Carey v. Rathman, 203
| Citation | 55 Wis.2d 732,200 N.W.2d 591 |
| Decision Date | 03 October 1972 |
| Docket Number | No. 203,203 |
| Parties | , 59 A.L.R.3d 1022 Jean A. CAREY, Respondent, v. George RATHMAN and American City Bank and Trust Company, co-executors of the Estate of Louis Rathman, Deceased, Appellants. |
| Court | Wisconsin Supreme Court |
Brady, Tyrrell, Cotter & Cutler, Milwaukee (Elwin J. Zarwell, Samuel J. Recht and Michael J. Spector, Milwaukee, of counsel), for appellants.
Quarles, Herriott, Clemons, Teschner & Noelke, Milwaukee (L. C. Hammond, Jr., and Harold P. Southerland, Milwaukee, of counsel), for respondent.
When the agreement was entered into on March 12, 1963, Jean A. Carey was secretary and treasurer of the insurance company and Louis Rathman was the chief executive officer and substantial shareholder. In 1965 Rathman requested all the shareholders to exchange each share of their stock in the insurance company for 3.2 shares of the holding company, which they did. 1 At that time Carey owned 100 shares and five other shareholders including Rathman owned 17,388 shares. On April 22, 1967, the board of directors declared a stock dividend on the common stock of the insurance company, which amounted to a fractional .42 share on each outstanding share of stock. On April 28, 1967, the insurance company declared a cash dividend of $1 per share. After Carey exercised her option, Louis Rathman obtained 1,000 shares of the insurance-company stock which he considered he was obligated to deliver under the contract from the holding company. He was then president and director of the holding company and met with the other directors. They agreed the holding company would accept Carey's check of $24,000 in exchange for the 1,000 shares of insurance-company stock which it owned. Rathman thereupon negotiated Carey's check to the holding company which transferred directly to Carey 1,000 shares of insurance-company stock. As a result of this transaction Louis Rathman claims he fulfilled his obligations under the stock-purchase agreement.
The second paragraph entitled 'Dilution' of the stock-purchase agreement 1a provided, in part, that in the event there was a recapitalization or exchange of shares or other reorganization of the capital structure of the insurance company, then Carey would have the additional right to purchase or acquire such additional or substituted shares of stock or other securities as she would have received had she been a holder of the shares subject to her unexercised right to purchase under the contract. The basic issue on appeal is whether Carey is entitled under the provisions of the dilution paragraph of the contract to the 3,200 shares of holding-company stock which were exchanged for 1,000 shares of the insurance-company stock held by Louis Rathman and subject to the contract. The determination of this issue depends upon the intent of the parties to the contract as expressed in the agreement.
The general rule of interpretation of a contract is to determine the intent from the instrument as a whole and not necessarily from isolated or particular parts thereof. Langer v. Stegerwald Lumber Co. (1951), 259 Wis. 189, 47 N.W.2d 734. The meaning of particular parts or words in a contract should be determined in light of and consistent with the general purpose of the agreement. State ex rel. Dept. of Agr. & Markets v. Badger Dairy, Inc. (1944), 245 Wis. 229, 14 N.W.2d 34. Since language in written instruments derives its meaning from its use in reference to other language and the general purpose sought to be expressed, the specific phrases and words must be considered in relation to the nature and the object of the transaction and read in light of other provisions of the contract and of the circumstances surrounding its execution. Marshall & Ilsley Bank v. Greene (1938), 227 Wis. 155, 278 N.W. 425. This is a familiar rule of construction, not only in contracts but in wills. Estate of Breese (1959), 7 Wis.2d 422, 96 N.W.2d 712.
In ascertaining the meaning of a contract, the court may look to the consequences which would result should it adopt one construction as opposed to another, because where there is ambiguity the more reasonable meaning should be given on the probability that persons situated as the parties were would be expected to contract in that way as opposed to a way which works an unreasonable result. Wisconsin E.R. Bd. v. Gateway Glass Co. (1953), 265 Wis. 114, 60 N.W.2d 768. While a court cannot engage in equitable redrafting of contracts, a construction which makes a contract reasonable, fair and just will be given over one making the contract unusual or extraordinary, if equally consistent with the language used. Bank of Cashton v. La Crosse C.S.T.M.I. Co. (1934), 216 Wis. 513, 257 N.W. 451.
Stock-option contracts given to employees generally favor them in the purchase of stock to motivate them to remain as employees and to increase efficiency in performance. The stock-option is to encourage key employees. Since a stock option generally runs for a period of time, it is customary, as in this case, to protect the economic value of the option by including a clause which will give the employee substantially the same or greater economic benefit offered by the option over the period of time.
In the construction of a contract, a court may look to the actions of the parties to see what construction they have placed upon the ambiguous contract. However, the cases involving construction through subsequent acts of the parties generally present situations where one party acts one way and the other party does nothing inconsistent therewith. Berger v. Alan Realty Co. (1956), 273 Wis. 427, 78 N.W.2d 747. In the instant case, the acts of the parties indicate opposite constructions. Carey tentatively accepted 1,000 shares of the insurance-company stock and asked for the additional 429 shares in her complaint--not until 17 months later did she ask for 3,200 shares of the holding-company stock. On the other hand, Louis Rathman in 1965 exchanged his insurance-company stock (1,000 shares of which he held subject to the contract) for holding-company stock and only by virtue of the fact he controlled the holding company was he able to get the holding company, in...
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