Rouggly v. Whitman

• Decision Date: 11 December 1979
• Docket Number: No. 40936,40936
• Citation: 592 S.W.2d 516
• Parties: Norman L. ROUGGLY and Stella Rouggly, His Wife, Respondents, v. Harold WHITMAN, Appellant.
• Court: Missouri Court of Appeals

Page 516

592 S.W.2d 516

Norman L. ROUGGLY and Stella Rouggly, His Wife, Respondents, v. Harold WHITMAN, Appellant.

No. 40936.

Missouri Court of Appeals, Eastern District, Division Two.

Dec. 11, 1979.

Clinton Almond, Hillsboro, for appellant.

John A. Schneider, Richeson, Roberts, Wegmann, Gasaway, Stewart & Schneider, Hillsboro, for respondents.

PER CURIAM.

This litigation springs from a disagreement over the effect of certain terms contained in a purchase money note taken by plaintiff-respondent (Seller) together with a deed of trust upon defendant-appellant's (Buyer) purchase of a large tract of land situated predominately in Jefferson County, Missouri. After making payments on the note for several years without incident, the Buyer concluded that under his interpretation of the disputed language he had satisfied his obligation in full. The Seller did not concur in Buyer's reading of the note, and this suit to enforce Seller's version of its terms ensued. From the resultant adverse judgment, Buyer appeals.

The following narrative is drawn from evidence adduced at trial that was essentially undisputed.

The land in question, slightly less than 300 acres, was inherited by Seller Norman Rouggly from his father, who had constructed a lake upon and partially platted the property. Mr. Rouggly, who had little or no experience in real estate development, decided in 1969 to sell the property and contacted a realtor who listed it for sale at $50,000. Buyer Harold Whitman, an experienced developer of similar lake properties, became interested in the property and offered to pay the full purchase price of $50,000 in cash. Seller, in order to secure a more favorable tax treatment of the transaction, countered with a proposal that Buyer pay $14,000 down and extend payment of the balance over a period of years. The Buyer accepted. The sale documents, including the note in question here, were somewhat inartfully prepared by Seller's realtor, who was not a lawyer. The note provided in pertinent part as follows:

De Soto, Missouri October 15, 1969

$36,000.00

For value received I promise to pay to the order of NORMAN L. ROUGGLY and STELLA ROUGGLY, his wife THIRTY-SIX THOUSAND________ DOLLARS with interest from date at the rate of 61/2 per cent per annum, payable as follows: $1,500.00 plus accrued interest on April 15, 1970, October 15, 1970, April 15, 1971 and October 15, 1971, and the sum of $2,000.00 plus accrued interest on April 15, 1972 and every six (6) months thereafter until the entire sum shall have been paid. Grantor agrees that there will be at least two (2) lots subdivided or platted within each acre of the land described in the accompanying Deed of Trust which is not now platted or subdivided land. Subject to this agreement Grantee agrees to release by partial release any of the above lots already platted or any of the lots to be platted upon an additional payment of $200.00 for each such lot released.

We further agree to pay all costs and attorney's fees should this note be placed in the hands of an Attorney for collection.

Prepayment of note reserved by maker at any time, without penalty.

/S/

/S/ Harold Whitman

(Emphasis added)

The emphasized language was included at Buyer's behest. Its purpose was to enable him to in turn convey clear title to any individual lots sold by him before full payment of the note and consequent release of the deed of trust on the entire development. The language allowing prepayment of principal without penalty was also included at Buyer's urging.

The transaction closed as planned and Buyer began making payments as scheduled in the note. The payments continued as scheduled until April of 1976, at which time the Buyer had also paid to Seller $15,200 in individual lot release payments of $200 each for lots he had in turn sold to third party purchasers. Buyer's accountant at that time drew attention to the fact that the note had been "overpaid" in that a total of $37,200 had been paid when lot release payments were added to amounts paid as scheduled on the note. The Buyer ceased making payments.

After being notified by Buyer that the note was paid in full, Seller demanded that the scheduled payments continue, claiming that the $200 lot release payments were not intended to count against the principal due on the note. On Buyer's refusal, Seller accelerated the note and brought this action to recover the balance and for a declaratory judgment to the effect that the $200 release payments were additional to and not deductible from the face amount of the note. Buyer counterclaimed for a reformation of the note reflecting his version of the "additional payment of $200.00" language, for a declaratory judgment affirming that the word "additional" was referable to regularly scheduled payments rather than to total principal, and for specific performance of Seller's obligation to release the deed of trust on the property. The counterclaim also included a count for refund of the amount overpaid and for damages due to lost business.

The trial court found that no ambiguity existed in the note's language, and that the word "additional", being referable only to the outstanding principal balance, precluded deduction of the $200 payments from amounts due under the note. Judgment was entered for Seller for the balance due plus interest and attorney's fees and against Buyer on his counterclaims.

For the reasons which follow, we reverse and remand.

The customary standards of appellate review enunciated in Murphy v. Carron, 536 S.W.2d 30 (Mo. banc 1976), are applicable. While considerable deference is to be accorded judgments turning on evidentiary and factual evaluations by the trial court under Murphy v. Carron, no such deferential consideration obtains in cases decided upon erroneous declarations or applications of the law. In re Marriage of Galloway, 547 S.W.2d 193, 196 (Mo.App.1977).

Whether ambiguity exists in the terms of a contract is a question of law for resolution by the court in the first instance, prior to any factual determination as to the meaning of such ambiguous language. Motor Carriers Council of St. Louis, Inc. v. Local Union No. 600, 486 F.2d 650 (8th Cir. 1973); O'Brien v. Missouri Cities Water Co., 574 S.W.2d 13 (Mo.App.1978).

A contract is ambiguous only when it is reasonably susceptible of different constructions. In determining whether or not there is such an ambiguity as calls for construction, the whole instrument must be considered. J. E. Hathman, Inc. v. Sigma Alpha Epsilon Club, 491 S.W.2d 261, 264 (Mo. banc 1973).

In this case, an examination of the entire instrument affords few clues as to whether the words "additional payment" are referable to outstanding principal or to the periodic installment payments. More specifically, it is not clear within the context of the document whether each $200 payment is to be considered additional only to the specified periodic installments and hence deductible from the outstanding principal balance, or whether each such payment is to be additional to and therefore wholly independent of that balance. The note is clearly "reasonably susceptible of different constructions" and, hence, ambiguous. The trial court's conclusion to the contrary is therefore an erroneous declaration and application of the law.

If, as the trial court concluded, there were no ambiguities in the note's terms, the intentions of the parties are to be ascertained by the court as a question of law within the four corners of that document and it alone. Thurman v. K. L. Koenig Realty Co., 423 S.W.2d 196, 200 (Mo.App.1967). The document was before the court. The court's conclusion that it contained no ambiguity rendered any resolution of factual issues based on the court's assessment and evaluation of witness testimony unnecessary to its disposition of the case. Thus, the more expansive scope of review applicable to judgments erroneously declaring or applying the law under Murphy v. Carron governs here. In re Marriage of Galloway. Accordingly, we will review the entire record of the proceedings below, and, if the evidence is sufficient to enable us to do so, enter such judgment as should have been entered below. City-Wide Asphalt Co. v. City of Independence, 546 S.W.2d 493, 498 (Mo.App.1976).

To aid in construing ambiguous contracts, courts may consider "the entire contract, subsidiary agreements, the relationship of the parties, the subject matter of the contract, the facts and circumstances surrounding the execution of the contract, the practical construction the parties themselves have placed on the contract by their acts and deeds, and other external circumstances which cast light on the intent of the parties." Grantham v. Rockhurst University, 563 S.W.2d 147, 150 (Mo.App.1978).

Considering the language of "the entire contract", we are struck by the prefatory clause "Subject to this agreement . . .", that qualifies the entire $200.00 additional payment provision. The intendment of the words "subject to . . ." seems to be that any such payments are subordinate to the primary undertaking of the note, i. e., the expressed promise to ultimately pay only a total of $36,000.00 plus specified interest. Had the scrivener meant to give effect to a different understanding of the parties, i. e., that all such payments were Additional to the $36,000 primary obligation, it is more likely that language connoting "Independent of" or "Separate from this agreement" would have been utilized prefatorily. We have already recognized that the note is inelegantly drawn.

The presence of the provision allowing prepayment of the note without penalty also supports the Buyer's position. Both parties essentially admitted in their testimony that Buyer offered to pay the purchase price in cash, but that Seller preferred installment payments for tax reasons. Buyer testified that the prepayment without penalty provision, seemingly contradicting the mutual understanding as to...