Sierra Blanca Sales Co., Inc. v. Newco Industries, Inc.

• Decision Date: 03 November 1972
• Docket Number: Nos. 846,898,s. 846
• Parties: SIERRA BLANCA SALES COMPANY, INC., a New Mexico corporation, Plaintiff-Appellant, v. NEWCO INDUSTRIES, INC., a New Mexico corporation, et al., Defendants- Appellees. SIERRA BLANCE SALES COMPANY, INC., a New Mexico corporation, Plaintiff- Appellee, v. Eric N. CULVER, Defendant-Appellant.
• Court: Court of Appeals of New Mexico

Page 867

505 P.2d 867

84 N.M. 524

SIERRA BLANCA SALES COMPANY, INC., a New Mexico corporation, Plaintiff-Appellant, v. NEWCO INDUSTRIES, INC., a New Mexico corporation, et al.,

Defendants- Appellees.

SIERRA BLANCE SALES COMPANY, INC., a New Mexico corporation, Plaintiff- Appellee, v. Eric N. CULVER, Defendant-Appellant.

Nos. 846, 898.

Court of Appeals of New Mexico.

Nov. 3, 1972.

Certiorari Denied Dec. 15, 1972.

John R. Shaw, San Antonio, Tex., Albert J. Rivera, Alamogordo, Irwin S. Moise, Sutin, Thayer & Browne, Albuquerque, for Sierra Blanca Sales Co., Inc

Joseph A. Sommer, Sommer, Lawler & Scheuer, Santa Fe, for Eric N. Culver and Tom Mosier.

Reginald J. Garcia, Simms & Garcia, Albuquerque, for Newco Industries and Ruidoso Racing Assn., Inc., known as Ruidoso Downs, Inc.

Bruce D. Black, George T. Harris, Modrall, Sperling, Roehl, Harris & Sisk, Albuquerque, for R. D. Hubbard.

OPINION

WOOD, Chief Judge.

These consolidated appeals involve claims for breach of contract and fraud. All of the various defendants, except Culver, were granted summary judgments in cause 846. The claims against Culver were tried, and a jury verdict against Culver was entered, in cause 898. Sierra (Sierra Blanca Sales Company, Inc.) appeals from the summary judgments and Culver appeals from the judgment entered following the verdict. We divide the numerous issues in both causes into four general categories: A. breach of contract claims; B. fraud claims; C. newly discovered evidence; and D. damages.

Beginning in 1953, Eugene V. Hensley was associated, in various capacities, with what is referred to as the Ruidoso race track. Two of those capacities are involved in these suits; that of stockholder and that of a promoter of horse sales. A change in those capacities occurred after Hensley was convicted, in 1967, of felony offenses involving the federal income tax law.

Hensley and Culver negotiated for the sale of Hensley's stock in Ruidoso (Ruidoso Racing Association, Inc.). These negotiations culminated in a stock purchase agreement, entered in April, 1969. The sellers were Hensley and a former wife, Billie. The buyer was Culver '* * * acting * * * solely as an agent for a corporation to be organized and not individually * * *.' In the same month, but subsequent to the stock purchase agreement, Newco (Newco Industries, Inc.) was incorporated.

In 1966, Myrl Hensley, another former wife of Hensley, apparently had the exclusive right to conduct certain horse sales held in conjunction with races at the track. By a contract dated in 1966, Myrl Hensley, for consideration, agreed to terminate this right and Ruidoso agreed to conduct the horse sales. Thereafter, either All American Livestock Sales Company or Ruidoso conducted the sales. There is evidence that Hensley was a major factor in the success of the sales.

The minutes of Ruidoso of July 7, 1968 (subsequent to Hensley's conviction), reflect that Ruidoso had inquired of the New Mexico Racing Commission (§ 60--6--2, N.M.S.A. 1953 (Repl.Vol. 9, pt. 1)), concerning the Commission's jurisdiction over horse sales by All American Livestock Sales Company, which is recited to be 'an unincorporated division' of Ruidoso. After this inquiry, Ruidiso's understanding was that the Commission would not have jurisdiction over '* * * a separate corporation not engaged or operating racing meets * * *.' The minutes show the president of Ruidiso was authorized to employ counsel to form a corporation '* * * for the purpose of engaging in the sale of livestock in New Mexico or other states; the name of the corporation shall be the All-American Horse Sales Co. * * *'

There is no evidence that the separate corporation authorized by the minutes of July, 1968 was ever formed. Instead, Ruidoso engaged Hensley, as an individual, to perform services in connection with the horse sales.

In the negotiations between Hensley and Culver concerning the stock sale, All American Livestock Sales Company and Hensley's relation to the horse sales were discussed. There is substantial evidence that Hensley's willingness to sell the stock was tied to his obtaining an employment contract in connection with the horse sales. In March, 1969 (prior to the stock purchase agreement), Culver's written memo to Hensley indicates he was '* * * having a seperate (sic) contract drawn up on the non-competitive and employment contract for you. * * *'

A draft of an employment contract was sent to Hensley by Culver in March, 1969. This proposed contract contained an express reference to the stock purchase agreement. This contract would have been between Culver, in the same capacity as agent as in the stock purchase agreement, and Hensley, as an individual. This contract was not signed. There is evidence that because of Hensley's conviction, and because the New Mexico Racing Commission, by § 60--6--2, supra, is to approve contracts for the payment of money by race track licensees, it was tactically preferable for Hensley's name not to appear on the employment contract.

On April 1, 1969, Sierra was incorporated. The stockholders were Hensley and his then wife, Frances. On June 4, 1969, an 'employment agreement' was entered. One of the parties was Sierra; the contract was executed on behalf of Sierra by Hensley and Frances. The contract recites that it is entered into by '* * * ALL AMERICAN LIVESTOCK SALES COMPANY, hereinafter referred to as 'All American' * * *' but was signed by Culver. This contract was for the same term and same remuneration as the unsigned employment agreement, refers to services to be performed in connection with horse sales, contains a non-competition paragraph and a personal guarantee by Culver. Alleged lack of performance under this contract triggered this litigation.

A. The contract claims.

(1) Culver's written contract.

(a) Ambiguity.

In claiming that Culver breached the employment contract, Sierra offered oral evidence as to the intent of the parties in entering the contract. This evidence was admitted over Culver's objection. Culver would apply the rule that a written contract merges all prior and contemporaneous negotiations and evidence of oral agreements is inadmissible to vary or contradict the written contract. Armijo v. Foundation Reserve Insurance Company, 75 N.M. 592, 408 P.2d 750 (1965). This rule applies to contracts which are clear and unambiguous. Armijo, supra; Boylin v. United Western Minerals Company, 72 N.M. 242, 382 P.2d 717 (1963). That is not the situation here.

It is for the court to determine, as a matter of law, whether the contract is ambiguous. Lindbeck v. Bendziunas, 84 N.M. 21, 498 P.2d 1364 (Ct.App.1972); McDonald v. Journey, 81 N.M. 141, 464 P.2d 560 (Ct.App. 1970). Culver's guarantee in the employment contract reads:

'Eric N. Culver personally guarantees that he will cause the terms of this agreement to be entered into between All American Livestock Sales Company and Ruidoso Racing Association, Inc., immediately upon assuming an executive position with both All American Livestock Sales Company and Ruidoso Racing Association, Inc.'

Does the quoted language mean that the two entities identified--All American and Ruidoso--were to enter an employment contract between themselves? If so, who was to be the employer and who the employee? Does it mean that each of the two entities were to enter a contract with Sierra, or were each to ratify Culver's contract? What is the entity referred to as All American? Looking to the entire contract (Lindbeck v. Bendziunas, supra), Sierra and Ruidoso are identifiable as corporations. All American is not so identified; the nature of that entity nowhere appears in the contract.

We hold the employment contract is ambiguous. The intent of the parties was, therefore, to be ascertained from the language and conduct of the parties and the surrounding circumstances. Ashley v. Fearn, 64 N.M. 51, 323 P.2d 1093 (1958). The trial court did not err in admitting oral evidence as to the intent of the parties.

(b) Mutual mistake of fact.

Culver contends no employment contract came into existence because of a mutual mistake of fact. This mutual mistake is asserted to be that the parties assumed that All American constituted a separate corporation. We do not reach the question of the status of a contract after it is established that there has been a mutual mistake of fact; this contention is answered on the basis that no such mutual mistake occurred. A mutual mistake exists where there has been a meeting of the minds of the parties and an agreement actually entered into, but the agreement in its written form does not express what was really intended by the parties. Morris v. Merchant, 77 N.M. 411, 423 P.2d 606 (1967); Cleveland v. Bateman, 21 N.M. 675, 158 P. 648, Ann.Cas.1918E, 1011 (1916); Smith v. Loos, 78 N.M. 339, 431 P.2d 72 (Ct.App.1967).

Here, the question of mutual mistake was one of Culver's defenses submitted to the jury for its determination. Its verdict in favor of Sierra necessarily found against Culver on this claim. The evidence is substantial that in referring to All American the parties agreed upon and intended the All American entity operated as an unincorporated division of Ruidoso and that was the All American referred to in the contract.

We add that the concept of a corporation having anything to do with the horse sales is nebulous, at best. An All American Livestock Sales Company, Inc. was incorporated in March, 1966, and Myrl Hensley was one of the incorporators. It apparently was in April, 1966 that Myrl Hensley, individually, entered the contract with Ruidoso by which she gave up her right to conduct the horse sales. We are referred to no evidence, and we have found none, indicating either that Myrl Hensley had transferred her right to conduct the horse sales to the All American corporation or that the All American corporation had any rights in connection with the horse sales at the race track. Further, as we have previously...