Marshall and Ilsley Bank v. Milwaukee Gear Co.

• Decision Date: 02 April 1974
• Docket Number: No. 234,234
• Parties: MARSHALL & ILSLEY BANK, Executor of the Estate of W. C. Kohls, Deceased, et al., Respondents, v. The MILWAUKEE GEAR CO., a Wis. corp., Appellant.
• Court: Wisconsin Supreme Court

Page 1

216 N.W.2d 1

62 Wis.2d 768

MARSHALL & ILSLEY BANK, Executor of the Estate of W. C Kohls, Deceased, et al., Respondents, v. The MILWAUKEE GEAR CO., a Wis. corp., Appellant.

No. 234.

Supreme Court of Wisconsin.

April 2, 1974.

Bruce C. O'Neill, Cahill, Fox & Smith, Milwaukee, for appellant.

Cook & Franke, Milwaukee, for respondents; Robert E. Cook, Milwaukee, of counsel.

ROBERT W. HANSEN, Justice.

This opinion is limited to answering the three questions asked by the appeal and the motion for review. QUESTION: Did the bank, as trustee of the W. C. Kohls trust and executor of the estate of Walter C. Kohls, have any right to redemption of the second preferred stock shares by the gear company?

The trial court answered that it did, and we agree. The trial court in its opinion noted that the agreement between the parties provided that the rights of Walter C. Kohls under the agreement shall enure to the benefit of his executor upon his death. It found that, as executor of his estate, the bank 'succeeded to the possession and ownership of his 3,310 shares for handling in the probate of his estate.' It further held that the provisions of the agreement on this point were 'clear, unambiguous, and need no construction or interpretation.'

The gear company argues that the only rights which enured to the executor of his estate upon the death of Walter C. Kohls under the agreement were 'the rights of Walter C. Kohls hereunder.' Since the shares of stock had been transferred to the revocable trust earlier, when Walter C. Kohls died, he owned no stock, and no right to redeem such stock under the agreement. So his right to redeem under the agreement no longer existed. The heart of this argument is the contention that a right to redeem stock under an agreement is appurtenant to the stock much like an easement upon property. The company's contention is that when Walter C. Kohls assigned the stock to the revocable trust, he could not retain the contractual right to redeem because that either went with the stock or passed out of existence. (Actually, the company claims that such right vanished probably because, if it went to the trust upon the transfer, arguably the bank as trustee of the trust, named as residuary legatee under the will, could as trustee and residuary legatee still exercise the option.)

The right of Walter C. Kohls to redeem the 3,310 shares of stock arises from the contractual agreement between him and the company. As the trial court did, we look to that agreement to determine the nature of the rights that agreement gave him. We see the right to redemption as created by the agreement to be personal to Walter C. Kohls, and not appurtenant to the shares of stock. The agreement speaks of the rights of the parties mentioned--Walter C. Kohls. Robert C. Kohls and Ethel E. Bau--to redeem the shares held by them. It is a right that, under the agreement, is not assignable without the company's written consent. It is this right to redeem that is to enure to the benefit of the executor, administrator or legatees of the estate of those mentioned. While the 3,310 shares of stock were placed by Walter C. Kohls in the revocable inter vivos W. C. Kohls trust, and the company issued stock certificates in the name of that trust, we do not see the personal right to redeem as either transferred to the trust or extinguished by such action. We do not see how, with Walter C. Kohls living and not joining the demand, the trustee of the trust could have exercised the option to redeem. We do not doubt that, if Walter C. Kohls and revoked his revocable trust, he could have exercised the option to redeem. That right to redeem, we agree with the trial court, was personal, not an appurtenance of stock ownership in the sense of being assigned or extinguished by transfer of title to the trust. Here the right to redeem was not assigned by the deceased to anyone during his lifetime and we agree that such right to redeem enured to the benefit of the executor upon the death of Walter C. Kohls.

Appellant company relies heavily upon a case in an eastern state where a shareholder had transferred away all his stock, but such transfer had not yet been recorded in the books of the corporation, and the former shareholder received and sold a stock subscription warrant sent him as owner of record of the stock. The court there held that the right to the stock subscription warrant went with the sale to the transferee who bought the stock. (Hornblower v. Austin (1934), 112 Pa.Super. 90, 170 A 358.) That case involved a unilateral action by the corporation and an outright sale or full divesting of ownership on the part of the stockholder. The case before us involves, and this opinion deals with a sitution where (1) the right involved derived from a contractual agreement of the parties; and (2) the transfer of stock was from the shareholder to a revocable, inter vivos trust he created and could terminate. Both facts distinguish the Pennsylvania case, and both support the reasoning and result reached by the trial court here on the point involved.

At the time of making its second demand for redemption of the stock, the bank, as trustee of the W. C. Kohls trust and residuary legatee under the will of the deceased, had assigned title to the 3,310 shares of stock involved to the executor, and, as executor of the estate of Walter C. Kohls, enured to the right to redeem such shares of stock given him under his contractual agreement with the gear company. As such executor it had the right to exercise such option to redeem, and the company was not entitled to reject the demand that the stock be redeemed at par value.

QUESTION: Did the trial court commit prejudicial error in excluding parol evidence offered to show a condition precedent and latent ambiguity in the stock redemption agreement?

The trial court held that parol evidence, as offered by the defendant company, was offered to alter the terms of a written instrument and was inadmissible. We agree that it was inadmissible. The general rule on the admissibility of parol evidence concerning the terms of a written agreement has, in this state and by this court, been held to be:

'Parol evidence is admissible to alter the terms of a written instruement only when: (1) It does not contradict, vary, add to, or subtract from the terms of a valid written agreement, or (2) fraud, mistake, or accident are shown to be present. (Cases and authorities cited.) The written document pertaining to obligations assumed by each of the parties being set out with great detail and exactness, and being signed by both parties, is convincing that the effort and intention was to place within the four corners of the writing all that needed to be expressed in order to declare the minds of the contracting parties . . . to cover the whole field in the written contract. (Case cited.)' Tees v. Lee (1940), 234 Wis. 607, 610, 291 N.W. 792, 793.

The defendant company seeks to fit its proffered parol testimony into two exceptions to the general rule: (1) The condition precedent exception; and (2) the latent ambiguity exception. The first provides parol evidence may be admitted '. . . not directed toward the contents of the agreement, but to establish a condition precedent, the happening of which was necessary before it became a binding contract. . . .' (Kryl v. Mechalson (1951), 259 Wis. 204, 206, 207, 47 N.W.2d 899, 900.) Under this exception, the parol evidence is admitted to prove the nonexistence of an agreement or, at least, that the writing in question never became binding and that it was to take effect only upon the happening of a subsequent event which never did happen. (See: Gibbons v. Ellis (1892), 83 Wis. 434, 53 N.W. 701; Gilman v. Gross (1897), 97 Wis. 224, 72 N.W. 885.)

However, the condition procedent exception does not stretch, accordionlike, to make admissible...