Springfield Tobacco Redryers Corp. v. City of Springfield

• Citation: 293 S.W.2d 189,41 Tenn.App. 254
• Parties: SPRINGFIELD TOBACCO REDRYERS CORPORATION v. CITY OF SPRINGFIELD, Tennessee.
• Decision Date: 18 May 1956
• Court: Court of Appeals of Tennessee

Page 189

293 S.W.2d 189

41 Tenn.App. 254

SPRINGFIELD TOBACCO REDRYERS CORPORATION v. CITY OF SPRINGFIELD, Tennessee.

Court of Appeals of Tennessee, Middle Section, at Nashville.

May 18, 1956.

Certiorari Denied by Supreme Court Sept. 3, 1956.

Wilson Sims and Cecil Sims, Nashville, for complainant.

Charles Willett, Springfield, for defendant.

FELTS, Judge.

This suit was brought by the Springfield Tobacco Redryers Corporation against the City of Springfield, Tennessee, to recover damages for an alleged breach of a contract by defendant to purchase complainant's real estate and plant, pursuant to our statute, Ch. 137, Acts 1951, T.C.A. § 6-1701 et seq., known as " 'The Industrial Building Revenue Bond Act of 1951.' "

This Act is designed to aid in bringing industries to our cities. It enables a city to purchase and improve industrial property; to pay therefor by issuance and sale of revenue bonds, provided their issuance is voted by three-fourths of the voters; and to lease such property to an industrial concern, the bonds to be secured by the property and the rentals, and to be amortized and paid off over a stated period. This is a valid enactment. Holly v. City of Elizabethton, 193 Tenn. 46, 241 S.W.2d 1001.

The bill alleged that, pursuant to this Act, defendant made a written contract, dated March 12, 1952, to purchase complainant's land and plant and to pay $175,000 cash for it; and that this promise was upon two contingencies: (1) that the issuance of the bonds should be approved by the voters, and (2) that defendant should lease the property to a named concern, these provisions of the contract (Ex. A to O.B.) being as follows:

"It is within the contemplation of the parties that the Purchaser is to execute revenue bonds of Springfield, Tennessee, secured only by an incumbrance upon said property and the rental thereof; and from the sale of said revenue bonds to purchase said land at $175,000.00 and to make certain improvements thereon and lease said property to the Wilson Athletic Goods Manufacturing Company, Inc., at such a rental as will pay off and discharge said revenue bonds which will be amortized over a period of twenty-five (25) years. It is agreed and understood by all of the parties that the issuance of said revenue bonds is to be voted upon in a referendum by the lawful voters of Springfield, Tennessee, as provided by law and that in the event that the issuance of said bonds does not receive the majority provided for by law then this contract is to be of no further force or effect.

"It is further agreed and understood between the parties hereto that the Purchaser desires to acquire said property for the sole purpose of leasing the same to Wilson Athletic Goods Manufacturing Company, Inc., and that said revenue bonds for the purchase of said land are not to be issued unless the Purchaser is able to effect a lease with Wilson Athletic Goods Manufacturing Company, Inc., at a rental sufficient to pay the interest and principal on said revenue bonds and retire the same in full over a period of 25 years. If for any reason said lease contract is not entered into, then this contract shall be of no further force or effect." (Italics ours.)

The bill further alleged that these two conditions had both been fulfilled; that the requisite majority of the voters of Springfield had voted for the issuance of the bonds; and that defendant had entered into a lease contract with the Wilson Athletic Goods Manufacturing Company, Inc. (hereinafter called Wilson); but that notwithstanding the fulfillment of these conditions defendant breached its contract by refusing to complete the purchase of the property.

It was further averred that upon such breach complainant filed a bill for declaratory judgment and specific performance; but that defendant still persisted in its breach; that while that suit was pending defendant desired to acquire the property to lease to another concern and offered $110,000 for it; and that complainant, solely in order to mitigate its damages, dismissed the suit without prejudice and sold the property to defendant for $110,000, thereby reducing its damage to the liquidated sum of $65,000 plus interest, etc., for which it sought recovery.

Defendant in its answer admitted it made the contract (Ex. A) and averred these matters in avoidance: (1) that complainant had no corporate existence on March 12, 1952, because its charter had been revoked for being delinquent in its taxes; (2) that its stockholders and directors had not authorized a sale of its property; (3) that defendant's promise to purchase the property was upon condition that it could lease the same to Wilson, that Wilson refused to lease it, and the contract was of "no further force or effect"; and (4) that complainant, by its subsequent sale of the property to defendant for $110,000, waived its rights under the first contract (Ex. A), and that contract was merged with the later one.

The cause was heard before the Chancellor upon the pleadings and proofs by depositions. There was no material conflict in the evidence. It showed without dispute that the bond issue had been approved by the voters, the vote being 1,134 for to only 3 against it; and that defendant and Wilson had entered into a contract (Ex. B to O.B.) for a lease, and had agreed on the terms of the lease, reduced it to writing (Ex. C to O.B.), had not signed it, but had attached it to and made it a part of the contract they did sign (Ex. B).

The Chancellor filed an opinion embracing his findings of fact and conclusions of law. He pointed out there was no dispute as to material facts, and he was of opinion that if complainant was entitled to any recovery, "the amount of such recovery would be the difference between said sum of $175,000.00, fixed as the purchase price of said property in said contract of March 12, 1952, and the sum of $110,000.00, fixed as the purchase price of the same property in said contract of June 16, 1953, or the sum of $65,000.00, and interest thereon".

He held, however, that complainant was not entitled to any recovery. He rested this conclusion upon two grounds: (1) that defendant's obligation under the contract (Ex. A) to purchase the property was upon condition that Wilson should execute the lease, which it declined to do, the condition failed, and the contract (Ex. A) was of "no further force or effect"; and (2) that if the contract could be regarded as binding, complainant waived its rights thereunder by its subsequent sale of the same property to defendant for $110,000, and the earlier contract was superseded by and merged into the later one. He accordingly dismissed complainant's bill.

Complainant appealed and has assigned errors. The first questions debated by learned counsel relate to the part of the contract (Ex. A), above quoted, as to defendant leasing the property to Wilson; what was the intent and meaning of this condition; whether it required that Wilson sign the lease (Ex. C) after they had made it a part of the contract (Ex. B) they had signed; or whether it merely required that they enter into a contract legally binding Wilson under the lease as part of such contract.

This depends on the intention of the parties, which is to be gathered from the words used in their contract, read in the light of their negotiations, the circumstances of the making of the contract, and the practical construction of it by the parties themselves. Southern Pub. Ass'n v. Clements Paper Co., 139 Tenn. 429, 201 S.W. 745, L.R.A.1918D, 580; Neilson & Kittle Canning Co. v. F.G. Lowe & Co., 149 Tenn. 561, 260 S.W. 142; Fidelity-Phenix Fire Ins. Co. of New York v. Jackson, 181 Tenn. 453, 181 S.W.2d 625.

This property, two and one-half acres of land with a large plant thereon, lies just outside the corporate limits of the City of Springfield, and was owned by complainant, a Tennessee corporation. Wilson was a Delaware corporation, with its principal office and place of business in Chicago, Illinois. It was said to be one of the world's largest manufacturers of athletic equipment, with factories in many cities. In October 1951, its representative, Mr. Gage, came to Springfield, talked to Mr. Wagner, complainant's General Manager, and looked at the property.

Early in 1952, Gage came back, expressed an interest in acquiring the property. Wagner asked $200,000 for it. Gage said: "I have been authorized by my company to offer you $175,000.00". Wagner agreed to accept this offer. Gage suggested that the property be purchased for Wilson by the City of Springfield under the "Municipal Bond Act". Wagner stated he was not familiar with that Act, and Mr. John R. Long, Mayor of Springfield, was called into a conference and discussed the matter with them.

Wilson's engineers came, inspected the property, asked for, and were given, a copy of the blueprints showing the construction of the building. The engineers made plans and specifications for remodeling the building for Wilson. It was agreed that defendant, City of Springfield, would proceed under the Industrial Revenue Bond Act, call an election on the issuance of bonds not to exceed $400,000, purchase the property for $175,000, pay the costs of remodeling it for Wilson, and lease it to Wilson for 25 years at such a rental as would pay off the bonds in that time.

The work of preparing the contracts was done by Mr. Gage, representing Wilson, and Mr. John R. Long, Mayor of Springfield, and Mr. George W. Yost, City Attorney of Springfield, the two latter eminent members of the Springfield Bar, representing Springfield. As it was uncertain, or not known beforehand, whether the voters of Springfield would vote for the issuance of the bonds, Mr. Gage suggested that the contract between defendant and complainant be put in the form of a mere option to defendant to purchase the property.

Mr. Wagner was called to the City Hall and asked if complainant would agree to give defendant an option to purchase the...