Wright-Dalton-Bell-Anchor Store Co. v. Barron

This case comes to this court upon certification by the Springfield Court of Appeals. The reason assigned for the certification was a conflict between their opinion and the opinion of the St. Louis Court of Appeals in the case of Knight v. Orchard, 92 Mo. App. 466. The Court of Appeals in its opinion gives, among other things, the following outline of the facts of the case:

"This is an action growing out of a lease on a lot in Poplar Bluff, Missouri. The cause was tried to a jury, and plaintiff recovered judgment for $4999. Defendant filed motion for new trial and in arrest, and these being overruled, he appealed.

"On June 1, 1901, Mrs. W.D. Knight, the then owner, leased to plaintiff, for the term of sixteen years, nine months and eight days, a certain described lot, 57 by 104 feet, fronting east on Main Street in the city of Poplar Bluff, at $40 per month, the lessee to pay all taxes, general and special. Later defendant purchased the leased lot from Mrs. Knight, and it is conceded that he is responsible under the lease contract as Mrs. Knight would have been. Plaintiff owned the ground immediately west of the leased lot, and the building immediately north, designated as the Orchard Building. One Saracini owned the building immediately south of the leased lot. The Saracini wall extended west 45 feet, and the Orchard wall extended west 60 feet. Plaintiff by contract with the owner strengthened the Saracini wall, and extended it west 75 feet, and extended the Orchard wall west 40 feet, so that the space enclosed included all the leased lot and a parcel of ground to the west thereof 16 by 57 feet. Using the Saracini and Orchard walls thus extended, plaintiff erected a building covering the leased lot, and it and its tenants occupied this building under the contract until the expiration of the lease. It was for the value of this building as limited by the lease contract for which this suit was brought.

"Plaintiff sued in two counts, one on the theory that defendant under the lease contract was compelled to buy, and the other on the theory of conversion. Defendant's answer sets up many and various defenses, but its general denial was sufficient to raise the decisive issue. At the close of the case defendant requested an instruction in the nature of a demurrer. The court directed a verdict for the defendant on the second count, and the cause is here on the count based on the theory that defendant, under the contract, was compelled to buy the improvements. Defendant makes many assignments, but we think it unnecessary to consider any except the assignment based on the court's refusal to grant defendant's peremptory request for a directed verdict on count one.

"Plaintiff construed the lease contract to mean that under its terms and provisions plaintiff at the expiration thereof might elect to sell to defendant, and that if it did so elect, defendant was compelled to buy the improvements erected on the leased lot. Just a short time prior to the expiration of the lease plaintiff served written notice on defendant that it elected to sell to him, but he ignored this notice. He had previously advised plaintiff's president that he would not buy the building. The paragraphs of the lease contract upon which plaintiff relies to support its contention that defendant must buy or be responsible for the value of the improvements as limited by the contract are as follows. The numbers are added by us for convenience:

"``1. All buildings and improvement of every kind placed upon the premises by the party of the second part [plaintiff] are to be and remain the property of the said party of the second part, and at the termination of this lease may be sold by him to the party of the first part, if the parties can agree upon the amount, if not, then the party of the second part is to have the right to remove the said property from the premises or to sell it to some other person or persons or to re-lease anew upon terms agreeable to both parties hereto.

"``2. In default of any agreement between the parties hereto as to the purchase price of said buildings at the termination of this lease, the same shall be referred to a board of three arbitrators, two of whom shall be chosen respectively by the parties hereto and the third to be chosen by the parties thus chosen, which board of arbitrators shall determine the matter thus referred to them as soon as may be and fix the price of said building and improvements as provided in this contract and the judgment and finding of said board is to be conclusive and binding to both parties alike, and we hereby agree to abide by the decision of said board of arbitrators as to all matter submitted to them for their decision.

"``3. The party of the second part agrees to erect a cheap one-story building on the premises herein described which building shall cost less than five thousand dollars, the north wall of said building shall be the south wall of the building commonly known as the Orchard Building. It being expressly understood as one of the considerations of this contract that if at the expiration of this lease the party of the first part shall purchase said building no account of the north wall [the Orchard wall] of said building shall be taken in computing and determining the price to be paid for said building by the party of the first part. It being further agreed that while the party of the second part, its successors or assigns, may remain the absolute owners of said wall, the party of the first part, its [her] successors or assigns, shall enjoy forever the same rights and privileges as if she were the absolute owner thereof.

"``4. Within ninety days from this date the party of the second part agrees to deliver to the party of the first part, a full and complete statement of the plans and specifications of the building proposed to be erected on said premises, together with an estimate of the cost of said building, said statement and estimate to be sworn to by a competent architect.

"``5. It is further agreed by and on behalf of the party of the first part that the party of the second part shall have the right to sell or assign this contract, or may sublet under this lease, subject, however, to all the conditions of this lease.

"``6. It is further agreed that all the conditions and covenants contained in this lease shall be binding upon the heirs, executors, administrators, successors and assigns of the parties to these presents respectively.'

"It appears from paragraph 1 that all buildings and improvements placed upon the leased premises by plaintiff were to be and remain its property, and at the termination of the lease said improvements may be sold to first party, in whose shoes defendant now stands, if the parties can agree upon the amount."

The answer is not fully outlined in the foregoing, but reference thereto can be made, if found necessary, in the course of the opinion. The first crucial question is, as stated by the Court of Appeals, whether or not (under the lease provision) the defendant can be forced to purchase the improvements, put on by plaintiff, or in lieu of an actual purchase by agreement, be forced to pay the value thereof.

The Court of Appeals reversed outright the judgment of the lower court. In so doing it held that the terms of the lease did not require defendant, as a grantee of the lessor, to purchase unless he so desired, and that he was not liable for the value of the building, under count one of the petition.

I. It is apparent from the foregoing statement that all questions raised, or which might be raised in this case, are secondary to the vital question lying at the threshold of the case, viz., what is the meaning of this lease contract? Appellant contends that he, as successor of the lessor in the lease (although bound by the terms of the lease as fully as the said original lessor), is not obligated to purchase the house per force of the terms of the lease, and not being so bound, could not be held liable, in an action upon the lease contract, for the value thereof, which was the result of the trial in the lower court. Respondent contends contra, and the lower court took the view of the respondent.

In the briefs much is said of the rules of construction of contracts. No serious conflict in the cases upon these rules appears. The rules are firmly fixed. Among such rules may be found (1) that the prime purpose is to ascertain the intention of the parties, (2) in soRules of doing the whole instrument must be considered,Construction. rather than segregated portions thereof, (3) if possible a construction must be given which will give effect to all portions of the instrument, (4) if the language is plain and unambiguous, the intent must be gathered from the language used, and (5) if the language is ambiguous and doubtful then extraneous matters may be considered in determining the intent of the parties. These and other rules of construction need not be reiterated. Under them we shall proceed in determining what the parties intended by this lease contract upon the disputed issue involved between the parties to this suit.

II. The first count upon which the verdict and judgment for plaintiff were obtained was one upon the contract. The proof tended to show that the improvement made exceeded very much the sum of $5000. The contract provided that theObligation improvement should be less than $5000, and in thisto Buy. count the sum sued for is $4999, the exact amount of the verdict and judgment. So that it clearly appears that this count rested upon the contract, and this question is not questioned in the briefs.

Does this lease require the defendant (the assignee of the lessor, and bound as was the lessor) to take this building? If it does, then as defendant refused to take and pay for it, and refused to arbitrate the price thereof, he may be liable for the value fixed by the jury, instead of the value fixed by arbitration. If, on the other hand, he was not bound to take the building, under the contract, then there could be no liability in an action upon the contract, and such is the action here.

The paragraph of the contract which has, for convenience, been numbered 1, provides (1) that the improvements shall remain the property of the lessee, (2) that upon the termination of the lease such property "may be sold . . . to the party of the first part, if theparties can agree upon the amount," (3) if they cannot agree, then the lessee shall have the right to sell to some other party, remove the property from the premises, or to "re-lease upon termsagreeable to both parties hereto." The words "if not" used in this paragraph must mean that if the parties fail to agree upon the amount or price, then the lessee can try out the other three alternatives, viz., (1) remove the house, (2) sell it to some other person or persons (to be removed), or re-lease, if he could do so. If this clause stood alone there would be no question as to the matter in issue. Under this clause there is no obligation upon the lessor to buy. The lessee may (not must or shall) sell to him if they can agree upon the price. "If not" then the lessee can re-lease if they can agree upon the terms, or failing in either, the lessee can remove, or sell to some other party, who would have the right to remove. Under this paragraph the lessor is not compelled to buy, nor is the lessee compelled to sell, because the word "may" is used. Further if by this paragraph the parties meant that the lessor must buy, and lessee must sell, then the other named options or rights given the lessee would serve no purpose in the contract. There would be no need of giving the right to the lessee to remove the building, or to sell the same to another, or to re-lease the premises, if the lessee must sell and the lessor must buy the improvements. So under this paragraph (numbered 1 by us for convenience) the lessee would have (1) the right to sell to lessor if they could agree upon the price, (2) to remove the improvements, (3) sell the improvements to another, or (4) re-lease the premises if they could agree upon the terms. If this were all of the contract, there would be no doubt upon the vital issue here. The lessor would not be obligated to buy. The trouble comes from the succeeding paragraph, numbered 2 in the statement, for convenience. Of the further situation in the following paragraphs.

III. By the paragraph of the contract numbered 2 in the statement of the case the interest of the parties becomes hazy. This paragraph and the one we have just discussed had best be reproduced here, that we may have the full picture in our mind's eye, as we attempt to reach the intent of the parties. These paragraphs read:

"1. All buildings and improvements of every kind placed upon the premises by the party of the second part are to be and remain the property of the said party of the second part, and at the termination of this lease may be sold by him to the party of the first part, if the parties can agree upon the amount, if not, then the party of the second part is to have the right to remove the said property from the said premises or to sell it to some other person or persons or to re-lease anew upon terms agreeable to both parties hereto.

"2. In default of any agreement between the parties hereto as to the purchase price of said buildings at the termination of this lease, the same shall be referred to a board of three arbitrators, two of whom shall be chosen respectively by the parties hereto and the third to be chosen by the parties thus chosen, which board of arbitrators shall determine the matter thus referred to them as soon as may be and fix the price of said building and improvements as provided in this contract and the judgment and finding of said board is to be conclusive and binding to both parties alike, and we hereby agree to abide by the decision of said board of arbitrators as to all matters submitted to them for their decision."

Glancing at the paragraphs above (and they are the trouble-makers in the case) if there was an absolute agreement to sell by the one party, and an absolute agreement to buy by the other, then there would be some reason for paragraph 2 in the contract. It would serve as the medium for fixing the price. But this would make the other provisions in paragraph numbered 1, as removing the house, etc., absolutely without use or purpose in the agreement, for, as said, if there was an agreement to sell upon the one part, and an agreement to buy upon the other, all other provisions would be useless. Plaintiff, however, tries to obviate this situation by urging that, although the contract does not bind the lessee to sell to the lessor, yet it does give the lessee four options, (1) to sell to lessor, if he elects so to do, (2) remove the property from the premises, (3) sell the property to another, and (4) re-lease the whole premises if they can agree upon terms. Under this theory the lessee (plaintiff herein) says that he can elect to sell to lessor (defendant) and if he does so elect, the lessor must buy, and if they can't agree upon the price, then such price shall be fixed in the manner presented by paragraph numbered 2, supra. To this contention the appellant says, that the contract (as to the sale) would be unilateral and not enforceable, because there is no obligation upon the lessee to sell. Of this later, if it becomes a deciding factor.

Reverting again to the meaning of this contract, let us examine the paragraph numbered 3, in our statement, for this may give some light. This paragraph first provides for a cheap one-story building to be erected to "cost less than five thousand dollars, the north wall of said building shall be the south wall of the building commonly known as the Orchard Building." This Orchard Building was owned by the lessee at the making of the lease. It is so recited in the lease. But the enlightening portion of this paragraph, which bears upon the meaning of the contract, is the sentence which reads: "It being expressly understood as one of the considerations of this contract, that, if, at the expiration of this lease the party of the first part shall purchase said building, no account of the north wall (the Orchard Building wall) of said building shall be taken in computing and determining the price to be paid for said building by the party of the first part." Defendant is the successor of the party of the first part, or the lessor.

The significance of the quoted sentence lies in the word "if" used therein. "If . . . the party of the first part shall purchase said building," then this wall owned by lessee shall not be considered in fixing the price. If there was obligation upon the lessor to purchase the building, the parties were unfortunate in the use of the word "if" in the sentence quoted, supra. Such word indicates that the lessor might purchase, but was not obligated to purchase. Another circumstance against the idea of obligation to purchase, is the character of a building which was to be erected — a cheap building. Had the lessor bound herself to buy the building upon the lapsing of the lease, she would no doubt have wanted a better building, as the permanent structure upon her lot. The whole drift of this lease indicates that the building to be erected thereunder was not intended for the permanent improvement upon the lot.

This contract is one of difficulties in the matter of its construction, but we do not believe that a reasonable construction of it gives the lessee the right to force the lessor to take and pay for the building in dispute. We construe this contract to mean that if the lessee desires to sell the building to the lessor, and the lessor desires to buy the same, and they cannot agree upon the price then the price may be arbitrated as per paragraph 2, supra. There must first be an agreement to sell upon the lessee's part, and an agreement to buy upon the lessor's part, and then an inability to agree upon the price, before the arbitration clause becomes operative. But it suffices for this case, to say that we do not believe that the contract places an obligation upon the lessor to buy. Nor does it bind the lessee to sell to the lessor. However it does say that the lessee may (not must or shall) sell to the lessor, but this would mean that the agreement of the one to sell and the other to buy, would be a matter of later action. If the one was willing to sell and the other willing to buy, but unable to agree upon the price, then as said, supra, the arbitration clause would be of value. But as said, it is sufficient to say that the Court of Appeals ruled well, in holding that the lease did not obligate the lessor to buy. Nor do we think that the matter in issue here was so involved in Knight v. Orchard,92 Mo. App. 466, as to make the language of the opinion in that case of any binding effect here.

The judgment of the lower court should be reversed, and it is so ordered. All concur.