Publication: The Southwestern Reporter
St. Paul, MN, United States
SHINKLE v. VICKERY et al.
(Supreme Court of Missouri, Division No. 1.
Feb. 5, 1900.)
SALES—BONA FIDE PURCHASER—SPECIFIC
1. The owner of stock contracted to exchange his shares for land. The contract gave the owner an option to rescind within one year. A portion of the land was owned by another, who conveyed to his co-owner to enable him to convey the entire tract. The land was incumbered, and the purchaser paid off the incumbrance, taking the note of his grantor for the amount, with the stock as collateral security. The note was extended, and, grantor being unable to pay the interest, his former co-owner paid the same, and received an assignment of the equity of redemption in the stock. Later the grantor agreed to purchase land from plaintiff, and as part payment secured an assignment of the equity of redemption from his former co-owner. The value of the stock was to be credited upon the purchase only on condition that the holder of the stock should transfer the same to plaintiff on payment by him of the note for which it was given as collateral. The original owner of the stock elected to rescind, and refused to deliver the stock to plaintiff. Held, that plaintiff was not a bona fide purchaser for value, the credit being conditioned on transfer of stock by holder.
2. Specific performance of a contract to reconvey stock on payment of debt for which it is held as collateral by defendant will not be decreed where the defendant is entitled to the stock as owner on rescission of a contract of exchange with the maker of the note, and plaintiff has paid nothing for the equity of redemption he seeks to enforce in the stock, and cannot be required to pay anything.
Appeal from St. Louis circuit court; Horatio D. Wood, Judge,
Bill by Bradford Shinkle against Samuel Vickery and others for specific performance. From a decree denying specific performance, plaintiff appeals. Affirmed.
This is a bill in equity to compel the specific performance of a contract with respect to shares of stock in a private corporation. Prior to July 16, 1894, Russell B. Gibson and Albert H. Engel (in the undivided proportions of three-fourths and one-fourth, respectively) owned 127.97 acres of land in St Louis county, and the defendant Vickery owned 470 shares of the capital stock of the Hemingray Glass Company, of Covington, Ky., of the par value of $100 per share. Gibson and Vickery proposed making an exchange of the respective real and personal property. Engel had acquired the interest in the land held by him from Gibson for $3,700 upon an agreement with Gibson that if Engel desired it he (Gibson) would take it back within six months at $4,200. To enable Gibson to exchange the land with Vickery for his stock, Engel reconveyed the one-fourth interest in the land held by him. Thereupon Gibson and Vickery agreed to make the exchange, Gibson valuing his land at $32,000. There was, however, a deed of trust on the land for $10,000, which had to be paid off in order that Gibson might give Vickery a clear title. Gibson was unable to raise the money to pay off this deed of trust so at last it was arranged that Vickery should lend Gibson the $10,000, and take his collateral note therefor, payable at six months, with 6 per cent. interest from date, with the 470 shares of stock pledged thereby to secure the payment of the note. This was done, and the exchange perfected, the deed of trust paid off, and the note and collateral executed. But it was also agreed that "If, in one year from this date, the said Vickery shall be dissatisfied with his said purchase of land, the said Gibson hereby binds himself to purchase said farm, either for himself or for another, and to pay therefor, or cause to be paid for same, the price of $250 per acre, or the sum of $32.000," and to secure this agreement Gibson agreed to convey to Vickery (the deed to be held in escrow by Samuel Cupples & Co., but in fact it was delivered to Vickery) 320 acres of land in Christian county, valued at $7,500 (over a mortgage for $2,500, then on the land). It was further agreed that Vickery was "to have the right, at any time during the year ending July 16, 1895, to notify Gibson in writing that he is satisfied with the land; and in that event, or in the event Vickery elected to rescind the exchange, Vickery obligated himself to return to Gibson the deed to the Christian county land. During the year Gibson was to have the right to sell the land exchanged at not less than $250 an acre, by paying Vickery the $32,000, with 6 per cent, interest from the date of the exchange. Vickery never at any time indorsed or transferred the certificate of stock. At the time Gibson executed his collateral note to Vickery, the latter gave him the following document: "St. Louis, Mo., July 24, 1894. Whereas, I have loaned to Russell B. Gibson the sum of ten thousand dollars, for which he has executed his note for the sum of that amount to me, due and payable six months after date, bearing date July 20, 1894; and whereas, said Gibson has deposited security to secure the payment of same 470 shares, of the par value of $100 each, of the capital stock of the Hemingray Glass Company, of Covington, Ky.: Now, therefore, I, the undersigned Samuel Vickery, do hereby agree to turn over and deliver to said Gibson said 470 shares of stock upon the payment of said note for $10,000 by said Gibson or his assigns at the maturity of said note, or any other time previous that may be agreed upon." Gibson paid Engel nothing when he transferred his one-fourth interest in the land, but on the 27th of July, 1894, Gibson paid Engel $1,200 on account of the $4,200 debt, and at the same time executed a note for $3,000 to cover the balance. Subsequently, Engel surrendered to Gibson this $3,000 note, and took from Gibson, in lieu of it, an assignment of a one-fourth interest in the equity of redemption in the stock in the Hemingray Glass Company. The $10,000 collateral note fell due on the 23d of January, 1895, and Gibson was unable to pay it, but he obtained Vickery's consent to renew it for six months on payment of $350, which was interest, in advance, at the rate of 7 per cent. Gibson could not pay the $350, so he, on January 19, 1895, assigned to Engel his entire interest in the equity of redemption in the stock by a written instrument, viz.: "For value received, I hereby assign, transfer, and set over unto Albert H. Engel four hundred and seventy shares of stock in the Hemingray Glass Co., of Covington, Ky., of the par value of $100.00 per share, now held by Samuel Vickery, of Evansville, Ind., as collateral security for the payment of a loan of $10,000, dated July 20, 1894, payable in six months, hereby warranting and defending the title to said stock against all incumbrance, except the said $10,000 above referred to. [Seal.] R. B. Gibson. Dated St. Louis, Mo., Jan. 19th, 1895." Thereupon Engel paid the $350 to the bank that held the collateral note for the six-months extension agreed upon by Vickery and Gibson, and gave the bank a copy of the assignment above set out. On January 29, 1895, Engel wrote to Vickery that the $350 had been paid, and told him that Gibson had previously transferred to him his equity in the stock, subject to the $10,000 and asked if the bank had sent him the duplicate of the transfer. Vickery answered, under date of January 30th, and told Engel that he (Vickery) held other obligations of Gibson's which were to be performed by July 1st, and, if performed, and if the $10,000 evidenced by the note and secured by the stock was paid, he (Vickery) would transfer stock; otherwise he would dispose of the stock under the collateral note. Engel replied on January 31st, saying he knew nothing of the other transaction, and had taken the equity of redemption subject only to the $10,000 note. Vickery replied on February 1st, explaining the terms of the exchange of the land for the stock, the loan of $10,000, and the giving of the collateral note, and told Engel he had notified Gibson that he must take the land back by the 1st of July. Thereafter, and between the 1st and 11th of February, 1895, Gibson went to Covington, Ky., and made an agreement with the plaintiff, Shinkle, to buy certain lots in Findlay, Ohio, for $50,500, of which the 470 shares of stock was to form a part, as stated in the agreement in this way: "In consideration of the premises, Gibson agrees to pay Shinkle fifty thousand five hundred dollars ($50,500) In the following manner: To procure the transfer and delivery to Shinkle of four hundred and seventy (470) shares of the stock of the Hemingray Glass Company at a valuation of fifty cents on the dollar of the par value of said stock, subject, however, to a lien for the sum of $10,000, now held by Samuel Vickery, of Evansville, Indiana, which sum of $10,000, secured by the pledge of said stock, Shinkle agrees to pay. That is to say, Shinkle will pay the principal sum due said Vickery, and thereupon receive said stock as a credit of $13,500, upon the payment of the consideration above named. Said stock is now evidenced by one certificate, registered in the name of said Vickery. Inasmuch as Shinkle will have no record evidence of his title to said stock until the amount owing said Vickery shall be paid and said certificate transferred to him (Shinkle), the assumption of the debt of $10,000, and his agreement to credit the agreed value of the stock, as aforesaid, is made only upon the condition that said Vickery shall duly transfer and deliver said stock to Shinkle upon the payment to him of said sum of $10,000. The balance of said consideration, to wit, $37,000, shall be paid in the manner hereinafter provided, and, until paid, shall bear interest at the rate of four per cent. (4 %) per annum." Thereupon Gibson returned to St Louis, and on the 11th of February, 1895, procured Engel to transfer the equity of redemption in the stock to the plaintiff by writing on the paper containing the assignment thereof from Gibson to him (Engel) the following: "For value received, I hereby transfer and convey to Bradford Shinkle all my right, title, and interest in and to the above stock, this 11th day of February, 1895," which Gibson forwarded to Shinkle. Neither Gibson nor Shinkle paid Engel anything for this assignment. But afterwards, on the 15th of February, 1895, Gibson paid Engel $1,000 on account of the $3,000, balance due him, and Gibson also paid Engel the $350 which Engel had paid to the bank for the extension of the $10,000 collateral note. When plaintiff received the assignment from Engel, he caused his agents to notify Vickery, under date of February 16, 1895, that he held an "order of sale" for the stock, which he held as collateral security for $10,000, and offering to pay the $10,000, less unearned interest, but, if Vickery preferred to hold it until the maturity of the note, directing him to return the "order of transfer," which was the transfer from Engel to Shinkle of February 11, 1895. Vickery replied, on February 18th, that "he had other claims against Gibson, for which I held that stock." The notice from Vickery to Gibson electing to rescind the exchange, and demanding that Gibson take back the land, was dated January 30, 1895, and specified that Gibson should do so by the 1st of July. At the maturity of the collateral note, Vickery sent it to the National Bank of the Republic in St. Louis. He also sent the certificate of stock, but did not indorse or transfer it. He also sent a properly executed deed to the land in St Louis county, conveying the same to Gibson, and also sent the deed from Gibson to him for the Christian county land, and he directed the bank to turn them over to Gibson on payment of the sum of $33,920. At the maturity of the collateral note the plaintiff, Shinkle, tendered $10,000 to the bank, and demanded the collateral note and the certificate of stock. The bank refused to accept the money or surrender the note or stock, and thereupon Shinkle instituted this suit in equity, asking for an injunction against the bank returning the note and stock to Vickery, and praying leave to redeem the stock by paying the collateral note, and further asking that Vickery be compelled to indorse and transfer the certificate of stock. The answer is a specific denial of the allegations of the petition, and a counterclaim for $15,000 damages growing out of the alleged breach of contract by Gibson in not taking the land back, and for $10,000 the loan evidenced by the collateral note. The answer also alleges, and the proof sustains the allegation, that at all the times stated Gibson was insolvent. The proof shows that Vickery is solvent The circuit court dismissed the plaintiffs bill, and the plaintiff appealed.
Geo. W. Taussig, John E. Bishop, and Hugh D. McCorkle, for appellant. T. K. Skinker and C. R. Skinker, for respondents.
MARSHALL, J. (after stating the facts).
1. The plaintiffs case is predicated upon the claim that he is a bona fide purchaser for value, and without notice, of the 470 shares of stock in the Hemingray Glass Company, subject only to a pledge thereof to secure the payment of the $10,000 note executed made by Gibson to Vickery, which note plaintiff offered, at its maturity, to pay, and still offers to pay. Briefly recapitulated, the plaintiff's claim rests upon these facts: Gibson had sold to Engel a one-fourth interest in the land for $3,700, upon an agreement to take it back at $4,200 in six months, if Engel so demanded. To enable Gibson to convey a good title to Vickery, Engel reeonveyed this interest to Gibson, nothing being paid Engel at the time. After Gibson sold to Vickery, he paid Engel $1,200 on account of the $4,200, and gave Engel an assignment of a one-fourth interest in the equity of redemption in the shares of stock. When the $10,000 note fell due, and Vickery agreed with Gibson to extend the note for six months on payment of $350, Gibson was unable to pay that amount so he assigned the entire equity of redemption to Engel, and he paid the $350. Engel then notified Vickery of the assignment to him, subject only to the $10,000 note for which the stock was pledged as collateral, and Vickery at once asserted and explained the further claim he had to the stock growing out of the exchange of the land for the stock, and of his right to rescind the trade within one year, which right he had exercised on the 30th of January, 1895. Thereupon Gibson made the deal with the plaintiff in reference to the lots in Findlay, Ohio, whereby, as part of the $50,500 Gibson agreed to pay plaintiff, it was agreed that the plaintiff should take the stock at 50 cents on the dollar of the par value of the stock, amounting to $23,500, of which $10,000 was to be paid to Vickery and $13,500 was to be credited on the $50,500; but this was to be done only upon condition that Vickery should duly transfer and deliver the stock to Shinkle upon the payment to him of the $10,000. Thereupon, on February 11, 1895, Gibson procured Engel to assign the equity of redemption in the stock to Shinkle. Nothing was paid by any one to Engel for so doing. On the 15th of February, Gibson refunded to Engel the $350 he had paid in January for the extension of the note, and about the same time Gibson paid Engel $1,000 on account of the balance he owed him. This is the sum and substance, of the facts upon which the plaintiff's claim rests that he is a bona fide purchaser for value, and without notice. The mere statement of the facts shows conclusively that the contention is wholly untenable. The plaintiff has paid nothing for the equity of redemption in the stock. Nor has he bound himself to pay anything, except on condition that Vickery transfers the stock to him upon the tender of the $10,000. In that event and upon that condition only, the plaintiff agreed to pay the $10,000 to Vickery, and to credit $13,500 on the $50,500 Gibson agreed to pay plaintiff for the property in Flndlay, Ohio. As Vickery refused to transfer the stock, it follows that plaintiff has not paid the $10,000, and is not obliged to credit the $13,500 on the $50,500. with the result that plaintiff has paid nobody anything, and Gibson owes plaintiff $50,500 for the Findlay property, and Gibson cannot compel plaintiff to credit the $13,500 on the price he agreed to pay for it As this contract could not be enforced against the plaintiff by either Gibson or Vickery, it follows that he cannot enforce it against either of them. The plaintiff, therefore, has failed to show that he is a purchaser of the equity of redemption at all. much more so that he is a bona fide purchaser thereof for value, and without notice. He holds it — if, indeed, it can rightfully be said he holds it at all — subject to all the equities that exist between Gibson and Vickery. When Engel received the assignment from Gibson of a one-fourth interest in the equity of redemption, he paid nothing for it, but it was simply a security for the $3,000, the balance due of the $4,200, which Gibson owed him for his interest in the land. And when Engel received the assignment of the entire equity of redemption, and paid the $350 for the extension of the $10,000 note, it is clear that the assignment was intended only as security for the $350 and for the $3,000 Gibson owed him, for within three weeks afterwards Engel assigned the equity of redemption to plaintiff at Gibson's direction, and received nothing therefor at the time, but four days later Gibson returned to Engel the $350, and also paid him $1,000 on account. Whether, therefore, Engel became the purchaser of the equity of redemption for value, when he paid the $350, or whether the assignment was a mere security for that sum, is wholly immaterial, because Engel had notice of all the dealings between Gibson and Vickery, and the sale, if it was a sale, of the entire equity of redemption, was rescinded on the 11th of February, and Engel received back from Gibson the $350 he had paid for the extension or assignment. Engel, therefore, was not an innocent purchaser for value, and without notice; and, even if the plaintiff can recover upon Engel's title, it would not strengthen his position. But the plaintiff cannot recover upon the strength of Engel's title, for he did not purchase from Engel. All his dealings were with Gibson, and his contract with Gibson was that Gibson was to cause the equity of redemption to be conveyed to him, which Gibson did by causing Engel to transfer it without any consideration whatever. The matter resolves itself, then, into this: That the plaintiff has neither paid anything for this equity of redemption nor bound himself to pay anything for it, except upon a condition precedent, which has failed. He has sold certain property in Findlay, Ohio, to Gibson, for $50,500, which Gibson must pay for, or the property will go back to plaintiff. (Reference to the other features of the Shinkle-Gibson contract is omitted as unnecessary to the determination of this case.) Engel has parted with his claim to the equity of redemption, and has only an unsecured note for $2,000 against Gibson, who is insolvent, to show for his one-fourth interest in the land. This reverts the matter to a simple question of equities between Gibson and Vickery, and, as they cannot be settled in this action, it is not proper or necessary to refer to or discuss them. The cases relied on by the plaintiff, of which Brinkerhoff-Farris Trust & Savings Co. v. Home Lumber Co., 118 Mo. 447, 24 S. W. 129, is a fair type, holding that the purchaser of stock in an incorporated company is not bound by any restriction or lien thereon of which he has no notice, are not, therefore, applicable to this case, except so far as they state the proposition that such a purchaser is bound by all restrictions and liens that the seller or transferror of the stock was bound by, and of which the purchaser had lawful notice (Id., 118 Mo., loc. cit 459, 24 S. W., loc. cit 132). and that the purchaser must be an innocent purchaser for value, and without notice, or else he will be bound by all restrictions or liens that his transferror was bound by. In no sense of the term, therefore, can the plaintiff be regarded as a bona fide purchaser for value, and without notice, and therefore whatever right he has, if any, to the stock, is subject to all the equities which may exist between Gibson and Vickery.