the [580] "benefits conferred under the agreement with the General Electric Company, with the terms of which both were fully conversant/ Hence it appears that the defendant obtained money under a mistake of fact on the part of the payer, that defendant was still the owher of the stock, and the plaintiff could maintain an action for its recovery as for money had and received. The guaranteed payment by its terms was incidental and appurtenant to the stock and the rights under it passed by transfer of the stock. • The contract with the General Electric Company was not made with the defendant personally, but was with him as a preferred shareholder, and, as pointed out, the guaranteed payment of ten dollars per share was intended for the holders of such preferred stock. This was the construction placed upon it by all the parties, including defendant, and the rights as well as the limitations imposed by that contract were intended to be transferred with the transfer of the stock. ■ The argument that plaintiff’s remedy is against the General Electric Company is not sound. That company paid the money in good faith to the person whom it supposed held the stock and without notice that defendant had parted with the stock. The wrong ■ party thus having received the money, and the plaintiff being without remedy as against the payer, it is. but equitable arid just that he ■ should recover the money which, under a mistake of fact, was paid to and received by the defendant. • We think, therefore, that the judgment dismissing the complaint and the order appealed from should be reversed, and a new trial ordered, with costs to the appellant to abide the event. Van Brunt, P. J., Ingraham, McLaughlin and Hatch, JJ., concurred. Judgment and order reversed, new trial ordered, costs to appellant to abide event. . Footnotes [*] Sic.