Palmer v. Guillow

Bugg, C. J. This is an action of contract. The declaration contains two counts. The first is upon a special contract printed in a footnote.* The second is for money had and received. There was evidence tending to show that the plaintiff and Hemenway, the defendant’s intestate (who will be called the defendant), were old friends; that the defendant, who was engaged in perfecting some machines, the invention of one Gosselin, applied to the plaintiff for $300 to defray his personal expenses until he could get some money out pf the invention; that the plaintiff handed it to him and received in return the contract; that at its end above the signature were the words, “with interest at six per cent from date hereof;” that through these words a line in ink was drawn by the defendant at the plaintiff’s request, who told him he did not want interest if the money was to be returned and the stock given him; that there were thereafter frequent conversations between the parties about the machines; that the plan of the defendant and Gosselin was that, when the machines were made sufficiently efficient, a corporation to be called the Gosselin Company was to be organized to manufacture and sell them; that the machines were a failure, the corporation never was organized, and of course no stock was issued. The plaintiff testified that the “drift of” the agreement was expressed in the writing. The plaintiff testified that he did not talk with the defendant about the contract “because the company wasn’t formed and he wasn’t ready to pay it and I knew that.” Gosselin, the inventor, testified that one of the machines had been substantially completed by Hemenway before his death, but that "on the other part which was essential to the completed machines, Hemenway had not been able to accomplish much.” The adminis [4] trator of the defendant testified “that Hemenway worked diligently on the machines for several years after 1907, but that during the last two or three years of his life he worked on them much less; and that Hemenway, a short time before his death, had told him the machines were a failure, that he could not make a success of them.” This evidence establishes that the writing expressed all the terms of the contract by which the plaintiff handed $300 to the defendant. The plaintiff does not testify to any other. It is necessary to decide what that writing means when read in the light of the circumstances under which it was given. Plainly the $300 was not a simple loan. The money was not advanced by the plaintiff to the defendant upon the latter’s credit with the then present intent and purpose on the part of both that the money be repaid at some time in the future. The plaintiff did not receive an unconditional promise to be paid money. He was to be paid in stock of the Gosselin Company and in cash. But the cash was to be derived from one source alone, namely, from the dividends upon twelve hundred shares of the defendant’s stock in the same company. That three hundred shares of stock and themoney derived from the dividends upon the other stock was the only payment to which the plaintiff was entitled under the contract. There is no provision for repayment to the plaintiff if the corporation is not formed and the stock is not issued. He is to be reimbursed only in one way and in no other. If the venture had been a success, the plaintiff would have been a sharer in its prosperity. He would have received three hundred shares in stock and the original principal wholly returned out of the dividends on twelve hundred other shares. He made no contract for the return of the principal in the event of a failure of the scheme. Both parties knew that Hemenway was working to perfect the machines and to make them useful and salable, so that the corporation to manufacture and sell them might be organized and its stock have value. It was an implied condition of the contract that Hemenway should use his faithful efforts to complete the machines. If he had utterly failed in undertaking to perfect the machines, doubtless there would have been a failure of consideration for the contract. But Hemenway did not refuse to go forward. According to all the evidence, he labored diligently for almost six [5] years in the performance of his part of the contract. It was no fault of his that the corporation was not formed and its stock issued. The reason was that the venture, so far as he was concerned, failed in spite of all he could do. The evidence discloses no failure of consideration such as warrants recovery of his money by the plaintiff. There is a failure of consideration when a plaintiff pays a defendant for property sold to him by the defendant to which the latter has no title. Rice v. Goddard, 14 Pick. 293. Claflin v. Godfrey, 21 Pick. 1, 9. There is a like failure of consideration when money is paid by a plaintiff to a defendant for an agreement by the defendant to perform acts which he totally fails to perform. Briggs v. DePeiffer, 214 Mass. 52, 58. Doubtless there may be other classes of cases of total failure of consideration. But the case at bar is not of that kind. The plaintiff gave his money to the defendant to be used to enable him to live while he was working for the success of a highly speculative project, and agreed to take his recompense out of that project when it reached the incorporation and dividend paying stage. The defendant used his best endeavors to bring the project to that stage, but failed. The time never has arrived and now, since the death of Hemenway, never can arrive when according to the terms of his contract the plaintiff is entitled to receive anything from the defendant. The real complaint of the plaintiff is not that the consideration for his contract has failed, but that the adventure on which he embarked has failed. What has been said disposes of both counts in the plaintiff’s declaration, which are for the same cause of action, without discussing the other defences pleaded. The exceptions must be sustained and in accordance with St. 1909, c. 236, judgment may be entered for the defendant. So ordered. Footnotes [*] "$300. Boston, Mass., April 1, 1907. Received of Winfield H. Palmer three hundred dollars to be paid according to the following conditions in stock of the Gosselin Company and in cash. Said Palmer shall receive of me three hundred shares of the stock of the Gosselin Company and as further recompense for the loan and accommodation I will set aside 1200 shares of my own holdings in said company, all the dividends on which shall be devoted to repaying said Palmer three hundred dollars in cash. E. P. Hemenway.”