Hambleton & Co. v. Union National Bank

Offutt, J., delivered the opinion of the Court. On December 6th, 1928, Hambleton & Co., Incorporated, the appellant, hereinafter called Hambleton, the Union National Bank of Pittsburgh, the appellee, hereinafter called Union or the bank, and the Baltimore Trust Company, hereinafter called the trust company, executed a written agreement, which, after reciting that: “Whereas, agreements for the purchase of seven per cent, cumulative prior preference stock of the Pittsburgh Hotels Corporation and common stock of said corporation, in units of one- share of prior preference stock and one-half share of common stock, are about to' be entered into between employees of Pittsburgh Hotels Corporation and Union, a true copy of the form of said purchase-agreement being attached hereto and made part hereof,” provided: (1) That the trust company would deliver to the-bank 1,500 shares of the preferred stock of the Pittsburgh Hotels Corporation, hereinafter called the hotels company, which it held as collateral on a loan to Hambleton; (2) that Hambleton would deliver to the bank 750 shares of the common stock of that company; (3) that the bank would receive-payments on such stock from employees of the hotels company purchasing the same under the form of the purchase agreement referred to in the preamble, and would remit such collections together with all dividends on the preferred stock received by it to the trust company; (4) that the bank would deliver to> employees purchasing stock under such installment ³²¹ purchase agreements the stock purchased by them whenever the payments made by dr for such purchasers on that account to the bank plus dividends on the preferred stock paid to it were sufficient to pay for the stock purchased; (5) that “In case Union is called upon to make any payment to or to credit the account of any purchaser, or his personal representative, under the provisions of the seventh paragraph of the purchase agreement, Hambleton agrees to reimburse Union for the amount so paid or credited upon demand by Union. When so- reimbursed, Union shall deliver to Baltimore, upon demand by it, certificates for the prior preference stock and to Hambleton, upon demand by it, certificates for the common stock covered by the agreement with the purchaser to whom, or to whose personal representative, payment has been so made. It is understood that Union shall have a lien upon any such stock immediately enforcible by public or private sale thereof, in case Hambleton should fail to reimburse it, upon demand, as above provided”; (6) that the bank was under no obligation “to terminate the right of any subscriber to continue payments or receive stock under the terms of his pxxrchase agreement, except after written notice from Pittsburgh Hotels Corporation of the termination of his employment”; and (7) that “Hambleton agrees to indemnify Union against any liability incurred by it on account of entering into said purchase agreements except to the event of such liability arising on account of the gross negligence or wilful default of Union.” The purchase agreements, the form of which was made a part of the contract described supra,, recited that: “Whereas, Hambleton & Company has offered to sell to the purchaser, on the terms herein mentioned, the shares of stock below set forth and in order to make more certain the carrying out of the plan for the sale of said stock, and to- enable the bank to enter into and carry out the terms of this agreement, has caused delivery to be made to the bank of certificates for said stock in form for transfer,” and then provided for the purchase of the stock by employees of the hotels company, the ³²² payment of the purchase price by dividends on preferred stock and installments to be deducted ‘by the hotels company from the wages of the employee and paid to the bank, for the delivery of the stock when fully paid up, that “in case the' purchaser dies, or his employment by the Pittsburgh Hotels Corporation is terminated for any other reason, before he had fully paid for his stock, the bank agrees to1 pay to the purchaser, or to his personal representative, or other person authorized to receive payment under any present or future law of the State of Pennsylvania, on identification satisfactory to the bank, the amount of all payments on the purchase price of said stock received by it (not, however, including any dividends credited on said purchase price), with interest on each of said payments at the rate of six per cent, per aruomm from the date of the receipt thereof to the date of the termination of purchaser’s employment by The Pittsburgh Hotels Corporation.

After such payment has been made by the bank, or the amount due the purchaser has been credited to him by the bank, all right, title and interest of the purchaser, or of his heirs, executors, administrators or assigns, in said stock, or under this agreement, shall terminate, except the right to receive the amount so credited.” The purpose and effect of those instruments may be thus summarized: Hambleton owned- a number of shares of the common and preferred stock of the Hotels Corporation and it had pledged 1,500 shares of the preferred stock as security foy a loan which the trust company had made to it. It had devised a plan to sell that stock to employees of the hotels company under an agreement by which the purchase price would be paid in installments deducted from the wages of the purchasers by their employer, and by dividends on the preferred stock. To carry out that plan, the trust company agreed to deliver to the bank 1,500 shares of the preferred stock which it held as collateral, and Hambleton was to deliver to it 750 shares of common stock which it held. The bank was then to execute purchase contracts with employees of the hotels company purchasing the stock thus delivered to ³²³ it, in which it would appear as principal and vendor, and to which neither Hambleton nor the trust company would be a party.

In those stock purchase contracts, the bank agreed with employees purchasing stock under them that, in the event of the death of the purchaser, or in the event that “his employment by the Pittsburgh Hotels Corporation is terminated for any other reason,” it would refund to such purchaser or Ms legal representative all payments made on account of the purchase price, exclusive of dividends received by it, together with interest thereon at six per cent, per annum. After the execution of the original contract, the bank executed with a number of the employees of the hotels company agreements in the form described above for the sale of shares of the common and preferred stock of the hotels corporation to them, and the trust company and Hambleton delivered to it certificates of stock sufficient in number to permit it to perform those contracts. For a time payments were made under the purchase contracts and remitted by the bank to the trust company, and occasionally, as some purchaser died or his employment by the hotels company was terminated, a certificate to that effect from the hotels company would be presented to the bank, it would notify Hambleton, and Hambleton would furnish the money to refund the purchaser what he had paid on the purchase, together with interest, as provided in.the stock purchase contracts. But when, in September, 1930, Hambleton was notified by the bank that the employment of about seventy-five of the employees of the hotels company who were bound by those stock purchase contracts had been terminated, and that those employees demanded of the bank a refund of payments made on account of the stock respectively purchased by them with interest thereon, it wrote the bank as follows: “We have made an investigation of the books of the Pittsburgh Hotels Corporation and find that with the exception of only a few employees, all of those who have demanded a refund of the amounts paid by them on the ground that their employment by the Hotels ³²⁴ Corporation had terminated, were ont of such employment in most cases for not more than two days and in no case for more than a week.

The agreement certainly never contemplated the return of the fund • on account of temporary suspension of employment, particularly when as in this case, the claim for the refund must he based upon collusive discharge of the employee. We are unwilling, therefore, to honor the claims for the refund unless we are furnished with satisfactory evidence over the signature of the president or vice-president of the hotel that the man who is making the claim has been discharged permanently and will not be re-employed by the Hotels Corporation at least for a period of one year.” On September 10th the bank in answer to that letter wrote: “Until advised by counsel to the contrary, we will exercise all reasonable care in complying with your stipulation, but inasmuch as the Stock Purchase Agreements between this hank and the various employees specify the conditions under which refunds are to be made, we are apprehensive that some employees may seek to hold this bank liable for breach of contract. Therefore, we should like to have an official communication from your company undertaking to indemnify and protect The Union Hational Bank of Pittsburgh from any and all liability and expense which may arise from our insistence upon compliance with the conditions imposed by your letter of September 9, 1930.” On September 11th, further answering Hambleton’s letter, the bank wrote: “This is in further reference to your letter of September 9, 1930, regarding the Pittsburgh Hotels Corporation Employees’ Stock Purchase Plan. Upoji further consideration of the agreement between your company, Baltimore Trust Company and this bank and the agreement between this bank and the employees, it is our opinion that the conditions imposed in your letter ³²⁵ are incompatible with the terms o£ the above-mentioned agreements and, therefore, we must decline to undertake to carry out such conditions.

We feel that insistence upon such conditions may involve this hank in serious liability to the respective employees on account of breach of contract under the Stock Purchase Agreements. “Therefore, you will kindly accept this as formal notice. “(a) That we hold in our files official certificates from the Pittsburgh Hotels Corporation indicating that the employment of each person listed in our letters of September 4th and 5th and in our two letters of September 8th has terminated and that his or her subscription contract is no longer in force so that each employee is entitled to a refund of the payments made, together with interest thereon as specified in the Stock Purchase Agreement; “(b) Tbat we ask your company to make remittance promptly of the money necessary to make the refunds described in our said letters; “(e) That we will look to your company to indemnify this bank against any expense or liability incurred on account of your delay in providing funds to meet said refunds.” In reply to that letter, Hambletoii & Co. on September 15th wrote the bank: “We regret extremely that you as a third party to the transaction, as it were, may he subjected to any annoyance in the matter,. Although we recognize the import of the strict wording- of the contract with the employee, it is not conceivable in our opinion that the paper could be so construed as to permit the employee in collusion with the management to get hack the money on the ground that they were discharged when as a matter of fact their employment was temporarily suspended only and that for the express purpose of enabling them to get the refund. ³²⁶ “We must, therefore, maintain the position set out in our letter to you of September 9th. “If any of the employees in question recover in a proceeding against you, we would, of course, expect to reimburse you the amount that you pay and your expenses in the matter, provided, of course, that we were given an opportunity to appear and defend the suit.” Following that correspondence, on September 19th, 1930, the bank; refunded to the employees named in a list sent to Hambleton payments made by them under the stock purchase agreements, aggregating $11,310.50, and by its letter of that date it notified Hambleton that such refunds had been made in accordance with certificates from the hotels company certifying that the employment of such purchasers by the hotels company had been terminated; that, as a consequence of that termination, the stock purchase agreements had also by their terms been canceled; that under section seven of such agreements the bank was obliged to make such refunds; and it demanded that Hambleton reimburse it for the amount which it has thus paid out. Hambleton refused to comply with that demand, and on December 19th, 1930, the bank brought this action in the Superior Court of Baltimore City against Hambleton. The case was tried before the court sitting as a jury, and, the verdict and judgment being for the plaintiff, the defendant took this appeal.

The plaintiff asked for no instructions, and, as the five prayers offered by the defendant were all refused, the court took the case for determination upon the pleadings and evidence without instructions of any kind. Its action in refusing the defendant’s prayers is the subject of the first of the two exceptions submitted by the record, and its failure to formulate of its own motion and for its Own guidance proper instructions is the subject of the second, and these two exceptions will be considered in inverse order. The long-settled and establshed practice in this state in respect to instructing the jury, of the court sitting as a jury, in law cases, as to the law applicable to the facts, is that each ³²⁷ party submits in writing for tbe consideration and action of tbe court bis contentions as to tbe law of tbe case, and in so far as tbe propositions embodying tliose contentions are applicable to the facts, an accurate exposition of the law, and necessary for the adequate and proper instruction of the jury, it is the duty of the