Tevis v. Ryan

• Decision Date: 02 April 1910
• Docket Number: Civil 1124
• Citation: 108 P. 461,13 Ariz. 120
• Parties: W. S. TEVIS, W. M. McKITTRICK and THE PACIFIC SURETY COMPANY, Defendants and Appellants, v. JEPP RYAN, T. C. RYAN and E. B. RYAN, Plaintiffs and Appellees
• Court: Arizona Supreme Court

108 P. 461

13 Ariz. 120

W. S. TEVIS, W. M. McKITTRICK and THE PACIFIC SURETY COMPANY, Defendants and Appellants, v. JEPP RYAN, T. C. RYAN and E. B. RYAN, Plaintiffs and Appellees

Civil No. 1124

Supreme Court of Arizona

April 2, 1910

APPEAL from a judgment of the District Court of the Third Judicial District, in and for Maricopa County. Edward Kent, Judge. Affirmed on condition that a remittitur be made.

The facts are stated in the opinion.

Ben Goodrich, A. C. Baker and Chas. Bowman, for Appellants.

The written contract is complete, unambiguous and definite, and requires no parol evidence to explain it, that no interest in the property or mines of the corporation is comprehended or covered by the contract or within its terms or stipulations. The law controlling the operation of a contract is deemed to be within the contemplation of the parties, as much as the words in which it is expressed, and becomes an essential part of it. Union Selling Co. v. Jones, 128 F. 672, 63 C.C.A. 224; Walker v. Whitehead, 16 Wall. (U.S.) 314, 317, 21 L.Ed. 357; Bulkley v. United States, 19 Wall. (U.S.) 37, 40, 22 L.Ed. 62; Manistee Iron Works v Lumber Co., 92 Wis. 28, 65 N.W. 865. The intention of the contracting parties is to control. Canal Co. v Hill, 15 Wall. (U.S.) 94, 21 L.Ed. 64; Pressed Steel Car Co. v. Eastern R. Co., 121 F. 609, 57 C.C.A. 635; 2 Page on Contracts, par. 1104. And this intention must be deduced from the entire agreement. The law controlling the operation of a contract is an essential part of it. Where a contract is susceptible to two constructions, one of which makes the contract equitable and reasonable and the other unconscionable and unreasonable, the former will be adopted. Scott v. United States, 12 Wall. (U.S.) 443, 20 L.Ed. 438; Hume v. United States, 132 U.S. 406, 10 S.Ct. 134, 33 L.Ed. 393. The court erred in the admission of parol evidence which contradicted, varied, altered and added to the written contract. "The rule that a written contract cannot be varied by parol extends to the legal import or intendment of the contract, as well as to the terms or words in which it is written." Union Selling Co v. Jones, 128 F. 677, 63 C.C.A. 224; Bast v Bank, 101 U.S. 93, 25 L.Ed. 794. "Where there is a contract appearing on its face to be complete, with mutual obligations to be performed, you can no more add to or contradict its legal effect by parol stipulations, preceding or accompanying its execution, than you can alter it, through the same means, in any other respect." Thomas v. Scutt, 127 N.Y. 133, 27 N.E. 961. "When the language employed in a contract is not free from ambiguity, or when its interpretation depends upon the sense in which the words are used in view of the subject to which they relate, the relation of the parties and the surrounding circumstances properly applicable to it, the intent of the parties becomes a matter of inquiry, and the interpretation of the language used is a mixed question of law and fact, to be determined by the jury" (Norton v. Shields. 132 F. 873); and should be submitted to the jury under proper instructions from the court. Coquillard v. Hovey, 23 Neb. 622, 8 Am. St. Rep. 134, 37 N.W. 479; Milwaukee Ry. Co. v. Kellogg, 94 U.S. 469, 24 L.Ed. 256.

Neal & Sutter, J. T. Kingsbury and Eugene S. Ives, for Appellees.

The evidence objected to was offered and received, not for the purpose of varying the terms of the contract, but for the purpose of showing the circumstances surrounding its making, in order to aid the court in its interpretation. "When an instrument has been correctly construed according to its terms, it is harmless error to admit incompetent testimony to show its interpretation." Taylor v. Hodges, 105 N.C. 344, 11 S.E. 156. It is the duty of the court, and not of the jury, to interpret a contract. "The court decided to hear oral testimony from the parties to the transaction, so as to put the court in the position of said parties at the time the transfers were made; not for the purpose of reading into those assignments or contracts any new conditions, or varying or changing their meaning, but for the purpose of ascertaining what the parties themselves meant by the terms used in the written bills of sale executed." Chicago Cheese Co. v. Fogg, 53 F. 73. "It is well-settled law that written instruments are always to be construed by the court, except when they contain technical terms or terms of art, or when the instrument is introduced in evidence collaterally, or where its effect depends not merely upon the construction and meaning of the instrument, but upon extrinsic facts and circumstances, in which case the inference to be drawn from it must be left to the jury." Goddard v. Foster, 17 Wall. (N.Y.) 123, 21 L.Ed. 589.

OPINION

LEWIS, J.

-- This is an action brought to recover damages for breach of contract. The facts in so far as essential to determination of the case are as follows:

In November, 1902, the Turquoise Copper Mining and Smelting Company, a corporation, was the owner of certain mining claims in Cochise county, Arizona. At that time its property had been sold for approximately $23,000, upon an execution in aid of a judgment, to one T. B. McPherson. The time for redemption was to expire January 31, 1903. Upon November 29, 1902, a conference was held between W. H. McKittrick, one of the appellants, and the appellees, which resulted in the execution of an agreement between the appellants and the appellees, the alleged breach of which is the subject matter in suit. This agreement may be summarized thus:

Whereas, the parties above mentioned represent all the stock in the Turquoise Copper Mining and Smelting Company, a corporation; and, whereas the first parties (the appellants) now own and control three-sevenths of the capital stock of said corporation, and parties of the second part (the appellees) four-sevenths of the capital stock thereof, and whereas the first parties are desirous of securing the controlling interest of the said capital stock of said corporation, and thereby obtaining the full management of the affairs of the said corporation: Now, therefore, in consideration of the conversion of the capital stock from its original capitalization to one million shares of the par value of one dollar ($1) each and the placing of 240,000 shares of said capital stock in the treasury of the company to be sold in whole or in part by the said first parties at such price or prices as the board of directors of said corporation may deem advisable, the moneys to be used first to pay off a certain judgment held by T. B. McPherson, and second to develop the claims of the company, the second parties agree that the officers of the company now representing the second parties shall resign, permitting the first parties to choose officers as they may desire. Said second parties further agree to give the first parties as their interest in the company 280,500 shares of the capital stock; the second parties to receive 279,500 shares, the remaining 200,000 shares to be issued to W. H. McKittrick, as trustee, and to be divided between the parties in the proportion of 101,000 to the first parties and 99,000 shares to the second parties. All of the parties agree to use their best endeavors to sell the trust stock at not less than par, the proceeds to be divided pro rata until reimbursed for the money then expended upon the property, when the remaining shares shall be divided between them according to their respective interests in the ratio aforesaid. It is further agreed that none of the individual holdings shall be sold until the trust stock has been sold or apportioned, and that the second parties shall not be liable for any expense connected with the operation of the company, excepting the expense of selling the trust stock.

The contract then concludes: "It is further agreed that the parties of the first part shall have a term of two years in which to comply with all the requirements of this contract. Should they fail or refuse to comply with all the agreements and stipulations herein mentioned within the period aforesaid, then this agreement shall become null and void and of no effect, otherwise to remain in full force and effect. Should this contract be annulled by any failure of the parties of the first part to do any and all things herein required of them, then the interest of the second parties shall reinvest in them in the same proportion and ratio as they held and were possessed of at the signing of this agreement." This clause has been denominated by counsel as the "reinvestment clause," and for convenience will be so referred to hereinafter.

Pursuant to the terms of this contract, the appellees resigned from the management. The appellants thereupon assumed control, and selected directors and officers. The articles of incorporation were amended, changing the capital stock from 100,000 shares at $10 each to 1,000,000 shares at $1 each. The old certificates of stock were surrendered, canceled, and new certificates issued, the appellees receiving and ever since holding 279,500 shares. The reorganization of the company was not effected until January 26, 1903, and in order to obtain the necessary funds with which to redeem from the sale to McPherson, the corporation borrowed $30,000 upon its note from W. S. Tevis, one of the appellants. This note was subsequently transferred to the Western company. McKittrick acting for the corporation, redeemed the mines from the sheriff's sale to McPherson. Thereafter 32,000 shares of the treasury stock were sold for twenty-five cents a share, netting the corporation $8,000, which funds were used by the corporation for further development of the mines. The interest upon the $30,000 note in the hands of the Western company was met by...