Stewart Title Co. v. Herbert

Opinion

GARGANO, J.

Defendant is one of the founders of the Continental Title Company, hereafter referred to as Continental, and owns 350 shares of its capital stock. He appeals from a judgment of the court below, ordering him to deliver his 350 shares to the plaintiff pursuant to the terms of an option agreement between Continental and plaintiff’s assignor, the Stewart Title Guaranty Company, hereafter referred to as Stewart. The sole issue centers on the court’s interpretation of this option agreement.

Continental was formed in the early part of 1960; 1,500 shares of common capital stock, at a par value of $100 per share, were authorized and issued. Upon formation, Continental commenced to operate as an underwriting company, examining title to real property and selling policies of title insurance issued by Stewart; Continental retained a percentage of the fees charged.

On September 18, 1963, Continental notified Stewart of its election to

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terminate the underwriting agreement under which they were operating, effective March 20, 1964. On March 19, 1964, Continental’s share of the fees charged from the sale of Stewart’s title insurance policies was increased and the notice of termination rescinded. In return, Continental, through its shareholders, gave Stewart an option to purchase all of Continental’s shares of stock for $250,000. This agreement was prepared by Stewart and reads as follows:

“State of Texas )

)

County of Harris )

This Agreement, entered into by and between Stewart Title Guaranty Company, a Texas corporation, herein styled “Underwriter”, its successors and assigns, and the undersigned stockholders of Continental Title Company, a California corporation, of Fresno, California, their heirs, personal representatives, successors and assigns, herein referred to as “Stockholders”,

WITNESSETH:

Stockholders herein hereby represent that they are all of the stockholders of Continental Title Company, of Fresno, California; said stockholders, in consideration of the covenants, agreements and concessions running to stockholders, and Continental Title Company, a corporation, of Fresno, California, contained in agreement of even date herewith, entered into and executed by and between Continental Title Company and Underwriter, the receipt of all of which is hereby fully acknowledged, do hereby give and grant unto the Stewart Title Guaranty Company a firm option to buy all of the stock of Continental Title Company, a California corporation, of Fresno, California, at any time on or before June 30, 1965, for a cash consideration of Two Hundred Fifty Thousand Dollars ($250,000.00), said price to increase or decrease in an amount equal to an increase or decrease in net worth from $70,963.57, net worth figure as shown on Continental Title Company’s December 31, 1963 audited balance sheet prepared by J. M. Cadwallader & Co., said price adjustment to be occasioned by retained earnings according to good and acceptable accounting practices, after taxes and depreciation, and not including any reappraisals of assets.