Plaintiff sued for specific performance of what he claimed was an absolute option to purchase 110.70 shares of the common stock of Columbia Brick and Tile Company, a Missouri corporation. Upon entry of judgment for defendants, plaintiff appealed to the Kansas City Court of Appeals. We sustained plaintiff’s application for transfer and now review the case “as on original appeal.” Rule 84.05 (h), V.A.M.R.
Prior to August 4, 1950, one Fred T. Kennedy, now deceased, acquired an option to purchase all of the outstanding stock of the named corporation. On that date, Kennedy and William R. Powell, plaintiff herein, entered into the contract which is the subject of this controversy. It provided, generally, (1) that Kennedy would exercise his option to purchase from others, (2) that Powell would purchase forty-five percent of the stock and Kennedy would retain fifty-five percent, (3) that additional financing would be obtained through an R.F.C. loan, (4) that “It is the desire of both of us that better utilization be made of fireclay deposits on company’s property with production of refractories to begin in a modest way as soon as possible,” (5) that “It is agreed that capital expenditures for plant will be made primarily out of operating profits and not out of borrowings or stock sales,” (6) that “ * * * Kennedy and * * * Powell agree that each will devote his full time and energy to the furtherance of affairs of the company * * (7) that “ * * * Kennedy will devote his principal time to general mánagement affairs with special attention to sales, financial matters and general office, (8) that “ * * Powell will be especially responsible for plant operations, (9) that “Each will consult freely with the other and assist each other to the fullest extent possible.”
The proper meaning of the last paragraph of the agreement is the crux of the dispute. It, verbatim, provided:
“It is agreed that in the event of death of either F. T. Kennedy or W. R. Powell that the survivor will have first option on purchasing an amount of the others stock sufficient to give him control of the company through stock ownership at a fair value as may be determined by competent outside certified accountants.”
It is agreed that the contract was drafted and executed by the parties without the services or advice of an attorney; and, that the wife of each signed the instrument as a witness only.
By stipulation, it is further agreed: (1) that Kennedy had on December 3, 1965, transferred 960 shares to his son, John P. Kennedy, as trustee, for a recited consideration of $10.00; (2) that Kennedy died on April 4, 1966; (3) that at the time this lawsuit was filed stock ownership was as follows:
Estate of Fred T. Kennedy, deceased 1.00
John P. Kennedy, as trustee of the Fred T. 960.00 Kennedy Trust
John P. Kennedy, as an individual 30.25
Elizabeth P. Kennedy, as an individual 22.50
Elizabeth L. Kennedy, as an individual 1.00
William R. Powell 810.00
Pauline Powell 20.25
Total shares outstanding 1845.00
(4) that plaintiff must acquire 110.70 shares (6%) if he is to have sufficient stock ownership to exercise control.
Necessarily, we first consider what, if any, right to such shares Powell, as the survivor, has by virtue of the agreement of August 4, 1950; and if his claim thereto is sustained, we must then consider whether or not it is susceptible of being specifically enforced. To do this, we must construe the paragraph relating to the questioned option.
On the first question, defendants submit that: “It is the defendants’ position that the above quoted words [first option] constitute at most, only a preemptive right or a conditional option, exercisable, if at all, only in the event that the defendants decide to sell any of the stock now or heretofore owned by F. T. Kennedy or his estate.” To the contrary, plaintiff asserts that use of the words “first option” does not “automatically conclude the matter,” and that we must look to the “intent of the parties to ascertain the true meaning of the contract.” In any event the parties recognize the distinction between an option to purchase and a right of preemption or right of first refusal. Beets v. Tyler,
Although our task requires that we resolve what Kennedy and Powell intended by the wording of the entire quoted paragraph, we, as did the parties, first look to the words “first option.” In at least two cases, this court has considered use of the words “first option” in contracts contemplating possible sale and purchase of property. Stein v. Reising,
In our effort to determine the actual intent of the contracting parties, we must seek to re-establish the circumstances under which it was executed. It appears that Powell was a professional engineer, having graduated from the Missouri School of Mines at Rolla, with degrees in Ceramic and Metallurgic Engineering. Over the next twenty years, after graduation, he was employed by companies engaged in related fields, and at the time of entering into the contract
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August 4, 1950, was general superintendent of the Mexico Refractories Company. He resigned from the latter position to enter the business venture with Mr. Kennedy who was also a professional engineer and graduate of the University of Missouri. His exeprience was in the engineering field but it does not appear to have included the manufacturing of brick and tile. As noted, Kennedy originally had an option to purchase all of the stock of the Columbia Brick and Tile Company, but the parties disagree as to the motivating factor that brought the two men into the common endeavor. Defendants suggest that Powell was only “fortunate” to have survived the man [Kennedy] who had given him an opportunity to own forty-five percent of a successful business; whereas, plaintiff submits that “Mr. Powell and Mr. Kennedy needed each other in this venture, and they contem
First, when the words “first option” are taken out of context and viewed alone, it is established that they mean a pre-emp-tive right or privilege of first refusal and not an absolute option as shown by both the Stein and DeWitt cases, supra, and the cases therein discussed. If this were the only point for consideration, and it be assumed that the parties were cognizant of the legal significance of the term used, defendants should prevail. However we are faced with the contention that the contract in question was written and signed by the parties without the advice and counsel of an attorney, and that the actual intent was to give the survivor an absolute option to continue control. Although the absence of legal advice has been mentioned often in cases pertaining to construction of written documents, we have found none that sought to specifically articulate the significance thereof. It is sufficient to say, however, that it is somewhat apparent that after noting the absence of legal advice, courts more readily look to the other factors mentioned.
Second, we turn to other provisions of the contract to see if they shed any light on the intent of the parties when they agreed to the paragraph in question. From those portions of the agreement already quoted, it is clear that the parties contemplated a mode of operation more consistent with the usual partnership than that of a corporation. Certainly, Kennedy had more voting shares and from a purely legal standpoint had technical control of the corporate structure. However, this fact does not defeat the obvious conclusion that control as such was to be exercised through the cooperative effort of both men. In addition to the provisions quoted, the agreement considered the possibility of need for further working capital, and, notwithstanding the difference in percentage of stock owned, each agreed to put in the same amount of money if required. Further it was agreed that to improve the cash position of the business, each agreed to draw the same modest salary. All of which necessarily tends to show that Powell not only demanded participation in management control, but that Kennedy as majority stockholder agreed and accepted Powell in such a capacity. As is generally true, we do not find any specific definitive explanation of the questioned paragraph while looking at the instrument as a whole. However, the provisions mentioned consistently tend to emphasize that Powell and Kennedy considered joint control something which they could live with and enjoy together. In this connection, it is significant that neither the questioned paragraph, nor any other provision of the entire contract, suggested that either man contemplated relinquishing control to strangers to the contract — be they heirs or otherwise. If it had been so intended, undoubtedly there would have been some expression calling for a promise to also consult and share decisions with the heirs or successors of either. As previously discussed, the words “first option” standing alone would give the survivor only a preemptive right to purchase. This right would remain in abeyance until such time as there was an offer to sell. As argued by plaintiff, it is obvious neither Powell nor Kennedy could make a decision to sell after either had died, so the would-be option was worthless unless some binding obligation was placed on the heirs or successors of either. Since the agreement does not so provide, nor suggest the possibility, the contract as a whole tends to sustain Powell’s argument he was to have an absolute option in the event Kennedy predeceased him.
Third, we look to the extrinsic or surrounding circumstances in so far as they aid in our task. In so doing, we need not repeat all the facts that brought the two men together. However, the agreement not only
At the trial, Powell, as the survivor, could not testify as provided by the Dead Man’s Statute. Section 491.010. However, the effort of Kennedy to make the quoted paragraph totally ineffective, whether it be called a first option or an absolute option, was developed. Slightly over three months before his death, Kennedy created the trust previously mentioned. It provided (Article 11(1)): “The Trustee shall hold, manage and vote the capital stock of the Columbia Brick and Tile Company herein placed in trust * * * exercising all the right and privileges incident to the same as if said stock were held and owned by him absolutely, provided, however, said capital stock of Columbia Brick and Tile Company * * * shall be sold as a unit * * (Emphasis added.) In view of our finding as to what was the true intent of the parties, we need not discuss all possible inferences that logically could be drawn from such action.
After considering all factors, we are compelled to conclude that both Powell and Kennedy appreciated the desire of the other to continue in control of the business upon the death of either; and that, notwithstanding the terminology used, it was actually the intent of both that the survivor would have an absolute option to buy sufficient shares as might be required for him to legally continue to exercise control of the business.
The further question remains — is the agreement susceptible to being specifically enforced? In seeking the answer, we will first consider each of defendants’ arguments that it is not.
First, it is argued that plaintiff has an adequate remedy at law if the “fair value” of six percent of the shares can be determined. However, the law is to the contrary as it has been established that: “No question can exist as to the right to sue in equity for the specific performance to deliver shares of stock whenever it is shown that the shares contracted for have no market value, or are difficult to obtain elsewhere, or there is some reasonable cause for the delivery of the particular shares arising out of the relation they bear to the control of the corporation. In all such cases the action for damages at law is wholly inadequate, and complete relief can
Second, argument is made that “the agreement which the plaintiff * * * seeks to enforce is void and unenforceable because it violates the rule against restraints on alienation of property.” This contention presents a rather ambivalent approach to the problem. After contending that Kennedy and Powell did, in fact, intend for the survivor to have a pre-emptive right, wherein the decision to sell would have to be made by the heirs or successors of Kennedy, in this point it is argued such a restraint on freedom of alienation by such persons would make the pre-emptive right void. It is sufficient to say that in view of our finding an absolute option was granted, we need not discuss other possibilities pertaining only to a first option or preemptive right.
Third, it is submitted that the contract is not subject to being specifically enforced for the reason it submits the “essential element of price to arbitrators or appraisers”; and fourth, that the agreement is “too indefinite and uncertain as to the essential element of price.” The two points are related and will be considered together. However, we should point out that we do not believe the agreement calls for the use of arbitrators as that term is generally used reference settlement of disputes. In any event, the parties did agree that others, “competent outside certified accountants,” were to determine the “fair value.”
We have considered every case cited by defendants on points Third and Fourth, and find none to be comparable factually. For instance: in Jenks v. Jenks, Mo.App.,
Lastly, defendants contend that “control” is too intangible and carries with it such rights and implications as to be beyond valuating. We need not express our opinion on this conclusion in view of what we consider to have been the meaning of the parties. Management control had been exercised by both men, and it does not appear to have been within the contemplation of either that a “bonus” was to be paid for the privilege of continuing on the death of the other. As written, the option indicates the parties did not contract for the sale of control but for the sale of a specific number of shares of stock in the corporation, knowing that the “control factor” would pass with those shares. Clearly, the option does not provide the survivor shall have an option to purchase control at a fair value, which would have been the normal way of expressing such intent if control, as such, had been the item for sale. Control appears to have been mentioned simply to modify the amount of stock subject to the option. There is no expression indi-
After finding that this contract is susceptible to a decree of specific performance, we, of necessity, find the judgment of the trial court to be erroneous. The judgment is reversed and the cause is remanded for further proceedings consistent with this opinion.