Appeal from the Circuit Court of Cook County; The Hon. THOMAS
E. KLUCZYNSKI, Judge, presiding. Affirmed.
MR. JUSTICE DRUCKER DELIVERED THE OPINION OF THE COURT.
Rehearing denied and opinion modified February 26, 1964.
This is an appeal from a declaratory judgment finding that a stock share agreement terminated on the death of one of the two parties.
Plaintiff in his action sought a determination of the status of an agreement between himself and Frank Koster concerning their rights and privileges of selling, transferring, conveying or otherwise disposing of their shares of stock in the Vogel Tool and Dye Corporation. Each owned 455 of a total of 1150 outstanding shares. The agreement made in 1954 provided in part (1) that each party thereto should have personal custody of each other's stock and each would assume all liability for the safekeeping of the certificates; (2) that if either party desired to sell, transfer, assign or convey or otherwise dispose of any shares, an offer must be transmitted to the other party who then had the right to accept such offer in full or in part in the manner set forth within said contract.
Koster died and in his will bequeathed his stock to a trustee for the benefit of his widow for life and then to his sons. In 1960 the widow, as executor, sought to have transferred to herself individually some of the shares in payment of her widow's award.
The prayer of the Complaint was that the contract be declared terminated at the death of Koster and in the alternative, that, if the court determined the contract to be in force, plaintiff be given the option to purchase some or all of the decedent's shares, and further that the executor be directed to turn over to plaintiff the shares standing in his name and that plaintiff be directed to deliver to the executor the shares standing in Koster's name.
The trial court found that the death of Koster and the transfer of his shares to the executor did not give plaintiff the option to purchase Koster's shares; that the agreement terminated upon the death of Koster; that all shares of stock were free of restraint; and that plaintiff's shares should be delivered to him and Koster's shares to the executor.
In 65 Harvard Law Review the following guides on stock purchase agreements between stockholders are set out:
First option provisions must be made specific. What occurrences create the options, who is to have them, how long they are to remain open, and what procedure one must follow in exercising them, must be stated with precision. What kinds of dispositions are subject to the restrictions also must be clearly indicated. (p 791.)
Draftsmen frequently find that first options should be combined with definite commitments to purchase on the occurrence of specified events, e.g., the death or incapacity of the holder or his leaving the employ of the company. First option provisions alone do nothing, for instance, to solve the problems of a deceased shareholder's family and estate. (p 796.)
The contract before us contained no specific declaration of rights with respect to the shares in the event of the death of one of the parties.
Defendants contend that under paragraph 6 of the contract the agreement did not terminate at the death of Koster but inures to the benefit of the executor and the heirs and that transfers of the shares to the executor, from her to the trustee and from the trustee to the sons, should not constitute a disposition entitling plaintiff to purchase the shares.
Paragraph 6 of the contract states: "The parties hereto further agree that the provisions of this agreement shall be binding upon and inuring to the benefit of the parties hereto and their respective administrators, executors, heirs and personal representatives."
In determining the meaning of this provision, we must consider not only its language but its relation to the entire agreement.
The purpose of the contract is declared therein to be that the parties "are desirous of entering into a mutual agreement with each other respecting rights and privileges of selling, transferring, conveying or otherwise disposing of said shares of said corporation." In ...