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Spiotta v. Milkon

Decided: October 30, 1961.


Pindar, J.s.c.


[70 NJSuper Page 345] Plaintiff, Joseph Spiotta, seeks specific performance of an escrow agreement as the successful bidder for 28,000 shares of stock of the City National Bank and

Trust Company of Hackensack, New Jersey, together with the right to all dividends paid on same since the inception of this suit, against the defendant escrowee, National State Bank of Newark, and against the four other individual parties to the agreement, defendants Harvey J. E. Milkon, John R. Kraycir, Walter H. Jones and William Sciacca. Plaintiff also demands judgment against the four individual defendants for all future unjustifiable expenditures which they incur and which depreciates the value of the assets of the bank whose stock is in issue, as reflected by the balance sheet of August 1, 1959, but this claim involved only the matter of dividends.

The defendant Milkon counterclaims for specific performance, as successful purchaser of said stock, against the plaintiff and defendant escrowee bank, and in the alternative demands judgment rescinding the escrow agreement and declaring it to be a nullity.

Defendants Kraycir, Jones and Sciacca demand judgment declaring the escrow agreement to be in full force and effect until the expiration of its term and reserving unto these defendants the right to submit an offer or offers. In the alternative they demand that the defendant bank be ordered to deliver to the party that has made the highest offer to purchase, extant for more than 15 days, and to remit the proceeds to them in accordance with the agreement, or in the alternative to rescind the escrow agreement.

The defendant escrowee bank appears in this litigation as a stakeholder; it merely seeks judgment, fixing and determining the rights of the plaintiff and of the individual parties defendant to the 28,000 shares of stock in escrow, and stating the conditions precedent to the delivery of said stock to the party or parties specified in the judgment.

The individual parties to this action comprise the primary stockholders and officers of the City National Bank and Trust Company of Hackensack. They own 32,200 of the 40,000 shares outstanding, and the plaintiff owns the largest amount, namely 13,464. Friction developed among the plaintiff

and the individual defendants, and in order to dissolve their discordant relationship they entered into an escrow agreement dated November 7, 1958, which provided therein for automatic termination 18 months thereafter. Under this agreement the parties, in substantially the same proportion of their ownership of the total shares owned by all of the parties thereto, placed 28,000 shares in escrow for the purpose of seeking a buyer. As paragraph 3 of this agreement contains the provisions in dispute, it is set forth fully as follows:

"The 28,000 shares so held by the ESCROW BANK shall be sold as a unit by the ESCROW BANK to any responsible person bringing a bona fide offer to the bank provided the price tendered is not less than $37.50 for each share, including commission not to exceed $1.00 per share. The terms under which such sale shall be made shall specify at least 29 per centum of the gross purchase price as a down payment and payment in equal installment over a period of not more than the next two succeeding years with open prepayment privilege and with interest at least 4 1/2% on the unpaid balance. Upon receipt of the proceeds, or installments thereof, of such sale the ESCROW BANK shall remit to each party on a pro rata basis, deducting amounts due from such party on his stock. No delivery of said shares shall be made until the purchase price is paid in full to the ESCROW BANK. Any one or more of the parties shall have the right of first refusal to meet, within 15 days of such offer, any or every bona fide offer made for the stock. Any party or parties meeting such bona fide offer shall be entitled to a commission of $1.00 per share. A bona fide offer, whether coming from a party or from a stranger to this contract, for the purposes of this contract shall be an offer where a deposit of at least $25,000.00 in cash or certified check is paid to the ESCROW BANK."

This suit developed from the confusion arising by the bid of July 10, 1959 of one Charles M. Silverman, and the subsequent bids made by defendant Milkon and plaintiff Spiotta.

The time and sequence of these bids are not contested but as the various suggested interpretations of the agreement in relation to such bids are dependent upon the entire situation created by them, they are listed below for clarity:

Amount Approximate

Date Person (Net*fn* ) Time

July 10, 1959 (Fri.) Silverman ...

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