Opinion
October 18, 1935.
January 31, 1936.
Practice — Judgment for want of a sufficient affidavit of defense — Statement of claim not self-sustaining — Guarantee for benefit only of holder of stock — Failure of plaintiff to aver ownership of stock.
1. Judgment may not be entered against defendant for want of a sufficient affidavit of defense where the plaintiff's statement of claim is not self-sustaining on the face of the record.
2. Written agreement, entered into between the purchaser of preferred stock in a stated company, and defendants, which provided that the defendants guaranteed payment of the full par value of the stock, should the purchaser desire to surrender the stock after the expiration of a stated time, and that the defendants guaranteed payment of the dividends on the stock, and which further provided that the agreement should inure to the benefit of the heirs, executors and administrators of the purchaser, but not assignees or transferees, construed, as a whole, together with a written supplement thereto, entered into between the purchaser's administrator and the defendants, to obligate the defendants only to the purchaser, as owner of the stock, and to his heirs, executors or administrators; and, in action on such agreements, statement of claim held not self-sustaining, where plaintiff failed to aver that she, as the widow of the purchaser of the stock, succeeded to its ownership, or that the stock was assigned to her in the settlement of his estate, or that she had any title to or ownership of the stock.
Appeal, No. 287, Oct. T., 1935, by defendants, from judgment of M.C., Phila. Co., March T., 1935, No. 428, in case of Laura Halpern v. Joseph Axelrod et al.
Before KELLER, P.J., BALDRIGE, STADTFELD, JAMES and RHODES, JJ. Reversed.
Assumpsit.
The facts are stated in the opinion of the Superior Court.
The written agreement, (Exhibit A), and the supplemental written agreement, (Exhibit B), referred to in the opinion of the court, were as follows:
EXHIBIT "A"
ARTICLES OF AGREEMENT made and entered into this 20th day March, 1929, by and between JOSEPH AXELROD, JACOB SALL and LOUIS SCHWAB, hereinafter referred to as "GUARANTORS", of one part and ISAAC HALPERN hereinafter referred to as "HALPERN", of the other part, all parties being of the City and County of Philadelphia, State of Pennsylvania —
WITNESSETH THAT
WHEREAS GUARANTORS are stockholders and are interested in the Girard Smelting Refining Co., hereinafter known as "GIRARD", a corporation chartered under the laws of the State of Pennsylvania, and
WHEREAS HALPERN has agreed, and by these presents does agree to purchase five hundred (500) shares of the Preferred stock of Girard Smelting Refining Co., hereinafter to be issued; and
WHEREAS guarantors and Halpern have agreed, and by these presents do agree as an inducement to HALPERN to purchase said stock that GUARANTORS guarantee certain matters in connection therewith. Now, therefore, in consideration of the premises and of the mutual promises and covenants herein contained, it is agreed between the parties as follows:
1. GUARANTORS do hereby guarantee to HALPERN the issuance and delivery of the said five hundred (500) shares of Preferred stock of GIRARD within thirty (30) days from date hereof; said stock to bear cumulative dividends at the rate of seven per centum (7%) per annum.
2. If, upon the expiration of five (5) years from the date hereof, HALPERN should desire to surrender the said five hundred (500) Preferred shares of stock, GUARANTORS hereby guarantee the full par payment thereof together with any and all dividends accrued to date thereon; provided however that should HALPERN not desire to surrender said stock upon the expiration of the said five (5) years, this guaranty shall thereafter be null and void and of no effect; and provided further, that should HALPERN desire to exercise the option to surrender said stock, he shall give to the GUARANTORS at least ninety (90) days written notice prior to the expiration of the said five (5) years of his desire so to do.
3. GUARANTORS do hereby guarantee to HALPERN dividends upon the said stock at the rate of seven per centum (7%) per annum payable in two equal semi-annual payments; provided that if GIRARD shall fail to declare dividends at any semi-annual period, GUARANTORS agree to pay same to HALPERN; and provided further that if after such payment by the GUARANTORS, GIRARD shall declare and pay a dividend to HALPERN for the period paid by GUARANTORS, then, in that event, HALPERN shall repay to GUARANTORS the amount paid by the latter to him for said period.
4. As a further inducement to HALPERN for the purchase by him of the aforesaid five hundred (500) shares Preferred stock of GIRARD, GUARANTORS agrees to assign and transfer to HALPERN one thousand (1,000) shares of Common, non-voting, no par, Class B stock of GIRARD, full paid and non-assessable; provided, however, and it is expressly agreed and understood that GUARANTORS shall have the option at any time within five (5) years from the date hereof to purchase from HALPERN the said one thousand (1,000) shares of Common non-voting stock for the total price or sum of SIXTY-SEVEN HUNDRED AND FIFTY DOLLARS ($6,750.00): the said certificates of stock to bear upon the face thereof a notation that it is subject to the terms of this agreement.
5. During the aforesaid period of five (5) years, GIRARD shall have the right to redeem any or all of the aforesaid Preferred stock purchased by HALPERN as hereinabove provided at the rate of ONE HUNDRED DOLLARS ($100.00) per share, together with the accrued dividends thereon to the date of such redemption.
6. During the period of five (5) years commencing from the date hereof, GUARANTORS hereby guarantee that in the event of the liquidation, dissolution or winding up of the company either voluntary or involuntary, HALPERN will realize upon the said Preferred stock the par value thereof plus accrued dividends, and in case such amount shall not be realized, then GUARANTORS agree to pay the difference between the par value thereof plus accrued dividends, and the amount realized thereon; it being the express purport of the parties hereto that the guaranty regarding the Preferred stock herein shall be only for a period of five (5) years from the date hereof.
7. This Guaranty shall apply to any stock of any kind or nature which HALPERN may within five (5) years from the date hereof, be compelled to accept in exchange for the aforesaid five hundred (500) shares of Preferred stock.
8. In consideration of the aforesaid guaranty HALPERN for himself, his heirs, executors, administrators and assigns hereby covenants and agrees not to use or employ or grant permission to any person, persons, corporations or firms to use or employ the name "I. Halpern" or "I. Halpern Co." or "I. Halpern Co.", or any other trade name or designation containing the name "I. Halpern" in connection with or in any wise pertaining to any business, trade or vocation similar or akin to that of GIRARD; provided however, and it is so expressly agreed and understood that HALPERN may engage in a business similar to that of GIRARD under the name of "ISAAC HALPERN", (without the designation "company," or "co." or "inc." or "corporation").
9. This agreement of guaranty shall not inure to the benefit of any assignee or transferee of HALPERN, but shall inure to the benefit of his heirs, executors and administrators, and the aforesaid undertaking shall extend to the heirs, executors and administrators of GUARANTORS.
10. This agreement shall be joint and several.
IN WITNESS WHEREOF the parties hereto have hereunto set their hands and seals the day and year first above written.
(Sgd) Joseph Axelrod (Seal) (Sgd) Jacob Sall (Seal) (Sgd) Louis Schwab (Seal) (Sgd) Isaac Halpern (Seal)
Louis N. Batoff, witness as to (I.H.) J. Schwab as to (J.A., J.S., L.S.)
EXHIBIT "B"
AGREEMENT, made July 28, 1932, supplemental to Agreement dated March 20, 1929:
WHEREAS, on March 20, 1929, Joseph Axelrod, Jacob Sall and Lewis Schwab, hereinafter referred to as Guarantors, entered into a certain Agreement with Isaac Halpern; and
WHEREAS, said Isaac Halpern has since died testate and Atlantic City National Bank has duly qualified as Administrator, c.t.a. of said Halpern, being hereinafter referred to as administrator, and
WHEREAS, the said Guarantors have defaulted in said contract of March 20, 1929, and have applied unto the Administrator for modification of the terms of said Agreement;
NOW, THEREFORE, in consideration of the sum of ONE ($1.00) DOLLAR paid by each of the parties to the other, the receipt of which is hereby acknowledged, it is agreed that the Agreement of March 20, 1929, above referred to be modified and amended in the following particular:
1. The time for the performance of the Guarantors agreement to purchase the five hundred preferred shares of stock should Halpern desire to sell, is hereby extended for a period of three additional years, until March 20, 1937.
2. The amount of interest guaranteed by Guarantors upon said stock until March 26, 1935 is reduced from seven per cent per annum to three and one-half per cent per annum, payable semi-annually.
In all other respects, excepting as modified by the above two amendments, the contract of March 20, 1929 and all guaranties shall remain and continue in full force and effect.
IN WITNESS WHEREOF, the parties hereto have duly executed these presents the day and year first above written.
(Sgd) Joseph Axelrod (Seal) (Sgd) Louis Schwab (Seal) (Sgd) Jacob Sall (Seal) Atlantic City National Bank, Administrator, c.t.a. of Isaac Halpern. By (Sgd) S. Craig Taylor, Asst. Trust Officer.
Witnessed by:
Matilda Kramer. Flora J. Coxe.
As to S. Craig Taylor.
Rule for judgment for want of a sufficient affidavit of defense made absolute, opinion by CRANE, J., and judgment entered for plaintiff. Defendants appealed.
Error assigned was action of lower court in making absolute the rule for judgment.
Louis E. Levinthal, with him David H. Rosenbluth, for appellants.
Nochem S. Winnet, for appellee.
Argued October 18, 1935.
Defendants appeal from a judgment entered for want of a sufficient affidavit of defense in an action of assumpsit. On full consideration of the pleadings we have concluded that the judgment must be reversed — not because of the sufficiency of the affidavit of defense, but because the plaintiff's statement is not self-sustaining on the face of the record, and on that account she is not, in the present state of the pleadings, in a position to demand judgment: Chestnut Street Nat. Bank v. Ellis, 161 Pa. 241, 244, 28 A. 1082; Penn Nat. Bank v. Kopitzsch Soap Co., 161 Pa. 134, 28 A. 1077; Parry v. First Nat. Bank, 270 Pa. 556, 559, 113 A. 847; Fritz v. Hathaway, 135 Pa. 274, 280, 19 A. 1011; Com. v. Hoffman, 74 Pa. 105, 111; Taggart v. De Fillippo, 315 Pa. 438, 173 A. 423.
The action was on a written agreement, (Exhibit A), as modified by a supplemental written agreement, (Exhibit B), both of which are printed in the reporter's statement.
Plaintiff's statement averred, inter alia, the making of the original agreement (Exhibit A) between the defendants and Isaac Halpern; the purchase of $50,000 (500 shares) 7% cumulative preferred stock of the Girard Smelting Refining Company by Isaac Halpern, pursuant thereto; the death of Isaac Halpern on January 9, 1932, and the grant of letters of administration c.t.a. on his estate to Atlantic City National Bank; the execution of the supplemental agreement (Exhibit B), between defendants and Halpern's administrator c.t.a.; and the transfer by said administrator of all its right, title and interest in said agreements to the plaintiff, — but this transfer did not purport to convey or assign any title to or interest in the stock aforesaid; that a semi-annual dividend of $1,750 became due on said preferred stock on January 1, 1935, but the same was not declared nor paid by said company; that in consequence thereof, the defendants became liable for the payment of $875 in accordance with their agreements aforesaid, but although requested to pay the same, they have neglected and refused to do so.
We are of opinion that the agreements are supported by a valuable and sufficient consideration and on their face create a legal and enforceable obligation on the part of the defendants; that while called a guaranty, the agreement was an original undertaking, enforceable against the defendants in accordance with its terms, without prior proceeding against the Girard Smelting Refining Company. The defendants, in effect, agreed to redeem the stock, at par and accrued dividends, at the expiration of five years from the date of the agreement, if Halpern desired to surrender the same, and, in the meantime, to pay him the stipulated dividends payable on the stock if the company failed to declare and pay them. If not an original undertaking by them as principals, it was, at the least, an agreement of suretyship. See Act of July 24, 1913, P.L. 971; Fidelity Mutual Life Ins. Co. v. Power, 311 Pa. 302, 166 A. 845.
But it seems clear to us that the agreement was for the protection of Isaac Halpern, as the owner of the stock purchased pursuant to it. If he sold the stock, the protection given by the agreement was gone. Considered as a whole, the agreement had no force or effect apart from the ownership of the stock. How could one who did not own the stock surrender it and demand payment of its par value? Or, how could one who did not own the stock be affected by a failure of the company to declare its stipulated dividends? If Isaac Halpern died the protection of the agreement inured to the benefit of his heirs, executors and administrators, who succeeded to the ownership of the stock, but the agreement cannot be successfully divorced or separated from the ownership of the stock.
The statement of claim fails to aver that the plaintiff, Laura Halpern, as the widow of Isaac Halpern, succeeded to the ownership of the stock, or that the stock was assigned or transferred to her in the settlement of his estate, or that she has any title to or ownership of the stock. There could be no valid assignment of the right, under the agreement, to surrender the stock and demand payment of its par value, separate and apart from the ownership of the stock; and the right to call on the defendants to pay the stipulated dividends payable on the preferred stock, or one-half of them, as provided by the supplemental agrement, Exhibit B, is irrevocably bound up with ownership of the stock. The stock could not be owned by one person and the right to require redemption of the stock and payment of stipulated dividends be held by another.
The plaintiff may be able, by amending her statement, to bring herself within the provisions of the agreements; she has not done so in the statement filed.
The judgment is reversed with a procedendo.