Texaco, Inc. v. Holsinger, 7708.

• Decision Date: 02 October 1964
• Docket Number: No. 7708.,7708.
• Citation: 336 F.2d 230
• Parties: TEXACO, INC., a Delaware corporation, Appellant, v. Wilmer M. HOLSINGER and Mary L. Moyer, Appellees.
• Court: U.S. Court of Appeals — Tenth Circuit

336 F.2d 230 (1964)

TEXACO, INC., a Delaware corporation, Appellant, v. Wilmer M. HOLSINGER and Mary L. Moyer, Appellees.

No. 7708.

United States Court of Appeals Tenth Circuit.

September 1, 1964.

Rehearing Denied October 2, 1964.

Leonard O. Thomas, Kansas City, Kan. (Lee E. Weeks, J. D. Lysaught, Richard Millsap, Robert H. Bingham, Ervin G. Johnston, Roger D. Stanton, Kansas City, Kan., Philip R. Wimbish and William E. Lester, Tulsa, Okl., on the brief), for appellant.

Robert E. Fabian, Kansas City, Kan. (John E. Blake, Bill E. Fabian and John E. Blake, Jr., Kansas City, Kan., on the brief), for appellees.

Before MURRAH, Chief Judge, and PICKETT and HILL, Circuit Judges.

HILL, Circuit Judge.

This declaratory judgment action was originally commenced in the state district court of Kansas to determine the rights and obligations of the parties under a real estate lease executed on June 10, 1953. The case was removed to the United States District Court for the District of Kansas, where a trial to the court was had and resulted in a judgment adverse to the appellant, Texaco, Inc. It appeals.

The stipulated facts show that, by the terms of the lease in question, the appellees leased a described tract of land, located in Johnson County, Kansas, to the appellant for an initial term of 10 years at an agreed rental of $140 per month. This lease required that Texaco build a modern service station on the premises at a cost of at least $18,000, and provided that the 10 year term should begin after construction of the station or, in any event, not later than January 1, 1954. In accordance with the contract, Texaco built a service station upon the premises at a cost of $40,700 and the initial term of the lease commenced on January 1, 1954. These premises have been maintained in good condition by Texaco and it has installed equipment worth $4,800. Texaco paid the required rent and, except as hereafter discussed, complied with all of the obligations imposed upon it by the lease.

The dispute in this case is over the interpretation to be given to paragraph 12 of the lease, which is entitled "Option to Extend Term". Under sub-paragraph (a) of that paragraph, the appellees, as lessors, granted to Texaco, as lessee, the "* * * right and option to extend this lease for six successive periods of five years each at the following rental: One Hundred and Forty Dollars ($140.00) per month, payable monthly in advance. * * *" and Texaco was required to notify the lessees, in writing, of its election to extend the lease at least 60 days prior to the date of termination of the lease. Sub-paragraph (b) provides: "If at any time during the term of this lease or any extension or renewal provided for herein, lessor shall receive a bona fide offer to lease the demised premises for a term to begin subsequent to the present demised term or such extension or renewal, and the lessor desires to accept such offer, lessor will immediately submit to lessee a written copy of such proposed lease with a full disclosure of the terms and provisions thereof and lessee shall have thirty (30) days after receipt thereof in which to elect to lease said premises upon the same terms and provisions contained in such proposed lease." The last provision of paragraph 12 is sub-paragraph (c), which states: "In the event lessee is granted an option to extend under the provisions of paragraph (12) (a), it is agreed that if lessee does not in any instance elect to lease said premises in accordance with the provisions of paragraph (12) (b), such failure shall in no way limit or affect lessee's right and option to extend this lease as provided in paragraph (12) (a)."

In February, 1963, the appellees received a bona fide offer to lease the premises at a monthly rental of $325 and, on February 11, 1963, they notified Texaco of such offer by letter from their attorney. A photostatic copy of the proposed lease was enclosed in the letter and Texaco was requested to advise them within 30 days "* * * as to whether or not you shall elect to lease said premises on the same terms as are contained in said proposal." Texaco refused saying that its lease with appellees "* * * contains six successive five-year options to extend in favor of our company, and in all probability our company will timely exercise the first of its said extension options and if and when it does this will continue our right to possession under our lease as supplemented." Appellees then commenced this action.

The trial court concluded that paragraph 12 was ambiguous and should be construed against Texaco, which prepared the lease; that paragraph 12(c) was repugnant to 12(a) and should be deleted from the lease; and it was implicit in paragraph 12(b) that, unless Texaco exercised the option to lease on the same terms as offered by a third party, the appellees had the right to lease to such third party.

At the outset, we agree with the parties that the lower court erroneously concluded that paragraph 12(c) of the lease was repugnant to paragraph 12(a). However, that does not necessarily require a reversal of the judgment. It is well settled that a judgment, which is correct in ultimate effect, will not be disturbed on appeal even though the lower court relied upon a wrong ground or gave an untenable reason for its action. The issue on appeal is the correctness in ultimate effect of a judgment and not the reason or reasons given for it by the trial court. If the judgment is sustainable upon any legal basis, it will be upheld on appeal despite the erroneous or untenable reasons given by that court for its entry. Brown v. Allen, 344 U.S. 443, 73 S.Ct. 397, 97 L.Ed. 469; J. E. Riley Investment Co. v. Commissioner, 311 U.S. 55, 61 S.Ct. 95, 85 L.Ed. 36; Helvering v. Gowran, 302 U.S. 238, 58 S.Ct. 154, 82 L.Ed. 224; Kaye v. Smitherman, 10 Cir., 225 F.2d 583, cert. denied, 350 U.S. 913, 76 S.Ct. 197, 100 L.Ed. 800; First National Bank in Wichita v. Luther, 10 Cir., 217 F.2d 262; Utah Copper Co. v. Railroad Retirement Board, 10 Cir., 129 F.2d 358, cert. denied, 317 U.S. 687, 63 S.Ct. 258, 87 L.Ed. 551. We must, therefore, determine from the record whether the judgment below is sustainable upon any legal basis and, if so, it must be upheld by this court.

Under the law of the State of Kansas, the place of making and performance of the lease in question, a contract that does not contravene legal principles, applicable statutes or the public policy of the state should be construed and interpreted in such a manner as to carry out and give effect to the mutual intention of the parties. Springer v. Litsey, 185 Kan. 531, 345 P.2d 669; Zelinkoff v. Johnson, 185 Kan. 489, 345 P.2d 665; Moore v. Jones, 10 Cir., 215 F.2d 719, 720, and Kansas cases therein cited. Unless a written instrument is ambiguous or vague in its terms, that intention must be determined from the instrument as a whole or, as is often stated, from its "four corners", which simply means that all of the language used anywhere in the instrument should be taken into consideration and construed in harmony with other provisions of the contract. Weiner v. Wilshire Oil Company of Texas, 192 Kan. 490, 389 P.2d 803; Borgen v. Wiglesworth, 189 Kan. 261, 369 P.2d 360; Kittel v. Krause, 185 Kan. 681, 347 P.2d 269; Smith v. Russ, 184 Kan. 773, 339 P.2d 286; Froelich v. United Royalty Company, 179 Kan. 652, 297 P.2d 1106; Dipo v. Ringsby Truck Lines, 10 Cir., 282 F.2d 126; Moore v. Jones, supra; Filtrol Corp. v. Loose, 10 Cir., 209 F.2d 10. An ambiguity does not appear until the application of the rules of interpretation to the face of the instrument leaves it genuinely uncertain as to which of two or more meanings is proper. Weiner v. Wilshire Oil Company of Texas, supra; Dearborn Motors Credit Corporation v. Neel, 184 Kan. 437, 337 P.2d 992; Custom Built Homes Co. v. Kansas State Commission of R. & T., 184 Kan. 31, 334 P.2d 808, cert. denied, 361 U.S. 816, 80 S.Ct. 55, 4 L.Ed.2d 62.

Appellant contends that there is no ambiguity in the provisions of paragraph 12 and that the intention of the parties is clearly expressed within the four corners of the instrument. Its argument is this: Paragraph 12(a) of the lease gives it the "right and option" to extend the lease for six successive periods of 5 years each; paragraph 12(b), which does not in any way conflict with 12(a) and which was inserted into the lease for its exclusive benefit, does not deal with options to extend the lease at all but, rather, is concerned solely with an option on its part to enter into a new lease to commence at the termination of the lease in question, as extended under 12(a), and requires the appellees to submit to it any proposed lease offer or offers they may receive in that regard for the purpose of giving it the option of accepting or rejecting a new lease on the same terms and conditions; and, in any event, the clear and concise language of paragraph 12(c) gives it the rights granted in 12(a), notwithstanding the provisions of 12(b) or any refusal on its part to accept any offer that might be made to lease the demised premises by a third party. In short, Texaco says that it has the right and option to extend the lease for a total of 30 years beyond the ten-year primary term by virtue of the provisions of 12(a), that this right and option is further secured by 12(c) and that, under 12(b), it has the right to extend the lease even further by electing to enter into a new lease with appellees under the same terms and conditions as may be set forth in a new lease proposal from a third party.

It is true that paragraph 12(a) standing alone, is the familiar lease clause by which the lessee is given an option to extend the primary term of the lease for a specified period or periods of time, provided that such...