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contractlawsuitbreach of contractattorneyappealtrial
contractbreach of contractattorneywill

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Passante v. McWilliam, 53 Cal.App.4th 1240, 62 Cal.Rptr.2d 298, 97 Cal. Daily Op. Serv. 2419, 97 Daily Journal D.A.R. 4304

Facts

In 1988, the Upper Deck Company needed $100,000 to secure a contract with the Major League Baseball Players Association. Corporate attorney Anthony Passante arranged the loan from a doctor, which was accepted by the board of directors. In gratitude, the board informally agreed to give Passante three percent of the company's stock. However, Passante never formally claimed the stock, and the company later reneged on the promise, leading to Passante's lawsuit for breach of contract.

The Upper Deck Company was formed in March 1988 to produce baseball cards with holograms. The initial directors were Paul Sumner, William Hemrick, Boris Korbel, Richard P. McWilliam, Angels' pitcher DeWayne Buice and Anthony Passante. Passante, who was already the personal attorney for Korbel and McWilliam, was appointed corporate attorney and secretary.

Issue

Did the oral promise to provide Passante with three percent of the company's stock constitute an enforceable contract?

Did the oral promise to provide Passante with three percent of the company's stock constitute an enforceable contract?

Rule

For a contract to be enforceable, there must be consideration that is bargained for and given in exchange for the promise. Past consideration cannot support a contract.

As a matter of law, any claim by Passante for breach of contract necessarily founders on the rule that consideration must result from a bargain.

Analysis

The court found that Passante's arrangement of the loan occurred before the promise of stock was made, indicating that there was no expectation of payment for the services rendered. Since the promise was not bargained for, it was deemed a mere gift and thus unenforceable. The court also noted that Passante's failure to advise the board to seek independent counsel created an ethical conflict that further undermined the enforceability of the promise.

But a close reading of the facts shows that the stock had not been bargained for in exchange for arranging the loan; Passante had already arranged the loan (even though the loan had not been formally accepted by the board) before the idea of giving him stock was ever brought up.

Conclusion

The Court of Appeal affirmed the trial court's judgment, concluding that the promise of stock was unenforceable due to lack of consideration and ethical violations by Passante.

The judgments in favor of McWilliam, the Upper Deck, and Korbel are affirmed.

Who won?

Upper Deck Company and its directors prevailed in the case because the court determined that there was no enforceable contract due to lack of consideration.

The Upper Deck Company and its directors prevailed in the case because the court determined that there was no enforceable contract due to lack of consideration.

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