Deitz v. Stephenson

Opinion by

Mr. Commissioner Slater.

1. This suit, it seems, was brought upon the theory that, by the legal effect of the contract, plaintiff had bought from defendant Stephenson a one-fourth interest in the furniture, fixtures, and business of the Hotel Scott, in the City of Portland, and that Stephenson was the owner of the remaining three-fourths; that having been invested by the latter with the possession thereof, as manager, and afterwards deprived of that possession by him, in violation of the contract, plaintiff is entitled in equity to be restored to that possession, and to be protected in the management of the business against any interference therewith by Stephenson or the corporation, to that extent specifically enforcing the contract, and thereby enabling plaintiff to perform his part of the contract, and by his labor pay for the property he bought. This could not possibly be done except upon the allegation and proof by plaintiff that by the terms of the contract, Deitz and Stephenson had agreed to become partners in the business of conducting the hotel, and that the subsequent acts of the latter were in fraud of his rights: High bn Injunction (4 ed.), § 1330. But there is no averment of the complaint that such contractual relationship existed between the parties, neither was it expressly or-impliedly created by the terms of the agreement. As we interpret the instrument on which the suit is based, it creates no more than a personal obligation on the part of Stephenson to sell, transfer, and deliver to Deitz one-fourth of the capital stock of the Scott Hotel Co. for an agreed price, and to procure for him the position of manager thereof, provided the former obtains control of all the stock of the corporation; but, should he fail to get control, then a new corporation is to be formed with a capital of $16,000, Deitz to have one-fourth of the stock, and Stephenson three-fourths, and the latter guarantees that all of the property in the hotel shall be turned over to such new corporation freed and discharged of any debts or liabilities of the Scott Hotel Co. From this view it results that Deitz did not become invested with any title to any part of the hotel or hotél business or any right to the continued possession thereof, as against the corporation; but he occupied the position of an employee of the corporation, and was subject to its direction and control and liable to be discharged by it at its pleasure: Christensen v. Borax Co. 26 Or. 302 (38 Pac. 127).

The lower court declined to enforce specifically the contract to the extent of restoring plaintiff to the possession and management of the hotel, or to enjoin defendants from interfering therewith because of the impracticability of enforcing such a decree, and in any event this conclusion was correct; but it did decree a transfer and delivery of one-half of the capital stock by Stephenson upon certain express terms and conditions. The only question, then, to be determined is whether Stephenson is in equity bound to make delivery of the stock at all, and, if so, when and upon what terms.-

2. As to the one-fourth first purchased, it was to be delivered only in the event that Stephenson “gets control of all the stock of said corporation,” and upon “completion of the payment of the $4,000 herein specified for”; that is, by taking charge of the hotel, managing it, and applying $65 per month of the salary of himself upon the balance of the purchase price due. This is a conditional contract, and the rule is well settled that specific performance will not be decreed unless such condition has occurred or has been performed: 25 Am. & Eng. Ency. of Law (2 ed.), 41. The first of these' conditions is admitted to have been accomplished.

3. That a contract for the sale of shares of private corporation may, under certain circumstances, be the subject of equitable jurisdiction for its specific performance, is well established. This- occurs where the value of the stock is not easily ascertainable, or the stock is not to be obtained readily elsewhere, or there is some particular and reasonable cause for the vendees requiring the stock contracted to be delivered; but if the stock contracted to be sold is easily obtained in the market, and there are no particular reasons why the vendee should have the particular stock contracted for, he is left to his action for damages: 1 Cook, Stock & Stockholders, § 338.

4. And in order that specific performance of an agreement to take or deliver shares of stock in a company may be decreed, it is necessary that the agreement should not involve any breach of trust (Frye, Specific Perf. [2 Am. ed.] § 388), nor include the performance by either party of obligations, the performance of which a court cannot practically enforce: 1 Cook, Stock & Stockholders, 462, note.

5. It was held, in Ross v. Union Pac. Ry. Co. 1 Wool. 26 (Fed. Cas. No. 12,080), by Mr. Justice Miller, that unless the court can decree specific performance of the whole contract it will not interfere to enforce any part of it. And in Peto v. Brighton Ry. Co. 1 H. & M. 468, it was held that an equity court has no jurisdiction to decree the specific performance of a contract calling for the delivery of shares of stock, the consideration for which on the part of plaintiff is the execution of certain works which the court is unable to superintend.

6. Here it is urged by the defense that the part performance by plaintiff involves a breach of trust and confidence by him, and, if so, that would destroy any right in the plaintiff to have specific performance, if any ever existed, by the defendant. Most of the testimony in the record was taken on this issue, but it is not necessary that we should examine into it to determine the issue on that point, for, assuming that a specific performance of the contract might be decréed by a court of equity, if this contract called for only the sale of shares of stock for a money consideration, yet we find that there is joined with that an obligation on the part of plaintiff to furnish the personal services of himself and wife in the management of the hotel at a salary of $125 per month, of which $65 was to be applied on the purchase price of the stock. This obligation necessarily involves a correlative one resting on the latter to employ, or to secure, plaintiff and his wife employment by the corporation in that capacity for at least a sufficient length of time to enable plaintiff to liquidáte his liability for this balance of the purcahse price of this stock. Here is mutuality of obligation, but is there also mutuality of remedy? Specific performance will not be enforced against one party if it cannot be so enforced by the other. The remedy must be mutual: Whiteaker v. Vanschoiack, 5 Or. 113; Barrett v. Schleich, 37 Or. 613 (62 Pac. 792); 2 Beach, Mod. Eq. Jur. 585; Pomeroy, Specific Perf. §§ 162-3. But “contracts for personal services, where the acts stipulated for require special knowledge, skill, ability, experience, or the exercise of judgment, discretion, integrity, and the like personal qualities on the part of employees, or where the services are confidential, in short, wherever the full performance, according to the spirit of the agreement, rests in the individual will of the contracting party, courts of equity have no direct and efficient means of affirmatively compelling a specific performance”: Pomeroy, Specific Perf. § 310.

7. By agreement of the parties the contractual obligation of the plaintiff that “he and his wife are to take charge of the hotel” means to personally supervise and manage it. This requires the possession of experience, personal skill, and the exercise of judgment, and involves integrity and the relationship of trust and confidence. And it is not susceptible of specific enforcement by a court of equity. It has been alleged by defendant Stephenson, and established by his testimony, that the controlling cause on his part for entering into the contract was the necessity of securing a competent, experienced, and honest manager to conduct the hotel, and was not merely a desire on his part to dispose of his stock. This becomes, then, a material consideration of the sale, and having no power to compel-plaintiff to specifically perform that part of his contract according to the intent of the parties, in favor of defendant, a court of equity should not enforce it in other respects against the latter. Nor is the mere offer to perform or tender of performance of personal services, the performance of which could not be compelled in equity, sufficient to relieve the case of the lack of mutuality as to remedy: Cooper v. Pena, 21 Cal. 403; Alworth v. Seymour, 42 Minn. 526 (44 N. W. 1030); Anson v. Townsend, 73 Cal. 415 (15 Pac. 49); Los Angeles Co. v. Occidental Oil Co. 144 Cal. 528 (78 Pac. 25).

8. As to the second one-fourth of the stock agreed to be sold by Stephenson for $4,000, plaintiff is not bound to purchase at all by the contract, but had an option to take within 60 days (which he says was extended) upon payment of $2,000, and the balance on or -before six months, the same to be secured by the stock of the corporation, and, in case he desired to purchase after the 60 days and prior to six months, he might do so by paying $4,500. He alleged he made a tender of $2,000' on February 7, 1905, and submits in proof thereof an offer in writing, dated February 7, 1905, to pay that amount. There is no proof or allegation to the effect that at the time he made the written tender he was able to pay in accordance with its terms, nor that at all or any times since he has been ready, able, and willing to perform, which is essential to a right to specific performance: McCourt v. Johns, 33 Or. 561 (53 Pac. 601). Nor has he paid into court the amount of such tender. Moreover, plaintiff would not be entitled to an immediate delivery, if all such had been strictly done and complied with, for, by the terms of the contract, the stock was to be held by-the vendor as security for the payment of the balance of the purchase price, and there is no pretense of a tender or offer or a readiness and willingness to pay the balance. Until that is done, plaintiff is in no position to demand a delivery of the stock.

9. It seems that because the contract included a provision that, in case the hotel makes a profit, the second party would be entitled to one-fourth thereof to be credited, together with $65 per month of plaintiff’s salary, upon the balance due on the stock, the court assumed that there may have been profits, together with damages which plaintiff was supposed to have suffered by his dismissal, sufficient to liquidate his indebtedness to defendant, and on that basis the decree provided for the appointment of a referee, to take an accounting of damages and of the earnings and profits of the hotel, and if any such were found to be applied on this stock purchase, and the balance, if any, to be paid by plaintiff in 40 days. But all this is mere speculation. There is no basis for it in the pleadings. There is no allegation that any profits have accrued or are due, nor is there any claim made therein for damages, and, if there were, plaintiff makes no tender of performance in his complaint by alleging his willingness and ability to pay any balance that may be found due after applying profits to the liquidation of his debt. The record contains no issues in the pleadings or facts to sustain the decree: Clarno v. Grayson, 30 Or. 111-143 (46 Pac. 426.)

For these reasons the decree should be reversed, and the- suit dismissed. Beversed : Suit Dismissed.