124 Ark. 90 | Ark. | 1916
Lead Opinion
(after stating the facts).
It is an old and familiar rule that “every legal contract is to be interpreted in accordance with the intention of the parties making-it.” Paepcke-Leicht Lbr. Co. v. Talley, 106 Ark. 400-411.
In arriving .at the intention of the parties to a contract it must be considered as a whole, all of its parts being considered in order to determine the meaning of any particular part. No word should be treated as surplus-age if any meaning can be given to it that is reasonable and consistent with the other words of the contract. Railway v. Williams, 53 Ark. 58-66; Earl v. Harris, 99 Ark. 112; Phoenix Cement Sidewalk Co. v. Russellville Water & Light Co., 101 Ark. 22-27; Yellow Jacket Mining Co. v. Tegarden, 104 Ark. 573; Pittsburg Steel Company v. Wood, 109 Ark. 537.
I. Keeping in mind these elementary rules, did the parties to the contract evidenced by the consent judgment intend that the old company should pay the $600 per annum beginning with the first of January, 1907, only until the expiration of its charter, or during the term of the lease under which it held, or was it their intention that the old company should be liable for these payments as long as it or anyone deriving auv interest in any way under it occupied the Arlington Hotel site even after its charter expired?
It was but little more than five years from January 1, 1907, the date when the first payment was to be made under the contract, until the charter of the old company wóuld expire. The lease under which the old company held, expired a few months before the expiration of its charter. So the life of the old company and the leasehold estate under which the old company occupied the hotel site were not for coterminous periods. If it had been the intention of the parties to fix either one of these periods as the limit bevond which the liability of the old comnany should not extend, it seems reasonable that they .would have named specifically one or the other of these periods, for these were definite and certain and but a few years in the future.
If the parties had really intended that the company should pay the sum of $600 per annum only for a definite period of a little more than five years, the most natural way to have expressed such intention would have been to fix the liability at an aggregate sum embracing that period, to be paid in annual payments; or, to designate the sum of $600 to be paid annually, beginning the first of January, 1907, and continuing until the charter or lease of the old company expired, naming the date. If the parties had contemplated that the liability of the old company should continue until its charter expired, then they could not have intended that its liability should cease with the termination of the lease under which it held; for, as we have seen, the time when the lease expired was a few months before the time of the expiration of Cie charter life of the old company. It is manifest that the lease from the United States to S. H. Stitt & Co. was mentioned simply for the purpose of designating the hotel site as the property constituting the subject-matter of the contract between them, and not for the purpose of fixing a definite time when the liability of the old comnnny should end. If the purpose in mentioning the lease from the Government to S. H. Stitt & Co. had been to fix the time of the expiration of that lease as the time also when the liability of the old company to pay the annual sum named should cease, then the natural language would have been as follows: “As long as the Arlington Hotel Company, or its successors or assigns, shall continue to occupy the Arlington Hotel site under a lease by the United States to S. H. Stitt & Co. for a term of twenty years beginning March 3, 1892, and ending March 3, 1912.” And doubtless the language “embracing the grounds included in said lease, or any part .of said grounds, used for the purpose of operating the hotel, nr for any other purposes, as the lessee or lessees of the United States or otherwise,” would not have been added, because it was meaningless surplusage, and because the words “or for any other purposes” and “or otherwise” were entirely inconsistent with, the theory that the liability of the old company to pay $600 per annum ended when either the charter or the lease expired.
The consent judgment was doubtless drafted by the attorneys for the respective parties, and the court rendered the judgment in the language used to express their intention. The old company, its assigns or successors, could not have occupied the hotel site under its charter and the Stitt & Co. lease for ¡any other purpose than operating a hotel. Under the charter and lease then existing the old company was holding only as a lessee of the United States government, and only for the purpose of operating a hotel. But the language, “or for any other purpose as the lessee or lessees of the United .States or otherwise,” shows that the parties contemplated that the old company or its successors or assigns might occupy the hotel site under lease from the Government for some other purpose than ¡operating a hotel, and that the old company, its successors or assigns, might occupy the. site as lessee under some other lessor than the Government.
The parties who framed the consent judgment knew of course when the old company’s charter and the Stitt lease would expire; yet they used language which is absolutely incompatible with an intention to limit the annual payments to the time of the expiration of the charter or lease, and language which shows affirmatively that such was not the intention.
After the charter of the old company had expired in 1912 its officers and agents continued to occupy the Arlington Hotel site, accepting leases from the Government in the name of the old company, paying the sum named to Rector, and operating the hotel just as it had done before. And not until the -Secretary of the Interior, some two years after the expiration of its -charter, demanded that the charter be extended or renewed, did they take steps towards the organization of the new company, thus showing that it was the intention of the old company long after its charter had expired'to continue to occupy and operate the hotel just as if its charter had not expired. This conduct upon the part of the old company shows that it was not its intention to treat its 'contract with Rector as at an end when its 'charter expired. The officers of the old company knew, when the charter expired, and if they had intended -to treat the liability under the contract with Rector for payment of the $600 per annum as at an end when the charter expired it stands to reason that they then would have refused to pay -and thus have repudiated the obligation.
II. It is a well settled principle in the interpretation of contracts that where parties contract for a service that is purely personal, or with reference to the continueexistence of some particular thing 'constituting the subject matter of -the contract, -if the person dies or the thing ceases to exist, then the performance of the contract will be excused because impossible. 9 Cyc. 631; Pollock’s Principles of Contract, p. 362. See also Collins v. Woodruff, 9 Ark. 463.
Appellant invokes this rule, citing Smith v. Preston, 48 N. E. (Ill.) 688, and Janin v. Browne, 59 Cal. 44. But the rule has no application here because in the sense contemplated by the parties to the consent judgment, the old company did not die when its charter expired, but continued to exist in legal effect, at least, until the new company was organized. And because the occupancy of the Arlington Hotel site by the parties designated, which was the particular thing or subject matter of the contract between them, has not ceased. As we have seen, the parties to the contract intended that the Arlington Hotel site should be occupied by the old company or its suoces- or assigns for an indefinite period beyond the time of the expiration of its charter or the lease under which it then held.
In R. C. L. supra, it is said: “A corporation de facto may legally do and perform every act and thing which the same entity could do or perform were it a de jure corporation. As to all the world except-the paramount authority under which it -acts, and from which it receives its charter, it occupies the same position as though in all respects valid.”
The doctrine of our own court is: “That a corporation de facto can sue and be sued, and, as a rule, do whatever a corporation de jure can do, and none but the State can call its existence in question. ” Whipple v. Tuxworth, 81 Ark. 391.
The shareholders of the old company, -after the expiration of its charter, continued the business of operating the hotel under leases from the Government just as it had done before until the organization of the new company. The old company, therefore, to all. intents and purposes, had a corporate existence de facto up to that time. Likewise, the particular thing, the Arlington Hotel site, and the occupancy thereof, which was the subject-matter of the contract, had not ceased to exist. Furthermore, the payment of the annual sum provided for by the contract was not -a purely personal service that could be performed only by the old company.
In Janin v. Browne, supra, cited by the appellant, it is held: “Where an executory contract is of a strictly personal nature, the death of a party by whom work is to be done before its completion determines -the contract, unless what remains to be executed can certainly be done to the -same purpose by another; but where the personal representative can fairly and sufficiently execute all that deceased could have done, he may do so and enforce the contract. ’ ’
Concerning’ contracts -and their obligations, that do not involve a purely personal service, and the liabilities created by breaches or nonperformance of those contracts, there is no distinction between the contracts of individuals and corporations. In other words, the debts of corporations and the debts of individuals are alike after the death of the debtor except as to the remedy for nonpayment. •
We conclude therefore, that if it was within the power of the old corporation to create a liability to Rector in the sum named as specified in the contract it was a continuing and existing liability at the time the new corporation was formed.
III. Was it within the power of the old company to-create such liability?
The record does not disclose the nature of the claim that Rector was asserting against the old company. But the appellant does not challenge the consideration for the contract. We must assume, therefore, that whatever the nature and character of Rector’s claim, it was entirely sufficient to justify the old company in agreeing to pay the' amount specified according to the terms of the contract. It was certainly within the power -of a corporation to settle by a consent judgment a lawsuit that was pending against it.
IV. The transactions set out in the statement which led to the organization of the new company and the taking over by it of all the assets of the old company, were such, as to constitute the new .company a successor or assign of the old one.
After the expiration of the Stitt & Co. lease under which the old company held, and the expiration of its charter, it continued the business of operating the Arlington Hotel under precisely the same organization, and under lease from the Government, just as if its charter had not expired, under the same name ■and with the same officers and shareholders as it had done before. The officers and stockholders did not consider it necessary or advisable to take out a new charter. They had procured a lease from the Government for another term of twenty years and operated under that lease for a period of two years, when the Secretary of the Interior, having discovered that the time for the expiration of the charter of the old company had expired, demanded that the charter be renewed and extended. It was not until then that the shareholders of the old company took steps to organize a new company.
The new company was organized, as expressed in a resolution of its stockholders, “for the purpose of taking over all ef the assets of the former, The Arlington Hotel Company,” and to continue the business of the old company. To further this purpose, the .shareholders of the old company passed a resolution authorizing its president to convey to the new company “all the assets, property and effects, real and personal,” and to execute such deed of conveyance as may be necessary for vesting title to the property” in the new company. The resolution also provided that the consideration for these transfers was the assumption by the new company “of all indebtedness and liabilities of every kind” of the old company, and the agreement upon the part of the new company “to issue its full paid capital stock” to the holders of the stock of the old company “in exchange share for share.”
The shareholders of the new company passed a resolution accepting the transfers “of the assets, property and effects, real and personal, including .all real estate owned and held” by the eld company “in fee or by lease■hold” in Garland County, in the city of Hot Springs, and agreeing to accept the transfers of the capital stock'of its shareholders, and in consideration of all these transfers, the new company agreed to “assume each and every of its liabilities of every kind and character which are in existence at that date, * * * and to issue its full paid capital stock to the shareholders” of the old company “in exchange share for share.”
The transfers were made in pursuance of these resolutions. The deed of the old company to the new recited, among other things, “This conveyance includes all our right, title and interest in all the real estate owned by said corporation, either in fee or leasehold, which is situated in the city of Hot Springs, .Garland County, Arkansas, or in said county.” '
The lease executed by the Government to the new company, after setting forth that the period for which the .old company was chartered had expired, recited that “The Arlington Hotel'Company has again filed articles of agreement and incorporation.” And also set forth that, “by reason of the reincorporation of the said Arlington Hotel Company aforesaid, ” etc. The lease executed by the 'Government, with change of date, was but a copy of the lease that had been executed to the old company.
It was the manifest intention of all the parties concerned in these transactions to substitute the new company for the old, and to make the new company a successor to the old. Treating the old company as a de facto corporation, the transfers as set forth above from it to the new company were sufficient to constitute the latter company an assign of the former in the ordinary and literal acceptation of that term.
Now, during all 'these transactions and before "the lease was entered into with the new company, the old company, under the act of Congress, had the right to compensation for the improvements on the Arlington Hotel site. This was a property right of great value, of which the Government could not deprive it until an opportunity had been given the old company to have compensation for these improvements in the method provided by the act of Congress. No lease could be entered into with another party until the old company had had the opportunity for compensation. The old company had never received compensation for these improvements prior to the lease to-the new company according to the method provided by the act of Congress. The old company waived this method and accepted its compensation in the transaction entered into with the new company which met with the approval of the Government as evidenced by its lease to the new company.
It would be most unreasonable to conclude that the old company, or its shareholders, would have surrendered its right to be compensated for its improvements without a satisfactory equivalent, which it received when the new company took over all of its assets, assumed all of its liabilities and issued to its shareholders the same amount of stock in the new company that they ¡had in the old.
V. The old company, in its contract with Rector made itself liable to pay annually the sum of $600 as long as it or its successors or assigns should continue to occupy the Arlington Hotel site. Appellant, the new company, as the successor of the -old company, had occupied the Arlington Hotel -site -and was occupying the same at the time of the institution of this suit, and refused to pay the annual sum when it was due. Having taken -over the assets of the old company under the arrangements above set forth, it would have been liable for the -sum named even if there had been no express agreement upon its part to pay the same.
In Hibernia v. St. Louis & N. O. Trans. Co., 13 Fed. 516, Judge Treat, speaking for the court, used this language: “The facility with which new corporations are formed under local statutes to succeed to rights of property by transfer 'from the old corporations is to be considered, and such transfers are not to be held in equity destructive of prior and existing rights. A corporation with obligations determined or undetermined can not change its name or assume the form of a new corporation, and thus escape its obligations, or relieve the new corporation of the obligations of the old. * * * It is the duty of the court to examine the whole transaction, .and to cut through mere paper transfers designed to obstruct or destroy the rights of parties. The evidence sufficiently discloses that the new corporation was a mere continuance' of the old, with substantially the same parties in interest — a mere change of name. Whether that change, with attendant transfers, was designed or not to defeat 'all outstanding demands of the old corporation, it is evident that substantially the two corporations are the same, and that the new must respond to the obligations of the old. The evidence is clear enough that there was a hidden purpose in the change of corporate existence to escape possible liabilities which equity does not tolerate. A mere change of name can not avoid obligations. The new corporation took all the property of the old, went forward with its business, had the same stockholders, except a few formal ones, was, in short, the old corporation.” See, also, Blair v. H. & K. Ry., 22 Fed. 36; Parsons Mfg. Co. v. Hamilton, 73 Atl. (N. J.) 255, and other oases cited in appellant’s brief.
The above language is appropriate to the facts of this record. True, it was used in equity proceedings, but that can make no difference, because, -under the facts discovered by the agreed statement, although the appellee sued at law upon an express promise of appellant to assume the liabilities of the old company which inured to his benefit, he was nevertheless entitled to have the principles of equity applied in considering the facts and circumstances out of which the liability arose. Organ v. Memphis & L. R. R. Co., 51 Ark. 235-259, and cases cited.
VI.
Affirmed.
Dissenting Opinion
(Dissenting). It ought hot to be difficult to construe the language of a contract when its subject-matter, and the situation of the parties with respect thereto, are made perfectly clear. In the present case there is no dispute on those points. The Arlington Hotel ^Company was a corporation whose legal existence expired on a certain date, -and it -owned a leasehold estate for a period substantially co-extensive with its own legal existence. The lease expired on March 3,1912, and the franchise of the corporation expired on March 30, 1912. The stipulation was that the corporation should pay to the plaintiff the sum ■of ‘ * six hundred dollars per annum on the first day of each year beginning on January 1,1907, as long as the Arlington Hotel Company or its successors or assigns shall continue to occupy the Arlington Hotel site leased by the United .States to S. H. Stitt & Co. for a term of twenty years, by lease dated March 3, 1912, ’ ’ and it strains the meaning of that language very much to say that it constituted an agreement to pay beyond the period of the lease mentioned. The parties were, in other words, evidently contracting with reference to a certain leasehold estate then in existence, for the corporation did not have the legal right to occupy the premises for a longer period, and they are presumed to have had in contemplation only that particular term unless words be found in the contract clearly indicating the contrary intention. Nothing in the language used manifests an intention to the contrary.
There is also the presumption, if the language admits of it, that those acting for the corporation did not intend to contract for liability continuing beyond its own lifetime, for the obligation was personal to the corporation itself. They had no power to bind the “successors or assigns” of the corporation beyond the existence of the lease or of the corporation itself, therefore, the presumption should be indulged that they did not intend to do so. In fact, they did not, according to the express language of the contract, attempt to do that.
The case falls within the principle that ‘ ‘ a man’s contracts shall not be so strained as to be unreasonable, or that it was impossible to be so intended, without necessary words to make it such. ” Singleton v. Carroll, 6 J. J. Marshall 527. The opinion of the majority takes refuge behind the use ¡of the word ‘ ‘ successors ’ ’ in addition to the word “assigns,” as being indicative of an intention to extend the contract beyond the life of the corporation and of the lease then in existence, but even if those words can not be construed as interchangeable terms, with the same meaning, there is a proper use for the word “successors” without the implication contended for. Some person or other corporation could have become the successors of the lessee corporation during the period of the lease' otherwise than by voluntary assignment of the lease, and the use of both terms is'consistent with an intention to confine the operation of the contract to the conditions then existing. The United States Government had the option, at the expiration of the existing lease contract, to lease the premises to another lessee, and the Arlington Hotel Company did not even have a preferential right to a new lease. It was only to be protected-to the extent .of the value of its improvements. If the parties meant to extend the operation of the contract beyond the period of the existing lease, they could easily have expressed that intention by stipulating that the payments should be made as long as the premises should be occupied under that or any subsequent lease. They would not likely have stopped at the mention of that particular leasehold estate if they had intended to provide for further occjapancy. The absence from the contract .of any provision with reference to the procurement of a new charter at the expiration of the old, or the procurement of a new lease, shows that the parties did not have in contemplation the operation of the contract beyond the period of the existing franchise or lease. It was optional with the stockholders of the corporation whether they would attempt to renew the charter or to procure another lease, and there is nothing in the contract which requires them to do either, so an agreement to pay in the event the lease or the charter should be renewed and the premises occupied thereunder would be entirely lacking in mutuality, and is not presumed to have been within the contemplation of the parties in the absence of •an express statement to that effect.
But if we attach the fullest significance to the use of the word “successors,” there is no liability established in the present case for the reason that the new corporation is not the successor of the old one within the meaning of this contract. Conceding that it is the successor of the old corporation so far as concerns the rights of creditors of the latter, it does not follow that it is the successor of the old corporation within the meaning of this contract.
The new corporation did not succeed to any of the rights of the old corporation, so far as concerns the occupancy of the premises in question, for the new company did not take an assignment of the lease, hut acquired all of its rights under a new lease contract made with the Government more than two years after the franchise of the old corporation had expired and after the old lease had expired. The new company, it is true, to ok over the assets of the -old company, but the leasehold estate had expired at that time, and was not a part of the assets of the old company. The new company also assumed and agreed to pay the indebtedness and liabilities of the .old company, but if there was no agreement on the part of the old company to pay except during the occupancy of itself and those who should hold as its successors, then there was no liability on that score to assume.
I am of the opinion, therefore, that the majority of the judges have reached the wrong conclusion in this case, and am constrained to record my dissent.
