Before Lumbard, Chief Judge, and Tuttle*fn* and Friendly, Circuit Judges.
Plaintiff-appellant, a citizen of New York, brought this action for breach of an agreement giving him an option to purchase stock. The option, granted by the defendant voting trust, organized under the law of Cuba,*fn1 in consideration of past services, gave plaintiff, Sigurd Scholle, the right to purchase 50,000 shares of its stock at a price of $1.00 per unit "for the duration of the trust, which will expire June 1, 1955." On November 15, 1954, four months after the option had been granted, the term of the voting trust was extended for ten years beyond the original expiration date. Plaintiff did not attempt to exercise his option until after June 1, 1955, but he contended thereafter, contrary to the voting trust's position, that his power to accept continued until the termination of the trust as extended. The court below was of the opinion that the option agreement remained in effect after June 1, 1955*fn2 and ordered the trial to proceed first on the issue of whether Mr. Scholle could have paid the $50,000 for the stock if the voting trust had been willing to deliver it. Viewing plaintiff's evidence as insufficient since it did not establish that he had the money on hand or had completed formal arrangements to obtain it, the district court directed a verdict for defendant. We hold that the evidence was sufficient to send the case to the jury and, therefore, reverse the disposition of the court below and remand the cause for a new trial.
I. The plaintiff had only to show that he intended to and was able to perform.
The voting trust contends on appeal that the verdict in its favor should be upheld since the agreement called for a formal tender and none was made.*fn3 Since the voting trust had made clear that tender if made would have been refused its contention is meritless. Acts made futile by the breaching party are not a prerequisite to recovery by the party claiming to have been wronged. Strasbourger v. Leerburger, 1922, 233 N.Y. 55, 60, 134 N.E. 834; Heller & Henretig v. 3620-168th Street, 2d Dept. 1949, 274 App.Div. 1007, 84 N.Y.S.2d 767.*fn4
The party wronged must show, however, that the breach caused his loss. To do this he must prove that he intended to and was able to perform when his performance was due. Roberts v. New York Life Insurance Co., 1st Dept. 1921, 195 App.Div. 97, 186 N.Y.S.2d 422, affirmed, 1922, 233 N.Y. 639, 135 N.E. 951; Globerman v. Lederer, 1st Dept. 1952, 281 App.Div. 39, 117 N.Y.S.2d 549.
II. The evidence of intent to perform and ability to perform.
The rise in the price at which Cuban-Venezuelan Oil Voting Trust units sold on the American Stock Exchange during the spring and summer of 1956, made plaintiff's option, if valid, very valuable. Accordingly, in late August and early September when the price fluctuated between 2 3/8 and 2 7/8 ($2.38 and $2.88), Mr. Scholle wrote letters to the trust, its president, and to a trustee, in each of which he requested instruction on where to deposit the $50,000 and stated that he "hereby [exercised]" the option.
Mr. Scholle admitted that at no time did he have $50,000 on hand. Indeed, his only showing of liquidity was the possession of 9,500 units of the voting trust's stock which, according to the testimony of a stockbroker, could have been sold in late August and early September of 1956 for an aggregate price of $23,750. Plaintiff made no formal arrangement to raise the difference between that sum and $50,000, but maintained that he could easily have borrowed the money. A stockbroker testified that had he been approached in August 1956, he would have advanced thirty percent of the then market value of the stock covered by the option, and that at a price of 2 1/2 this would have yielded $37,500.*fn5
The plaintiff himself testified that Lincoln Valentine, deceased at the time of the trial but a large stockholder of the voting trust in August of 1956, had offered at that time to lend him a sufficient number of shares to provide collateral for a loan of the necessary amount if plaintiff decided to exercise the option. He also testified that his brother Julian, who was alive and in the jurisdiction at the time of trial, had said he would, if asked, loan $25,000 to help pay for the stock.*fn6 In both cases the testimony was stricken as hearsay. Both rulings were erroneous.
The statements should have been admitted, under the "state of mind" exception to the hearsay rule, to establish the truth of what was said and should also have been admitted to prove circumstantially that the speaker would help the plaintiff in a time of financial need. Used in either way, the statements were relevant since they support plaintiff's claim that he could have borrowed the money if defendant had been willing to honor the option. Obviously, this is so when the evidence is used directly to establish the truth of what was said. Circumstantially, the statements tended to show that a relationship existed between plaintiff and the speakers that made it likely that they would have loaned the money if asked.
Since the statements were relevant, they should have been admitted unless barred by some exclusionary rule. The court below excluded the evidence as hearsay, and no other reason for exclusion has been suggested. But the hearsay rule does not bar admission of the statements used circumstantially, since, when so used the primary focus of inquiry is whatever inferences can be drawn from the fact that the words were spoken and not the truth of what was said. Cf. Hooper-Holmes Bureau, Inc. v. Bunn, 5 Cir., 1947, 161 F.2d 102, 106; Loetsch v. New York City Omnibus Corp., 1943, 291 N.Y. 308, 52 N.E.2d 448. Moreover, even though the hearsay rule normally excludes out-of-court statements used to establish the truth of what was said, it should not have been applied in this case to exclude this evidence used in this way because the need for cross-examination and jury observation of the out-of-court speakers was minimized by the strong probability that the words if spoken were true. See generally McCormick, Evidence § 268.
The statements were allegedly made before it was clear that the money would not be needed. Neither speaker would be likely to want to create an expectation which, if frustrated, would exacerbate relations with brother or business associate. On the other hand, if such witnesses were to repeat their statements at trial, their motive to falsify would be great since their statements would not obligate them to act, and the benefits from cross-examination and jury observation at trial would be minimized since the testimony would relate to past intent, a matter peculiarly locked within their minds. Under these ...