Souder v. Tri-County Refrigeration Co. , 190 Kan. 207 ( 1962 )

The opinion of the court was delivered by

Wertz, J.:

This was an action for specific performance of a contract. The pertinent facts follow.

Defendants (appellees) A. W. Torluemke and P. B. Lindsay, owners of all of the stock of the defendant corporation, Tri-County Refrigeration Co., Inc., had an opportunity to dispose of the assets of their corporation. Through some previous arrangement between Lindsay and W. E. Souder, plaintiff (appellant), Souder, in the event of sale of the assets of the corporation, was to be given the first opportunity to purchase. On June 30, 1961, Lindsay contacted Souder in order to give him the first opportunity to purchase the stock of the corporation. Souder was advised by Lindsay that he and Torluemke had an offer to sell the corporation for $115,000 but because of their past association Souder would be permitted to purchase all of the stock of the corporation for $100,000.

A meeting was arranged, and on July 1,1961, all the parties being present, discussion arose with reference to giving Souder time to raise the purchase price. It was first discussed that Souder would be given an option to buy the stock on or before July 15. Souder asked for more time in order to raise the money through Cities Service Oil Company. Negotiations were completed and a written offer was submitted to Souder whereby he was given an option to purchase all of the capital stock of the corporation for the sum of $100,000, said option to be exercised on or before July 20. The written offer read:

“July 1, 1961

“Dear Mr. Souder:

“I am writing this letter as Secretary of the Tri-County Refr. Co., Inc., Manhattan, Kansas, and at the direction of the President of that Company.

“Please be advised that the Tri-County Refrigeration Co., Inc., Manhattan, Kansas, has a firm offer to sell their present business here in Manhattan, Kansas, including all property owned by them free and clear of any and all indebtedness for the sum of $115,000.00 from a Major Oil Company with the exception of their Accounts Receivable and the Fertilizer business. The TriCounty Refrigeration Co., Inc., must accept or reject this offer within a reasonable time; however I am giving you the opportunity to purchase all of the Capital stock of the Corporation for $100,000.00.

“I must have your acceptance or refusal to purchase this Capital stock on or before July 20, 1961.

“Yours truly,

“/s/ Richard C. Wells “Secretary”

and on this same date Souder acknowledged receipt of the offer and its terms by the following endorsement on the letter:

“I, W. E. Souder, agree to the above foregoing letter and if I do not purchase the stock as above set out, I hereby release and waive any rights to purchase the stock in the future.

“/s/ W. E. Souder

“Dated July 1, 1961, Manhattan, Kansas.”

The record disclosed that defendants Torluemke and Lindsay testified over objection of the plaintiff that contemporaneously with the delivery of the option and plaintiff’s acceptance thereto the entire $100,000 was to be paid on or before July 20, and was so understood by all the parties. They further testified Souder stated this would give him time to obtain the money, and get it paid in. Souder’s testimony was:

“Q. How did you arrive at the date of July 20 which was inserted in the option agreement?

“A. Well, there was two reasons for that: number one, was to be sure that I had the money and, second, was that I figured by that time 1 would have ample time to see some of the records of that company.”

The record further disclosed that several telephone conversations were had between Souder and representatives of Cities Service Oil Company in order to procure authorization to advance the $100,000 to Souder.

On the morning of July 20, Souder went to the office of his attorney, Joseph W. Menzie, in Manhattan for the purpose of exercising his option. While there, a telephone conversation occurred between a representative of Cities Service Oil Company and Souder and Menzie wherein the plaintiff was informed that $100,000 would be available and delivered to him in Manhattan by a representative of the company on two and one-half hours’ notice. Thereafter, Mr. Menzie, as attorney for Souder, prepared and sent to the defendant company’s representative the following notice of acceptance:

“You are hereby advised that I accept the above offer to purchase the capital stock of the Tri-County Refrigeration Co., Inc; as above set forth.” [referring to Mr. Wells’ letter of July 1]

“It will be appreciated if you would advise me when we may arrange to have a transfer of the stock and the payment for same which I am ready, willing and able to do at your direction.

“Dated at Manhattan, Kansas, this 20th day of July, 1961.

“/s/ W. E. Souder”

and the acceptance was duly acknowledged by the company’s secretary on the letter as follows:

“The original of the foregoing notice of acceptance of offer was delivered to me this 20th day of July, 1961, at 10:45 a. m.

“/s/ Richard C. Wells

“Secretary, Tri-County Refrigeration Co., Inc.,

“Manhattan, Kansas.”

After the foregoing notice of acceptance had been served on the corporation’s representative Souder had a conversation with defendant Lindsay but did not advise Lindsay that the $100,000 would be available that day, nor did he tender or pay the purchase price under the terms of the contract. These facts are substantiated by the following excerpt from the record of the cross-examination of Sonder:

“Q. Did you tell him [Lindsay] at that time that you were in a position to pay the money on that date?

“A, I didn’t even mention it; I didn’t tell him.

“Q. Did you say anything about having the funds available in Kansas— from Kansas City and that they could be brought that day?

“A. No, not to my knowledge.

“Q. Did you tell any of the defendants on July 20 that you could have the money out there on the 20th- — -that day?

“A. No, not that I recall.”

Souder also testified that he neither authorized his attorney nor anyone else on his behalf to accept delivery of the corporate stock.

Souder remained in Manhattan until about 2:00 p. m. and then returned to Augusta. He did not advise the defendants where he would be the remainder of the day, nor did he advise them that he was leaving Manhattan, and no further contact was made either by Souder or his attorney with the defendants on July 20, 1961.

At approximately 2:30 p. m. that same day the two defendants went to Menzie’s office and attempted delivery of the stock to Menzie [Souder’s attorney], but Menzie had left his office and was not available.

At no time did the plaintiff, or anyone acting as his agent, inform or advise the defendants that the $100,000 was available for payment on July 20. No tender or offer to make payment was made, and defendants had no knowledge of the plaintiff’s capability in that regard.

The following day, July 21, Mr. Menzie and Mr. Wells engaged in a conversation in regard to the stock transaction, and Wells advised Menzie at that time that the sale would not be consummated inasmuch as it was the position of the defendants that the plaintiff had not performed by payment of the purchase price on July 20.

Among its findings of fact the trial court found that at the time of the delivery of defendants’ option to Souder, and Souder’s acceptance thereof on July 1, that it was agreed that the $100,000 purchase price specified in the option would be paid by July 20 if Souder decided to exercise the option; that plaintiff had made arrangements to obtain the $100,000 from Cities Service Oil Company and that a representative of that company was prepared to deliver the money to plaintiff in Manhattan on two and one-half hours’ notice throughout the entire day of July 20; that at no time did plaintiff, or anyone acting in his behalf, inform or advise defendants that said sum was available for payment, and that Souder did not at any time pay or tender to defendants payment for the stock; that defendants Torluemke and Lindsay were in Manhattan the entire day and stood ready to deliver the stock to Souder upon payment therefor; that Souder left the city of Manhattan for Augusta shortly after noon and did not return the remainder of that day. The court concluded as a matter of law that there was a contemporaneous collateral oral agreement between Souder and defendants wherein Souder was required to pay or tender the $100,000 purchase price for the stock to the defendants by July 20 if he elected to exercise the option. Inasmuch as the plaintiff failed to pay or tender the purchase price on July 20, plaintiff was not entitled to specific performance. The trial court entered judgment accordingly, and plaintiff appeals.

Defendants contend that there was a contemporaneous collateral oral agreement between the parties made on July 1, the day the option was delivered to plaintiff, whereby plaintiff was to pay the $100,000 to the defendants on or before July 20 for the 200 shares of capital stock in the event plaintiff exercised his option, and that said contemporaneous collateral oral agreement was never fulfilled by the plaintiff Souder by tendering or paying the purchase price.

Plaintiff Souder contends that evidence of the contemporaneous collateral oral agreement was not admissible in evidence as it violated the parol evidence rule, but that if such evidence was admissible, the defendants did not sustain the burden of proof.

From our review of the record we find there was ample evidence to sustain the contemporaneous collateral oral agreement made on July 1.

The determinative question presented by the plaintiff on appeal is that the evidence relating to the time when the $100,000 was to be paid, being a conversation had prior to or at the time of the execution of the option agreement of July 1 and Souder s acceptance thereof, tended to vary the terms of that contract and was a violation of the parol evidence rule and is not admissible to vary or contradict the terms of a complete or an unambiguous written agreement. This point is not well taken. Defendants were not attempting to vary the terms of the written instrument but only to explain or supplement the indefinite and incomplete matter contained in the contract. It is well established that when a written contract is silent as to a particular matter discussed and agreed upon between the parties, parol evidence may be offered on that matter without varying the written contract. (Hummel v. Wichita Federal Savings & Loan Ass’n, 190 Kan. 43, 372 P. 2d 67; Kirk v. First National Bank, 132 Kan. 404, 407, 295 Pac. 703; Kaul v. Telephone Co., 95 Kan. 1, 147 Pac. 1130.)

There is a wide distinction between an attempt to contradict the terms of a written instrument and to explain the circumstances and conditions under which it was executed and delivered. It has regularly been held that where a contract is incomplete or silent in any particular, parol evidence is admissible to show the actual agreement between the parties, and this is not limited to cases where there is ambiguity. Parties to a contract know best what was meant by its terms and are the least liable to be mistaken as to its intention, and, where the contract is silent or ambiguous concerning a vital point incident thereto, parol evidence will be received to aid in its construction. (Mayse v. Grieves, 130 Kan. 96, 99, 100, 285 Pac. 630; Kirk v. First National Bank, supra; Hummel v. Wichita Federal Savings & Loan Ass’n, supra.)

The rule against admission of parol evidence to contradict, alter or vary the terms of written instruments is not violated when such evidence does not contradict but explains or supplements indefinite or incomplete matters contained in the instruments, or when it tends to show the relation of the parties and the circumstances under which the instruments were executed. (Handrub v. Griffin, 127 Kan. 732, 275 Pac. 196; Hummel v. Wichita Federal Savings & Loan Ass’n, supra.) In cases where a written contract does not definitely embrace the entire agreement of the parties, and thus their interests are not completely expressed, parol proof may be received to supplement and explain that which is written. (Kaul v. Telephone Co., supra.) Evidence of an omitted term has been received as to the time of payment of amounts due or to become due under a contract. (32 C. J. S., Evidence, § 1013, p. 1035.) An oral agreement as to the manner in which a contract is to be performed is competent where the writing is not contradicted thereby, such as a delay in paying the purchase price. (20 Am. Jur., Evidence, § 1140, p. 993.)

It is true that defendants had offered and agreed that plaintiff might have the privilege of purchasing the stock on or before July 20, and this agreement was binding upon defendants, that is, that defendants were bound that the offer should be open and available to plaintiff to the end of that period. Plaintiff had the option to purchase, which he was at liberty to accept or not on or before the specified date, but the fact that the offer was made did not constitute a sale nor invest in plaintiff any title or interest in the stock. Until plaintiff had elected to accept the offer made by the defendants and had paid or tendered the purchase price within the stipulated time there was no sale and no compliance with the terms of the contract on plaintiff’s part.

Plaintiff argues that the time of performance was not of the essence of the contract. It is true that it contained no statement to that effect; however, the option specifically provided that the defendants had another offer for the sale of the stock from a major oil company for a sum exceeding that which the plaintiff was to pay. It was apparent that defendants should set a deadline for plaintiff’s performance of the contract so that in the event the plaintiff did not accept and pay for the stock within that time they would be at liberty to exercise the oil company’s previous offer to purchase the stock. Defendants could not sit idly by and wait for plaintiff to pay the purchase price, thereby losing their opportunity to accept the previous offer of the sale of the stock.

We stated in Kirk v. First National Bank, supra, that although a written contract for the sale of property does not specifically state that time of performance is of the essence of the contract, it may become so from the nature of the property sold and the surrounding circumstances which induced the sale. The circumstances, as disclosed by the record, had the effect of making time of payment of the essence of the contract.

The written option and acceptance of July 1 was incomplete as to whether the $100,000 was to be paid on or before July 20, and it is to that proposition the alleged oral agreement was directed. Under well-established rules oral evidence is admissible to show the relation of the parties and to explain the circumstances under which a written agreement was executed and delivered. All of the dealings, both oral and written, were, under the circumstances, but one transaction and founded upon one consideration. The record in the instant case clearly reveals that there was a contemporaneous collateral oral agreement existing between the parties; that in the event that Souder exercised his option to buy he would buy the 200 shares of stock of the corporation and pay the $100,000 on or before July 20. There was ample evidence to sustain such contract. It did not violate the parol evidence rule. Plaintiff’s failure to pay or tender payment constituted a failure on his part to comply with the terms of the contract, and he is not entitled to specific performance.

The judgment of the trial court is affirmed.

Fatzer, J., dissents.