House v. Lesow

Decision Date30 December 1975
Docket NumberNo. 1--675A105,1--675A105
Citation167 Ind.App. 449,339 N.E.2d 86
CourtIndiana Appellate Court
PartiesJessie M. HOUSE, Executrix of the Estate of Wilson M. House, et at., Appellants (Defendants below), v. Dolores LESOW, Executrix of the Estate of John E. Lesow, and James E. Lesh, Appellees (Plaintiffs below).

Eric A. Frey, Rosenfeld, Wolfe, Frey & Lowery, Terre Haute, for appellants.

Steven H. Ancel, Ancel & Ancel, Indianapolis, Kenneth C. Miller, Miller & Miller, Brazil, for appellees.

LOWDERMILK, Judge.

Plaintiffs-appellees Lesow and Lesh (hereafter, Lesow) brought an action to recover the commission allegedly due to them for services rendered in procuring the sale of all of the stock of Eastern Express, Inc., then owned by defendants-appellants Wilson House and other members of the House family (hereafter, House).

Lesow had represented the House family for many years in the family's dealings with the Interstate Commerce Commission. House became interested in the possible sale of the family's entire interest in Eastern Express, and Lesow subsequently introduced House to a third party who purportedly was one of a group of investors interested in purchasing Eastern Express stock. At that time, an agreement was entered into between the House family and Lesow. It provided that a fee of 4% of the 'purchase price' of the stock would be paid to Lesow in return for his services both in procuring the sale of the stock and in performing the legal services necessary to consummate such a transaction, including the obtaining of Interstate Commerce Commission approval of the sale. The contract was entered into by both parties in an arms-length transaction. It is this contract, set out more fully below, that we are called upon to construe.

After the contract was agreed to by both parties, it developed that the group of investors that had expressed interest in a possible purchase of the stock were only agents for American Export Industries, Inc. (A.E.I.), an east coast concern interested in purchasing a trucking operation. Although House was surprised by this turn of events, a sale was eventually arranged between A.E.I. and the House family for a consideration of ten million dollars, the bulk of which was to be paid over a five year period in equal annual installments. It appears that this sale was still within the terms of the commission contract and this fact is not in issue in this appeal.

During the negotiations, the A.E.I. representatives informed the House family that Eastern Express stock could not be used as collateral, to guarantee payment, and that the House family would have to accept unsecured notes subordinated to senior indebtedness in order to complete the transaction. Inasmuch as this arrangement was not initially acceptable to the House family, a special provision was included in the sale-purchase agreement.

It stated that A.E.I. would arrange to have an irrevocable letter of credit issued to House that would be payable only in the event that default occurred on the third of fourth payments due under the sales agreement. House paid the cost incurred by A.E.I. in obtaining the issuance of the letter of credit.

The sale was consummated, three payments were made on schedule, but A.E.I. defaulted on the fourth payment. House had its local bank begin collection proceedings on the letter of credit that had been issued by a New York bank, and shortly thereafter the local bank received payment on the letter of credit.

The commission contract provided as follows:

'Compensation shall be payable to you only as and when the stockholders receive payment of the purchase price, either in cash or in other property, on one or more occasions, and in an amount equal to four per cent (4%) of the purchase price amount received on any particular occasion.'

Under this clause, Lesow had received the commission payments due to him for all payments that had been collected by House, up to and including the third payment. When House discovered that the fourth payment on the sales contract would not be forthcoming, and that collection under the terms of the letter of credit would be necessary, he informed Lesow that no further commission payment would be made, regardless of whether the letter of credit was collected.

Lesow immediately instituted suit against House for the amount of the commission due. At the same time, he initiated attachment and garnishment proceedings against the local bank for a four per cent share of the proceeds of the letter of credit, which proceeds were then being held by the local bank for the benefit of House. The garnishment was granted but this action was later held improper, and the garnishment was released.

At this point, House filed a counterclaim seeking actual and punitive damages for Lesow's wrongful attachment and garnishment. The trial court granted partial summary judgment to Lesow on the issue of the commissions due to him, but reserved judgment on House's counterclaim. It eventually denied relief to House on the counterclaim, stating that the liability of House on the principle issue had foreclosed the possibility of House recovering on the counterclaim.

The two issues to be decided are (1) whether House is liable under the commission contract; and (2) whether the trial court's denial of recovery under the counterclaim for wrongful attachment and garnishment was proper.

I.

The trial court granted Lesow's motion for summary judgment in regards to the commission contract. We must affirm that judgment if we find no genuine issue of material fact and find that Lesow is entitled to a judgment as a matter of law. Ind.Rules of Procedure, Trial Rule 56. No challenge is made to the court's finding of fact, but House does contend that the court incorrectly applied the law.

The cardinal principle of contract interpretation is to ascertain the intention of the parties from their expression of it and to give effect to that intention if it can be done consistently with legal principles. Fort Wayne Bank Bldg., Inc. v. Bank Bldg. & Equip. Corp. (1974), Ind.App.,309 N.E.2d 464.

Although evidence of intent of the parties which is extrinsic to a contract may properly be considered by a court where fraud, mistake, illegality, duress or undue influence are shown, such evidence is not admissible where these are not shown and where the terms of the instrument are susceptible of a clear and unambiguous construction. Id. If the meaning of a contract is clear and unambiguous on its face, its effect will not be controlled by an erroneous construction placed on the agreement by the parties. Id.

Contracts should neither be so narrowly or technically interpreted as to frustrate their obvious design nor be so loosely interpreted as to relieve the obligor from a liability fairly within the scope or spirit of their terms. Pierce v. Yochum (1975), Ind.App., 330 N.E.2d 102.

In construing a contract, the court cannot extract particular clauses, but must read the contract as a whole, giving effect to each provision if possible. Myers v. Maris (1975), Ind.App., 326 N.E.2d 577. In the absence of an ambiguity, the construction of a written contract is a question of law to be resolved by the court. Id. The test used to determine if a written contract is ambiguous is whether reasonable men would find the contract subject to more than one construction. Id.

The commission contract provided, in relevant part, as follows:

'We have agreed to pay you compensation in consideration of your promises and services in effecting sale of the stockholders' stock in Eastern on terms acceptable to the stockholders. The purpose of this letter is to state our agreement and the amount of compensation to be paid to you, if any. The stockholders agree that, if the group referred to--or any member thereof--enters, within one year from the date of this letter, into a contract to purchase, or purchases, all the stock of the stockholders in Eastern on terms satisfactory to the stockholders, then, the stockholders agree to pay to you a sum equal to four per cent (4%) of the purchase price to be paid to the stockholders for their Eastern stock. 'Purchase price' means the consideration paid to the stockholders expressly, and only, for their Eastern stock by the buyer group involved or member thereof, whether the consideration be payable in cash or the equivalent of cash, or in the stock or securities of any other person. 'Person' means an individual, firm, corporation...

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