Telex Corp. v. Data Products Corp.

Decision Date28 May 1965
Docket NumberNo. 39557,39557
Citation271 Minn. 288,135 N.W.2d 681
PartiesThe TELEX CORPORATION, Respondent, v. DATA PRODUCTS CORPORATION, Appellant.
CourtMinnesota Supreme Court

Syllabus by the Court

1. A contract is ambiguous only if it is reasonably susceptible to more than one construction. Whether a contract is ambiguous or not and therefore open to construction presents, in the first instance, a question for legal determination by the trial court.

2. The principle that the lower court's determination is to be sustained unless it is without reasonable support in the evidence is applicable in the instant case notwithstanding that the issue involved is the interpretation to be placed upon a written agreement.

3. It is an elementary principle of law that a contract must be construed as a whole. The intention of the parties must be gathered from the entire instrument and not from isolated clauses and in so far as it is reasonably possible it is to be construed so as to harmonize all of its parts.

4. Since the terms of the contract herein, construed as a whole, are clear and unambiguous, there is no need to resort to practical construction.

5. Where the written language of an agreement applied to the subject matter therein is clear, it is neither necessary nor proper in construing it to go beyond the wording of the contract itself. Construction lies only in the field of ambiguity, and where there is no ambiguity there is no room for construction.

6. Where the subject dealt with is wholly contractual it is not for this court to create or add exceptions to or to remake the contract in behalf of either of the contracting parties.

Faegre & Benson, Armin M. Johnson and Gordon G. Busdicker, Minneapolis, for appellant.

Cant, Haverstock, Beardsley, Gray & Plant, and Robert F. Henson, Minneapolis, for respondent.

NELSON, Justice.

This appeal is from a summary judgment and involves the interpretation and construction of a contract originally entered into between defendant, Data Products Corporation, and Telex, Inc., the predecessor in interest of plaintiff, The Telex Corporation. For convenience both plaintiff and its predecessor will be referred to hereafter as Telex.

The agreement under consideration on this appeal was dated October 11, 1962, and provided for the payment to Telex by Data of an indebtedness of $404,068.74, either in cash on or before September 30, 1967, or, at the option of Telex, in common stock of Data. The issue in the case is whether Telex exercised its option to convert the indebtedness to stock on September 30, 1963, at the rate of $2 per share, or on October 10, 1963, at the rate of $2.50 per share. The issue was decided by the trial court in favor of Telex on cross motions for summary judgment.

The pertinent provisions of the contract are the following:

2(c). 'In the event that the Indebtedness or any part thereof remains unpaid on September 30, 1963, or in the event of any payment of the Indebtedness, or any part thereof, prior to September 30, 1963, Telex shall hereafter and until September 30, 1965, have the right to convert the Indebtedness into shares of common stock of Data in the following manner and to the following extent:

'(i) The right of conversion may be exercised by Telex.

'a. On September 30, 1963, or in the event of any payment on the Indebtedness prior to said date, at any time after receipt of notice of Data's intent to prepay all or a portion of such Indebtedness, on the basis of one (1) share of common stock of Data for each Two Dollars ($2.00) in principal amount of the Indebtedness unpaid at the time the notice of the intention to exercise such rights is given by Telex;

'b. During the period beginning October 1, 1963, and ending September 30, 1964, on the basis of one (1) share of common stock of Data for each Two Dollars and Fifty Cents ($2.50) in principal amount of the Indebtedness unpaid at the time the notice of the intention to exercise such rights be given by Telex;

'(iii) Telex shall give written notice of its intention to exercise such right, specifying therein the amount of such Indebtedness sought to be converted, and Such right shall become effective ten (10) days after such notice is received by Data at its Lauderdale, Minnesota facility, c/o Erwin Tomash (unless Telex is directed to send such notice to Data at a different address.)' (Italics supplied.)

Paragraph 9 of the agreement provides:

'Any notice which any party is required or may desire to give shall be deemed given three (3) days after a written copy of said notice is deposited in the United States mails registered mail, postage prepaid to the following addresses * * *.'

Pursuant to this provision Telex gave written notice of the exercise of its first unconditional right of conversion by mailing a notice to Data dated as of September 30, 1963, and admittedly received by Data before that date. Telex also served an identical notice personally upon a managing agent for Data on September 30, 1963. Telex claims that it properly exercised its right of conversion on September 30, 1963, at the rate of $2 per share. Data contends that the notice given by Telex did not result in the exercise of a conversion right until 10 days thereafter and that Telex thereby exercised its right of conversion existing during the period beginning October 1, 1963, and ending September 30, 1964, at the rate of $2.50 per share.

The determination of the meaning of paragraph 2(c)(iii) is the primary issue. Data takes the position that the foregoing paragraph requires the giving of a written notice 10 days in advance of the exercise of any conversion right by Telex. Telex takes the position that this paragraph relates only to the fixing of a date for its transition from creditor to shareholder.

After Data's position became known to Telex the parties, on November 20, 1963, entered into an agreement entitled 'Mutual Release' whereby Data agreed to issue 161,627 shares of its common stock to Telex, the number of shares to which Telex was entitled under Data's construction of the agreement of October 11, 1962, leaving the question of whether Telex is entitled to 40,407 additional shares for presentation to a court of competent jurisdiction in the State of Minnesota. The action herein followed, with the understanding that the dispute is to be resolved in accordance with Minnesota law.

1. There was agreement between the trial court and counsel for Telex and Data that there was no question of fact for determination and moreover that the contract was free from ambiguity. The function of this court, in cases of this nature on appeal, was stated in Employers Lia. Assur. Corp. v. Morse, 261 Minn. 259, 263, 111 N.W.2d 620, 624, by Mr. Justice Knutson:

'Whether a contract is ambiguous or not and therefore open to construction presents, in the first instance, a question for legal determination by the trial court. The trial court in this case determined that the contract was not ambiguous * * *. On appeal, it is for us to determine whether the trial court was correct in holding that there was no ambiguity and also whether the proper interpretation was given to the language used by the parties.

'A contract is ambiguous if it is reasonably susceptible to more than one construction.'

2. Telex argues that the scope of review is limited by the doctrine that the trial court's decision is to be sustained unless it is without reasonable support in the evidence. While it is a well-established rule that all evidentiary doubts are to be resolved against the party to whom summary judgment has been granted, Abdallah, Inc. v. Martin, 242 Minn. 416, 65 N.W.2d 641, Telex contends that this rule does not apply here because the parties have agreed that there is no evidentiary doubt to be resolved. It argues also that the hearing of cross motions below was the equivalent of a trial since all facts were before the trial court and ample time for argument was provided. Although Data contends that the trial court's decision is fully reviewable, since the appeal raises only questions of law, Telex argues that the principle that the lower court's determination is to be sustained unless it is without reasonable support in the evidence appears to be applicable notwithstanding that the issue in the case involves the interpretation to be placed upon a written agreement. It cites Independent School Dist. No. 877 v. Loberg Plumbing...

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