Thompson v. Schoch

Opinion bt

Me. Justice Moschziskee,

This suit was instituted by E. M. Thompson, receiver and trustee of the Nevada Copper Mining and Smelting Company, to the use of Charles E. Miller, Jr., against A. Z. Schoch, to recover on the following written instrument: “Bloomsburg, Pa., October 22d, 1906. Due W. M. Hoagland, Treas. Nevada Copper M. & S. Co., Thirty-Six Hundred dollars ($3,600) for 2,000 shares stock in said Company in name of A. Z. Schoch and Samuel Wig-fall, 1,000 each. (Signed) A. Z. Schoch.” Judgment was entered on a verdict for the defendant, and this appeal followed.

The plaintiff proved the above writing; that, by judicial decree in the State of Maine, the Nevada company had been formally dissolved and E. M. Thompson appointed receiver and trustee thereof, with power “to collect by suit or otherwise all outstanding debts or claims due said corporation”; further, that such receiver had been duly authorized to “commence suits or actions at law or equity for the collection of all moneys or other property of said corporation.” The main defense was an attempt to prove an alleged contemporaneous parol contract to the effect that Mr. Schoch was not to be required to pay the amount of his written obligation unless and until he disposed of the stock mentioned therein at a price sufficient to give him a profit, and that he should not sell for a period of two months from October 22,1906, but could at any time 'return the stock and get back his acknowledgment of indebtedness. The defendant contended he had signed the due bill on the faith of this alleged contemporaneous agreement, and that, being unable to sell, in October, 1907, he gave back the stock and requested the return of his obligation, which request was, in effect, refused; therefore, he claims the action in the court below to be a fraudulent use of the Writing in suit, which, under our authorities, entitles him to relief.

There are several points in the case, but the most important one concerns the sufficiency of the evidence to sustain the defense relied upon, particularly to prove the alleged parol agreement. The writing in suit is a clear, definite and unqualified acknowledgment of indebtedness, signed by the defendant, which implies a promise to pay immediately upon demand; and, in order to overcome the strong prima facie case thus made for the plaintiff, the burden was on the defendant to present proof as clear and convincing in character. It is contended, however, that the evidence offered for this purpose was too indefinite, uncertain and contradictory to establish either the terms of the alleged parol agreement or to prove it was the inducement for the execution of the written obligation; and, furthermore, that the defendant, had he seen fit, could have sold the stock at a figure which would have netted him a substantial profit.

It is established with us that the testimony of a defendant, standing alone, is insufficient materially to 'modify the plain terms of a Avritten instrument sued upon; that, before such testimony can be permitted to have this effect, it must be corroborated by other witnesses or proof of confirmatory attending circumstances. This rule applies even Avhefi the testimony is offered to prove a contemporaneous parol agreement Avhich is alleged to have induced the execution and delivery of the Avriting sought to be enforced, if the former is at variance Avith the latter; and when a contract of this nature is adduced, its terms must be proved by clear, specific, and indubitable evidence. In other words, in order to sustain such defense, the evidence relied upon, taken as a whole, must be so persuasive in character, so free from self-contradiction or material internal variances, and so intrinsically probable, that the judicial mind can rest thereon with a conviction that the ends of justice would be served by giving it effect as the basis of a decree reforming the writing in suit. That is to say, the witnesses,in support of the alleged contemporaneous parol contract must be credible and their examination must show them to have a distinct recollection of the relevant material facts; and, in so far as their evidence must be mutually corroborative, they should, to a reasonable degree, show a common understanding of the particular matter in question. In brief, their testimony must be clear, precise and indubitable before it can be permitted to overcome the documentary proof to which it is oppo'sed; and, in cases of this kind, after measuring the evidence relied upon according to proper legal standards, a court should never permit a jury to do what it would' not sanction if sitting as a chancellor. These are the principles which must govern the present review: Phillips v. Meily, 106 Pa. 536‘, 544; Hoffman v. Bloomsburg & Sullivan R. R. Co., 157 Pa. 174,195-7; Ogden v. Philadelphia & West Chester Traction Co., 202 Pa. 480, 485-6; Williamson v. Carpenter, 205 Pa. 164; Fuller v. Law, 207 Pa. 101, 104; Highlands v. Philadelphia & Reading R. R. Co., 209 Pa. 286, 292; Gandy v. Weckerly, 220 Pa. 285, 288-93; Faux v. Fitler, 232 Pa. 33; see also Potter v. Grimm, 248 Pa. 440, for a recent discussion of the abstract right to vary a written contract by proof of a parol agreement.

Three witnesses were called to prove the alleged agreement at bar. The first of these, Mr. Hoagland, testified that, at the date of the due bill, he was the secretary and treasurer of the Nevada company; that E. B. Tustin, who carried on the transactions with the defendant, was a director and member of the executive committee of this corporation; that the witness, upon inquiry as to why Mr. Tustin “received a due bill instead of cash,” was informed by the latter that “he had made an arrangement with Mr. Schoch......to this effect, that if the stock was sold by Mr. Schoch at a profit why he was to pay the due bill, otherwise the stock was to be returned.” Later, in reply to the question, “Will you state again what Mr. Tustin told you when he handed you that due bill?” the witness said Mr. Tustin had told him “that he had made an arrangement with Mr. Schoch whereby he was to send this stock to Mr. Schoch and if he could sell it, or did sell it, at a profit, he was to pay the due bill, otherwise the stock was to be returned.” Mr. Tustin was next called. He first said, “The understanding between us was the stock was to be paid for after its sale, so that he (Schoch) should have a chance to make some money out of it.” Then he testified the stock was not to be paid for out of profits, but from “the proceeds” of its sale, and that it was understood Mr. Schoch should not be called upon for payment until he had an opportunity to dispose of the stock; but, -when asked what, the arrangement was in the event of Mr. Schoch not being able to sell, the witness replied, “There was not anything said about that.” Subsequently, Mr. Tustin stated he did not remember that anything was said about a possible return of the stock, adding, “It was never presumed the stock of the company would depreciate in value”; and, although' examined at some length, he shed no further light upon this subject. When the same witness was asked the question, “In the contract with Mr. Schoch contemplating a possible sale, who was to judge of the time and price of that sale?” he answered, “There wasn’t anything said about that.” Mr. Schoch appeared in his own behalf. He stated the stock was sent to him without any prior understanding or request on his part (which Mr. Tustin denied) ; that, when he saw Mr. Tustin some days thereafter and asked why the stock had been sent, the latter replied, “Some one is going to have the benefit, you have favored me and I want you to have some benefit, at the proper time sell this stock and out of the proceeds pay for it”; that about two weeks subsequent to this conversation, on October 22,1906, Mr. Tustin said he was requested by the treasurer of the company to secure some kind of a written acknowledgment, and suggested the defendant give his note, which the latter refused to do; that Mr. Tustin had then stated these conditions to the defendant: “I was not to pay for the stock till after its sale, and out of the proceeds I was to pay for the stock”; further, “the only condition he (Tustin) imposed was that I was not to sell the stock for two months.” The defendant then said that Mr. Tustin tried to persuade him to give a written obligation, and assured him “repeatedly of this arrangement and that he would personally make himself responsible to me for any difficulty......or......responsibility I would have in the matter.” Mr. Schoch further testified: “I finally agreed to give him a due bill, with the understanding or agreement, as we made it between us or as he proposed, that I was to hold this stock for two months and then out of the proceeds pay it and under no other conditions”; that he (Schoch) suggested these conditions be placed in the writing, but Mr. Tustin objected, so they were left out; that when he said to the latter, “Suppose I am not able to sell the stock at the price,” Mr. Tustin replied, “All you have to do is to ask for the return of your certificate (due bill)' and it will be returned to you;” and that, upon getting this assurance, lie wrote, signed and delivered the due bill in suit.

In reading tbe evidence just reviewed, it will be observed that tbe first witness testified merely to what bad been told him by Mr. Tustin, which was, in brief, that tbe due bill was signed and delivered upon tbe understanding that Mr. Scbocb was to be given an opportunity to dispose of tbe stock and pay therefor out of tbe proceeds; and, if not sold, tbe stock could be returned at any time. Tbe testimony of tbe second witness was to tbe effect that Mr. Scbocb “should have a chance to make some money out of it [tbe sale of tbe stock],” liquidating bis obligation out of tbe proceeds; further, that no provision was made concerning tbe due bill in case tbe defendant failed to realize enough to pay it, and that tbe witness did not remember anything was stated as to a possible return of tbe stock. Thus, to this point, tbe evidence went no further than to prove that Mr. Scbocb gave tbe writing in suit upon tbe understanding and agreement that be was not to be called upon to pay for tbe stock until be could sell it at a price sufficient to liquidate tbe amount due and realize some profit therefrom.

Under a contract such as just indicated, tbe law would imply an obligation, within a reasonable time, to take advantage of a maiket which afforded an opportunity to sell at a price more than sufficient to meet tbe due bill. In this connection, tbe uncontroverted testimony shows that, for a period of twenty-nine days after October 22, 1906, tbe date of tbe obligation, tbe Nevada company’s stock sold in tbe open market at $3 per share; that for some time thereafter tbe price fluctuated between f2 and $3; and, finally, it fell to twenty-five cents a share. This proves beyond a doubt that tbe defendant bad a fair opportunity to make a reasonable profit by taking advantage of tbe open market, and, if tbe testimony of Mr. Hoagland and Mr. Tustin were tbe only evidence in tbe case, of necessity, tbe defense would fail; but, when tbe testimony of Mr. Schoch is read, we find he said the alleged oral contract contained these conditions, (1) the stock was not to be sold for two months after the date of the due bill, (2) if, at the expiration of that time, he could not sell at a price sufficient to pay his obligation, he might hand back the stock and secure a return of the due bill; and, if these alleged facts were sustained by sufficient evidence, they might constitute a defense.

The difficulty with the defendant’s case, however, is that he must point to clear, precise and indubitable evidence sufficient, both in character and substance, to sustain a finding that the alleged parol contract contained the two material conditions contended for by him, whereas, the only proof produced upon these points (particularly that the stock was not to be sold for a period of two months) was his own testimony, for, as already indicated, neither of the other witnesses depended upon by him gave any corroboration of these important features of the defense. Moreover, in a letter written by the defendant, on October 14, 1907, returning the stock certificates to Mr. Tus tin, he not only omits to say anything about the parol contract containing the conditions in question, but states the agreement thus: “This stock was taken with the understanding that, as we had been instrumental in aiding the sale of this stock at the time we — would—should—have it without paying for it until shuch a time as we could turn it at a profit.” In addition, on cross-examination, the defendant’s story of the transaction was much weakened, and, when compared with the testimony of his own witnesses, in the words of the learned court below, “there were discrepancies and contradictions.” Under these circumstances, it cannot be said the verdict is sustained by clear, precise and indubitable evidence.

. While the defendant stated Mr. Tustin “was under obligations to me because I made him personal loans of considerable amounts,” or “he may have considered him.self under obligation to me because of my personal loans to Mm,” and the evidence showed that he (Tustin) was a director of the Nevada company, and a member of its executive committee, “delegated” to sell the treasury stock, nevertheless there is no testimony upon the record which indicates any express authority in this director, or in the executive committee as a whole, to make the special arrangement which the defendant claims was entered into with him, or to sell this treasury stock at other than “a price not less than $2 per share,” which, of course, would mean $2 in cash or its equivalent; and it appears that, in fact, Mr. Tustin was directed by the treasurer of the corporation to “get cash.” Therefore, a question might well be raised as to the authority of any one representing the Nevada company to make the alleged parol contract contended for by the defendant; but it is not necessary to pass upon that point, for, while it is evident there was a parol agreement of some sort, yet, in view of the variance in the testimony given by the several witnesses depended upon to prove the one alleged, and the lack of sufficient corroboration of the defendant’s own version thereof, it is clear that “the measure of proof necessary to warrant the destruction of a written instrument” (Ogden v. Philadelphia & West Chester Traction Co., 202 Pa. 480, p. 486), i. e., the due bill in suit, was not reached in this case.

Although it appears that, in October, 1907, the defendant sent the stock to Mr. Tustin, yet the subsequent correspondence between them indicates this was done so the latter, acting for the former, might give the certificates to the treasurer of the Nevada company, and, if possible, get the due bill from him; but there is nothing to prove that Mr. Hoagland in any sense accepted a surrender of the stock, nor is it sufficiently clear that the certificates ever actually came into his possession; and it plainly appears he declined to return the defendant’s written obligation, saying he did not have authority so to do without the sanction of the board of directors. Hence, on the proofs presented, it cannot be said the Nevada company was in any sense estopped by a return and acceptance of the defendant’s stock. Moreover, we do not' think the opinion of the receiver, expressed to the court which appointed him, that the due bill had no value, can be given any material effect, for there is nothing to show this in any manner harmed the defendant; furthermore, the fact that the receiver did not surrender the due bill, but, by authority of court, passed it to a creditor, indicates that, after all, it must have been considered of some real value. Of course, the fact that no suit was brought till near the end of the statutory period, is of no particular significance; and all of these matters, together with the other points suggested by the defendant, whether taken singly or as a whole, have no real value as corroboration of his insufficient testimony concerning the .alleged agreement that he was to hold the stock for a period of two months before attempting a sale thereof, which latter fact we have already determined it was essential for him to demonstrate by proof measuring up to the full requirements of the law, in order to sustain the verdict and judgment in his favor.

Since the legal plaintiff showed a right to sue on the obligation béfore us, it was not necessary for the use-plaintiff to prove his title thereto; but, if for any reason it could successfully be contended to the contrary, the evidence produced was sufficient to that end. Finally, the fact that certain dividends were declared by the legal plaintiff, which were not paid to the defendant, is of no controlling force, since the receiver was authorized to distribute assets to stockholders only “upon the surrender to him of their stock certificates”; and the defendant did not attempt to make such a surrender, apparently preferring to stand on his present defense, although he knew Mr. Hoagland had failed to return the due bill and that, in all probability, the certificates were still in the hands of Mr. Tustin. These dividends were not claimed as a set-off in the court below, and the question whether this could legally be done is not before us at tbe present time. On tbe evidence as presented, we conclude as a matter of law that tbe plaintiff was entitled to judgment in bis favor, and tbe court below should have so instructed; be cannot, however, claim interest from tbe date of tbe due bill, as suggested in bis sixth request for charge, but only from tbe time of tbe demand for its payment: Breyfogle v. Beckley, 16 S. & R. 264, 265; Jacobs v. Adams, Executor, 1 Dallas 52; Rayne, et ux., v. Guthrie & Wallace, 1 Addison 137.

All tbe assignments of error covering tbe points discussed in this opinion, which complain of rulings to tbe contrary of tbe views here expressed, are sustained; tbe judgment is reversed and tbe record is remitted to tbe court below, with directions to enter judgment against tbe defendant n. o. v. for tbe amount of tbe due bill, with interest as already indicated.