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Van Dam v. Tapscott

40 A.D. 36 Court N.Y. App. Div. English

Delivered by Cullen, J.:

Contents

Majority

p. 36
Philip Van Dam, Respondent, v. Frank L. Tapscott, Appellant.

Headnote

Sale of stock in a corpoi'ation to he incorporated■—•consideration therefor — a purchase jointly hy two cannot be severed hy the vendor.
An agreement by one party to sell to another shares of stock in a corporation to be thereafter incorporated, is a sufficient consideration for tlie latter’s promise to purchase the stock. t ' l
On April 29, 1892, the following agreement, supported by a valuable consideration, was entered into: “We, the undersigned, agree to buy from Mr. John Leuckel, Esq., eleven thousand (§11,000) dollars of the common stock of the Trenton Potteries Co., within one year from the date of incorporation of said company, at par.
“FRANK L. TAPSCOTT
“D. K. BAYNE.”
The corporation became incorporated May 28, 1892, and on January 27, 1893, Bayne paid Leuckel §5,500, and received §5,500 of stock, and took a receipt reciting that the payment was “in full settlement of all claim against him” under the agreement, from which Bayne’s name was then erased.
Held, that the transaction could not be considered as the release of .a ¡joint debtor under section 1942 of the Code of Civil Procedure, as, at the time such release
p. 37
was effected, the joint promisors were not in default upon theirxcontract, and their liability thereunder did not then constitute a debt;
That, as the damages were unliquidated, the discharge was valid, although the " receipt was not under seal;
That by tendering §5,500 in stock to Tapscott, Leuckel could not place Tapscott in default, as his joint agreement to purchase §11,000 in stock could not be modified, or the joint obligation severed, without his consent:
Appeal by the defendant, Frank L. Tapscott, from a judgment of the Supreme Court in favor of the plaintiff, entered in the office of the clerk of the county of. Bichmond on the 31st day of October, ■ 1898, upon the verdict of a jury rendered by direction of the court.
Paul P. Towne, for the appellant.
Howard R. Bayne, for the respondent.

On April 29, 1892, the defendant and one Daniel K. Bayne executed and delivered to the plaintiff’s assignor, John Leuckel, the following instrument:

“We, the undersigned, agree to buy from Mr. John Leuckel, Esq., eleven thousand ($11,000) dollars of the common stock of the Trenton Potteries Co. within one year from the date of incorporation of said company at par.
“(Sgd.) FBANK L. TAPSCOTT,
“(Sgd.) D. K BAYNE.” '

At the same time Leuckel executed and .delivered to the defendant and Bayne this writing:

“I herewith agree to sell and deliver, on demand, eleven thousand ($11,000) dollars of the common stock of the Trenton Potteries Co. to Mess. Tapscott and Bayne, at par.”

The Trenton Potteries Company became incorporated on May 28, 1892. On January 27, 1893, Bayne paid Leuckel $5,500, received $5,500 of stock, and took the following receipt:

“ Deceived this twenty-seventh day of January, 1893, from D. K. Bayne, five thousand five hundred dollars ($5,500) in full settlement of all claim against him under contract of April 29, 1892, signed by him and F. L. Tapscott.”
p. 38
At the same time Bayne’s name was erased from the agreement to purchase the stock. The allegation of the complaint concerning this'last transaction is that the plaintiff’s assignor “then and thereby exonerated and relieved said Bayne alone, and not the defendant, from ■all liability to him, said Leuckel, under said agreement, and it was then and there expressly understood and agreed that the defendant should not be released from the said agreement.” Subsequently plaintiff’s assignor tendered the defendant $5,500 of stock and demanded payment of that sum in money. The defendant failed to comply with this demand and the claim was subsequently assigned to the plaintiff. The two writings signed by the parties constituted the agreement between them, and the promise of the plaintiff’s' assignor to sell was sufficient consideration for the promise to buy. There was, therefore, a valid contract between the parties. The defendant in his answer has set up the non-joinder of Bayne to defeat the action, but the interest of Bayne and the failure 'to make him a party appeared on the face of the complaint and the objection to hi's non-joinder could only be taken by demurrer. The defendant having answered, the objection was waived. The only question to be considered in the case is what was the effect of the-transaction between the plaintiff’s assignor and Bayne in January, 1893,- on the contract previously made between all parties.

This transaction cannot be considered as the release of a joint, debtor under section 1942 of the Code of Civil Procedure. The contract of April, 1892, was an executory contract for the sale and purchase of the stock. The obligation of the defendant and Bayne under the contract to pay .for the stock was contingent on the vendor’s delivery of the stock. The liability of none of the parties. could constitute a debt until there should occur a breach of the contract, and which party, if either, would be debtor, and which creditor, was dependent on which should make default. The case is, therefore,' wholly different from that of .a unilateral obligation for the payment of money by debtor to creditor, or of a promise to pay rent, such as in People v. St. Nicholas Bank ( 151 N. Y. 592 ). At the time that plaintiff’s assignor released Bayne, Bayne &nd the defendant were not yet in default in the performance of their contract. The year in which they agreed to take up the stock would not expire until May. Had Leuckel tendered the stock at the end of the year,

p. 39
and. the purchasers failed to take it, he would have had a cause of action against them, either for damages or the purchase price. Had lie after that time settled with Bayne, a different case would have been presented. Nor can there be any question as to the sufficiency ■of the consideration for which Bayne was discharged from the contract. It is not like a case where part of an amount concededly due is paid for discharge from the whole obligation. Such a payment is not a sufficient consideration for the contract, and the agreement is inoperative unless a technical release under seal is given. Here •even after breach the damages were unliquidated, and before breach it was entirely uncertain to which party the contract was advantageous. Any consideration, even the mutual release of both parties from the obligations of the agreement, would have been sufficient for its rescission. The discharge of Bayne from his liability under the contract was, therefore, valid, although the receipt was not under seal.

The plaintiff’s assignor not only released Bayne from the contract, but assumed by that action to divide the contract between the parties. He never tendered the defendant $11,000 par value of the stock, but only $5,500, and the breach sued for in the complaint is for the refusal to accept the s'maller amount. This brings us to the correctness of the proposition which the learned counsel for the respondent most earnestly argues; that is to say, that a joint contract ef two or more parties to purchase property, where the property is ■divisible into portions absolutely alike in quality and value, can be treated as the individual promise of each party to purchase and take his aliquot share.. We know of no authority in support of this •claim, and think that- on principle it cannot be maintained. Certainly such a subdivision of the liabilities under an executory contract ef sale cannot be made without the assent of the vendor, for as to liim the contract is entire. He cannot be compelled to sell or ■deliver anything less than the whole quantity he has agreed to sell, .and the liability of each of the purchasers is for the whole purchase price. If the liabilities of the parties to the contract cannot be severed without the consent of one party, it would seem’that they ■should not be severable except with the consent of all. In reality in such a case the contract is not severed, but it is rescinded, and new ■contracts substituted in its place. The defendant in this case never

p. 40
agreed to purchase $5,500 of stock, nor any less amount than. $11,000, and that' he did not agree to purchase alone, but jointly with Bayne. The contract upon which he is sued is entirely different from that which he made, and the written instrument evidendingtile one' that he made has been altered so as. to represent that .he alone is liable on it. It may be said that the purchasers, after the jcontracthad been performed and they had received the stock, cotjld have, severed it without action by the court. There is a line of cases, in. this State which holds that, where property is- absolutely jalike in quality and value, and divisible by weight, tale or measure, one of several tenants in common may sever and take out his share, even. without' the assent of his. co-tenants. (Tripp v. Riley, 15 Barb. 333 ; Lobdell v. Stowell, 37 How. Pr. 88 ; Channon v. Lusk, 2 Lans. 211 ; Stall v. Wilbur, 77 N. Y. 158 .) But this principle does not affect the rights or liability of several parties under the contract by which they are to acquire the property. Though presumptively the purchasers acquiring property under the contract would each "be the owner of an undivided half, "it may very well be that, under the-agreement between them, their interests were to be different, or it. might be that certain equities between the parties would entitle one or the other to hold it as against his co-tenant. What the actual agreement between the parties was, or their situation in this case,, does not appear; but whatever it was, We think that eacli of the joint purchasers could insist that the. contract should be'performed according- to, its terms, and that they should be left- to settle their rights in the property acquired, under the contract between themselves. For these reasons we think the action cannot be" maintained.

The judgment should' be reversed and a new trial granted, costs, to abide the event.

All concurred.

Judgment reversed and new trial granted, costs to abide the event.

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