Opinion
Decided January 3d 1941.
The preponderance of evidence is in favor of complainant's contention that at the time defendant agreed to buy the stock of the theatre company brought to his attention by complainant, he agreed to advance the entire purchase price and, in consideration of complainant devoting his time to the successful management of the enterprise, further agreed to give complainant a half interest in the stock, to be held in escrow by defendant until he had realized his investment from the profits of the theatre, at which time complainant was to receive his shares. Complainant has an equitable right to have defendant transfer to him the shares which cannot be obtained in the open market.
On appeal from a decree of the Court of Chancery advised by Vice-Chancellor Fielder, who filed the following opinion:
"Complainant had had considerable experience in the management and operation of moving picture theatres when he made the acquaintance of the defendant Julius Kasdin, who was a druggist and unfamiliar with the theatre business. Kasdin expressed a desire to invest in that business and complainant brought several theatres to his attention, one of which, the Bergen theatre, was accepted by Kasdin as a good place for his investment and complainant arranged a contract for Kasdin to purchase the stock of Bergen Theatre Corp., the owner of a lease on the theatre property, and accordingly a contract was entered into in April, 1938, in the name of Kasdin Realty Co. (a corporation owned and controlled by Kasdin), which contract was executed by Kasdin as president of that corporation, to purchase said stock which consists of ten shares. The contract obligated Kasdin Realty Co. to pay a purchase price of approximately $48,000. Complainant acted in the transaction so far as the seller was concerned, as broker and as such was entitled to a commission of $1,750 from the seller. When the contract was closed May 3d 1938, complainant's commission was credited on the purchase price and Kasdin personally made a payment according to the terms of the contract, and Kasdin Realty Co. was bound to pay the balance at a specified time, to secure which balance the stock purchased was deposited in escrow with the seller.
"It is complainant's contention that at the time Kasdin contracted to buy the stock, he agreed with complainant to advance the entire purchase price and, in consideration that complainant would devote so much of his time as was necessary to manage the theatre successfully, Kasdin would give complainant a half interest in the stock to be purchased and that after Kasdin had secured the release of the stock from escrow, five shares would be issued in complainant's name and be endorsed by him and held in escrow by Kasdin until from the profits of the theatre Kasdin had been paid the total amount of his investment, whereupon the five shares would be delivered to complainant. Kasdin admits an agreement with complainant, but contends it was that complainant would contribute one-half of the money required for the stock purchase and thereupon receive a half interest in the stock. All money required for the purchase of the stock was advanced by Kasdin, except such part as was realized from the earnings of the theatre and except also the $1,750 commission contributed by complainant. When the contract for the purchase of the stock was closed, the certificate therefor was issued in the name of Kasdin Realty Co. and after full payment of the purchase price the certificate was delivered to that corporation and is now held by it. After much negotiation between Kasdin and complainant, Kasdin refused to give complainant any stock interest and terminated complainant's management of the theatre. The bill in this cause seeks a decree that Kasdin and Kasdin Realty Co. specifically perform the agreement complainant claims Kasdin made with him.
"A few days before the contract for the purchase of the stock was closed, complainant took Kasdin to the office of Mr. Seidman, complainant's lawyer, and there they discussed the terms of a paper to be prepared and executed which would set forth their agreement. Mr. Seidman and complainant testified that it was then and there stated by both parties that complainant was to have fifty per cent. interest in the theatre enterprise when it was acquired by Kasdin but that complainant was to have no share in the profits until Kasdin had recouped his investment out of profits; that Kasdin was to advance all money necessary to acquire the theatre and that nothing was said about complainant contributing anything toward the purchase. Kasdin testified denying that such terms were stated but he did not testify that he told Seidman his version of the agreement he claims he had with complainant. Immediately following that conference Seidman prepared a form of agreement which provided, among other things, that Kasdin should advance all sums necessary to acquire the Bergen Theatre Corp. stock, fifty per cent. of which should be issued to complainant; that complainant should assign to Kasdin all dividends on his stock until Kasdin had received fifty per cent. of the sum Kasdin had advanced for purchase of the stock and that complainant should devote as much of his time as might be necessary to the management of the theatre. It is only reasonable to think that Seidman set forth such terms in his draft of a proposed agreement because they had been so stated to him by the parties. That agreement was submitted to Kasdin who took it to his lawyer, Mr. Berman. In the meantime the contract for purchase of the theatre stock had been closed, Kasdin making the payments then required.
"Berman disapproved the form of Seidman's agreement and on or about May 18th, 1938, prepared another, in the form of a letter to be addressed by complainant to Kasdin. This was about two weeks prior to the due date of a payment of $10,000 to be made pursuant to the contract on account of the purchase price of the stock. The letter states that Kasdin has advanced all money for the purchase of the stock, except as to $1,750 contributed by complainant and provides that if within two years from its date, the full amount advanced by Kasdin has been repaid to him out of profits of the theatre, Kasdin is to give complainant fifty per cent. of the theatre stock. The letter makes no mention that complainant should contribute toward the $10,000 payment then about to be made or toward about $19,000 theretofore advanced by Kasdin for the stock purchase, and it is evidence in support of complainant's contention as to the terms of the agreement Kasdin had made with him. The letter was not satisfactory to complainant and he, Seidman and Kasdin met at Berman's office in June, 1938. Complainant testified that he then protested that the letter Berman had prepared was not in accordance with his agreement with Kasdin, and that Kasdin concurred in his protest and told him he would have Berman draw an agreement which would contain the terms complainant stated had been agreed on between him and complainant. Complainant and Seidman testified that at this conference Berman and Kasdin admitted that complainant was entitled to have a fifty per cent. interest in the stock, for which he was not required to put up any money. Berman and Kasdin denied this testimony and Berman testified that he asked complainant to fix a time for putting up his share of money toward purchase of the stock, and that he did not insert any reference in the letter to complainant's duty to contribute because complainant would not fix a time. That does not appeal to me as a plausible reason for such omission.
"Complainant testified that he continued to importune Kasdin for a proper agreement and that Kasdin kept putting him off with promises and in the fall of 1938, at Kasdin's request he agreed to submit settlement of this dispute to one Ginsberg, a mutual friend. According to complainant, at a conference with Ginsberg, Kasdin stated he had borrowed $10,000 from his brother Joseph and wanted complainant to agree that the stock be divided equally between complainant, Kasdin and the latter's brother. After some argument Ginsberg suggested that complainant be content with a one-third interest and that the parties draw weekly salaries, $100 to complainant and $50 each to Julius and Joseph Kasdin, and that profits be divided one-third to each. Complainant testified further that the parties agreed to Ginsberg's suggestion and that it was left to Berman to prepare an agreement, which he did in October, 1938. That agreement is a long one and recites that the entire purchase price of the shares of stock was paid by Julius and Joseph Kasdin and by notes of Kasdin Realty Co. and it provides that on repayment of the cost of the stock such stock shall be issued equally to Julius and Joseph Kasdin and complainant; that complainant's stock, endorsed in blank, shall be held by Julius and Joseph Kasdin subject to the terms of the agreement and that Julius and Joseph Kasdin shall draw weekly salaries of $62.50 each and that complainant shall draw $100. The proposed agreement contains many other provisions and conditions, but it is not stated therein that complainant's claim to a stock interest was disputed or that he had agreed or was required to pay any part of the purchase price of the stock. Complainant refused to execute the agreement on the ground that it did not represent the settlement to which he had consented at the Ginsberg conference and he then called in Mr. Wolf, another lawyer. Mr. Wolf testified that he had a conference with Berman and Kasdin in November, 1938, at which they both admitted that the original agreement between complainant and Kasdin was that complainant was to have a half interest in the stock and Wolf's testimony in this respect was denied by Berman and Kasdin. Negotiations between the parties continued to May, 1939, but they failed to reach any settlement.
"I think the preponderance of the evidence is in favor of complainant. Kasdin's testimony is that the original agreement and all subsequent negotiations between him and complainant called for equal contributions from both for purchase of the Bergen Theatre Corp. stock, but none of the agreements prepared by the several lawyers contains even a suggestion to that effect. On the contrary all make it appear that Kasdin was to advance the entire purchase price and that complainant was to receive for services rendered and to be rendered, shares of stock after Kasdin had been repaid his investment out of the profits of the enterprise. It seems clear that complainant's contention that he never agreed to contribute more than his $1,750 commission toward the purchase of the stock, is true and that it is also true that Kasdin knew at the very inception of the transaction that complainant was financially unable to make any contribution. Kasdin testified that he knew in July, 1938, that complainant's financial status was bad; but he knew that fact before that date because on April 13th, 1938, complainant borrowed $700 from him on complainant's check which Kasdin was to hold a few days, and when the check was presented for payment about two weeks later, payment was refused for want of funds and it has not yet been paid. Kasdin also knew that in May and June, 1938, complainant got cash from the Bergen theatre on his bad checks. If complainant had agreed to put up half the cost of the stock purchase, it seems strange that Kasdin would have listened to complainant insisting on a stock interest without putting up any money, from the date of complainant's initial default which Kasdin says occurred in May, 1938, until at least November of that year and that he would have consented that complainant remain in the employ of Bergen Theatre Corp. until July 1st, 1939. When Kasdin took over the stock of that corporation complainant was named as vice-president and he performed his part of the agreement for which he contends, by entering on the management of the theatre immediately after the stock purchase. He continued as such manager to July, 1939, when Kasdin discharged him, and in the first year of his management the theatre made a profit of $18,000.
"The equitable right of complainant is to have defendants transfer to him certain shares of stock which cannot be acquired in the open market. Safford v. Barber, 74 N.J. Eq. 352; Bronsdon v. Shupe, 98 N.J. Eq. 67; affirmed, 99 N.J. Eq. 449. There should be a decree adjudging that complainant is entitled to a half interest in the stock of defendant Bergen Theatre Corp. issued to defendant Kasdin Realty Co.; that defendants Julius and Joseph Kasdin and Kasdin Realty Co., or one of them, hold the stock wherein complainant has such interest, in trust for complainant; that said defendants deliver the certificate or certificates evidencing such shares, to defendant Bergen Theatre Corp., endorsed for transfer on its books, and that the last named corporation issue a new certificate for five shares of stock in complainant's name; that complainant endorse such certificate in blank and deliver it to defendant Julius Kasdin, with a legend thereon that it is to be held in escrow until said defendant has been repaid out of the profits of the corporation, any balance due him for the money advanced by him for the purchase of ten shares of stock of Bergen Theatre Corp., with six per cent. interest; that when defendant Julius Kasdin has been so repaid, he shall deliver said certificate to complainant free of the conditions of the escrow and that the terms of the decree with respect to the issuance of and transfer of the stock be carried out under the supervision and direction of a master of this court.
"On the hearing of the cause it developed that prior to filing the bill of complaint herein, complainant had assigned his claim against defendants to Morris Wolf as security for a debt due from him to Wolf. In order that the pleadings should conform to the proofs, the bill should be amended to name Wolf as a party complainant in the cause."
Mr. Benjamin Gordon, for the appellants.
Mr. Louis R. Kagan, for the respondent.
The decree appealed from will be affirmed, for the reasons expressed in the opinion delivered by Vice-Chancellor Fielder in the Court of Chancery. For affirmance — THE CHIEF-JUSTICE, CASE, BODINE, DONGES, HEHER, PERSKIE, PORTER, DEAR, WELLS, WOLFSKEIL, RAFFERTY, HAGUE, JJ. 12.
For reversal — None.