Lindsay's Estate , 210 Pa. 224 ( 1904 )

Opinion by

Mk. Justice Brown,

In Fitzsimmons v. Lindsay, 205 Pa. 79, we held that the agreement of the stockholders of the James C. Lindsay Hardware Company, by which each subscribing stockholder acquired a preferred right, by way of option, to purchase the shares of anyone who died or might withdraw from the business, was a binding contract, supported by a mutual and sufficient consideration. In the proceedings in the court below to enforce its provisions against the appellee, administrator of John S. Lindsay, deceased, there was a decree for its specific performance, as nothing was developed in the evidence as a reason why it should not be specifically enforced.

As the administrator has taken no appeal, the only complaint of the appellants is as to the terms imposed upon them by the court in decreeing that they have a right to exercise their option to purchase the stock of the deceased. These terms involve but two questions : 1st Should the good will of the business have been considered in ascertaining the value of the stock? 2d The appellee having refused to perform the contract of the decedent, though requested so to do by the appellants shortly after his death, if they now elect to take the stock after the ascertainment of its value, should they receive the dividends that have accrued since the death of the deceased stockholder and pay his estate only legal interest on the valuation, the dividends having exceeded that rate ?

Though the agreement speaks of the “ book value ” of the stock, it refers also to the- “ fair price ” of it. Its language is that, if the representative of the deceased stockholder, or one desiring to retire by the sale of his interest, cannot agree with the surviving or remaining stockholders “upon a fair price or book value thereof,” then arbitrators are to be appointed, who “ shall fix a price ” for it; And it is still further provided that if the two arbitrators cannot agree, they shall choose a third party as umpire, and a majority shall fix'the “ price,” and “ at tbe price so determined ” tbe stock can betaken or refused. It is, therefore, manifest, as stated by the court below, tliatthe contemplation of the parties was a fair value of the stock as a basis upon which it could be taken; and whatever contributes to such value must be taken into consideration as an element of it. It is a matter of common knowledge that beyond the actual value of the tangible assets of a successful partnership or corporation there is also a substantial value in the patronage enjoyed, due to the reputation of the firm or company for excellence in its business. S.uch value is recognized by the law as good will. When the partnership or corporation enjoying it ceases to exist and passes away with no successor, this good will disappears with it. But with the continued successful business life of a partnership or corporation the good will goes along as one of its assets, to pass to a successor. Here the business of the hardware company goes on and with it the good will which the deceased stockholder may have helped to bring to it, imparting additional value to his stock; and those who would now enjoy the same cannot be heard to say that good will is no part of its value. This is but a repetition in brief of the view correctly held and more fully dwelt upon by the learned president judge of the orphans’ court. The correctness of the value of the good will, as found by the court below, does not seem to be seriously questioned by the appellants. There is a simple averment in the argument of their counsel that there was not sufficient evidence to justify the finding of the value of the good will. The answer to this is that there was, as is pointed out by the court in its findings of fact. The real complaint is the court’s consideration of this value as an element in ascertaining the value of the stock. The assignments of error relating to it are dismissed.

It is admitted in the answer of the appellee that shortly after the death of John S. Lindsay the appellants came to him and notified him that they desired to avail themselves of the provisions of the article of agreement, and requested him to join in the appointment of arbitrators to ascertain the book value of the shares, but that he declined to accede to their request because he had been advised that the agreement was not binding upon the estate. If he had then recognized their rights under it, and they had elected to take the stock after its value had been then ascertained, the subsequently accruing dividends would have belonged to them. They are not responsible for their delay in saying whether they will exercise the option given them, and any consequences that have resulted from the delay ought not to be borne by them but by the estate whose representative is responsible for it. What, therefore, would now be equitable if they should elect to purchase the stock, is that they pay the estate of the deceased what it would have received if they had taken the same immediately after his death. This will be accomplished by their paying it the ascertained value at the time of his death, with interest at six per cent from that day, and the subsequently accruing dividends will belong to them. The decree of the court below, directing that they shall have the option or privilege of purchasing the 225 shares of stock in the hands of the appellee upon paying the price of $27,587.70, together with all earned profits on such shares.from the death of John S. Lindsay until the time of transfer, is modified by directing that they shall exercise such privilege upon paying the said sum, together with legal interest from the death of the said deceased, all earned profits or dividends to belong to them if they exercised the option or privilege.

The decree, so modified, is affirmed without costs on this appeal to either of the parties.