Lyon v. Willie, 62313

• Decision Date: 20 February 1980
• Docket Number: No. 62313,62313
• Citation: 288 N.W.2d 884
• Parties: George J. LYON and Lloyd J. Farrer, Appellees, v. B. V. WILLIE, Appellant, and Spencer Community Antenna System, Inc., Appellee. B. V. WILLIE, Appellant, v. George J. LYON, Lloyd J. Farrer and Spencer Community Antenna System, Inc., Appellees.
• Court: Iowa Supreme Court

Page 884

288 N.W.2d 884

George J. LYON and Lloyd J. Farrer, Appellees, v. B. V. WILLIE, Appellant, and Spencer Community Antenna System, Inc., Appellee.

B. V. WILLIE, Appellant, v. George J. LYON, Lloyd J. Farrer and Spencer Community Antenna System, Inc., Appellees.

No. 62313.

Supreme Court of Iowa.

Feb. 20, 1980.

Robert F. Wilson, Cedar Rapids, and Robert W. Sackett, Spencer, for appellant.

Leo E. Fitzgibbons and Harold W. White of Fitzgibbons Brothers, Estherville, for appellees.

Considered by LeGRAND, P. J., and UHLENHOPP, McCORMICK, ALLBEE and McGIVERIN, JJ.

McCORMICK, Justice.

This appeal concerns a right of first refusal in a buy-sell agreement among the stockholders of defendant Spencer Community Antenna System, Inc. Plaintiffs George J. Lyon and Lloyd J. Farrer and defendant B. V. Willie are the sole stockholders. Plaintiffs each own fifty shares of stock in the corporation, and Willie owns one hundred shares. As authorized in the buy-sell agreement, plaintiffs negotiated a sale of all the stock subject to Willie's option to buy plaintiffs' interests on the same terms. Willie purported to exercise his option, but plaintiffs contended he did not do so. They brought this action against him and the corporation, in one count seeking to require defendants to transfer the stock to carry out the negotiated sale, and in a second count seeking damages from Willie for alleged breach of the buy-sell agreement. Willie cross-petitioned ¹ against Lyon, Farrer and the corporation, seeking specific performance in accordance with the buy-sell agreement and other relief. Both sides moved for summary judgment on their claims for specific performance. The trial court overruled Willie's motion but sustained plaintiffs' motion for summary judgment on the first count, reserved the second count for trial, and dismissed Willie's cross-petition. Willie appealed. We reverse and remand.

Four main questions are presented: first, whether the summary judgment was final for appeal purposes; second, whether the trial court erred in interpreting the terms of the first refusal option in the buy-sell agreement; third, whether the court erred in refusing to hold that Willie was excused from making a tender because plaintiffs repudiated the buy-sell agreement; and, fourth, whether Willie was entitled to summary judgment on the count of his cross-petition seeking specific performance.

I. The finality of the judgment. The first question is one of subject matter jurisdiction. In entering summary judgment for plaintiffs on one count of their petition, the court ordered Willie to deliver his stock to the corporation for transfer to the purchaser. Willie's motion for summary judgment was overruled, and his cross-petition was dismissed. Yet, the case was not fully put out of court because the damages count of plaintiffs' petition was reserved for trial. Because defendant did not obtain permission to appeal, we do not have jurisdiction unless the judgment was final within the meaning of Iowa R.App.P. 1.

The general principles which govern the determination of finality are delineated in Shoemaker v. City of Muscatine, 275 N.W.2d 206, 208 (Iowa 1979). Ordinarily a final judgment conclusively adjudicates all the rights of the parties. Such an adjudication puts it beyond the power of the court to place the parties in their original positions.

However, it is possible for an order to put it beyond the power of the court to return the parties to their original positions even though it does not conclusively adjudicate all the rights of the parties. The present case is an example. The judgment requires Willie to turn his stock over so the transfer to plaintiffs' purchaser can be carried out. If this judgment were carried out, the court would lack authority, without a new lawsuit In this situation, the requirement of full adjudication gives way. Two final orders are possible in a single case, one putting it beyond the power of the court to put the parties in their original positions in relation to a specific issue, and the other adjudicating remaining issues in the case. Johnson v. Johnson, 188 N.W.2d 288, 293 (Iowa 1971) ("In this case the order to pay a large part of plaintiff's funds to the bank would put the payment beyond the power of the court to restore the parties to their original position (at least absent a new lawsuit). . . . We therefore regard that portion of the order as final and appealable as a matter of right."); See Forgay v. Conrad, 47 U.S. (6 How.) 201, 204, 12 L.Ed. 404, 406 (1848); Gazin v. Hieber, 8 Wash.App. 104, 113-14, 504 P.2d 1178, 1184-85 (1972).

to order the purchaser to return the stock. Nonetheless, the judgment did not adjudicate all the rights of the parties because the damages count remained for trial.

Because the present case comes within these principles, we hold that the partial summary judgment was final for purposes of appeal. Therefore we have jurisdiction.

II. The terms of the first refusal options. The buy-sell agreement, which was entered into by the stockholders on March 11, 1974, provided in relevant part:

It is agreed by and between the parties hereto that from and after the date of June 1, 1975, any party to this Agreement may negotiate a sale of all of the issued and outstanding shares of stock of Spencer Community Antenna System, Inc., subject to the right of first refusal, hereinafter set forth to any individual, partnership or corporation; said negotiated sale must be bona fide and shall be in writing and may be for any amount, but must be payable in cash at the time of the delivery of the stock, which delivery must be not later than one hundred and twenty (120) days after the date of Notice and the purchase price may not be payable in installments. For the purposes of this Agreement, the shares of Lloyd J. Farrer and George J. Lyon shall be treated as a unit and as one party and the shares of B. V. Willie shall be treated as a unit and as one party. The party negotiating the sale shall submit a true copy of the proposed sale to the other party not negotiating the sale and the party not negotiating the sale shall have the first option to buy the interest of the other fifty percent (50%) proposing to sell at a price based upon the price the negotiating party would be receiving for his one-half interest in the corporation from the outside purchaser. The party desiring to exercise this first right to buy referred to above shall notify the negotiating party in writing within sixty (60) days from the date of Notice and by making full payment in cash of the above purchase price within one hundred twenty (120) days from the date the written Notice of the negotiated sale is mailed to or delivered in person to the party or parties not negotiating the sale and if said party or parties fail to exercise the option, then all stockholders shall endorse their stock and deliver said stock to the Security Savings Bank of Eagle Grove, Iowa, on the part of B. V. Willie and The First National Bank of Mason City, Iowa, on the part of Lloyd J. Farrer and George J. Lyon; said banks to act as escrow agents. The party negotiating the sale may then sell all of the stock of the corporation at the price and on the terms as proposed. It is further agreed that on delivery of stock and payment thereof, all payments due the stockholders under paragraph four (4) of this Agreement shall be paid to the stockholders forthwith as their interests appear. (emphasis supplied).

The parties do not agree on what must be done to exercise the first refusal option. Plaintiffs contend and the trial court agreed that it is necessary to serve notice within sixty days and tender full payment in cash within 120 days of the negotiated sale. Willie contends the option is exercised by the serving of notice alone and asserts payment is merely a condition subsequent in a contract which becomes executory when notice of exercise of the right of first refusal is given.

This dispute presents a problem of contract interpretation, the meaning of its language. In this case neither party offered extrinsic evidence bearing on the meaning of the option. Therefore the trial court's interpretation is reviewed as a determination of law. Connie's Construction Co. v. Fireman's Fund Insurance Co., 227 N.W.2d 207, 210 (Iowa 1975). This also means no problem is presented as to whether summary judgment was precluded because of existence of a genuine issue of fact regarding the meaning of the option language.

The applicable rule for determining what must be done to exercise an option is the same as the general rule governing interpretation of contracts. The intent of the parties controls:

The only fixed rule regarding the manner of the exercise of an option under a contract granting it, is to discover from the language of the instrument, construed in the light of competent parol testimony, the intent of the parties with reference thereto. It may be that under the terms of a given option the only proper and binding method of election or acceptance is by the payment or a tender of the purchase price. On the other hand, there are many cases where the option may be exercised in parol or by any other method indicating an election to take the land the payment of the purchase price and the making of the deed being subsequent matters in the performance of a binding contract. In the one case, there is an election to sell, upon payment of the purchase price, which is a condition precedent to the foundation of the contract; and in the other there is an election to take the land upon the terms proposed, payment of the purchase price being a condition subsequent, or rather the performance of an executory contract theretofore entered into.

It is important in such cases to distinguish that which pertains to the performance of a contract from that which pertains to its making. To make any sort of a contract, there must be a meeting of the minds upon a given subject....