Pleading, Form of demurrer. Contract, Construction. Under Pub. Sts. c. 167, § 12, it is sufficient to allege as a cause of demurrer for a defect of substance, that the declaration does not state a legal cause of action. The words "substantially in accordance with the rules contained in this chapter" need not be added unless the defect relied on is one of form.
The following provision, omitting unessential words, was printed on the back of all the certificates of stock of a certain company: "Should the person to whom this certificate is issued desire to sell any of his shares of stock, he shall cause such shares to be appraised by the directors of this company, which it shall be their duty to do on request, and shall thereupon offer the same to them for the use of the company at such appraised value; and if said directors shall choose to take such shares for the use of the company, such person shall, upon the payment or tender to him of such appraised value thereof, and the dividends due thereon, transfer and assign such share or shares to said company; provided that the said directors shall not be obliged to take such shares at the appraised value aforesaid, unless they shall think it for the interests of the company; and if they shall not, within fifteen days after such shares are offered to them in writing, take the same and pay such person, therefor the price at which the same shall have been appraised, such person shall be at liberty to sell and dispose of the same shares to any person whomsoever." One of the original stockholders requested the directors of the company to appraise his shares under the foregoing provision. They refused to do so, whereupon the stockholder sold his shares at auction and sued the company on its alleged contract to have the shares appraised on such request, alleging that by reason of the refusal of the directors to appraise his shares they had sold for much less than their true value. Held, on demurrer, that the defendant had not made the agreement alleged, but that the plaintiff had agreed to cause his shares to be appraised by the directors, and, what the declaration alleged had not been done, was the thing that the plaintiff agreed to cause to be done. Held, also, that the purpose of the appraisal was to fix the price to be paid for the stock, if the company should elect to take it, and that the stockholder had no right to an appraisal unless the stock was to be taken for the company.
BARKER, J.
The demurrer alleges that the "declaration and the matters therein contained in manner and form as the same are set forth, are not sufficient in law for the plaintiff to have his action against the defendant." The plaintiff contends that it brings nothing before the court. But it points out that the declaration does not state a legal cause of action, which, where the question is one of substance and not of the form of allegation, is one of the causes of demurrer mentioned in Pub. Sts. c. 167, § 12, cl. 2. It brings that question before the court. The words of the clause cited, "substantially in accordance with the rules contained in this chapter," need not be used if the party demurring relies upon no question of form. Proctor v. Stone, 1 Allen, 193, 196. Chenery v. Holden, 16 Gray, 125.
The substance of the declaration is that the plaintiff was a stockholder, and that the defendant was bound to him in the terms of the agreement, by which, as the declaration puts it, the corporation promised him that upon request it would cause his shares to be appraised by its board of directors in accordance with the agreement; that being desirous of selling his shares he applied to the defendant to cause the same to be appraised in accordance with the agreement, and that the defendant, disregarding its promise, refused to appraise the shares or to cause them to be appraised in accordance with the agreement, by reason of which refusal he has lost the difference between the real value of the shares and a lower price at which, for lack of the appraisal, the shares were sold at public auction at the Stock Exchange.
Omitting the words relating to executors, etc., the agreement, so far as is now material, is that should the person to whom the certificate of stock is issued desire to sell any of his shares he shall cause them to be appraised by the directors, "which it shall be their duty to do on request," and shall thereupon offer the same to the directors for the use of the company at such appraised value, and that upon payment or tender to him thereof and of the dividends due, if the directors choose to take the shares for the use of the company, if the appraised value is not less than the book value as defined, he shall transfer the shares to the company; with a further proviso that the directors shall not be obliged to take the shares at the appraisal unless they shall think it for the interests of the company; and if they shall not within fifteen days after the shares are offered to them in writing take and pay for the same, the shareholder shall be at liberty to sell them to any person.
While the declaration alleges that the corporation promised the plaintiff that upon request it would cause his shares to be appraised by its board of directors, such is not the language of the agreement. It provides, on the contrary, that the plaintiff "shall cause such his shares respectively to be appraised by the directors." Assuming that the words "which it shall be their duty to do on request" make it the duty of the directors to make the appraisal, the agreement does not say that the company shall cause them to perform that duty, and does say that the plaintiff shall cause them so to do; nor does the agreement say that the company shall be responsible for the breach of this duty by the directors, in the performance of which, if they act, they are not mere agents of the company, but referees or arbitrators standing between it and the stockholder and acting for one party as much as the other. Reading the agreement as a part of the declaration there is no allegation of a failure by the corporation to perform what the agreement says the corporation shall do. The substance of the allegation is that what the plaintiff agreed to cause to be done has not been done.
Aside from this, it is plain that the object of the agreement taken as a whole, in view of the circumstances and relations of the parties to it when it was entered into, was to enable the company to keep its stock in the ownership of stockholders of its own choosing, and that the office of the appraisal was simply to fix the price at which the stock should be paid for, if the company should elect to take it. It would serve no useful purpose to have an appraisal if the directors should not choose to take the stock for the company, while their refusal to appraise upon request of the stockholder would give him the right to sell to any purchaser.
The fair construction of the whole agreement is that the stockholder had no right to an appraisal unless the stock was to be taken for the company.
Order sustaining demurrer affirmed; judgment for defendant affirmed.
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