Powell v. Kennedy
| Decision Date | 08 February 1971 |
| Docket Number | No. 55711,55711 |
| Citation | 463 S.W.2d 802 |
| Parties | William R. POWELL, Appellant, v. Elizabeth P. KENNEDY, Executrix of the Estate of Fred T. Kennedy, Deceased, and John P. Kennedy, Trustee of the Fred T. Kennedy Trust, Respondents. |
| Court | Missouri Supreme Court |
David Collins, Hadley E. Grimm, Collins & Grimm, Macon, for appellant.
Terence C. Porter, Columbia, for respondents, Welliver, Porter, & Cleveland, Columbia, of counsel.
Plaintiff sued for specific performance of what he claimed was an absolute option to purchase 110.70 shares of the common stock of Columbia Brick and Tile Company, a Missouri corporation. Upon entry of judgment for defendants, plaintiff appealed to the Kansas City Court of Appeals. We sustained plaintiff's application for transfer and now review the case 'as on original appeal.' Rule 84.05(h), V.A.M.R.
Prior to August 4, 1950, one Fred T. Kennedy, now deceased, acquired an option to purchase all of the outstanding stock of the named corporation. On that date, Kennedy and William R. Powell, plaintiff herein, entered into the contract which is the subject of this controversy. It provided, generally, (1) that Kennedy would exercise his option to purchase from others, (2) that Powell would purchase forty-five percent of the stock and Kennedy would retain fifty-five percent, (3) that additional financing would be obtained through an R.F.C. loan, (4) that 'It is the desire of both of us that better utilization be made of fireclay deposits on company's property with production of refractories to begin in a modest way as soon as possible,' (5) that 'It is agreed that capital expenditures for plant will be made primarily out of operating profits and not out of borrowings or stock sales,' (6) that '* * * Kennedy and * * * Powell agree that each will devote his full time and energy to the furtherance of affairs of the company * * *,' (7) that '* * * Kennedy will devote his principal time to general management affairs with special attention to sales, financial matters and general office, (8) that '* * * Powell will be especially responsible for plant operations, (9) that 'Each will consult freely with the other and assist each other to the fullest extent possible.'
The proper meaning of the last paragraph of the agreement is the crux of the dispute. It, verbatim, provided:
'It is agreed that in the event of death of either F. T. Kennedy or W. R. Powell that the survivor will have first option on purchasing an amount of the others stock sufficient to give him control of the company through stock ownership at a fair value as may be determined by competent outside certified accountants.'
It is agreed that the contract was drafted and executed by the parties without the services or advice of an attorney; and, that the wife of each signed the instrument as a witness only.
By stipulation, it is further agreed: (1) that Kennedy had on December 3, 1965, transferred 960 shares to his son, John P. Kennedy, as trustee, for a recited consideration of $10.00; (2) that Kennedy died on April 4, 1966; (3) that at the time this lawsuit was filed stock ownership was as follows:
Estate of Fred T. Kennedy, deceased 1.00
John P. Kennedy, as trustee of the Fred T
Kennedy Trust 960.00
John P. Kennedy, as an individual 30.25
Elizabeth P. Kennedy, as an individual 22.50
Elizabeth L. Kennedy, as an individual 1.00
William R. Powell 810.00
Pauline Powell 20.25
-------
Total shares outstanding 1845.00
(4) that plaintiff must acquire 110.70 shares (6%) if he is to have sufficient stock ownership to exercise control.
It is also conceded that upon the death of Kennedy, Powell made a demand for the purchase of 110.70 shares which to this date has been refused by the defendants.
Necessarily, we first consider what, if any, right to such shares Powell, as the survivor, has by virtue of the agreement of August 4, 1950; and if his claim thereto is sustained, we must then consider whether or not it is susceptible of being specifically enforced. To do this, we must construe the paragraph relating to the questioned option.
On the first question, defendants submit that: 'It is the defendants' position that the above quoted words (first option) constitute at most, only a preemptive right or a conditional option, exercisable, if at all, only in the event that the defendants decide to sell any of the stock now or heretofore owned by F. T. Kennedy or his estate.' To the contrary, plaintiff asserts that use of the words 'first option' does not 'automatically conclude the matter,' and that we must look to the 'intent of the parties to ascertain the true meaning of the contract.' In any event the parties recognize the distinction between an option to purchase and a right of preemption or right of first refusal. Beets v. Tyler, 365 Mo. 895, 290 S.W.2d 76; Barling v. Horn, Mo., 296 S.W.2d 94; McCrory v. Brinckmann, Mo., 388 S.W.2d 883.
Although our task requires that we resolve what Kennedy and Powell intended by the wording of the entire quoted paragraph, we, as did the parties, first look to the words 'first option.' In at least two cases, this court has considered use of the words 'first option' in contracts contemplating possible sale and purchase of property. Stein v. Reising, 359 Mo. 804, 224 S.W.2d 80; DeWitt v. Stotts, Mo., 265 S.W.2d 398. Both involved parties standing in a landlord-tenant relationship. In each it had been provided that the lessee would have a 'first option' to purchase, and in each the court ultimately found that only a pre-emptive right had been given. However, of more immediate importance is the approach taken by the court to the comparable problem submitted. In each instance, the words used were considered (1) apart from their context, (2) in the context of the agreement and (3) in light of the extrinsic circumstances. However, at this point, it should be noted that although we reaffirm and intend to follow the guidelines of both the Stein and DeWitt cases, we believe they are factually too different to be controlling in the instant case. For instance, each of the lessees was interested in his lessor only in so far as he owned the premises being used, whereas in the instant case many additional factors are involved, i.e., mutuality of investment, work and hope.
In our effort to determine the actual intent of the contracting parties, we must seek to re-establish the circumstances under which it was executed. It appears that Powell was a professional engineer, having graduated from the Missouri School of Mines at Rolla, with degrees in Ceramic and Metallurgic Engineering. Over the next twenty years, after graduation, he was employed by companies engaged in related fields, and at the time of entering into the contract on August 4, 1950, was general superintendent of the Mexico Refractories Company. He resigned from the latter position to enter the business venture with Mr. Kennedy who was also a professional engineer and graduate of the University of Missouri. His exeprience was in the engineering field but it does not appear to have included the manufacturing of brick and tile. As noted, Kennedy originally had an option to purchase all of the stock of the Columbia Brick and Tile Company, but the parties disagree as to the motivating factor that brought the two men into the common endeavor. Defendants suggest that Powell was only 'fortunate' to have survived the man (Kennedy) who had given him an opportunity to own forty-five percent of a successful business; whereas, plaintiff submits that 'Mr. Powell and Mr. Kennedy needed each other in this venture, and they contemplated joint control, joint efforts and joint responsibility * * * Each needed the talents of the other.' Possibly neither argument is solely without merit, and we will proceed to reach our own conclusion.
First, when the words 'first option' are taken out of context and viewed alone, it is established that they mean a pre-emptive right or privilege of first refusal and not an absolute option as shown by both the Stein and DeWitt cases, supra, and the cases therein discussed. If this were the only point for consideration, and it be assumed that the parties were cognizant of the legal significance of the term used, defendants should prevail. However we are faced with the contention that the contract in question was written and signed by the parties without the advice and counsel of an attorney, and that the actual intent was to give the survivor an absolute option to continue control. Although the absence of legal advice has been mentioned often in cases pertaining to construction of written documents, we have found none that sought to specifically articulate the significance thereof. It is sufficient to say, however, that it is somewhat apparent that after noting the absence of legal advice, courts more readily look to the other factors mentioned.
Second, we turn to other provisions of the contract to see if they shed any light on the intent of the parties when they agreed to the paragraph in question. From those portions of the agreement already quoted, it is clear that the parties contemplated a mode of operation more consistent with the usual partnership than that of a corporation. Certainly, Kennedy had more voting shares and from a purely legal standpoint had technical control of the corporate structure. However, this fact does not defeat the obvious conclusion that control as such was to be exercised through the cooperative effort of both men. In addition to the provisions quoted, the agreement considered the possibility of need for further working capital, and, notwithstanding the difference in percentage of stock owned, each agreed to put in the same amount of money if required. Further...
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