Hamilton v. Wosepka

Decision Date14 November 1967
Docket NumberNo. 52430,52430
Citation261 Iowa 299,154 N.W.2d 164
PartiesV. B. HAMILTON, Appellant, v. Lyle WOSEPKA, Nick Pronk and Wilbur Chandler, Appellees.
CourtIowa Supreme Court

Linnan, Lynch & Straub, Algona, for appellant.

Hobson, Cady & Drew, Hampton, for appellees.

MASON, Justice.

This law action tried to the court arose out of the purchase of plaintiff Hamilton's stock in two related companies, Farmers Hybrid Seed Corn Company and Farmers Hybrid Hogs, both of Hampton by defendants Wosepka, Pronk and Chandler. Both companies had the same stock ownership, directors and officers. On a former appeal we held plaintiff's claim was not barred by the statute of limitations. Hamilton v. Wosepka, 255 Iowa 910, 124 N.W.2d 512.

Plaintiff Hamilton now seeks to recover from the three defendants personally additional salary allegedly due under a written contract dated May 20, 1959. He appeals from dismissal of his petition.

Plaintiff had been in the employ of the original company since August 1, 1944, and president, director and stockholder in both companies since April 1954 at an annual salary of $15,000. He had acquired 780 shares of stock in each company. As of May 20, 1959, Wosepka was in the employ of the companies as secretary and assistant in sales at a salary of $7000; Pronk was vice-president and sales manager at a salary of $10,000; and Chandler was assistant treasurer and manager of sales department at a salary of $10,000.

At this time there were 4177 shares of stock outstanding in each company. 2455 of these were owned by Mr. and Mrs. Methfessel.

Defendants were seeking to gain control of the companies and were negotiating with the Methfessels for the purchase of their stock. They apparently were desirous of obtaining an option to purchase plaintiff's stock until they could make certain they would be able to acquire the Methfessel stock and thus the control of both companies.

On April 20, 1959, plaintiff gave defendants a 30-day written option to purchase 730 of his shares in each company for $65,000 on certain stated terms and conditions. Defendants gave written notice of their intention to exercise the option and on May 20 entered into the written contract for the purchase of plaintiff's stock.

By June 19 defendants had acquired control of both companies and on that date by action of the board of directors of the two companies Wosepka's salary was increased from $7000 to $15,000 per year, the salaries of Pronk and Chandler were each increased from $10,000 to $15,000 effective July 1. These salaries remained at $15,000 until November 1, 1962. Plaintiff's salary was not increased by the companies and he remained in the employ of the companies as president at the same salary of $15,000 until September 1, 1962. At that time defendants paid the balance due on the purchase price of plaintiff's stock, the stock was transferred and the sale completed. Plaintiff was compensated at the annual rate of $15,000 until November 1, 1962, when his services were terminated. Defendants had exercised their option to purchase plaintiff's remaining 50 shares in each company under the terms of the contract which expressly provided that if plaintiff's employment be terminated defendants were to have the right to purchase his stock at book value.

Plaintiff then brought this action to recover from defendants personally the sum of $33,333.33, the amount of additional salary he asserts defendants had agreed to pay him under the terms of the contract. The only matter in dispute is whether plaintiff is entitled to the amount demanded in his petition as additional compensation.

In deciding the question it must be determined what the parties meant by what they said in this basic provision contained in paragraph 4 of the agreement:

'The Party of the First Part shall remain a member of the Board of Directors and President of the above named companies at a guaranteed salary of $15,000.00 per year, Said salary to be increased or decreased in proportion to the increase or decrease of the salary or salaries of Lyle Wosepka, Nick Pronk and Wilbur Chandler, and said employment shall continue at least as long as any of the indebtedness for the purchase price of said stock exists.' (Emphasis supplied).

Defendants admitted the execution of the contract, but contended it was ambiguous entered into by mutual mistake and asserted there was an oral understanding the salaries of the three defendants were to be all fixed at $15,000, the same as plaintiff's and that the provision of the written contract as to increase of salary was to become effective only after their salaries had been equalized with plaintiff's and asked for reformation, but did not ask that the action be transferred to equity for equitable relief. Defendants also pleaded waiver and estoppel.

Evidence was offered by defendants, all over plaintiff's objection that it was in violation of the parol evidence rule, of the negotiations leading up to the execution of the May 20 contract.

Plaintiff contends paragraph 4, set out supra, has but one unambiguous meaning. He argues the contract, after expressly providing that plaintiff shall remain in the employ of the companies at an annual salary of $15,000, plainly states 'said salary to be increased or decreased in proportion to the increase or decrease of the salary or salaries of Lyle Wosepka, Nick Pronk and Wilbur Chandler'; since their salaries were all raised to $15,000, plaintiff was entitled to a proportionate increase at the same time and a personal judgment against defendants for the amount thereof.

The trial court was not convinced the paragraph has but one meaning, first because it purports to give plaintiff a 'guaranteed salary of $15,000 per year;' then in the same sentence provision is made that such salary may be 'increased or decreased.' In addition the contract says, 'in proportion to the increase or decrease of the salary or salaries' of defendants, and the word 'proportion' has many definitions.

The court concluded that under these circumstances the actual intent of the parties must be determined from the situation of the parties and the objects they were trying to accomplish, that oral evidence was admissible and to be regarded as relevant in interpreting the writing. Further, the practical construction placed on the contract by the conduct of the parties was entitled to great weight. As stated, plaintiff's petition was dismissed. No question of reformation or mistake is now involved.

Plaintiff's appeal assigns 11 errors relied upon for reversal. They all present his contention that the court erred in admitting extrinsic evidence for the purpose of aiding in the interpretation of the written contract.

I. This law action is not reviewable de novo here but only on errors assigned. The court's findings of fact have the effect of a jury verdict if there is substantial evidence to support them, rule 344(f)(1), Rules of Civil Procedure, unless in arriving at them the court erred in its rulings on evidence or in other respects upon questions of law. Ferris v. Employers Mutual Cas. Co., 255 Iowa 511, 514--515, 122 N.W.2d 263, 265. We may also find error if the trial court applied erroneous rules of law which materially affected the decision. France v. Benter, 256 Iowa 534, 536, 128 N.W.2d 268, 270.

We will not weigh the evidence or the credibility of the witnesses. Rule 344(f)(1), R.C.P. Further, the evidence will be construed in the light most favorable to the trial court's judgment. McCune v. Muenich, 255 Iowa 755, 757, 124 N.W.2d 130, 131.

II. Before the execution of the April 20 option plaintiff and defendants had four meetings at which they discussed the purchased of plaintiff's stock. The first of these meetings took place on the preceding Friday in a cafe and was then transferred to the office of defendants' attorney. A later meeting was held at Chandler's home Friday evening. The fourth, at which attorneys for both parties were present, took place Saturday evening. The option was prepared the following Monday.

Each defendant was permitted to testify in regard to conversations, negotiations and transactions leading up to the purchase of plaintiff's stock over timely objection by plaintiff that it was in violation of the parol evidence rule.

In substance defendants testified that at the first meeting on Friday they told plaintiff they would like to purchase 730 shares of his stock and were willing to pay a fair price for it; they wanted plaintiff to remain with the companies as president. They contend plaintiff was told, if the transaction went through, defendants would have to have their salaries raised to the point where his was in order to meet the obligations that they were picking up by reason of their purchasing his and Methfessels' stock; the matter of when the scale would be effective was discussed due to the fact at that point defendants were not in the position to effect this change immediately and would not be until they came into control of the company; that it was stated the salaries of plaintiff and defendants would all be the same; that plaintiff raised the question about subsequent increases or decreases in salary and was told that raises or decreases would be the same for everyone. All of this was assuming that all transactions were completed so that the stock transfers were made as defendants hoped.

Plaintiff testified:

'It is my testimony that preceding the signing of the written option, the matter of my salary and payment and raises were discussed, but not the salaries of the three defendants. In the negotiations for the sale of my stock, the security for the payment to me was discussed. The matter of their salaries and increases in salaries never came up only as they were written in the contract.'

Plaintiff's attorney during these negotiations also testified as to his recollection of the conversations and transactions during the various meetings. As a result of his and...

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