APPEAL from the Circuit Court of Cook County; the Hon. NATHAN
M. COHEN, Judge, presiding.
MR. JUSTICE JOHNSON DELIVERED THE OPINION OF THE COURT:
This is an appeal from a suit brought to require specific performance of an agreement between the plaintiffs and the defendant for the sale of stock. A decree which denied the relief requested was entered following a trial by the court in equity without a jury. The issues presented for our review are whether the trial court erred in its construction of the agreement and whether the findings by the trial court are against the manifest weight of the evidence.
Microwave Communications, Inc. (hereinafter MCI) was incorporated under the laws of Illinois in October, 1963, for the purpose of providing service as a common carrier for microwave communications between Chicago, Illinois, and St. Louis, Missouri. On December 31, 1963, MCI applied to the Federal Communications Commission (hereinafter FCC) for a construction permit for its microwave system. In February, 1966, the FCC designated MCI's applications for hearing to begin in early 1967. Among the issues specified for determination was whether the company was financially capable of constructing and operating the proposed microwave route.
During December, 1966, and January, 1967, the directors of MCI met several times to discuss methods of demonstrating financial responsibility to the FCC. In particular, they decided to create an escrow fund for investors. Under the terms of the escrow the invested funds would be segregated from the other affairs of the company and distributed to MCI only if the construction permit was granted by the FCC. Thus, the risk of loss to investors in the event MCI's application was denied would be eliminated. A fixed term of preferably one year was suggested so that, in the event the FCC failed to act within that time, depositors would be able to withdraw their money from the fund and MCI would be free to dissolve the escrow and consider alternate forms of financing.
One of the MCI stockholders who eventually became involved in the escrow was the plaintiff, Nicholas Jannes. Following negotiations between Jannes and Thomas Hermes, MCI's secretary-treasurer, an agreement was reached on March 3, 1967, pursuant to which Jannes and Jannes Associates, Inc. (hereinafter JAI), an Illinois corporation of which Jannes was president, committed $45,000 for investment in MCI. The agreement contemplated an immediate purchase by Jannes of 250 shares of common stock for $25,000 and a deposit by Jannes of $20,000 in the escrow for the purchase of 133 1/3 shares of common stock at $150 per share provided the FCC ruled favorably on MCI's pending application.
At the March 3, 1967, meeting, Jannes asked to examine the form of the escrow pursuant to which the funds would be held. The escrow agreement which Jannes received later that day from the State National Bank of Evanston provided, in effect, that if the FCC issued the construction permit, the escrowee bank would deliver the deposits under the escrow to MCI; if the FCC denied the permit, the bank would return the funds to the depositors.
On March 6, 1967, following the review of the proposed escrow by his attorney, Jannes requested a confirmatory memorandum from Hermes for the purpose of having a written memorial of the terms of the agreement. Hermes immediately prepared a letter, dated March 6, 1967, which provided as follows:
"This will confirm our agreement and understanding. I have received from you, this date, on behalf of Microwave Communications, Inc., a check in the amount of $20,000.00 made out to Microwave Communications, Inc. Escrow Fund. This money will be deposited in the Escrow Fund under the terms of the agreement which will be received by you directly from the bank. In the event that the license or construction permit is granted to Microwave Communications by the FCC, the amount in the Escrow Fund, in your name, will be turned over to the corporation and at that time stock will be issued to you to cover the entire amount at the rate of $150.00 per share."
As contemplated by this letter, Jannes received the escrow agreement from the State National Bank of Evanston on or about March 9, 1967. This escrow was identical to the copy delivered Jannes on March 3, 1967, except that a new clause had been added which provided:
"[I]f no action has been taken by the FCC with respect to the aforesaid applications within 12 months from the date hereof, the Escrowee shall, after deducting its expenses and reasonable fee, return the balance of the Fund, plus increments thereto, to the Depositors as their respective interests may appear. Upon such return by the Escrowee, this agreement and the duties of the Escrowee hereunder shall terminate."
Jannes signed and returned to the bank a statement acknowledging receipt of the escrow agreement and agreeing to be bound by its terms. One week later, Hermes told Jannes that a one-year period for the escrow had been added at the request of the escrowee bank.
In October, 1967, an FCC hearing examiner authorized the issuance of a construction permit to MCI. However, MCI's opponents appealed this decision and it was stayed pending review by the full Commission.
In February, 1968, Jannes received a letter from MCI asking him to agree to an amendment of the escrow agreement which would extend his escrow deposit for an additional six months. The letter also stated:
"If your signed Agreement does not reach the Bank by March 3, 1968, the escrow will be terminated insofar as your participation is concerned and all rights of stock purchase thereunder will also be terminated."
Jannes told Hermes that he was uncertain about continuing in the escrow on two occasions. Nevertheless, Jannes signed amendments to the escrow agreeing to extend his participation in the fund for additional six-month periods in February, 1968 and August, 1968.
In February, 1969, before the expiration date of the escrow, the directors of MCI decided to allow the original escrow agreement to expire and to offer a new form of escrow to the current depositors and others. Under the terms of the new escrow agreement, MCI would issue stock at $300 per share and the depositors would be permitted to maintain the same potential equity position that they held under the original escrow. Jannes declined MCI's invitation to become a depositor under the new escrow agreement and, upon expiration of the original escrow, plaintiffs' deposit of $20,000, with interest, was returned to them. Plaintiffs deposited the $20,000 in an escrow account at First National Bank of Chicago on terms substantially similar to those of the 1967 escrow.
On August 14, 1969, the FCC approved MCI's application for a construction permit. Plaintiffs then made a demand on MCI to issue 133 1/3 shares of its common stock at $150 per share. MCI refused to issue the stock at that price and, on April 16, 1970, plaintiffs initiated an action seeking to compel specific performance.
The action below was brought and tried by the plaintiffs on the basis of an alleged oral agreement by MCI to issue 133 1/3 shares of common stock to plaintiffs at $150 per share if and when the FCC ruled favorably on MCI's pending application, regardless of how long the FCC took to act. They argue that their agreement with MCI regarding the purchase of the stock was separate and distinct from the escrow agreement, which served merely as a repository of committed funds between the depositors and the bank. Plaintiffs further contend that, since MCI was not a party to the ...