Elhard v. Rott

Bruce, Ch. J. This is an action for the specific performance of a contract to sell bank stock. The defendant had agreed to- sell the plaintiff the stock in question at its “book value” at the time of the purchase and the only question which we need to consider is the meaning of the term “book value.” In arriving at the book value of the stock, was it necessary to. compute the accrued interest on the notes which were held by the bank, even though such notes were not due ? And did the books include all of the books .of the bank, or merely the ledger ? In other words, should a note for $500 which drew 10 per cent interest and was due six months from date be figured merely at its face value if only three months had run since the note was executed; or, in estimating its value, should the accrued interest for the three months be taken into consideration? The learned trial court held that in view of all the circumstances, the parties intended that in arriving at the book value of the stock such interest should be taken into consideration. We are satisfied that he was justified in this conclusion. We believe, indeed that the term “book value” has an established meaning in so far as the capital stock of a banking corporation is concerned. It “means value as predicated on the face value of the assets of the corporation after deducting its liabilities.” Steeg v. Leopold Weil Bldg. & Improv. Co. [225] 126 La. 101, 52 So. 235; Cabble v. Cabble, 111 App. Div. 426, 97 N.Y. Supps. 775 ; 1 Words & Phrases, 2d series, 479. The assets, of course, must appear upon the books of tbe company and must be able to be estimated therefrom, but it does not follow that the computation must have been made on such books and appear on the ledger. The book value of stock is determined by the face value, of the assets as they appear upon the books. The bills receivable of every bank contain not merely the record of the notes and of the face value of the principal thereof, but of the interest which they draw, and the dates of their making and maturity. If these notes were sold or discounted, it is very clear that the interest already earned would be taken into consideration. A note, for instance, of $500 which draws interest at the rate of 10 per cent and which has run for three months is surely worth more than its face value of $500, even though it has some three months yet to run before it reaches maturity and the interest can be collected. This conclusion disposes of the case and the other questions raised need not be considered. \ •The judgment of the District Court is affirmed. !