Hubbard v. Marsh, 47491

• Decision Date: 10 January 1950
• Docket Number: No. 47491,47491
• Citation: 241 Iowa 163,40 N.W.2d 488
• Parties: HUBBARD v. MARSH.
• Court: Iowa Supreme Court

Page 488

40 N.W.2d 488

241 Iowa 163

HUBBARD v. MARSH.

No. 47491.

Supreme Court of Iowa.

Jan. 10, 1950.

O'Connor, Thomas & O'Connor, of Dubuque, for appellant.

Kenline, Roedell, Hoffmann & Reynolds, of Dubuque, for appellee.

MULRONEY, Justice.

The issue on this appeal is the correctness of the trial court's construction of the contract consisting of the following letter from defendant to plaintiff, dated March 17, 1944: (For convenience we have supplied paragraph numbers).

1. 'Dear Mr. Hubbard: Agreeable with our conversation in Indianapolis and Dubuque, I propose to give you the following Opportunity. This letter is written in duplicate and your acceptance will constitute an agreement.

2. 'You will come to Dubuque and take charge of its log department. You will be responsible for all activities in that department, personnel and equipment. You will be responsible to no one but the undersigned, and we two will work hand and hand to formulate the logging program, changes in policy etc.

3. 'It is fully understood that our greatest need at this time is prompt, proper, and efficient management of the logging department, but after you make good in that department, then I propose that you study the problems of other departments, and eventually qualify for efficient management in any and all departments, that should it become necessary, you could carry on successfully.

4. 'You shall have a drawing account for personal use of $100 per week, plus traveling expense allowance. In addition to this weekly compensation, you will participate, on my option, in the net profits of the Marsh Veneer and Lumber Company, in both the Dubuque and Indianapolis operations. This participation will vary with the profits we realize and shall extend from 10% to 33% 5. 'To summarize, I propose to you to come into this business, which is well established, and is earning a very satisfactory return, and take your chances in the post war period, knowing full well, that if you help build, maintain and enlarge this business, that your personal income will be in direct ratio to the company's earnings, and also in the event the sledding gets tough, that you are willing to make necessary personal adjustments downward to meet the prevailing condition. Then, in that event, I would like for you to sign on the dotted line, and return my copy at an early date.

6. 'Assuring you that I feel we can work together in perfect agreement, and that our prospects to make very good money for several years, is most excellent, and with the best personal regard, I remain

Yours sincerely,

J. B. Marsh.'

Endorsed on the letter is plaintiff's acceptance dated 5-24-44.

By appropriate pleadings before trial the parties submitted the question of the construction of the contract to the court and the court ruled the contract was 'full and complete in itself and unambiguous'; that the weekly compensation was clearly stated; that any participation by plaintiff in profits was at defendant's option; and that to permit oral evidence 'would be to add to and specifically change the terms of the written agreement.' It is now admitted this ruling disposed of the case and plaintiff now appeals from the judgment dismissing his petition. For an earlier appeal held to be interlocutory, see Hubbard v. Marsh, 239 Iowa 472, 32 N.W.2d 67.

The plaintiff's appeal asserts the trial court erred (1) in not construing the contract as entitling plaintiff to at least 10% of the profits and (2) in construing the contract as unambiguous.

I. The question of whether a written contract is ambiguous or not is one of construction and interpretation. Ambiguity may be said to appear when, after the application of pertinent rules of interpretation to the face of the instrument, a genuine uncertainty results as to which one of two or more meanings is the proper one. Restatement, Contracts, secs. 230 and 231; 17 C.J.S., Contracts, § 294.

Defendant's argument in support of the trial court's ruling is based entirely on a portion of the second sentence in the fourth paragraph: 'you will participate, on my option, in the net profits.' Of course words in a contract are to be given their ordinary and natural meaning unless a contrary intent appears. Carson v. Great Lakes Pipe Line Co., 238 Iowa 50, 25 N.W.2d 855. The above phrase, if standing alone, would perhaps compel the construction the trial court made. But the phrase does not stand alone. It is tied into other sentences in the same paragraph and it must be considered in the light of what the contract states in the fifth and sixth paragraphs.

We said in U. S. F. & G. V. Iowa Telephone Co., 174 Iowa 476, 156 N.W. 727, 729: 'It is a well-settled rule of construction that the legal force and effect of a contract * * * are to be ascertained by taking into consideration the entire instrument in all its parts.'

The fifth paragraph where the defendant seeks 'to summarize' the entire agreement, will not square with an interpretation of the language of the fourth paragraph, that plaintiff's participation was to be at defendant's option. In the fifth paragraph the defendant definitely states his proposition to plaintiff to be that plaintiff will 'come into' the business and plaintiff is to know 'full well' that if he helps 'build, maintain, and enlarge this business', his 'personal income will be in direct ratio to the company's earnings.' He certainly would not know full well that he would ever participate in the company's earnings under the defendant's interpretation of paragraph four. All that he would know full well would be that he would receive $100 a week drawing account. Here too the plaintiff is told that if 'the sledding gets tough' he is to be 'willing to make personal adjustments downward.' But if plaintiff was assured of his weekly drawing account, and nothing more there would be no necessity for him to be willing to make a downward 'adjustment.'

The same thought of some participation in profits is carried into the sixth and last paragraph where the defendant expresses his feeling that they 'can work together' and that their 'prospects to make very good money for several years, is most excellent.' How could plaintiff have 'most excellent' prospects of making very good money if his only right under the contract was to receive the stated drawing account?

The sentence with the quoted phrase in the fourth paragraph must be read as a whole and it must be read with the sentence that goes before and the sentence that follows it. The sentence starts with the words: 'In addition to this weekly compensation,' plainly indicating the plaintiff is to receive something more than the $100 a week drawing account, provided for in the preceding sentence. This is entirely consistent with the use of the phrase 'drawing account for personal use.' A drawing account cannot be said to be quite the same as a salary. The term rather denotes that some other method is to be used to determine the full compensation and an advance drawing is to be allowed as against said compensation. In the filed of commission salesmen the drawing account would probably mean an advance of a constant sum, weekly or monthly, against anticipated commissions. In Packard Motors Co. v. Tally, 212 Ala. 471, 103 So. 455, 457, it is said: 'A drawing account is a well-recognized modern business method of furnishing the employee with means of maintenance while engaged in the service from which wages, or commissions are to accrue.'

Here the employment was not as a salesman and the drawing account cannot be said to be an advance, for the next sentence says the participation is to be 'in addition' to the drawing account. But the fact that defendant used the term 'drawing account' which carries the meaning of something more that will determine the full compensation; the fact that defendant said the drawing account was for 'personal use' which might well mean maintenance until other anticipated compensation could be determined; and the fact that in the next sentence he says he will receive participation 'in addition' to the drawing account, all would indicate that defendant was offering something more than $100 a week compensation. True the defendant states plaintiff will participate 'on my option' but in the last sentence of the paragraph he defines the optional participation for the purpose of this contract by stating: 'this participation will vary with the profits we realize and shall extend from 10% to 33%.' This fourth paragraph could well be construed to say, 'you will have $100 a week drawing account and in addition option participation in profits. The optional participation in profits means that the participation will at my option extend from 10% to 33% depending upon the profits we realize.' Such a construction would be consistent, not only with the language in the fifth summarizing paragraph, but also with the use of the phrase 'drawing account for personal use' and the other language of the fourth paragraph where the participation was to be 'in addition' to the drawing account and the term 'participation' was defined with a minimum and maximum range. There would clearly be no necessity of defining the optional participation or saying that it 'shall extend from 10% to 33%' if any participation was to be at the mere whim of the defendant.

The trial court's interpretation gives no effect at all to the last sentence of the fourth paragraph: 'This participation will vary with the profits we realize and shall extend from 10% to 33%.' (Italics supplied). We said in Nylander v. Nylander, 221 Iowa 1358, 268 N.W. 7, 8: 'It is fundamental that all words used in written instruments must be given effect, if reasonably possible * * *.'

The force of the trial court's construction is that this sentence was entirely superfluous. Why would defendant take pains to state the range of participation in percentage figures if plaintiff was to receive no right of participation? Portions of construction rules...