Opinion
February 7, 1957 —
March 5, 1957.
APPEAL from a judgment of the circuit court for Douglas county: CARL H. DALEY, Circuit Judge. Affirmed.
For the appellant there was a brief by Johnson, Fritschler, Barstow Witkin of Superior, and oral argument by Barney B. Barstow.
For the respondent there was a brief by Crawford, Crawford Cirilli of Superior, and oral argument by Raymond A. Crawford.
Specific performance. This action was brought by the plaintiff, Andrew C. Larson, on September 4, 1954, to compel the defendant, Superior Auto Parts, Inc., a Wisconsin corporation, to perform a contract of purchase of the plaintiff's shares of stock in the defendant corporation. The case was before this court on a former appeal and was reported in Larson v. Superior Auto Parts (1955), 270 Wis. 613, 72 N.W.2d 316. The previous appeal was by the defendant and another, from an order overruling the demurrer to the complaint. This court affirmed the order of the trial court in so far as it applied to this defendant's motion in said matter.
Trial upon the merits of the action was had to the court without a jury. Findings of fact and conclusions of law were filed by the court. On July 23, 1956, judgment was rendered directing that the plaintiff recover from the defendant the sum of $40,141.06, and that upon payment of said amount by the defendant, the plaintiff shall indorse and deliver the 65 shares of stock owned by him in the defendant corporation to the defendant. This appeal is from that judgment.
The trial court's findings of fact and conclusions of law are as follows:
"Findings of Fact
"1. That at all times herein mentioned the plaintiff was and is now a resident of the city of Superior, Douglas county, Wisconsin, residing at 717-3d avenue East in said city.
"2. That the defendant, Superior Auto Parts, Inc., a Wisconsin corporation, is engaged in the general business of sale of parts and accessories for automobiles with its principal place of business located in the city of Superior at 1315 Ogden avenue.
"3. That Joseph Kopito was at all times herein mentioned an employee of the said Superior Auto Parts, Inc., and an officer of the same, and that during the months of May and June, 1954, he was president of said corporation.
"4. That the plaintiff immediately prior to the 1st day of June, 1954, was an employee of the Superior Auto Parts, Inc., and owned 65 shares of the common stock of said corporation; that on the 1st day of June, 1954, plaintiff's services as an employee of said corporation were terminated pursuant to a resolution of the board of directors adopted on that day, and since that time the plaintiff has been no longer employed by the said corporation.
"5. That a contract was entered into between Edward A. Anderson, Joseph Kopito, Andrew C. Larson, being all of the stockholders of the defendant, Superior Auto Parts, Inc., and the Superior Auto Parts, Inc., effective as of the 30th day of January, 1947, and executed by the parties on that date, or within a short time thereafter. That said contract provides as follows:
"`It is hereby resolved and agreed that the following, Edw. A. Anderson, Joseph Kopito, and Andrew C. Larson, and the Superior Auto Parts, Inc., OK., E. A. Anderson, L. R. McPherson, sec'y, for the protection of their individual interests in the Superior Auto Parts, Inc., that in the event of severance of connections from said company by any member or members either by death or otherwise, the Superior Auto Parts, Inc., shall arrange to pay such member or members or their estate his full interest in the company as shall appear on the books of the company at time of such severance, the books of the company having been brought up to date in all respects. The method of payment to the severing member or members shall be the amount of one third of his interest in the company within thirty days of severance the balance of the amount owing to him or to his estate to be paid in full within ninety days of first payment made to him or to his estate. After full payment has been made to severing member or to his estate, his stock shall be surrendered to, and revert to the Superior Auto Parts, Inc., or as another alternative, his stock may be purchased by the remaining members in such proportion that they will then become equal shareholders in the Superior Auto Parts, Inc.
"`The interest of member or members shall be computed on the basis of the number of shares he holds in the company in relation to the net worth of the company, the books of the company having been brought up to date in all respects to date of severance. The merchandise inventory shall be computed in the usual way, merchandise inventory at cost or market value, whichever is the lowest, plus merchandise purchased at cost prices, minus cost of goods sold.
"`In the event that the company has not the funds or ready cash to liquidate member's interest, it shall become the duty and obligation of remaining member or members to negotiate a loan for the company, or arrange to personally advance funds to the company which in either case shall become a notes-payable obligation of the company to the party furnishing said funds. This agreement shall be binding primarily on the superior Auto Parts, Inc., supplemented as well by each individual personally or collectively signing this document.
"`It is also agreed that any life insurance taken out on any member of the Superior Auto Parts, Inc., and premiums paid by the company, that in the event of death of such member insured, the insurance monies received from the insurance company by the Superior Auto Parts, Inc., shall be used in full amount in the first payment to the deceased member's estate in purchasing his stock.
"`In the event that the insurance monies exceed one third of said member's interest in the company, the Superior Auto Parts, Inc., shall only be liable for the balance of the deceased member's interest in the company as it appears on its books as to the final payment to his estate.'
"6. That on the 30th day of June, 1938, the corporation, with the assent of all of the stockholders of the corporation, adopted the following by-law:
"`If at any time any of the stockholders of this corporation desire to sell and dispose of their stock, said stockholder or stockholders shall first offer it in writing to the board of directors at its book value and give the board of directors sixty (60) days in which to place it with the stockholders. At the expiration of said sixty (60) days, if no stockholder has purchased and settled for the same said stockholder or stockholders shall have the right to sell to whomever will purchase.'
"7. That life insurance was taken out on certain members of the Superior Auto Parts, Inc., and that, pursuant to the said contract, the premiums on said insurance policies was paid by the said corporation, and the insurance purchased on the life of Edward A. Anderson was paid in full on the 4th day of March, 1949, in the amount of $8,000, which money was received and has been retained by the said corporation. That the life insurance policy obtained on the life of the plaintiff, Andrew C. Larson, is still in full force and effect and all of the premiums thereon have been paid by the said corporation.
"8. That within a few days after the termination of the services of the said Andrew C. Larson as an employee of the said corporation, oral demand was made upon an officer of the corporation to comply with the terms of the contract, to wit: To purchase the stock of Andrew C. Larson, whose services had been terminated, and that the said officer of the corporation, Joseph Kopito, informed plaintiff that he would talk it over with the boys. That at said time the said Joseph Kopito inquired of Andrew C. Larson as to what he wanted for his stock and he was informed that the price was to be the face value and that was the end of the discussion. On July 9, 1954, and on August 10, 1954, letters were written to the corporation wherein and whereby demand was made upon the corporation to purchase the stock of the said plaintiff pursuant to the contract of January 30, 1947, but that the said corporation has failed to act upon said demand.
"9. That the book value per share of the shares of stock of the corporation on the 31st day of May, 1954, was $560.78 per share; that the book value of the 65 shares of said stock owned by Andrew C. Larson was, on the 31st day of May, 1954, the sum of $36,450.70.
"Conclusions of Law
"1. The contract entered into between all of the stockholders of the said corporation and the corporation, effective as of the 30th day of January, 1947, constituted a continuing offer to purchase from any stockholder who is employed by the company and whose services were terminated either by death or otherwise all of the stock of such member whose services had been terminated, at the book value of the corporate shares.
"2. That the continuing offer of the defendant corporation to purchase plaintiff's stock was in full force and effect when it was accepted by the plaintiff.
"3. That the plaintiff duly accepted the offer of the defendant corporation to purchase the 65 shares of its stock owned by plaintiff on or shortly after June 1, 1954.
"4. That the assets of the corporation exceeded its liabilities on May 31, 1954, and it was eligible under the law to purchase its stock pursuant to the Wisconsin statutes in such case made and provided. That on said date the corporation had a surplus and undivided profits of $54,929.48.
"5. That plaintiff is entitled to recover from the defendant, Superior Auto Parts, Inc., the book value of said stock, to wit: The sum of $560.78 per share for the 65 shares of stock owned by him on the 31st day of May, 1954, in the total amount of $36,450.70.
"6. That the plaintiff is entitled to recover his costs and disbursements herein.
"7. That the plaintiff is entitled to recover interest at the legal rate from the date of the demand, the exact date of the demand not having been fixed but having been indicated as a few days after the termination of the plaintiff, Andrew C. Larson's, employment, and the date of August 10th, 1954, having been definitely determined, interest is awarded from the 10th day of August, 1954.
"8. The memorandum opinion herein of this court, dated May 18, 1956, is hereby made a part of the foregoing findings of fact and conclusions of law.
"9. Judgment shall be entered in favor of the plaintiff, Andrew C. Larson, and against the defendant, Superior Auto Parts, Inc., a Wisconsin corporation, in accordance with the foregoing findings of fact and conclusions of law."
Challenge is directed by the defendant, Superior Auto Parts, Inc., to the trial court's determination that the defendant's offer as contained in the agreement of January 30, 1947, between all of its stockholders (including plaintiff) to purchase the plaintiff's shares of stock, was a continuing one, and that it was in full force and effect when accepted by the plaintiff. The defendant submits that the evidence conclusively indicates that no continuing offer was ever intended. In the alternative it maintains, that if the offer is to be construed as a continuing one, then under the evidence it must be held that the offer was terminated before there was any acceptance of it.
On the former appeal this court held that while the agreement of January 30, 1947, was not enforceable as to the plaintiff with respect to binding him to sell his stock when he left the defendant's employ, for the reason that contrary to sec. 183.14, Stats., the restrictions of the contract were not stated upon the plaintiff's certificates of stock, nevertheless the defendant's promise could be treated as a continuing offer to buy, which, if accepted by the plaintiff before the offer was revoked, would ripen into a binding contract. Specifically it was said (p. 620): "We regard the corporation's promise to buy as such a continuing offer. It was never withdrawn by the corporation and was accepted by the respondent when his employment was terminated and he demanded the stipulated price for his stock." It is to be recognized that such observation pertained to the facts alleged in the complaint, which were to be taken as true when the sufficiency in law of the same was being tested on demurrer. By its answer the defendant denied all allegations and implications that the offer was a continuing one, and that it had not been terminated prior to the acceptance by the plaintiff. Such issues were tried and determined by the court. It is the rule that in a trial to the court, findings of fact will not be set aside on appeal unless they are contrary to the great weight and clear preponderance of the evidence. Swazee v. Lee (1951), 259 Wis. 136, 47 N.W.2d 733.
The defendant contends that since this court on the previous appeal determined that the contract was not enforceable as to the plaintiff in respect to compelling him to sell his stock, it may not be considered as a continuing offer to purchase it. In the light of the arguments presented on this appeal we have again considered the views expressed in the opinion on the former appeal with reference to this subject, and have concluded not to depart from what was there said to the effect that the contract could be a continuing offer to purchase the plaintiff's stock. That it was a continuing offer has now been determined as a fact by the trial court.
It is plain that the agreement itself constitutes an offer to purchase a stockholder's shares in the event that his employment with the defendant company is terminated, and provided that the company has a surplus as contemplated. The evidence indicates that Anderson, Kopito, and Larson each recognized that the offer was a continuing one. In 1948 Anderson and, Kopito expressed to the defendant their desire to sell their stock pursuant to the contract. Larson did so in 1954. Anderson and Kopito, however, were not in a position to compel a performance of the offer at the time, for the reason that they had not severed their, services with the company. Defendant's position that Larson did not consider the offer as a continuing one is predicated on several bases, viz., (a) that Larson testified he "never made any acceptance because he was never offered any. Never made any offer for any stock," (b) for the reason that in a letter by Larson to the company and Kopito dated July 9, 1954, he stated that since his certificate did not contain the restriction in the bylaws, he considered that he need not first offer his stock for sale to the board of directors, (c) for the reason that in his letter of August 9, 1954, addressed to the defendant and Kopito wherein he demanded a purchase of his stock pursuant to the terms of the agreement, he made no reference to any acceptance of the offer, (d) his demand was in reality an offer and not an acceptance.
With reference to the first of these items it appears that the statements were made at a time when Larson was being examined as a witness with reference to his demand that the company purchase his stock. He had stated that he visited the company's place of business, and that in a discussion with Kopito had advised him that he wanted book value for his stock. Manifestly, the court construed his statement to mean that the company was unwilling to purchase his shares in accordance with the agreement. As to the second item, it does not appear that Larson inferred that he was at liberty to sell his shares to anyone. In another portion of the letter he specifically demanded that the company purchase his stock pursuant to the contract. As to the third item it is apparent from the very statement itself that demand was being made pursuant to the contract. As to the fourth item, it is considered that the acceptance of an offer need not be in any particular form. The request of Larson to the company that it purchase his stock in accordance with the terms of the contract may well be considered an acceptance of the offer.
We find no merit to the contention that the court's finding to the effect that the offer was a continuing one, is contrary to the great weight and clear preponderance of the evidence.
With respect to its position that the offer was terminated prior to any acceptance thereof, the defendant points to the evidence that when Anderson and Kopito made their overtures for the sale of their stock to the company pursuant to the contract, the defendant took no action with regard to purchasing the same; that when the defendant did not purchase Anderson's stock, he sold part of it to another stockholder; that when the company did not purchase Kopito's stock, he did not attempt to force the defendant to comply with the contract; that the defendant purchased stock from a stockholder on a basis different than book value as contemplated by the contract. As we have already observed, neither Anderson nor Kopito at the time when they requested the company to purchase their stock, or sold any portion thereof to the company, was eligible to enforce compliance with the contract. The defendant was not required, therefore, to accede to the demands of Anderson and Kopito. The record indicates that Larson was the first eligible stockholder to make a demand that the company purchase stock under the contract.
While an offer may be revoked by a communication from the offeror to the offeree that the offeror no longer intends to enter into the proposed contract, providing the communication is received by the offeree before he has exercised his power of creating a contract by acceptance of the offer, Frank v. Metropolitan Life Ins. Co. (1938), 227 Wis. 613, 277 N.W. 643, from the evidence here it does not appear that the defendant, its officers, or agents at any time communicated to the interested stockholders an intention to withdraw or revoke the offer to purchase.
By deciding that the continuing offer of the defendant to purchase plaintiff's stock was in full force and effect when it was accepted by the plaintiff, the court impliedly determined that the offer had not been withdrawn or revoked. Such determination is not contrary to the great weight and clear preponderance of the evidence.
The defendant also contends that specific performance should have been denied for the reason that the enforcement of the offer would produce a harsh, inequitable, and oppressive result in view of the difference in the book value of the stock and the market value of the inventory. True, one of the general rules is that equitable relief will not be granted if under the circumstances of the case, the result of the specific performance would be harsh, inequitable, oppressive, or result in an unconscionable advantage to the plaintiff, even though the complainant has no intention of taking an unfair advantage, and even though the contract may be valid and enforceable at law. 49 Am. Jur., Specific Performance, p. 72, sec. 58. However, a contract is to be judged as of the time when it was entered into, and if fair when made, the fact that it has become a harsh one or less beneficial to the party sued, by the force of subsequent circumstances or changing events, will not necessarily prevent its specific performance, unless such change is in some way the fault of the party seeking its specific execution. 49 Am. Jur., Specific Performance, pp. 77, 78, sec. 63. The inadequacy of price which will defeat specific performance must be an inadequacy existing at the time the contract was made. 49 Am. Jur., Specific Performance, p. 81, sec. 65.
It clearly appears from the evidence that the contract in question when made was not harsh, inequitable, or oppressive. Parties may contract for the sale of stock at book value. "The weight of authority is to the effect that a corporate bylaw which requires the owner of the stock to give the other stockholders of the corporation, or the corporators, in case the corporation is empowered to purchase its own stock, an option to purchase the same at an agreed price or the then-existing book value before offering the stock for sale to an outsider, is a valid and reasonable restriction and binding upon the stockholders." Doss v. Yingling (1930), 95 Ind. App. 494, 500, 172 N.E. 801. Such rule manifestly applies whether the option to purchase is granted under a by-law or a contract.
It appears from the evidence that on May 31, 1954, the defendant company had a net worth of $95,844.98, with current assets of $105,085.79 and current liabilities of $9,240.81, thereby making it eligible under the contract to purchase the plaintiff's stock which according to book value was then worth $36,450.70.
As against the claims of the defendant, the trial court was entitled to weigh the equities in favor of the plaintiff. It does not appear that there was an abuse of discretion in the matter of the consideration and determination of the equities.
By the Court. — Judgment affirmed.
BROADFOOT, J., dissents.