Barceloux v. Donohoe

MR. PRESIDING JUSTICE FINCH Delivered the Opinion of the Court.

This action arises out of a sale by the defendants to the plaintiff of a part of the capital stock of the Bank of Orland. The defendants executed a written option to sell their shares of stock to the plaintiff at prices per share stated in the option. The option contained the following :

“It is expressly understood and agreed that should the sale of this bank stock hereinbefore mentioned, be consummated and completed hereunder, that upon the payment for the same as herein provided by the party of the second part, the parties of the first part will sign, execute and deliver to the party of the second part that certain agreement, a copy of which is attached hereto and marked ‘Exhibit A’ and made a part hereof . . . the execution of the said agreement by the parties of the first part . . . being part of the consideration for the sale of said capital stock and the purchase thereof by the party of the second part.”

The agreement referred to contained the following:

“Whereas, there is now pending in the Superior Court, State of California, County of Glenn, two law suits in which

[262]

the Bank of Orland is plaintiff, and T. W. Harlan is defendant, the amount involved in the said two suits being the sum of $10,000., and the said $10,000., being equal to the sum of $20., per share of all of the capital stock of the Bank of Orland, and

“Whereas, the loss to the Bank of Orland of the said $10,000., the amount involved in the said two suits or any portion thereof, will depreciate the value of the capital stock of said bank which may be sold under said option agreement to said George A. Barceloux proportionately as the amount of said loss which said bank may sustain in said suits bears to the whole capital stock of said bank.

“Now, therefore, we, the undersigned, respectively undertake and agree to pay to George A. Barceloux, at the conclusion of said litigation hereinbefore mentioned, whatever sum per share the whole capital stock of said Bank of Orland may have been depreciated by reason of loss of the said sum or any part of said sum of money involved in said two suits to said Bank of Orland on the said stock sold by us respectively to him under said option, provided, however, that said sum shall not exceed $11.34 per share on each share of stock of the Bank of Orland so sold to him.”