Burke v. Universal Granite Quarries Co.

Vinje, C. J. It is urged that the complaint fails to state a cause of action against the Wisconsin Granite Company because it appears that when the contract was terminated on November 30, 1921, by a vote of the Universal Granite Quarries Company the Wisconsin Granite Company had fully performed. A number of other grounds of failure to state a cause of action based upon the facts of the termination of the contract and its indefiniteness are also urged, but we shall not consider these because it appears that the [525] contract was for a definite period that has not yet expired, and it also appears that they operated under it for about twó years and no suggestion is made that there was the least difficulty because of indefiniteness. We think the gist of the controversy is the validity of the corporate action terminating the contract. If that be valid plaintiff’s right would probably be limited to a return of his stock. If it be not valid the contract must still be held to be in force with such rights as it. gives to each party. It seems quite clear that a contract between plaintiff as an individual and the defendant Wisconsin Granite Company was made; that it resulted in a benefit to the Universal Granite Quarries Company, whose stock was all owned by plaintiff — therefore though not legally yet practically for the benefit of plaintiff. As a guaranty that two thirds of the profits of the Universal Granite Quarries Company would be turned over to the Wisconsin Granite Company, plaintiff deposited with Sloan, for the benefit of the Wisconsin Granite Company, two thirds of the stock of the Universal Granite Quarries Company. This was to be .held by the Wisconsin Granite Company as collateral security for the performance by plaintiff of the contract. It appears from the complaint that the stock was transferred to Sloan on the books of the company, and afterwards with the consent of plaintiff it was transferred to the defendant Armstrong. It also appears that nothing was said or agreed between the parties as to who should vote the stock. Assuming that the right to vote the stock in such case passes to the pledgee because the books show him to be the legal holder of the stock, which is prima facie evidence that he is entitled to vote it (7 Ruling Case Law, 348), still it does not follow that a vote cast for a termination of the contract was a valid vote. To so hold would be to permit a pledgee to destroy the-very purpose of the pledge. The stock was transferred as collateral security for the performance of a contract by the plaintiff, and it must have been the [526] intent of both parties when the stock was so transferred that the contract should be performed, not destroyed. It therefore clearly appears that the vote cast to terminate the contract was cast in direct violation of the intent of the parties and of the purpose of the pledge. Its effect was to destroy the subject matter of the contract, not to carry it out as was intended. Such use of stock deposited as collateral cannot be tolerated in law or in equity. It is a distinct breach of a clearly implied contract to hold inviolate the subject and purpose of the trust. It follows that the contract is still in force and effect and that Armstrong holds the stock in a trust capacity as security for its faithful performance by the plaintiff. The complaint therefore states a cause of action against the Wisconsin Granite Company for a reinstatement of the contract and against Armstrong for an injunction restraining him from disposing of the stock and for a declaration that he holds it as collateral security for the performance of the contract. Since it appears from the complaint that the stock was transferred from Sloan to Armstrong with the consent of the plaintiff and that Sloan makes no claim to the stock, no cause of action is stated against him, and his demurrer should be sustained. This is a suit in equity growing out of a series of transactions affecting all the defendants. It is not essential that the relief. prayed against each should be identical in order that there be no- misjoinder of causes of action. Simon v. Weaver, 143 Wis. 330 (127 N. W. 950), and cases cited on page 342. It is also obvious that the Universal Granite Quarries Company as its directorate was constituted would not join with plaintiff, so it was properly made a party defendant. By the Court. — Order as to- defendants Wisconsin Granite Company, Universal Granite Quarries Company, ,and Armstrong affirmed, and as to defendant Sloan reversed, and cause remanded for further proceedings according to law.