26 Del. Ch. 333 | New York Court of Chancery | 1942
This is a bill to reform a contract executed by both the complainant and the defendant. The controversy relates to the interpretation of the language used in Article V., and whether it carries out the real intent of the parties; whether a material provision, relating to certain payments to be made to the complainant on certain conditions therein stated, and alleged to be in the nature of commissions, was intended to be wholly unconditional. The provisions of the various contracts and assignments, preceding the contract in controversy, are somewhat complicated, and need not be set out in detail; they have been stated, with some particularity, at other stages of the case, both in the Superior Court and this court. Colvocoresses v. W. S. Wasserman Co., 8 W. W. Harr. (38 Del.) 253, 190
Briefly, Colvocoresses, the complainant, under a contract with one Reid, held certain defeasible option rights in the mill tailings and mine dumps on the Congress mine property in Arizona, which he agreed to assign to the Wasserman Company upon payment of $6,000, pursuant to the terms of a prior contract between other persons. Those rights related to the extraction of ore from the tailings and dumps, and included certain incidental possessory rights which need not be explicitly stated.
Reid did not have the legal title to that property, but, by assignment from one Clark, held a contract giving him the right to purchase it, including the mine tailings and dumps thereon. Under the provisions of the contract between Reid and Colvocoresses, the latter had the right to receive “a good and sufficient conveyance of any and all of the mine dumps and mill tailings * * if and when Reid acquired “a valid and legal title to the same.” On payment of the agreed consideration for the tailings and dumps ($6,-000.) Reid was to execute a good and sufficient conveyance therefor, but this conveyance was to be “held in escrow and not delivered to” Colvocoresses “until and unless” Reid or Colvocoresses “on his behalf, shall in due season and pursuant to the terms of the Congress Contract and this instrument acquire a valid and legal title to the same by completing and carrying out all of the terms and conditions of the ‘Congress Contract’ and this instrument, including the full payment of the remainder of the purchase price.'’
The first phrase of Article V. of the contract between Colvocoresses and the Wasserman Company provided:
“In the event Second Party (the defendant company) acquires the tailings and dumps covered by said Congress Contract.”
It then gave certain rights to the complainant, in addition to a $500.00 consideration, the payment of which
(1) A 5% non-assessable interest in the tailings and dumps.
(2) His employment by the defendant company as manager for the exploitation and treatment of the tailings and dumps, at a salary of $500.00 per month, with an option on either party to terminate that relation; in case of the termination of the complainant’s employment during the first year, he was entitled to either an additional 5% interest in the tailings and dumps, or to the payment of $12,000 in cash, at his option.
Article VI also provided:
“Nothing in this agreement contained shall be deemed to bind Second Party either to acquire any of the property herein mentioned or thereafter to develop and exploit the same, or to continue to develop the same, it being intended that Second Party shall at its own sole discretion acquire, develop and/or exploit any of said property or refrain from doing so as it sees fit.”
The complainant seeks to have the first phrase of Article V reformed, so as to read:
“In the event Second Party (Wasserman Company) acquires the rights and privileges under the Reid Agreement with respect to the tailing and dumps.”
The very purpose of reformation by a court of equity is to make an erroneous instrument express correctly the real agreement between the parties; no court can make a new contract for them. Home Life Ins. Co. of America, v. McCarns, 25 Del. Ch. 220, 16 A. 2d 587; 5 Pomeroy’s Eq. Jur. (2d Ed.) § 2097. The right may be exercised in a clear case when the alleged mistake sought to be corrected relates either to the contents of the instrument, or to the real meaning of the language used. 5 Pom. Eq. Jur. (2d Ed.) § 2096.
The negotiations on behalf of the Wasserman Company, for the purchase of the complainant’s option rights in the tailings and dumps on the Congress Mine property, were conducted by D. M. Barringer, Jr., and began early in February of 1935. The contract sought to be reformed was finally drawn on February 11th, but was not executed until February 15th, 1935. Prior to February 11th, the complainant had drawn a tentative agreement. Barringer had no authority to conclude a contract binding the Wasserman Company, but Colvocoresses hoped that the terms of this memorandum would form the basis of the contract which probably would be made on a subsequent date. The provisions of Article V of that memorandum would have protected the complainant’s alleged unconditional rights to the compensation provided for in the contract, including the liquidated compensation on the termination of his relation as an employee of the Wasserman Company. In order for that company to be liable, that memorandum did not require the acquisition of the “tailings and dumps covered by” the “Congress Contract.” It merely provided in the event second party, the Wasserman Company, exercised the Reid option and made the payments provided for in Article IV, etc. Whether Barringer originally clearly understood its unconditional meaning is perhaps subject to some question; but whether because of his optimism as to the value of the tailings and dumps, or otherwise, apparently he was not anxious to
Barringer testified:
“A good part of the efforts of Mr. Mackay (the defendant’s attorney) and myself during the discussion (February 11th) were directed towards pointing out that Article V., as newly drawn, would prevent us having to pay a commission in case something interfered with our acquiring the mine.”
Other statements made by him are substantially to the same effect. He further testified:
“There was both the question of protecting them against loss of the—against not acquiring the mine because of third persons coming in and prosecuting liens that might prevent us acquiring the mine; and secondly, not acquiring the mine because we decided we should not exercise our option.”
Colvocoresses claims that his general unconditional •rights to the various agreed payments in the nature of commissions, were not openly questioned on February 11th; were in fact conceded. There is some evidence to that effect, but it is difficult to tell whether it is based on positive evidence of statements made by the defendant’s agents, or
1. That if the claim of one Jay Burns under a prior lease of the Congress Mine were valid, the Wasserman Company could acquire no rights whatever under the Colvocoresses option, and that “the first sentence of Article V” should, therefore, relate back to the Congress contract rathef than to the Reid agreement.
2. That the right to elect between percentages and cash payments to Colvocoresses should be in the Wasserman Company in order that, if the exploitation of the tailings and dumps should be unprofitable, it could pay him off and get rid of him.
The undoubted insistence on a reference to the Congress contract in Article V, instead of to the more restricted Reid agreement, is regarded as unimportant, in view of the fact that the explanation given is said to merely refer to protection against the Burns claim. The alleged restricted nature of the second explanation is even more strongly stressed. On complainant’s refusal to agree that the option rights, with respect to an additional 5% interest in the tailings or dumps, or the payment of a liquidated sum, provided for by Article V, should be given the defendant, a witness testified that the attorney for that company finally said: “Well, if you are going to have your way about that, I will add another paragraph (Article VI.) which will give us an option to continue or not as we please.” Colvocoresses construes that language quite strictly. His solicitor, in his brief, claims that “the standard by which the contract should be reformed is the oral understanding involved in the affirmation by” the defendant’s attorney, “and the acceptance by
A possible, and perhaps probable, explanation of Bar-ringer’s alleged inconsistent acts and declarations is that he was extremely optimistic as to the value of the Congress mine tailings and dumps, and did not regard the failure of his company to exercise its option rights within the range of possibility. All of these acts were before the receipt of the unfavorable report of the metallurgist, and, therefore, long before the Wasserman Company had decided not to exercise its rights.
The bill will, therefore, be dismissed, and a decree will be entered accordingly.