This action was brought to restrain the defendant from prosecuting certain actions against the plaintiff upon certain promissory notes, and for a decree adjudging that the defendant holds certain bonds as collateral security only for the payment of such notes. The defendant's answer set up by way of counterclaim that under a contract dated August 18, 1891, between the parties, he was entitled to have certain additional bonds deposited with him as collateral security, to be held by him pursuant to the provisions of the contract.
Upon the trial the plaintiff offered no evidence and requested that his complaint should be dismissed. The defendant objected and gave evidence to sustain his claim for an affirmative judgment. The trial court found against the defendant upon the merits and ordered a dismissal of the complaint. The General Term reversed the judgment holding that the defendant was entitled to a specific performance of the contract, which is as follows:
"THIS AGREEMENT, made on the 18th day of August, 1891, between Edward S. Stokes and W.E.D. Stokes, witnesseth:
"Whereas, the said W.E.D. Stokes has heretofore, with the consent of said Edward S. Stokes, purchased from Cassius H. Read 1,250 shares of his preferred stock and 500 shares of his common stock of `The Hoffman House,' a corporation, and with the knowledge and consent of said Edward S. Stokes is about topurchase from said Read the remainder of his stock, to wit: 1,963 shares of common stock, or a portion thereof, with the intent that they may together be the owners of the whole of the stock of said corporation.
"Whereas, the whole of the issue of five hundred thousand *Page 711 of bonds of said `Hoffman House,' secured by a mortgage to The Farmers' Loan and Trust Company — except twenty-five thousand dollars given up and canceled — are now held and owned by said Edward S. Stokes, except a portion held and controlled by him as a pledge from said Read for money due by him to said Edward S. Stokes.
"Whereas, the said Edward S. Stokes hereby declares that the indebtedness of the old firm of C.H. Read Co. has been paid and extinguished, except the contested claim now in suit against them by John W. Mackay, except the claim against them by Edward S. Stokes, and except about fifteen thousand dollars for taxes which said C.H. Read Co. are bound to pay; and further declares that there is no indebtedness of the `Hoffman House,' except as shown in their balance sheet of 31st of July, 1891, for $66,353.49 for current expenses,
"Now, therefore, in consideration of the premises, and of the covenants herein by each made to the other, and for a good and valuable consideration by each paid to the other, the said parties hereby covenant and agree as follows:
"First. Neither of said parties will sell any of his stock of the Hoffman House, without first consulting with and offering to sell the same to the other, and if a sale is made by one, the other party shall have the option to make it a sale for joint account.
"Secondly. Said Edward S. Stokes shall have, for his services as an officer of said corporation, a salary not to exceed four hundred dollars a month. No new enterprise or business shall be undertaken or any liability incurred by said corporation outside the regular business of managing the present hotel, restaurant and cafés, except with the express consent in writing of said W.E.D. Stokes.
"Thirdly. The said W.E.D. Stokes shall have two of the directorships of said corporation for himself or his nominees.
"Fourthly. For the consideration aforesaid, the said Edward S. Stokes guarantees the said W.E.D. Stokes that there are no other claims and debts against the `Hoffman House,' *Page 712 except those shown on said balance sheet of 31st of July, 1891, and the current expenses, and guarantees and indemnifies him against all claims against the Hoffman House, by said C.H. Read Co. or John W. Mackay or said Edward S. Stokes, or any other persons as the creditors of said C.H. Read Co.
"Fifthly. The said Edward S. Stokes further covenants and agrees not to sell or dispose of any of the bonds of `The Hoffman House,' owned or held by him as aforesaid, without the express consent of said W.E.D. Stokes, and also that the $25,000 of the $50,000 of bonds received from said Read, not yet canceled, shall be canceled pursuant to the terms of the mortgage on 1st of July, 1892, and meantime held solely for that purpose, and no interest shall be paid thereon.
"Sixthly. And as security for these guarantees, for a loan of about $32,000, and for any obligation of said Edward S. Stokes to W.E.D. Stokes, connected with said Read, and against any foreclosure of the said mortgage, said Edward S. Stokes has deposited with said W.E.D. Stokes, bonds of said Hoffman House to the par value of $150,000.
"Seventhly. The said W.E.D. Stokes agrees to sell and transfer to said Edward S. Stokes one-half of the whole or ofsuch portions of said 1,963 shares of common stock as he may purchase from said Read, at the price he pays for said shares, with interest at six per cent, on his note at twelve months, with one renewal, if he desires, for twelve months longer, with the stock so held as collateral. Upon payment of said price, at the time above specified; the shares sold be delivered to said Edward S. Stokes, and he shall in the meantime receive the dividends thereon.
"Eighthly. For any violation of this agreement each party shall have a claim and charge against the other, on the books and accounts of the Hoffman House.
"In witness whereof, we have hereto set our hands and seals on the day above written.
*Page 713"E.S. STOKES. "W.E.D. STOKES."
In entering upon a consideration of the contract a complete understanding of the existing relations of the parties will be useful. The "Hoffman House" is a corporation organized under the laws of New Jersey with a share capital of $750,000, divided into 2,500 shares of preferred stock and 5,000 shares of common stock, which had been divided between the plaintiff and one Cassius H. Read, who had previously thereto been engaged as co-partners in running the "Hoffman House" as a hotel in the city of New York. The property and franchises of the corporation had been mortgaged to secure the payment of $500,000 bonds of the company, which were all owned by the plaintiff, with the exception of a few which were owned by Read, but which were held by the plaintiff as collateral security for Read's indebtedness to him.
On the 1st day of May, 1891, the plaintiff borrowed from the defendant the sum of $32,300 upon his three promissory notes, one for $12,300, and two for $10,000 each, and upon the 14th day of August thereafter the further sum of $4,000, altogether making the sum of $36,300, upon which notes $32,000 and upwards remained unpaid. As collateral the plaintiff had delivered to defendant $30,000 of "United Line" bonds and $125,000 of "Hoffman House" bonds. The defendant had purchased from Read his preferred stock in the "Hoffman House" corporation, 1,250 shares, and 500 shares of his common stock, and held in his hands as collateral security for the payment of Read's indebtedness to him the remaining 1,963 shares owned by Read. Under these conditions the contract was executed. It recites, "for a good and valuable consideration by each paid to the other, the said parties hereby covenant and agree as follows:" Then are inserted provisions in which the parties agree not to sell their stock without first consulting each other; that Edward shall have for his services in conducting the business of the corporation not to exceed $400 per month; that he shall not engage in any other business; that defendant shall have the naming of two of the directors of the corporation, and certain guarantees are *Page 714 made by the plaintiff with reference to the existing indebtedness and liabilities of the corporation, none of which here require consideration.
We then have a recital appearing in the beginning of the contract to the effect that the defendant "is about to purchase from said Read the remainder of his stock, to wit, 1,963 shares of common stock or a portion thereof, with the intent that they may together be the owners of the whole stock of said corporation." By the sixth clause it is provided: "And as security for these guarantees, for a loan of about $32,000, and for any obligation of said Edward S. Stokes to W.E.D. Stokes connected with said Read, and against any foreclosure of said mortgage, said Edward S. Stokes has deposited with the said W.E.D. Stokes, bonds of said `Hoffman House' to the par value of $150,000." And seventh: "The said W.E.D. Stokes agrees to transfer and sell to said Edward S. Stokes one-half of the whole or of such portions of said 1,963 shares of common stock as he may purchase from said Read, at the price he pays for said shares, with interest at six per cent, on his note at twelve months, with one renewal, if he desires, for twelve months longer, with the stock so held as collateral. Upon payment of said price, at the time above specified the shares sold be delivered to said Edward S. Stokes, and he shall in the meantime receive the dividends thereon."
In the sixth clause $150,000 of the "Hoffman House" bonds are mentioned as having been deposited by the plaintiff with the defendant. In fact only $125,000 of such bonds had been deposited, and it was understood by this provision that an additional $25,000 of such bonds should be deposited with the defendant. It is for the specific performance of this part of the contract that the defendant now demands judgment.
It will be observed that the defendant has not agreed to purchase any of the Read stock and that the only provisions of the agreement binding upon him are those pertaining to his sale of stock without first consulting the plaintiff, and that in which he undertakes to sell to the plaintiff one-half of the stock that he purchases from Read. And aside from the *Page 715 recital in the contract of a good and valuable consideration by each paid to the other and the provisions alluded to, there is no consideration passing from the defendant to the plaintiff. What then was the purpose and intent of the parties?
Edward was the owner of the bonds and a half owner of the stock of the "Hoffman House" corporation. The defendant was the owner of half of the preferred stock and 500 shares of the common stock. The property of the corporation consisted of the "Hoffman House," a hotel in the city of New York. Read had been a co-partner with Edward, and was still the owner of a large block of the stock. It is evident that Edward and William contemplated the buying out of Read and of their running the business of the corporation themselves. Hence the recital of the contemplated purchase by the defendant of Read's stock.
Obscurity is cast upon the intention of the parties by the use of the phrase "or a portion thereof," from which it is alleged that there was no understanding that the defendant should purchase the whole of the stock; but there follows the expression, "with the intent that they may together be the owners of the whole of the stock of said corporation." We here have an express statement as to the intent of the parties, and whilst the words "or a portion thereof" may properly be construed as words of limitation, still when used in connection with that which follows, expressing intent, we think that the parties must have contemplated the purchase of the whole or a substantial part thereof. This view, we think, is strengthened by the fact that the 1,963 shares did not constitute the whole, for there were still 37 shares outstanding and unaccounted for, so that in case of the purchase of the entire 1,963 shares they still would not be absolutely the owners of the whole, but would be substantially so. If this was the true understanding of the parties, then the provisions of the seventh clause require no explanation. The defendant agreed to sell to the plaintiff one-half of the stock that he should so purchase and take his notes therefor, payable in one year, with *Page 716 the right to a renewal for another year. Here we have the defendant about to assume further obligations and to give further credit to the plaintiff, and it is apparent that this contemplated action formed the real consideration for the agreement to deposit with the defendant as collateral security the additional $25,000 in bonds of the "Hoffman House" corporation.
The trial court found as facts that the defendant purchased of Read 500 shares of stock for the sum of $10,000 after the contract was executed; that Read refused to sell the rest and that the defendant has not been able to purchase more, and that no part of the 500 shares so purchased has been transferred to the plaintiff.
Ought specific performance under the circumstances be now decreed? We think not. The liability of the plaintiff to the defendant has not been increased. The defendant, through the refusal of Read to sell, has not been able to carry out the understanding of the parties, which formed the real consideration for the deposit with him of the additional collateral.
A contract must possess certain elements in order that a court of equity may exercise jurisdiction to compel its performance. "It must be upon a valuable consideration. It must be reasonably certain as to its subject-matter, its stipulations, its purposes, its parties, and the circumstances under which it was made. It must be, in general, mutual in its obligations and its remedy." (3 Pomeroy's Eq. Jur., sec. 1405.)
The reversal of the judgment by the General Term appears to have been based upon a misconception of the facts. In the opinion it is stated that the pledge of the bonds was in consideration of the loan of about $32,000. The fact that the loan was pre-existing evidently had been overlooked.
The order of the General Term should be reversed and the judgment of the Special Term affirmed, with costs, in this court and the General Term, to the appellant.