North Gate Corp. v. National Food Stores, Inc.
| Decision Date | 17 March 1966 |
| Citation | 140 N.W.2d 744,30 Wis.2d 317 |
| Parties | NORTH GATE CORPORATION, a Wis. corporation, Respondent, v. NATIONAL FOOD STORES, INC., a foreign corporation, Appellant. |
| Court | Wisconsin Supreme Court |
John L. Riley; Riley, Pierce & Lynch, Madison, for appellant.
Byron C. Ostby, Madison, W. Scott Van Alstyne, Jr., and George F. Jacobs, Jr., Madison, of counsel, for respondent.
The sole issue debated by the parties is whether, the lessor being a corporation, the words 'its beneficiaries' in paragraph Fifth of the lease, mean or include 'its shareholders.' National takes the position that North Gate, the lessor, warranted that its shareholders would not permit the use of land owned by them individually, if within a mile, for a retail food store.
The critical portion of paragraph Fifth reads: '* * * neither Lessor nor his heirs or legal representatives, or its beneficiaries, subsidiaries, affiliates, successors, or assigns, or any entity in which they or any of them have an interest. * * *'
Contract terms being construed are to be considered an context. 1 Words used in a contract are generally given their plain or ordinary meaning but '* * * technical words are to be interpreted as usually understood by persons in the profession or business to which they relate, unless the context of the contract or an applicable custom or usage clearly indicates that a different meaning was intended.' 2 Neither the ordinary meaning nor any technical meaning of 'beneficiary' is equivalent to 'shareholder.'
Black's Law Dictionary (4th ed.), defines 'beneficiary' as
Where various meanings can be given a term, the term is to be strictly construed against the draftsman of the contract. 3 Here the draftsman was National. Further, the intent of the provision in question is to restrict trade and the use of land. Such provisions are to be strictly construed. 4 The legal term 'beneficiaries' normally refers to persons designated to receive benefit from a trust, an estate or an insurance contract.
National contends that the term as used in paragraph Fifth cannot refer to a cestue que trust because of the grammatical context. National suggests that the form was devised for use by either an individual or by a corporation. Where the lessor is an individual, the phrase 'nor his heirs or legal representatives' is applicable. But where the lessor is a corporation, National claims that the entire phrase 'or its beneficiaries, subsidiaries, affiliates, successors, or assigns' becomes operative, and each of the terms must be relevant to a corporation. National rejects the possibility that a trust or estate might be named as lessor as if it were an entity, and that the term 'its beneficiaries' was intended to refer to the beneficiaries of a lessor trust or estate. National makes the nice point that the trustee or the executor properly should be named lessor in such case, and that the beneficiaries of the trust or estate are not properly called beneficiaries of the trustee or executor. This particular argument does not explain, however, why we should prefer the assumption that a draftsman would not name a trust as lessor over the assumption that he would not refer to the beneficiaries of a corporation if he meant its shareholders.
Canons of construction are designed to aid courts in ascertaining the intention of the parties. 5 Normally the words used by the contracting parties are the best indicators of their intention. Occasionally words not used are also instructive. Here National contends that it was the intention of the parties that paragraph Fifth apply to shareholders of a corporation. If that were the intention of the parties, the intention could easily have been manifested merely by using the common term 'shareholders.' We cannot ignore the draftsman's failure to use an obvious term, especially where it is the draftsman who is urging a tenuous interpretation of a term in order to make it applicable to a situation which would clearly have been covered if the obvious term had been chosen.
National argues that a construction of an agreement which leaves a part of the language useless or creates surplusage is to be avoided. This is the general rule 6 but it has much less force where, as here, a standard form, designed for use in varying fact situations, is used, and it is obvious that in each transaction where the form is used, some of its terms will necessarily be surplusage.
We think the term 'beneficiaries' may have meaning...
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