APPEAL from the Circuit Court of Cook County; the Hon. DANIEL
A. COVELLI, Judge, presiding.
MR. JUSTICE GOLDBERG DELIVERED THE OPINION OF THE COURT:
Standard Steel & Wire Corporation (plaintiff) filed a complaint for specific performance of an alleged agreement to purchase some of its own corporate stock from Chicago Capital Corporation (defendant). Defendant then filed a counterclaim praying specific performance of an alleged agreement for issuance to it of certain additional shares of stock in plaintiff corporation. After a bench trial, the court dismissed both complaint and counterclaim with prejudice. Plaintiff appeals. Defendant cross-appeals.
The issues involved in the complaint and counterclaim are not related. They will receive separate consideration.
As a preliminary matter, it is undisputed that defendant received a warrant issued by plaintiff on February 9, 1962, expiring November 30, 1968, for issuance to defendant of 185 shares of stock in plaintiff corporation. On November 27, 1968, defendant exercised this warrant and received these 185 shares at a total cost to defendant of $20,350. Both the warrant and the stock certificate contain provisions which reserve to plaintiff the right of first refusal in event that defendant should choose to sell the shares thus issued. Prior to any such contemplated sale, defendant was obliged to give written notice to plaintiff of its intention to dispose of the stock, "stating the amount proposed to be received by it in connection with such sale * * *." Plaintiff had the right for 30 days following its receipt of such notice "to purchase such shares at a price equal to the price proposed to be received * * *" by defendant.
Plaintiff called as its witness the attorney who had handled the transaction in its behalf. He testified that he had received a telephone call from counsel for defendant on March 31, 1969. Defendant's counsel stated that defendant was going to sell its stock for a price of approximately $52,000 and that subsequently the stock might be sold back to defendant. On cross-examination the witness added that, in this initial conversation, counsel for defendant asked him if plaintiff would waive its rights under the stock agreement. In addition, he was told that defendant wanted "to get this on the record as of March 31 * * *"; the same day on which the conversation occurred.
The two attorneys again discussed the matter on the telephone on April 3, 1969. Plaintiff's counsel further testified that he directed the attention of the other attorney to the terms of the warrant in question and stated that he should have a written notice, a copy of which he could send to his client for consideration. On April 7, 1969, plaintiff's counsel received a letter from defendant's attorney dated back to March 27, 1969, together with a typewritten note initialed by the sender and marked "confidential." These documents were actually mailed on Friday, April 4, 1969.
The letter in question was directed to plaintiff's attorney rather than to plaintiff corporation. It stated in the first paragraph that defendant proposed to sell its stock to Snow Manufacturing Company at a selling price of $285 per share; a total of $52,725. However, in following paragraphs, the letter stated that the warrant provided for notice to plaintiff which would then have the right to purchase the stock for 30 days at the same price. The letter also stated that this aspect had been discussed, with attention to the fact that defendant would like to consummate the transfer "on Monday next, March 31, 1969." The letter then requested that plaintiff corporation "in the light of all of the circumstances, waive its right to such notice in this particular case, and its right to purchase such shares within the 30 day period * * *." It also asked that the addressee would, "if you could, after discussing the matter wih your client, confirm such waiver in a letter to me." It further stipulated that Snow Manufacturing Company, as new holder of the shares of stock, would be subject to the same restrictions regarding right of first refusal in event of sale, as endorsed upon defendant's stock certificate. It should be noted that defendant corporation and the Snow Company are related by common ownership of stock.
The typewritten note enclosed with the letter was undated. It stated that defendant's attorney had the certificate in his possession with separate stock power attached transferring the shares to the Snow Company. It requested receipt of "further views at an early date * * *" so that the new certificate would be dated March 31, 1969. Plaintiff's attorney further testified that shortly after the initial telephone conversation, which took place on March 31, 1969, and prior to the next telephone conversation, he consulted with the treasurer of plaintiff corporation and asked him if the cash required to exercise plaintiff's right of purchase of the stock could be accumulated in 30 days. He never thereafter told defendant's counsel that he was making continued efforts to obtain the cash so that his client could purchase the stock, although he was primarily concerned with that activity. It should be noted with particularity that plaintiff's counsel was informed at all times that the suggested transaction was not a sale at arm's length in the usual sense of the word but was strictly a transaction for convenience. The letter in question was written by defendant's counsel only at the request of the attorney for plaintiff.
The record also shows that about April 22 or 23 counsel for plaintiff called the same attorney for defendant and asked if the proposed sale of the stock was for cash on installments. The attorney responded that he did not know but did not think it would make any difference since plaintiff was not going to exercise the option. Plaintiff's counsel responded to the effect that his client was in fact going to do so. The evidence shows that plaintiff was successful in its effort to accumulate the needed amount of cash. It is undisputed that plaintiff did, on May 1, 1969, actually make tender of the proper amount of cash to the attorneys and several agents of defendant together with service of notice of its election to exercise its right to purchase the stock.
In this court, plaintiff urges that the legend on the stock certificate giving it the right of first refusal is lawful; such right is a unilateral contract which becomes a bilateral contract upon acceptance by plaintiff as purchaser; and, after such acceptance by plaintiff, defendant had breached the contract of first refusal so that plaintiff is entitled to specific performance. Defendant responds that it did nothing which would give rise to a right of plaintiff to purchase the stock but merely requested that plaintiff waive its right of first refusal; defendant did not breach the legend on the stock certificate which gave plaintiff a right of first refusal, as defendant neither made nor accepted an unconditional offer for sale of the stock and did not actually sell it. In addition, defendant urges that plaintiff has filed no reply to new matter alleged in defendant's answer regarding the authority of defendant's attorney in connection with the transaction.
The basic issue which thus arises is the legal significance of the letter dated March 27, 1969. Plaintiff argues that the restrictions on transfer of the stock were lawful and constituted a binding unilateral contract which became an enforceable bilateral contract when the plaintiff as purchaser accepted and acted upon the notice served by defendant. It is therefore the essence of plaintiff's claim that the letter was unconditional and binding and that defendant was bound by the conditions thereof, all pursuant to the endorsement upon the stock certificate. Defendant does not take issue with these legal principles except for the last proposition. Defendant construes the letter from its counsel, in the light of the entire record, as being a request that defendant waive its right of first refusal and further takes the position that it had never actually sold the stock in question as plaintiff well knew at all times. The solution to the problem does, in our opinion, indeed rest upon the legal significance of the letter.
Careful examination of the letter itself shows that it is capable of being understood in more senses than one. The letter commences with a statement of fact that defendant proposes to sell the stock and states the selling price. There is, however, no statement as to whether the price is cash or whether the consideration is to be paid in installments. Counsel for plaintiff recognized this deficiency when he called defendant's attorney and attempted to supplement the letter by a verbal commitment. Of crucial importance is the fact that the letter on its face does not purport to be merely a notice of proposed sale. On the contrary, it goes much further and expressly requests a waiver of "such notice in this particular case * * *." It would ...