Denzer v. McAvoy

Mr. Justice McSurely delivered the opinion of the court. This is an appeal from a judgment of $5,236.40 against defendant upon a directed verdict in an action upon four promissory notes executed by defendant to the order of plaintiff. The notes were given in connection with the purchase of shares of stock by defendant from plaintiff, and the defense asserted is the alleged failure of plaintiff to deliver the stock for which the notes were given. The evidence shows that plaintiff owned thirty-eight shares of stock in the London Auto Supply Company, an Illinois corporation, and in December, 1914, agreed to sell the same to defendant for $3,800, taking his notes therefor. December 30, the parties went to the office of plaintiff’s attorney, Mr. Jacobs, to consummate the sale. The four notes in question were prepared. They provided that the certificates should be held by plaintiff as collateral. It then developed that plaintiff did not have his certificates of stock with him, and that they were in Cleveland, Ohio, where plaintiff then lived. Defendant then agreed to execute the notes and leave them with Mr. Jacobs pending the delivery of the certificates. At the same time two memoranda were prepared and signed, which are as follows : “Charles Y. McAvoy, having purchased thirty-eight (38) shares of the capital stock of the London Auto Supply Company from the undersigned, the undersigned agrees to deliver within five (5) days from the date hereof, certificates for said shares issued in his name and duly endorsed by him. “Dated at Chicago, Illinois, this December 30, 1914. (Signed) Charles E. Dehzer.” “The undersigned, Charles Y. McAvoy, agrees to deliver to Charles E. Denzer certificates for thirty-eight (38) shares of the capital stock of the London Auto Supply Company issued in his name and endorsed by him, to be held by the said Charles E. Denzer as collateral security to certain notes dated December 30, 1914, heretofore given by the undersigned to the said Denzer. Charles Y. McAvoy.” The parties separated, the notes being left with Mr. Jacobs, the first memorandum, supra, being taken by defendant, and the second memorandum taken by plaintiff. The evidence tends to support defendant’s claim that plaintiff failed to deliver the stock, either within the 5 days mentioned in the memorandum or at any other time. The respective undertakings of the parties under the two memoranda were not performed. Defendant argues that these circumstances, and the papers signed, constitute one integral contract, bilateral in nature, in which a double exchange is contemplated, first of promises, and later of performances, and that just as a failure to give a promise would entail invalidity of the counter promise, so a failure to give performance on one side deprives the party in default of a right to enforce performance on the other side. Williston on Contracts, vol. 2, sec. 813. This would be applicable to a case like that considered in Kinser v. Cowie, 235 Ill. 383, which was a simple transaction providing that, upon the payment of a certain sum, certain shares of stock would be turned over to the purchaser. The seller failing to turn over the certificates, the buyer elected to rescind the contract and sued to recover the purchase price. The present case has an element which distinguishes it from the ordinary contract of sale. The partios here agreed by the notes and memoranda that the seller should retain the certificates of stock as collateral security for the notes, and-absolute delivery was not to be made to the buyer until the notes were paid. The memoranda was, in substance, an agreement that the certificates should be delivered to the buyer solely for the purpose of exchanging them for new certificates which should be delivered to the seller and held by him in lieu of the originals. This calls for a different rule applicable to two separate undertakings, first, the absolute obligation of defendant to pay according to the terms of the notes, and second, the mutual promises with reference to the delivery and exchange of the old certificates for new certificates to be delivered to the seller and held as collateral. The promise of defendant to pay the notes was in consideration of the promise of plaintiff to deliver the certificates for exchange. There is then no failure of consideration, although there may be a failure to defendant of resulting benefit; that is, he has not received all the benefit from executing his notes which he was authorized to expect. This rule has been stated with clearness in Gage v. Lewis, 68 Ill. 604, and followed in Newton v. Clarke, 138 Ill. App. 196; Smith v. Western Trust & Guaranty Co., 150 Ill. App. 587; Schiavone v. Zingarelli, 191 Ill. App. 167; Graf v. Perlman, 209 Ill. App. 172; Crowther v. Bell, 190 Ill. App. 48. In Linnell v. Leon, 206 Mass. 71, upon facts somewhat similar to these, it was held that the failure of performance of an undertaking incidental to the execution and delivery of a promissory note was not a failure of consideration for the note, but would be a breach of contract for which the defendant might have a remedy in damages. We emphasize the fact that the secondary agreement of the parties, comprehended in the two written memoranda, was, in essence, to substitute as the collateral to be held by plaintiff, new certificates for the old. The failure of either party in this respect was not a failure of consideration for the notes by which the obligation to pay according to their terms was absolute and independent of tbis secondary agreement. In tbis view of the case, it was no legal defense to assert tbe nonperformance of tbe promise of plaintiff to deliver tbe certificates of stock. Rulings of tbe trial court upon evidence tending to explain tbe nondelivery of tbe certificates are not material. Tbe instruction to find for plaintiff was right, and tbe judgment is affirmed. Affirmed, Dever, P. J., and Matchett, J., concur.