Hughes v. Charlton

This proceeding was instituted in the circuit court of Cabell county by James A. Hughes and Thomas Hatfield and prays that W. A. Charlton, trustee, be required to disclose the names of the persons for whom he acted as trustee in the purchase of the stock of the Pence Springs Water Company, and for a recovery from him and other named defendants, the amount due plaintiffs by virtue of their contract with Charlton, executed June 11, 1923, and, further, that relief he had against D. J. Pancake, by reason of his contract with Charlton, dated October 22, 1923, whereby he assumed all of Charlton's obligations under the former contract with plaintiffs. On the hearing before the Court, all the defendants, except Charlton and Pancake, were dismissed from the cause. Charlton and Pancake appeal from a decree against them for $16,004.08.

Prior to the execution of the contract of June 1, 1923, plaintiffs either owned or controlled all of the outstanding stock of the Pence Springs Water Company, engaged in the business of bottling and selling water from Pence Springs, Summers county. On the 11th day of June, 1923, this contract was entered into, whereby plaintiffs, as such owners, sold to Charlton (who was designated therein as trustee) the stock of said corporation, aggregating $44,000.00 for the consideration of $25,000.00, of which purchase price $2,500.00 was paid in cash, $2,500.00 was agreed to be paid on or before July 15, 1923, and the remaining $2,000.00 was to be paid at the rate of $500.00 per month, commencing September 1, 1923, "all of which deferred payments were to be evidenced by notes of the company", and Charlton to have the right, if he so desired, to sell additional stock in the corporation in order to raise the money to complete the payments of the stock. And the stock sold to Charlton was to be placed in escrow in the hands of Z. T. Vinson and to be delivered as paid for, and the purchase price was to be paid to the said Vinson, who was, out of the purchase money, first to pay certain debts of the Pence Springs Water Company, aggregating $14,402.07, before turning over any money to plaintiffs. Charlton signed this contract as trustee, and Hughes and Hatfield, as the "owners of all outstanding stock" of said company.

At the time of the delivery of the foregoing contract, a letter of agreement was addressed to Vinson, who had been designated to hold the stock, receive payments therefor, etc. This latter agreement provides that Vinson is to turn over stock (certificate of which is placed in his hands signed in blank) as Charlton, trustee, makes payments, in proportion of $25,000.00 to $44,000.00; that Charlton, trustee, will cause to be executed by the said corporation, notes for all the deferred payments mentioned in said contract, said notes to be deposited with Vinson for collection; that Vinson is to pay creditors designated by plaintiffs; and that the residue, after payments of debts, be turned over to Thomas Hatfield.

Charlton insists in this appeal that the entire transaction can be explained by the two foregoing writings, when read together, and set them both out in full in his brief in this Court. He proceeds on the theory that the agreement between him and the plaintiffs was for the purpose of bringing about a re-organization of the company, which was heavily indebted at that time, as shown on the face of the contract and the evidence adduced. As this plan of re-organization is not shown by the pleadings or evidence, if such is shown to exist, it must, as counsel for Charlton contends, be found in the foregoing writings. But do the writings so show? The mere appendage "trustee" to Charlton's name and signature is not of itself sufficient to indicate that the obligation incurred under the contract was that of a third person. Scott v. Newell,69 W. Va. 118; Thompson Lively v. Mann, 53 W. Va. 432; State v. Hudkins, 34 W. Va. 370; Bank v. LewisCounty, 28 W. Va. 273; Rand v. Hale, 3 W. Va. 495. The statements in the contract and the escrow agreement to the effect that the deferred payments are to be evidenced by notes of the company, and that if Charlton should deem it necessary he "may increase the capital stock of said corporation and sell same for the purpose of liquidating the notes herein described", are relied on. The first statement is amplified by the escrow agreement to the effect that Charlton, trustee, "will cause to be executed by the Pence Springs Water Company, notes for all of the deferred payments mentioned in said contract". But these do not of themselves show that Charlton is to be relieved of the personal liability under his contract. It would rather show that Charlton had agreed that the Water Company would back his promise to pay. And the latter provision regarding the issuance of additional stock seems on its face to be inserted for the express purpose of aiding Charlton in the sale of stock in the Company and getting money to pay for his property. Had this not been inserted in the contract, Charlton would have been handicapped by not having any stock to turn over to those whom he sought to interest in the venture to the extent of buying stock. There is ample authority to the effect that the two papers may be read together. See 6 Rawle C. L. 850.

While we have held in many cases that the contract is the depository of all agreements between the parties(Jones v. Kessler, 98 W. Va. 1), yet where the contract is not clear, we are permitted to look to their acts at the time of entering into the contract and their subsequent conduct in relation thereto, for the purpose of determining its proper interpretation. 13 C. J. 546; Holdred Colliers v. Boone CountyCoal Corp., 97 W. Va. 109; Summit Coal Co. v. RaleighSmokeless Fuel Co., 99 W. Va. 11; Clark v. Sayers Lambert,55 W. Va. 512; Smith v. South Penn Oil Co., 59 W. Va. 204; HallMining Co. v. Consolidated Fuel Co., 69 W. Va. 47;Myers v. Carnahan, 61 W. Va. 414; Lovett v. Central W. Va. GasCo., 73 W. Va. 40; 5 Enc. Dig. Va. W. Va. Rep., 282. Hughes and Hatfield exercised no rights in the corporation after the contract with Charlton. Charlton, however, took possession of the minute book and other records and documents of the Pence Springs Water Company, and went to Pence Springs and took personal charge of the property for several months and had himself elected president of the company. He made payments aggregating $6,000.00 on the purchase price. He then entered into the contract hereinbefore referred to with Pancake, selling the latter his rights under the contract with plaintiffs for $5,000.00, taking Pancake's two notes aggregating that amount, with provision that Pancake was to assume payment of the balance remaining unpaid under Charlton's contract. Pancake having defaulted in payment of notes, Charlton, in his own name, sued Pancake and recovered a judgment for said amount. Charlton states that he was not "acting as trustee for anybody." Likewise the defendants dismissed from this suit say Charlton was not their trustee.

The foregoing acts show that Charlton recognized the debt as his own debt but was simply laboring under a false impression that when he sold the contract to Pancake his liability thereunder terminated. All these actions would tend to defeat any possible contention on the part of Charlton that the contract purported to contain a re-organization plan of the company, and that he was not personally liable. The fact that Charlton was to execute notes to the company, etc., in view of the fact that he never attempted to execute the same would tend to show that said notes were to be additional security and that plaintiffs looked primarily to Charlton for payment. Suppose the terms of the contract had been carried out by Charlton and Pancake, and Vinson had turned over the stock to them. Would Hatfield and Hughes have any interest therein? Assuredly not. Who would be in position to contend that Charlton and Pancake did not own such stock? No one, so far as this record discloses. This is the test.

Since Charlton is personally bound for the purchase price of the stock, Pancake, who agreed under his contract with Charlton to "perform all obligations undertaken" by the latter under contract of June 1, 1923, is likewise bound. Charlton v.Pancake, 98 W. Va. 363. Under his contract Pancake was to receive in consideration of the above, and $5,000.00, "all of the stock which the said Hatfield and Hughes therein agreed to sell to the said Charlton, trustee". Having assumed the indebtedness contracted by Charlton, he is also bound. This is the holding of the learned chancellor in the court below. The rule established by the repeated decisions of this Court, both as to law and equity, is that the finding of the circuit court as to facts in issue, unless against the plain preponderance of the evidence, is conclusive on this Court. McBee v.Deusenberry, 99 W. Va. 176.

While plaintiffs' rights to maintain this suit in equity is challenged, we are of opinion that they are entitled to come into equity, on the ground that Pancake, not being a party to the contract, could only be proceeded against in equity. And since equity has taken jurisdiction for that purpose, it retains jurisdiction for all purposes. Petty v. Warren, 90 W. Va. 397;King v. Scott, 76 W. Va. 58; Hamilton v. PublicService Co., 88 W. Va. 573.

While the appellants objected to plaintiffs' motion to refer this cause to a commissioner of the circuit court to ascertain the indebtedness of the Pence Springs Water Company of the 1st day of June, 1923, and provided to be paid out of the purchase price of the Pence Springs Water Company, under said contract of June 1, 1923, and further moved the court to appoint a special receiver therein to collect and hold the recovery therein, pending the report of the said Commissioner, and said objection was sustained by the court, I believe that such reference should have been made for the purposes specified. And to this end alone, I would reverse and remand this cause.