Williams v. Fletcher

Mr. Justice Wilkin delivered the opinion of the Court: A reversal of the judgment of the Appellate Court is urged here on the single ground that the finding and decree of the •Superior Court were contrary to the law and the evidence. Appellants insist that by the payment of the $20,000 by Wil-' liams to Horace Fletcher, under the agreement of October 8, 1883, and the subsequent transactions between them, two hundred of the shares of stock issued to Horace by the Japanese Development Company, and by him indorsed to appellee, became and were the property of Williams, and that Horace had no right or authority to indorse them to appellee. Appellee, by his interpleader, claims, even as between Horace .and Williams, some of the stock was owned by the latter; but he also contends, that, waiving that question, no claim to such ownership in Williams can be successfully maintained against him, he being an innocent holder. At the date of the first contract above mentioned, Horace Fletcher was proprietor and manager of a Japanese store in San Francisco, California, called “Ichi Ban.” Subsequently, but before the tripartite contract was made, he had established a branch of that business in Chicago, which he called “Nee Ban.” All the property and business of these stores was transferred to the said Japanese Development Company, a joint stock corporation organized in the month of September, 1884, for which Horace Fletcher received the said shares of stock. At that time the indebtedness from Horace to appellee ■amounted to about $80,000, of which the development company assumed all but $40,000. For this last amount Horace -executed and delivered to appellee his promissory note, and indorsed the said certificate of stock as collateral security. Appellee testified that the $40,000 for which said note was given •went to pay, in part, for the subscription to the capital stock ■of the corporation made by Horace, and that he consented ■thereto only upon the express agreement that the stock should be assigned and delivered to him as security on the note, and he is wholly uncontradicted as to that fact. The indebtedness from Horace to appellee is not questioned, nor is it denied that much more than the whole amount here involved remains due and unpaid thereon. We have examined the evidence, and find no fact or circumstance proved from which it can be inferred that appellee took the certificate of stock with notice that any part of the shares therein specified belonged to Williams. The evidence of appellee is direct and positive to the contrary. The record is also barren of evidence of fraud, even on the part of Horace, much less of appellee, in procuring the execution of the tripartite agreement. On the contrary, it clearly appears that Williams executed it after the fullest opportunity to examine and ascertain its contents and learn its legal effect, and that he deliberately signed it after consulting an attorney, neither of the Fletchers being present or in any way influencing him in the matter. He does not pretend that he was misled, or mistaken, even, as to any fact affecting his rights under that ■contract, except that he did not know that Horace owed appellee anything at the time he placed his $20,000 in his hands; but as to that fact he does not claim that he was deceived by anything done or said by Horace, for the purpose of practicing a fraud upon him. He made no inquiry, took no steps whatever to ascertain how much money appellee had previously loaned Horace, or when the loans were made, nor as to what future advances were to be made, before signing and delivering the tripartite agreement. Having executed it freely and voluntarily, he must submit to its terms, unless he has shown that he has, in some way, been discharged from its obligations. That agreement admits of no construction. It treats Horace P. Fletcher as the debtor of both appellee and Williams; states that appellee has agreed to make further advances and loans, not to Williams and Horace, but to Horace individually, and contemplates that Williams may also do so; and as to all such debts then existing or to be contracted, it is in the most positive terms agreed that appellee shall be first paid. Had the business of the Bans been closed directly, instead of being transferred to the Japanese Development Company, appellee’s right to payment in full, as against Williams, would certainly be conceded under the terms of that agreement. Did the transfer operate to abrogate that contract? Appellants insist that it did, because, they say, the contract was “applicable only to the business owned by Williams and Horace Fletcher.” But that contract did not recognize Williams as part owner of any business, and, as a matter of law, he was not. The only the vry upon which it can be claimed that he was part owner with Horace in the Bans, is, that by the terms of the contract of October 8,1883, they became partners, and the contract admits of no such construction. 1 Bindley on Partnership, 23; Lycoming Ins. Co. v. Barringer, 73 Ill. 230; Smith v. Knight, 71 id. 148; Adams v. Funk, 53 id. 219; Niehoff et al. v. Dudley, 40 id. 406. The business belonged to Horace Fletcher, and he had the sole right to manage and control it. Williams’ right was against him for the profits, and, finally, for repayment of the $20,000 at the expiration of five years. There is nothing in the contract of October 8, 1883, which would prevent Horace Fletcher, acting in good faith and with business prudence, from associating with himself others, either as partners or joint stockholders in a corporation, with or without the consent of Williams. He did, however, consent that the business should be transferred to the development company. True, he swears that he consented thereto only upon the express agreement of Horace that the two hundred shares of stock should be issued in his name and delivered to him personally, the effect of which would have been to end the trust relation created hy the former contract, and allow him to become a joint stockholder in the corporation. Such contract, if made, would be of no binding force upon appellee, unless he agreed to it also, of which there is no pretense of proof. Horace Fletcher denies that there was any such agreement, and we think the subsequent conduct of Williams is so-inconsistent with such < an understanding, that if the determination of that fact was necessary to a decision of the case, we would be compelled to find it against appellants. It clearly appears that after the organization of the corporation, and after he knew the shares of stock had been issued to Horace, Williams continued to receive quarterly payments from Horace up to January, 1886, for which he gave a receipt as late as January 8,1885, stating! that the sums received “were to be deducted from the profits, and in case of no profits the amount to be considered in settlement of the business.” No attempt is made by Williams to explain this conduct on his part, and we think it is explainable only upon the supposition that he continued to rely upon ' the contract relations existing between himself and Horace, and at no time understood that he was a stockholder in the Japanese Development Company. We hold that the tripartite agreement continued in full force after the transfer of the stores- to the company, and must control the rights of the parties to this controversy. As to the point made, that that contract did not cover any indebtedness from Horace to appellee existing at the time of the investment by Williams, it need only be said that no such qualification or limitation is found in the contract. It is true, as contended by counsel for appellants, that “a contract means what the parties contracting understood it to mean when they made it;” but it is also true that the parties will be presumed to have meant what their language imports. It is not what one of the parties may have intended, but what is shown by the contract to have been the intention of all parties thereto. Here the language of the agreement is plain and unambiguous, and its legal effect can not be escaped by appellants because Williams may not have understood it. It is also true that the evidence does not prove that any part of such prior indebtedness entered into the consideration of the note for which the stock in question is held as collateral security. On the ground that Horace Fletcher was the owner of the whole eight hundred and seventy-four shares, the judgment of the Appellate Court must be affirmed; and even if it were held that as between appellants and Horace two hundred of the shares were owned by Williams, still, appellee being an innocent holder, the judgment was right on the doctrine concisely stated by Rapallo, J., in McNeil v. Tenth Nat. Bank, 46 N. Y. 325, thus: “It must be conceded, that, as a general rule applicable to property other than negotiable securities, the vendor or pledgor can convey no greater right or title than he has. But this is a truism predicable of a simple transfer from one party to another, where no other element intervenes. It does not interfere with the well-established principle, that where the true owner holds out another, or allows him to appear, as the owner of or as having full power of disposition over the property, and innocent third parties are thus led into dealing with such apparent owner, they will be protected. Their rights in such cases do not depend upon the actual title or authority of the party with whom they deal directly, but are derived from the act of the real owner, which precludes him from disputing, as against them, the existence of the title of power, which, through negligence or mistaken confidence, he caused or allowed to appear to be vested in the party making the conveyance.” Judgment affirmed.