Maginn v. Lancaster

BLAND, P. J. The execution of the two agreements set out in the petition was admitted. It appears from the evidence that after O ’Reilly and Lancaster had been paid the $25,000, which they had paid into the corporation, with ten per cent interest thereon, and after Barnett had transferred twenty-five shares of his stock to O’Reilly, as per agreement of August 18, 1866, he — 125 — voluntarily transferred sixteen shares of his stock to Lancaster for the reason, as Lancaster testified, that he (Lancaster) had collected and paid out for the corporation the whole $45,000 expense in the construction of the building without charge, and that Barnett transferred the stock to him as remuneration for these services. All of Barnett’s two hundred shares of stock were pledged to Yeatman as collateral security for the interest on $20,000 he had loaned to Barnett, and Lancaster testified that he continued to pay interest to Yeatman to the end of the lease out of profits in the proportion the sixteen shares, transferred to him by Barnett, bore to the two hundred shares formerly held by Barnett, and that the sixteen shares were of no profit to him. In 1876 Lancaster transferred one hundred shares of his stock to Tiernan, the transfer,, in fact, being made to one Keating for Tiernan’s benefit. Lancaster was secretary and treasurer of the corporation; Tiernan being his bookkeeper carried the Yeatman interest on the books of the corporation as a joint charge against the dividends declared on the stock of O ’Reilly, Barnett and Lancaster until August, 1877, when Lancaster refused-to longer contribute to the payment of the interest. Lancaster testified that he objected to-and protested against the payment of any part of the interest to Yeatman after 1874, when he had been paid the par value of his stock with interest and when Barnett became entitled to receive dividends on his own shares of stock, and that he then claimed that his obligation to contribute to the payment of interest terminated in 1874, when Barnett became entitled to receive dividends on his own stock. The right of plaintiff to recover, if any he.has, must be found in the contract of August 18, 1866. The contract has no latent ambiguities and can not, therefore, be- helped by the parol evidence in the case. In respect to the length of time the Yeatman interest should — 126 — be treated as a first charge against dividends on the 1‘onr hundred and fifty shares of pooled stock, the contract is somewhat obscure. This obscurity furnished the occasion for this lawsuit. The contention of plaintiff is that under the contract, O’Reilly, Barnett and Lancaster pooled their stock for the life of the lease and agreed that the Yeatman interest should be paid out of the earnings of the pooled stock until all interest to become due was discharged. The defendant contends that the pool ended at the point of time when he and O’Reilly were paid, out of the net earnings of the pooled stock, the par value of their stock with interest. It is claimed by plaintiff that the parties themselves, by continuing the pool for three years after Barnett became entitled to dividends on his own stock, construed the contract as continuing tlie pool to the end of the lease. In the light of the evidence of Lancaster, that he objected to and protested against contributing to the Yeatman interest after Barnett became entitled to dividends on his own stock,.we do not think it can be safely said that he at any time construed the contract as contended for by plaintiff or agreed to that construction. The coiitract must therefore be construed by its terms. These being of doubtful meaning we must ascertain what was in the minds of the parties at the time the contract was entered into with reference to the subject-matter under consideration, and the purposes to be accomplished by the contract and from these ascertain the scope and meaning of the agreement as written. The situation was, O’Reilly, Barnett and Lancaster had subscribed $45,000 to the corporation to be used in the erection of a building to be leased to tenants. Barnett had subscribed for two hundred shares of stock in the corporation and had borrowed $20,000 of Yeatman to pay for it, agreeing to pay eight per cent interest per annum on the loan for twenty years in discharge of the loan and had pledged to Yeatman his two hun — 127 — dred shares -of stock as collateral security for the payment of this interest and had given O’Reilly as personal security for $15,000 of the interest to accrue after the building was erected to secure which O’Reilly had pledged to Teatman his one hundred and fifty shares of stock. At this time the stock was earning nothing and could not until the completion of the building on. the leased premises. After the erection of the building it was expected that large profits would be made, but the amount of these profits was uncertain. It was not known at that time,. and no doubt the parties were uncertain, whether or not the dividends from Barnett’s two hundred shares would be sufficient to pay the Teat-man interest; if not, then his holdings of stock would' be a positive burden instead of a profit to him. To provide against this contingency, Barnett proposed to forego all participation in dividends to be declared on his stock until the happening of an uncertain event, if O’Reilly^and Lancaster would pool their stock with him and agree that the Teatman interest should be a first charge on the dividends to be declared on the pooled stock; O’Reilly and Lancaster to receive the balance of such dividends until from such balance they should each receive the par value of his stock with ten per cent interest thereon, thereafter Barnett to receive the dividends on his own stock. This arrangement was satisfactory to all parties and was agreed to and incorporated in the contract. The contingency, provided for in the agreement, upon the happening of which Barnett would be entitled to.receive the dividends on his own stock, might never happen and Barnett never realize any profit on his shares of stock, but he would not be the loser, if the whole of the dividends on the pooled stock would have been sufficient to pay the Teatman interest. On the other hand, it might have turned out that the dividends on Lancaster’s one hundred shares of stock would have been greater, taking the whole life of the lease, had he not agreed to contribute to the pay — 128 — ment -of the Yeatman interest. This was the situation when the agreement was made and these possibilities and contingencies must have been in the minds of the parties at the time, and the contract must be construed with these in mind. It will be seen by reading the contract that Lancaster did not make himself a party to the prior agreement between Yeatman, Barnett and O’Reilly, nor did he become unconditionally bound to Barnett and 0 ’Reilly, or to Yeatman,' to pay any part of the interest. He agreed to pool his stock with that of 0 ’Reilly and Barnett and that the payment of the Yeatman interest should be a first charge on the earnings of the pooled stock. When, if at all, during the life of the corporation did this, agreement terminate, is the question in controversy. It seems to us that it was to run and be in force “until” the amounts paid by O’Reilly and Lancaster into the corporation with ten per cent interest thereon should be earned in net dividends on the four hundred and fifty shares of pooled stock and be paid to them. After the attainment of this result, Barnett was to transfer to 0 ’Reilly twenty-five shares of his stock and the profits (dividends) were to be divided pro rata between the three of them in proportion to the amount of stock held by each. When this changed condition was brought about the shares held by 0 ’Reilly and Lancaster had paid for themselves with ten per cent interest. The shares held by Barnett were still burdened with, the payment of the Yeatman interest hypothecated as security therefor. It is contended by respondent that the last clause of the contract, to-wit: “And when the said sums so paid up by said 0 ’Reilly and Lancaster shall have been fully paid back, the said Barnett, as trustee of Elizabeth Barnett, shall transfer to said 0 ’Reilly twenty-five shares of said stock, so as to make equal the amount of stock owned by said Barnett, trustee, and said O’Reilly, after which any dividend declared upon said stock shall — 129 — be received by said O’Reilly, Lancaster and Barnett, trustee, pro rata, in pioportion to tbe amount of stock held by them, as by their legal representatives, as aforesaid,” would be meaningless if the pool of the shares of stock is made to end at the point of time when O’Reilly and Lancaster had received from dividends of the four hundred and fifty shares of pooled stock the amounts they severally had paid into the corporation with ten per cent interest thereon; that the purpose of this paragraph was to continue the aggregation of these shares and the dividends thereon charged with the payment of the Yeatman interest to the termination of the lease. It seems to us this clause was introduced in the contract for an entirely different purpose. It is not connected with the preceding clause and its purpose, it seems to us, is to provide that after the pool arrangement had accomplished the purposes of the pool, a new arrangement, as between O’Reilly and Barnett, in respect to their shares of stock should be made, to-wit, that all the pledged stock, Barnett’s two hundred shares and O’Reilly’s one hundred and fifty shares should be equally divided between the two, by Barnett transferring twenty-five of his shares to O’Reilly and that thenceforth they, O’Reilly and Barnett, should share equally in the earnings of this stock, if such earnings should exceed the amount required to discharge interest to become due to Yeatman. Lancaster’s shares were not pledged and hence he was not brought into this new arrangement for the partition of the stock. The stipulation that after the transfer of twenty-five shares of stock to 0 ’Reilly, the dividends declared should be received by O’Reilly, Barnett and Lancaster pro rata in proportion to the amount of stock held by them without mentioning the Yeatman interest, seems to us to exclude the idea that the pool of four hundred and fifty shares should longer continue and that this was written into the contract to show that Bar — 130 — nett should participate in the dividends and the proportion he should be entitled to. There is certainly nothing in the paragraph to indicate that dividends on Lancaster’s stock should contribute to the payment of the Teatman interest, or that his stock should be any longer pooled with that of O’Reilly’s and Lancaster’s, unless the word “until” used in the preceding paragraph of the contract carries forward the pooling clause therein to the last paragraph. Respondent contends that this word has this effect, and that its proper office is to connect these two separate and distinct clauses together. The contract should be construed as a whole and not by piecemeal, and if one part or clause has reference to another the two should be construed together. But the separate and distinct clauses providing for separate and distinct things can be considered together, only in so far as the one throws light upon the other, and we are required in the construction of contracts to give words their ordinary meaning, when they have one. The word “until” is a word of limitation used ordinarily to restrict what immediately precedes it to what immediately follows it. Its office is to point out some point ’of time or the happening bf some event when what precedes it shall cease to exist or have any further force or effect. In the connection in which it is used in the contract it can have no other meaning than that the pool contract should continue up to the time when 0 ’Reilly and Lancaster received from the dividends on the pooled stock the amounts respectively paid into the corporation by them with ten per cent interest thereon. It appoints a time when the pool contract shall end. “In open prospect nothing bounds our eye, Until the earth seems joined unto the sky.” The argument, that the word “until” .joins the last to the preceding paragraph of the contract, seems to us as delusive as is the optical illusion that the earth joins the sky at the extreme point of unobstructed vision. The last clause does not serve to explain the first — 131 — any further than to show when the agreement contained in it should terminate. Another obstacle in the way of plaintiff’s construction of the contract is, that the interest due to Yeatman was Barnett’s debt, not .Lancaster’s. "Why should Lancaster-continue to contribute to the payment of Barnett’s debt after the inducement to do so had been withdrawn by Barnett’s stepping in and participating in the dividends or profits? For it must be kept in mind that the only consideration that could have moved Lancaster to enter into the agreement of August 18, 1866, was that Barnett agreed to forego participation in the dividends on the four hundred and fifty shares of pooled stock on condition that O’Reilly and Lancaster would agree to treat the Yeatman interest as a first charge on said dividends. It seems to us that when the consideration for the contract failed, that Lancaster’s obligation under the contract ceased. After providing that the $400 of interest becoming due quarterly on the Yeatman note should be included as an expense of the corporation, the contract provides as follows: “ There shall be first refunded and paid to the said O’Reilly and Lancaster, pro rata on the respective amounts of $15,000 advanced by O ’Reilly, and $10,000 advanced by Lancaster, until both these amounts shall be paid in full with interest at the rate of ten per cent per annum.” The right of O’Reilly and Lancaster to receive all the dividends after paying expenses, including interest to Yeatman, is made to depend upon the application of dividends to the payment of interest on Barnett’s note to Yeatman.. These are interdependent stipulations, both of which were to run together and continue until O’Reilly and Lancaster should"receive the respective amounts paid into the corporation by them with interest. The preposition “until” is a restrictive word, a word of limitation (State ex rel. v. Perkins, 139 Mo. l. c. 115), and means in this contract that the payment of the Ypatman interest out of the — 132 — profits of the corporation shall he limited to the point of time when O’Reilly and Lancaster should receive from the profits the amounts respectively paid in by them with the stipulated interest. These were the purposes of the bargain and it should be restrained to these purposes. Blair v. The Chicago & Alton R. R. Co., 89 Mo. l. c. 393. The purposes of the bargain between Barnett, O’Reilly and Lancaster, so far as Lancaster was interested or concerned, were accomplished when he received his $10,000 with the agreed interest, when Barnett became entitled to and did receive the dividends on his own stock. The construction of the contract contended for by the respondent was given it by Judge Bakewell, a former judge of this court, by the referee and by the judge of the circuit court. It was ably presented on the first hearing by the respondent’s counsel and we gave the case careful consideration before preparing our first opinion and hesitated long before committing ourselves to the result then reached for the reason the views we entertained were opposed to the views of the three learned jurists above mentioned. When the motion for rehearing was filed we readily sustained it and granted a rehearing, not because we had changed our views, but for fear we might be in error. The case has been again very ably argued by counsel for both parties. With these arguments fresh in our minds we have again gone over the case and given it the best consideration we are capable of, with the single object of arriving at a correct interpretation of the contract. After doing so we find it impossible to change our views as expressed in our former opinion and therefore reverse the judgment. All concur.