Opinion
October Term, 1903.
Judgment affirmed, with costs, on the opinion of the referee.
The following is the opinion of Charles F. Brown, Referee:
Mr. Hoagland's liability for the matters in controversy is fixed by his letter to the United States Mortgage and Trust Company and to Blair Co. (known in this case as the bankers) dated February 24, 1899, and by the memorandum which accompanied said letter, which papers constitute the contract by which Mr. Hoagland agreed to the sale of the capital stock of the Royal Baking Powder Company of New York and the New York Tartar Company. By that agreement all costs, counsel fees and charges in the pending trade marks litigations incurred prior to February 1, 1899, were to be paid and discharged by Mr. Hoagland, and all costs, counsel fees, charges, damages and expenses of every nature arising out of said litigation subsequent to February 1, 1899, were to be assumed by the purchaser. It was further agreed that the stock of the companies named was to be taken by the purchasers as stock of going concerns, subject to the payment of all charges payable or maturing subsequent to January 31, 1899, and subject to unfulfilled contracts growing out of the trade mark litigation, and that Mr. Hoagland was to pay the indebtedness payable and matured before February 1, 1899. This agreement is too plain to need construction or to admit of doubt. By the stipulation of the parties as to the facts of the case, none of the items included in the claims presented to the executors fall within the terms of the agreement, except the item of £ 1,428-7-3, the taxed costs in the libel suit. Excepting this item, the plaintiff's claim is for costs, counsel fees and disbursements in the trade mark litigation, none of which was payable or had matured on February 1, 1899. The item of £ 1,428-7-3 appears as a charge and also as a credit in the bill of the solicitors, Messrs. Janson, Cobb, Pearson Co., rendered to the Royal Baking Powder Company of New York in response to its request for "a statement of your disbursements and charges from the time of last settlement up to February 1st, 1899." When Mr. Hoagland paid the bill, he rejected the item as a proper charge against the company, but took the benefit of the credit This, plainly, he had no right to do. The proper charges against the baking powder company appear in the bill exclusive of that item. That sum was not a payment upon those charges, nor was it money in the hands of the solicitors, which they were at liberty to apply as a payment upon account of their bill. It was a special deposit with them, pursuant to the practice prevailing in the English courts, and which they were obliged to repay to Wright, Crossley Co., if their appeal, taken in the libel suit, was sustained. The item did not belong upon the bill at all, but being there, if the charge was stricken off, the credit should have been extinguished also. The money cannot be treated as an asset of the baking powder company. It never was in the possession of the company, or of any agent or representative of the company, but was held by the solicitors solely under the conditions named. Mr. Hoagland had no more right to credit it upon the account of the solicitors than he would have had if the costs had been deposited in court, which would have been done had the solicitors not given the obligation to repay them. When the appeal of Wright, Crossley Co. was sustained, the money was repaid to the solicitors of that firm. It follows that the plaintiff is entitled to recover from the executors of Mr. Hoagland the sum named with interest, unless the legal defenses can be sustained. I am of the opinion that neither of the defenses urged by the learned counsel for the defendants is well taken. First. As to the defense that the audit of the claim by the audit company was a condition precedent to the maintenance of the action. The terms of the agreement do not sustain the plaintiff's contention in this respect. As already stated, Mr. Hoagland's agreement was that he would pay all indebtedness or liability payable and matured before February 1, 1899, and that he would assume and pay any part of such indebtedness which for any reason it was not practicable to discharge before the closing of the transaction as thereafter provided. It was, as to such last-named indebtedness, provided as follows: "As to any and all that portion of such liabilities which for any reason have not then (at the closing of the transaction) been determined, and, therefore, cannot then be paid or discharged by me, the amount thereof shall be ascertained and determined by the Audit Company of New York as being correct, and shall be certified to me by said Audit Company before the first day of March, 1900, and upon certificates of said Audit Company of New York as to the correctness thereof, I will pay and discharge the same." This provision did not confer on the audit company the power to determine as to any claim whether it fell within the class of indebtedness or liabilities which Mr. Hoagland had agreed to pay, but it gave to the audit company power only to ascertain and determine the correctness of the amount of such liabilities and certify them to Mr. Hoagland. The question as to the construction of the contracts, and whether any claim asserted was within the terms of the contract was one as to which the audit company had no jurisdiction. Second. I am also of the opinion that the plaintiff may enforce the agreement of Mr. Hoagland for the following reasons: The agreement was made for the benefit of the plaintiff, and was adopted by the plaintiff. It was the intention of the parties that the business which had been carried on by the companies named in the agreement should be continued to be carried on, and so provision was made for the incorporation of the plaintiff which should by the issue of its capital stock purchase the plant and property and the assets of every kind, and all the capital stock of the baking powder company of New York and the tartar company, and of the other companies named. Mr. Hoagland's letter bears date February 24, 1899. He owned or controlled all the stock of the baking powder company of New York and of the tartar company, and agreed to sell all the stock of the said companies to the United States Mortgage and Trust Company and to Blair Co., or to their nominee, for the purpose of transfer to the Royal Baking Powder Company of New Jersey (the plaintiff). The stock, property and assets of said companies were to be taken by the plaintiff as stock in going concerns subject to all unfulfilled contracts and to all charges payable and maturing subsequent to February 1, 1899. If there should prove to be excess in value of quick assets over and above the amounts specified in Mr. Hoagland's letter, such excess was to be paid to Mr. Hoagland in cash at the time of closing the transaction by the new corporation, and a proper proportion of charges and liabilities for goods delivered after January thirty-first, or previously delivered or in transit and not wholly paid for, were to be discharged by the plaintiff. The consideration of these obligations, which it was the intention of Mr. Hoagland the new corporation should assume, was in part his promises which are the subject of this suit, and I think it clear that when the new corporation was created (as it was on the 28th day of February, 1899), and received the transfer of all of the property of the Royal Baking Powder Company of New York and the tartar company, it became bound by the agreements specified in Mr. Hoagland's letter. It is equally clear that upon acceptance of the property, upon the conditions named, the new corporation was entitled to enforce the performance by Mr. Hoagland of his promises and covenants. In this view, it is of no consequence that the plaintiff was incorporated subsequent to the execution and delivery of the agreement between Mr. Hoagland and the bankers. The agreement of all the parties provided that all the old corporations should be operated for the account and benefit of the new corporation from the 1st day of February, 1899, and that the new corporation should be entitled to all the earnings of said companies from said date, so that at the date of Mr. Hoagland's agreement reorganization was substantially complete, and the business was being actually carried on for the benefit of the new corporation.