Opinion
03-03-1910
GOERKE CO. v. DISKON.
Louis Hood, for complainant. William B. Gourley, for defendant.
Bill by the Goerke Company against John J. Diskon, to reform a contract Decree for defendant.
Louis Hood, for complainant.
William B. Gourley, for defendant.
HOWELL, V. C. The bill in this case is filed to reform a contract made between the complainant and defendant. The complainant for many years has been engaged in conducting a large department store in Newark. For a good portion of the time the defendant was in its employ in a position of trust and importance. In 1006 there was talk that the defendant intended to leave the complainant; thereupon a conversation was had between the president of the complainant company and the defendant, which resulted in the contract in question. The negotiations were carried on for several days, and culminated on March 29, 1906, on which day they came to an agreement. In the afternoon of that day the president of the complainant in his office, and with his own hand made the first and original draft of the agreement. It is produced before the court, marked as an exhibit, and reads as follows: "Newark, Mch. 29, 1906. Agreement made this day between the Goerke Company of Newark, N.J.and John J. Diskon of Newark, N.J.In consideration of John J. Diskon devoting his entire time and attention to the interests and business of the Goerke Company they agree to retain him in the services of the company for one year from March 1st, 1906, to Mch. 1st, 1907, and said Diskon agrees to remain in the employ of the G. Co. during the above stated period, at a salary of sixty dollars (60.00) per week. The Goerke Co. also agrees to pay him five per cent. (5%) of the net profits of the corporation during the said year after the corporation has set aside an amount equal to or has paid six per cent. on the capital stock outstanding at the present time. It is further stipulated and agreed upon that five per cent. of the profits shall not be less than seven hundred and fifty dollars (750.00) during said period. John J. Diskon. The Goerke Company, R. J. Goerke, Prest." Subsequently, but on the same day, the defendant came to the office, made a copy of the agreement which had been so drawn, and they were signed by the two parties; the complainant's president retaining the copy that was written by the defendant, and the defendant retaining the copy that was written by the complainant's president From that time on the defendant continued in the complainant's employ, until the spring of 1909. He received a stated salary per week, which was paid to him, and under the agreement he claimed 5 per cent. of the profits of the corporation. At the end of the first year complainant made up a statement showing that the defendant was entitled, as his share of the profits, to the sum of $1,450. This was paid to him by check of the complainant, and, according to the complainant's president, a statement was exhibited to the defendant at the time showing the manner in which the statement of profits was made up. While the agreement was for one year only, it was continued during the succeeding years until the spring of 1909. At the end of the second year the complainant made up a statement of the profits that were due to the defendant under the contract for that year, and there were paid to him, in pursuance thereof, the sum of $1,507. At the end of the third year the defendant left the complainant's employ, and established himself in business in Paterson, and shortly thereafter brought suit in the Supreme Court on the contract to recover whatever might be due to him thereunder. The complainant then filed its bill, alleging that in drawing the agreement upon which the common-law action was based the parties had made a mutual mistake; that what the defendant intended to bargain for, and in fact did bargain for, was 5 per cent. of the profits of the business conducted under the style of the department store only; that the complainant, in addition to conducting the department store, was engaged in large real estate transactions out of which profits were accruing to the company, but in which profits the defendant did not intend, and was not intended, to share, and praying that the contract sued on might be reformed to the extent of declaring that the defendant was entitled to five per cent. of the profits arising from the department store only. The defendant in his answer denies that there was any mistake made, and asserts that the written contract expressed, and now expresses, the true agreement between them, and the whole of it.
The only witnesses to the transaction were Rudolph J. Goerke, the president of the complainant corporation, and the defendant himself; no one else was present during the negotiations, or at the time of the drawing and execution of the contract. The testimony given by each of them on the point in issue is flatly contradicted by the other, and, unless the complainant can find circumstances in the somewhat meager testimony of the other witnesses produced by it, it must fail. Mr. Justice Depue in Green v. Stone, 54 N.J.Eq. 387, 34 Atl. 1099, 55 Am. St. Rep. 577, speaking for the Court of Errors and Appeals, says: "Courts of equity may grant relief on the ground of mistake by rescinding the entire contract or reforming it, but such relief will not be granted in case of a deed unless upon proof that is entirely satisfactory and convincing. * * * But in the case of the reformation of a contract or deed by altering or expunging some of the terms contained in it on the ground of mistake, the part improperly introduced into it will be altered or expunged, and the instrument will stand as reformed. To warrant reformation there must be a mutual mistake; that is, a mistake shared in by both parties." And quoting from the opinion in Diman v. Providence Railroad, 5 R. I. 130, he says: "if the court were to reform the writing to make it accord with the intent of one party only tothe agreement, who avers and proves that he signed it as it was written by mistake, when it accurately expressed the agreement as understood by the other party, the writing when so altered would be just as far from expressing the agreement as it was before, and the court would be engaged in the singular office of doing right to one party at the cost of a precisely equal wrong to the other." And, touching the character of the evidence of the mistake, he quotes from the opinion of Van Fleet, V. C, in Rowley v. Flannelley, 30 N.J.Eq. 612: "When the evidence in demonstration of mistake is doubtful or equivocal or strongly contradicted, so that it is impossible for the mind to reach a strong conviction as to the truth, the court will not change what is written. * * * Until a mistake has been established by such force of proof as leaves no rational doubt of the fact, no change in the writing sought to be reformed is entitled to be called a correction."
The reasoning of the learned judge applies to the case in hand. The complainant is seeking to reform a contract which was drawn by its president and accepted by the defendant without hesitation or objection or advice of counsel, against the statement of the same defendant that the agreement as written contains the agreement upon which the mind s of the parties met. By way of corroborating his statement the complainant's president says that at the time the two checks were given to the defendant in settlement of his annual share of the profits, statements showing the manner in which the accounts were made up were prepared and were exhibited to the defendant; these statements the complainant still has, but they were not produced, nor was the lack of their production in any way accounted for. It was likewise said by the complainant's president, and admitted by Mr. Diskon, that there was talk between them of charging up interest on the money invested in the store before the calculation of complainant's profits was made. This appears in the contract in the words "after the corporation has set aside an amount equal to or has paid six per cent. on the capital stock outstanding at the present time." But this, instead of aiding the complainant, appears to me to corroborate the statement of the defendant, and to give greater force to his view that he was dealing with the profits of the entire business of the corporation.
It is likewise urged on behalf of the complainant that the defendant must be held to have acquiesced in the profits awarded to him, for the reason that he had access to the books in the office, and could have examined the accounts, and so have ascertained the manner in which they were made up. The fact that he did not make such examination cannot be held to estop him from claiming what he believes he can prove as a fact. His neglect to make such an examination did not mislead the complainant to any extent, and he says that as soon as he did make the examination and ascertained what the fact was, he made his demand with all convenient speed. I, therefore, think that this point is without merit.
Nor do I place any reliance upon the argument made for the complainant that the declaration in the common-law action is evidence of what the defendant thought the contract was when that declaration was drawn in the latter part of 1909. It may well be that without having the contract before him, and taking the statement of the defendant, the attorney who drew the declaration was led astray by loose statements made by the defendant himself. Without some further explanation I do not think that the facts surrounding the drawing of the declaration would be sufficient to base the decree upon.
I am therefore of opinion that the complainant has failed to make out a case, and the decree will go for the defendant, dismissing the bill, with costs.