Appeal from the Circuit Court of Cook county; the Hon. CHARLES
S. DOUGHERTY, Judge, presiding. Decree reversed and cause
remanded with directions.
JUDGE ROBSON DELIVERED THE OPINION OF THE COURT.
Rehearing denied November 18, 1957.
This is an appeal from a decree granting summary judgment to plaintiff Jackson Martindell for specific performance of an option to purchase 67 per cent of $425,000 of debentures and 67 per cent of 425 shares of the common stock of defendant Marquis-Who's Who, Inc., a not-for-profit corporation, hereinafter called the corporation. (The American Institute of Management, a not-for-profit corporation of which plaintiff Martindell is president and a director, is a party plaintiff to this action as a third party beneficiary under the agreement upon which this suit is predicated. It was not a party to the agreement, and, for the purpose of clarity reference to it as plaintiff will be omitted from the text of this opinion.) Defendants contend that the right of plaintiff to purchase the defendant corporation's debentures and stock was terminated by the payment and discharge of the debentures by the corporation prior to the exercise of plaintiff's option to purchase the debentures and stock, and that plaintiff's motion for a summary decree should have been denied and a summary decree entered in favor of the defendants, or, in the alternative, that a trial be had with respect to any issue of material fact. The issues were determined by the trial court upon a verified complaint, answers, replies thereto, each with exhibits attached, requests for admissions of fact and genuineness of documents and replies thereto and sworn affidavits of the parties.
The relevant facts necessary to determine the issues, based upon this record, are that Wheeler Sammons, Senior, and his wife, Dorothy W. Sammons, had for a long period of time prior to October 2, 1952, published "Who's Who in America" and similar publications. In 1951 Sammons, Senior, conducted various negotiations for the sale of the business or for financial backing which would assure the perpetuation of their enterprise. With the data collected by Who's Who publications as a nucleus, he was interested also in establishing a public library of biographies. After negotiations with various firms and individuals he determined to enter into an agreement with plaintiff for the purpose of securing the necessary financial backing and establishing the library. On October 2, 1952, Wheeler Sammons, Senior, and defendant Dorothy W. Sammons entered into an agreement with plaintiff. The agreement refers to plaintiff as the buyer and the Sammonses as the sellers. It is a comprehensive plan by which the Sammonses could obtain the necessary financing and continue to remain active in the publishing business, receive an income from the net profits of the business, establish a biographical library, and at the same time provide for the perpetuation of the publishing business and the library in the event the sellers ceased to remain active by virtue of retirement, disability, or death. The agreement recites that plaintiff was interested in creating and maintaining the library and also in assuring the perpetuation of the project.
To carry out the purpose of the agreement, it provided for the formation of a corporation authorized to issue 425 shares of capital stock with a par value of $3 a share, to be purchased by the Sammonses. The agreement next provides for a loan from plaintiff to the Sammonses of $125,000 in cash, secured by a mortgage on the building owned by the Sammonses in which they conducted their business, and further secured by a pledge of certain debentures of the face value of $125,000 to be issued by the new corporation to the Sammonses. By a third provision the Sammonses were required to transfer the $125,000 in cash and all the capital assets of the partnership to the new corporation in return for $425,000 worth of debentures to be issued by the corporation. These debentures were subject to another provision which gave plaintiff an option to purchase up to but not in excess of 67 per cent of the original principal amount of the debentures, and to transfer and assign to him one share of stock for each $1,000 in principal amount of the debentures. The time for the exercise of the option started ten years after the issue of the debentures and continued ten years thereafter, unless Sammons, Senior, died, in which event the time was accelerated to the date his administrator or executor was appointed and continued six months thereafter. The time was further accelerated in case of his retirement. The agreement contained the following provision with reference to the exercise of the options:
"In the event that the Buyer chooses to exercise any of the options granted hereunder, he shall notify the Sellers or their personal representative or representatives, as the case may be, not less than thirty days in advance of the date specified in said notice for the exercise of said option." (Emphases ours.)
Pursuant to the terms of the agreement, the corporation was formed on February 20, 1953. Plaintiff loaned the $125,000 to the Sammonses, which was evidenced by their note for this amount, secured by a mortgage on the real estate occupied and used by the business and owned by the Sammonses. The Sammonses transferred the partnership assets, including the $125,000 received from plaintiff, to Who's Who, Inc. in exchange for the $425,000 of the corporation's debentures. They purchased the 425 shares of common stock of the corporation for $1,275. They pledged debentures bearing numbers one, two and three, totaling $125,000, to plaintiff. In addition, they executed the mortgage heretofore mentioned and assigned to plaintiff the lease to the corporation as security for his loan. The debentures have the following provision:
"The right is hereby reserved to the corporation to redeem this bond at any time by the payment of the principal hereof and the interest thereon to the date of redemption; provided, however, that if there be any bond or bonds outstanding with a lower serial number, such bond or bonds shall be redeemed first."
The pledge agreement executed and delivered to plaintiff had the following provision:
"If the pledgors shall repay the above described principal sum of One Hundred Twenty Five Thousand (125,000.00) Dollars, together with all interest due thereon, on or before the maturity thereof, then, in such event, the pledgee shall deliver back to the pledgors all of the said debenture bonds then remaining unpaid, and shall reassign said lease to the pledgors. . . ."
"In the event that any of the said debenture bonds are redeemed by the obligor corporation, the proceeds of such redemption shall be applied by the pledgee first in payment of interest due on the above described principal sum and the remainder on account of the principal balance then remaining unpaid."
Debentures bearing numbers one through three were delivered by the Sammonses to plaintiff and held by him under the terms of the pledge. The remaining seven bonds, serial numbers four through ten having a value of $300,000, were in the possession of the Sammonses. Mrs. Sammons had an undivided 80 per cent interest in the bonds bearing serial numbers four through ten. The estate of Wheeler Sammons, Sr., had the remaining twenty per cent interest in these bonds.
On February 21, 1956, Sammons, Sr., died. The letters of administration with will annexed were issued on March 5, 1956. This action concerns the events which transpired in the succeeding two days and involves the construction of provisions in the initial contract, the principal note, the pledge agreement, and the debentures.
On March 5, 1956, the directors of the corporation by resolution elected to redeem the ten debenture bonds. The corporation and Mrs. Sammons had previously agreed to discharge her interest in bonds four through ten by accepting a loan from her of $240,000 in return for a demand note in that amount to be executed by the corporation. The directors then authorized that transaction. On the same date, March 5, 1956, the corporation drew a check for $185,000 on its account at The First National Bank of Chicago ...