Parsons v. Bristol Development Co.

Decision Date17 June 1965
Citation62 Cal.2d 861,402 P.2d 839,44 Cal.Rptr. 767
CourtCalifornia Supreme Court
Parties, 402 P.2d 839 Cejay PARSONS, Plaintiff and Appellant, v. BRISTOL DEVELOPMENT CO. et al., Defendants and Respondents. L. A. 27434.

Felix H. McGinnis, Torrance, for plaintiff and appellant.

Launer, Chaffee & Hanna, Daniel L. Stack, Fullerton, Miller, Nisson, Kogler & Wenke and Clark Miller, Santa Ana, for defendants and respondents.

C. Douglas Wikle, Walter Atkinson, W. Alan Thody, Los Angeles, Dell L. Falls, Lancaster, Cooper & Boller, Rowland, Paras & Clowdus and Gloyd T. Clowdus, Sacramento, as amici curiae on behalf of defendants and respondents.

TRAYNOR, Chief Justice.

In December 1960 defendant Bristol Development Company entered into a written contract with plaintiff engaging him as an architect to design an office building for a lot in Santa Ana and to assist in supervising construction. Plaintiff's services were to be performed in two phases. He completed phase one, drafting preliminary plans and specifications, on January 20, 1961, and Bristol paid him $600.

The dispute concerns Bristol's obligation to pay plaintiff under phase two of the contract. The contract provided that 'a condition precedent to any duty or obligation on the part of the OWNER (Bristol) to commence, continue or complete Phase 2 or to pay ARCHITECT any fee therefor, shall be the obtaining of economically satisfactory financing arrangements which will enable OWNER, in its sole judgment, to construct the project at a cost which in the absolute decision of the OWNER shall be economically feasible.' It further provided that when Bristol notified plaintiff to proceed with phase two it should pay him an estimated 25 per cent of his fee, and that it would be obligated to pay the remaining 75 per cent 'only from construction loan funds.'

Using plaintiff's preliminary plans and specifications, Bristol obtained from a contractor an ewstimate of $1,020,850 as the cost of construction, including the architect's fee of 6 per cent. On the basis of this estimate, it received an offer from a savings and loan company for a construction loan upon condition that it show clear title to the Santa Ana lot and execute a first trust deed in favor of the loan company.

Shortly after obtaining this offer from the loan company, Bristol wrote plaintiff on March 14, 1961, to proceed under phase two of the contract. In accordance with the contract, Bristol paid plaintiff $12,000, an estimated 25 per cent of his total fee. Thereafter, plaintiff began to draft final plans and specifications for the building.

Bristol, however, was compelled to abandon the project because it was unable to show clear title to the Santa Ana lot and thus meet the requirements for obtaining a construction loan. Bristol's title became subject to dispute on May 23, 1961, when defendant James Freeman filed an action against Bristol claiming an adverse title. 1 On August 15, 1961, Bristol notified plaintiff to stop work on the project.

Plaintiff brought an action against Bristol and Freeman to recover for services performed under the contract and to foreclose a mechanic's lien on the Santa Ana lot. The trial court, sitting without a jury, found that Bristol's obligation to make further payment under the contract was conditioned upon the existence of construction loan funds. On the ground that this condition to plaintiff's right to further payment was not satisfied, the court entered judgment for defendants. Plaintiff appeals.

The trial court properly aedmitted evidence extrinsic to the written instrument to determine the circumstances under which the parties contracted and the purpose of the contract. (Code Civ.Proc., § 1860; Civ.Code, § 1647; see Corbin, The Interpretation of Words and the Parol Evidence Rule, 50 Cornell L.Q. 161.) There is no conflict in that evidence. Bristol contends, however, that an appellate court is compelled to accept any reasonable interpretation of a written instrument adopted by a trial court whether or not extrinsic evidence has been introduced to interpret the instrument and whether or not that evidence, if any, is in conflict. We do not agree with this contention.

Since there has been confusion concerning the rules for appellate review of the interpretation of written instruments (see Estate of Platt, 21 Cal.2d 343, 352, 131 P.2d 825 (concurring opinion); Estate of Shannon, 231 A.C.A. 975, 978-979, 42 Cal.Rptr. 278), it is appropriate here to define the scope of such review.

The interpretation of a written instrument, even though it involves what might properly be called questions of fact (see Thayer, Preliminary Treatise on Evidence, pp. 202-204), is essentially a judicial function to be exercised according to the generally accepted canons of interpretation so that the purposes of the instrument may be given effect. (See Civ.Code, §§ 1635-1661; Code Civ.Proc., §§ 1856-1866.) Extrinsic evidence is 'admissible to interpret the instrument, but not to give it a meaning to which it is not reasonably susceptible' (Coast Bank v. Minderhout, 61 Cal.2d 311, 315, 38 Cal.Rptr. 505, 507, 392 P.2d 265, 267; Nofziger v. Holman, 61 Cal.2d 526, 528, 39 Cal.Rptr. 384, 393 P.2d 696; Imbach v. Schultz, 58 Cal.2d 858, 860, 27 Cal.Rptr. 160, 377 P.2d 272), and it is the instrument itself that must be given effect. (Civ.Code, §§ 1638, 1639; Code Civ.Proc., § 1856.) It is therefore solely a judicial function to insterpret a written instrument unless the interpretation turns upon the credibility of extrinsic evidence. Accordingly, 'An appellate court is not bound by a construction of the contract based solely upon the terms of the written instrument without the aid of evidence (citations), where there is no conflict in the evidence (citations) or a determination has been made upon incompetent evidence (citation).' (Estate of Platt, 21 Cal.2d 343, 352, 131 P.2d 825, 830. Accord, Moore v. Wood, 26 Cal.2d 621, 629-630, 160 P.2d 772; Western Coal & Mining Co. v. Jones, 27 Cal.2d 819, 826-827, 167 P.2d 719, 164 A.L.R. 685; Estate of Wunderle, 30 Cal.2d 274, 280, 181 P.2d 874; Estate of Fleming, 31 Cal.2d 514, 523, 190 P.2d 611; Meyer v State Board of Equalization, 42 Cal.2d 376, 381, 267 P.2d 257.) 2

It is true that cases have said that even in the absence of extrinsic evidence the trial court's interpretation of a written instrument must be accepted 'if such interpretation is reasonable, or if (it) is one of two or more reasonable constructions of the instrument' (Prickett v. Royal Ins. Co., 56 Cal.2d 234, 237, 14 Cal.Rptr. 675, 677, 363 P.2d 907, 909, 86 A.L.R.2d 711; Lundin v. Hallmark Productions, Inc., 161 Cal.App.2d 698, 701, 327 P.2d 166), or if it is 'eqaully tenable' with the appellate court's interpretation (Estate of Northcutt, 16 Cal.2d 683, 690, 107 P.2d 607; accord, Estate of Cuneo, 60 Cal.2d 196, 201, 32 Cal.Rptr. 409, 384 P.2d 1). Such statements are not in conflict with Estate of Platt, supra, 21 Cal.2d 343, 131 P.2d 825, if they are interpreted, as they should be, to mean only that an appellate court must determine that the trial court's interpretation is erroneous before it may properly reverse a judgment. (See Estate of Shannon, 231 A.C.A. 975, 982, 42 Cal.Rptr. 278.) They do not mean that the appellate court is absolved of its duty to interpret the instrument.

Since there is no conflict in the extrinsic evidence in the present case we must make an independent determination of the meaning of the contract. After providing for payment of an estimated 25 per cent of plaintiff's fee upon written notice to proceed with phase two, paragraph 4 of the contract makes the following provisions for payment:

'4. * * *

'(a) * * *

'(b) Upon completion of final working plans, specifications and engineering, or authorized commencement of construction, whichever is later, a sum equal to SEVENTY-FIVE (75%) PER CENT of the fee for services in Phase 2, less all previous payments made on account of fee; provided, however, that this payment shall be made only from construction loan funds.

'(c) The balance of the fee shall be paid in equal monthly payments commencing with the first day of the month following payments as set forth in Paragraph 4(b); provided, however, that TEN (10%) PER CENT of the fee based upon the reasonable estimated cost of construction shall be withheld until thirty (30) days after the Notice of Completion of the project has been filed.

'(d) If any work designed or specified by the ARCHITECT is abandoned of (sic) suspended in whole or in part, the ARCHITECT is to be paid forthwith to the extent that his services have been rendered under the preceding terms of this paragraph. Should such abandonment or suspension occur before the ARCHITECT has completed any particular phase of the work which entitles him to a partial payment as aforesaid, the ARCHITECT'S fee shall be prorated based upon the percentage of the work completed under that particular phase and shall be payable forthwith.'

Invoking the provision that 'payment shall be made only from construction loan funds,' Bristol contends that since such funds were not obtained it is obligated to pay plaintiff no more than he has already received under the contract.

Plaintiff, on the other hand, contends that he performed 95 per cent of his work on phase two and is entitled to that portion of his fee under subdivision (d) of paragraph 4 less the previous payment he received. He contends that subdivision (d) is a 'savings clause' designed to secure partial payment if, for any reason, including the lack of funds, the project was abandoned or suspended. Plaintiff would limit the construction loan condition to subdivision (b), for it provides 'that this payment shall be made only from construction loan funds' (emphasis added), whereas the other subdivisions are not expressly so conditioned.

The construction loan condition, however, cannot reasonably be limited to...

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