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Sagner v. Glenangus Farms Inc.

Decided: March 11, 1964.


Appeal from the Circuit Court of Baltimore City; Cullen, J.

Brune, C. J., and Hammond, Prescott, Marbury and Sybert, JJ. Hammond, J., delivered the opinion of the Court.


The case involves the construction and effect of an agreement in writing by which Stanley Sagner, owner of the thoroughbred stallion Saggy, undertook to cause to be sold to horse-breeders a number of indivisible shares of ownership in the horse in order to realize a large capital gain at a time when Saggy was enjoying preeminence as a sire. In the early summer of 1961, Sagner entered into negotiations with L. S. MacPhail, who was the principal owner of the corporation known as Glenangus Farms, Inc., which operated a stud farm in Harford County, in an effort to have MacPhail, who was experienced and knowledgeable in such matters, arrange for the syndication of the horse, as the sale of such shares is called. MacPhail finally agreed to participate and help in the syndication if Sagner agreed that Saggy would stand at Glenangus Farms for the breeding seasons of 1962, 1963, and 1964, and MacPhail would be syndicate manager and have complete charge of the breeding operations.

The syndicate agreement reached final form after a number of drafts in the latter part of August 1961, and beginning in the first part of September printed copies were mailed out to prospective subscribers. The agreement recited that it was between Sagner and "signers of counterparts hereof * * * hereinafter designated as the 'Shareholders,'" that Sagner was the owner of the thoroughbred stallion Saggy, "a syndicate having been formed for the purpose of purchasing a horse for the sum of One Hundred Sixty Thousand Dollars," and it was mutually agreed: a. that the ownership of Saggy was to be in thirty-two shares of $5,000 per share, and that each of the shares was on an equal basis with the others and indivisible; b. that Saggy should

stand at Glenangus Farms "under the sole personal management and supervision of L. S. MacPhail at the prevailing rates at Glenangus Farms for stallion keep; c. that MacPhail was to serve as manager of the syndicate, was to advertise the stallion, select the veterinarian, and establish the annual stud fee and terms and conditions of service; d. that the shareholders were to pay all charges, costs and expenses in the proportion that their respective shares bear to the whole number of issued shares; e. if the veterinarian in charge certified that it would be better that the stallion be bred to less than thirty-two mares, the owners of shares were to draw lots to determine whose mares were to be bred, and that if the veterinarian decided that the stallion could be bred to more than thirty-two mares, the proceeds of the additional seasons were to be divided equally among the shareholders; f. neither the syndicate manager nor Sagner were to be responsible for insuring the stallion but any shareholder could insure his own share for his own benefit.

It was then provided that every subscriber for one share was to pay its purchase price of $5,000 in three installments, the first $1,000 to be paid on or before February 1, 1962, a second payment of $2,000 on or before February 1, 1963, and the third payment of $2,000 on or before February 1, 1964. The purchase price was to be evidenced by a promissory note of the subscriber for a total of $5,000, payable to Sagner, with no interest if paid at maturity. It was then provided as follows: "Title to said shares shall pass unto the second party when the notes shall have been delivered as herein provided. In the event the syndication of the stallion be not completed, for any reason, prior to February 1, 1962, then the first party shall return to each subscriber the promissory negotiable note executed by said subscriber as aforesaid."

There followed the proviso that if Saggy died prior to February 1, 1962, any payments which had been made by any shareholder should be refunded and the notes for subsequent payments were to become null and void, and that if Saggy died after February 1, 1962, all notes due for payment after his death were to become null and void. It was then provided as follows: "This agreement may be executed in several counterparts, and when executed by all of the Shareholders and accepted by first

party, the several parts shall constitute the agreement between the parties as if all signatures were appended to one original instrument." MacPhail joined in the agreement in order to evidence his obligation to carry out his undertakings as expressed in the agreement.

Only four subscribers signed the agreement and gave notes as provided therein. Sagner was dissatisfied with the lack of success in selling shares in the horse, and in January 1962 notified MacPhail that as of February 1 he intended to cancel the syndication agreement. Towards the end of January, MacPhail, in his own behalf and for the benefit of those who had subscribed, filed suit against Sagner and one Gee M. Cohen, who had been Sagner's agent in negotiations as to the operation and meaning of the agreement, seeking a declaration as to the respective rights, duties and obligations of the parties, and an injunction restraining Sagner and Cohen from removing Saggy from Glenangus Farms, as they had said they intended to do.

In addition to the rights he claimed under the agreement, MacPhail relied on two independent oral substitute or complementary agreements. One allegedly provided that Saggy was to stand at stud in Glenangus Farms in 1962, 1963, and 1964 and that Sagner would pay $300.00 a month board and give to MacPhail one free service from Saggy during each of the three breeding seasons. The other oral agreement was said to have been that Sagner would give MacPhail either a one thirty-second interest in Saggy or $5,000 in cash in return for MacPhail's assistance in syndicating Saggy.

The four subscribers to the agreement later intervened as plaintiffs, as did two others who, although not subscribers to the syndicate agreement, had purchased a breeding service in 1962 to Saggy. The answer of Sagner and Cohen denied that Sagner had entered into any oral agreements and asserted that Sagner was the sole owner of Saggy because the syndication had not been completed by February 1, 1962, and that under the terms of the agreement was entitled to terminate the syndicate as he attempted to do. Sagner asked the court to declare that he was the sole owner of Saggy and entitled to possession of him.

After hearing testimony, Judge Cullen found the written agreement

to be valid and existing between the parties, disallowed the claim of MacPhail that Sagner had orally agreed to give him a thirty-second interest in Saggy or pay him $5,000 in cash, and found it unnecessary to pass on the alleged oral agreement that independent of the syndication agreement Saggy was to stand at Glenangus Farms. Sagner appealed from the decree which was entered in conformity with the opinion. There was no cross-appeal by MacPhail on the holding adverse to him.

MacPhail and Sagner each testified in support of his construction of the contract and offered witnesses and exhibits to substantiate his position. The testimony covered not only the details of the negotiations which led up to the making and form of the agreement but also the acts and declarations of the parties, and others involved, after its signing, and was directed not only towards showing the meaning ...

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