Title: Shattuck v. Precision-Toyota, Inc.

State: arizona

Issuer: Arizona Supreme Court

Document:

115 Ariz. 586 (1977) 566 P.2d 1332 Lemuel C. SHATTUCK, Jr., a married man, in his sole and separate right, Appellant, v. PRECISION-TOYOTA, INC., an Arizona Corporation, Appellee. No. 12841. Supreme Court of Arizona, In Banc. July 11, 1977. *587 Robertson, Molloy, Fickett & Jones, by Donald J. Oppenheim, Myles C. Stewart, Tucson, for appellant. Gerald B. Hirsch, Tucson, for appellee. STRUCKMEYER, Vice Chief Justice. Appellant, Lemuel Shattuck, brought this action against Precision-Toyota, Inc. for breach of a noncompetition agreement. The case was tried without a jury and at the close of Shattuck's case the trial judge entered a verdict and judgment in favor of appellee, Precision-Toyota. Judgment of the Superior Court reversed with directions that appellant Shattuck be granted a new trial. In 1972, Shattuck had been in the business of selling used cars in Tucson, Arizona for fourteen years. He leased a lot on East Speedway on a month-to-month basis. Precision-Toyota was a new and used car retail distributor directly across the street from Shattuck. In early May, 1972, appellee, through its president, Jack Rowe, contacted Shattuck about subleasing Shattuck's business premises. After negotiations and at Precision-Toyota's instigation, a five-year lease was obtained by Shattuck. The then parties signed two documents, a sublease and a noncompetition agreement. The sub-lease provided that Precision-Toyota would lease Shattuck's premises for three years at a rental of $775.00 per month, renewable for two additional years at its option. The noncompetition agreement provided in its pertinent part: The sublease and noncompetition agreement were signed on June 9, 1972. On February 4, 1974, Precision-Toyota notified Shattuck that effective March 1, 1974, it would no longer make the $1,000.00 per month payments as called for under the noncompetition agreement but would continue the $775.00 per month payments on the sublease. It then terminated the $1,000.00 payments and this suit for damages was brought. The trial judge believed that paragraph two of the noncompetition agreement set up a durational restriction. He based his conclusion on the language "so long as he receives these payments will not compete with Precision." Precision-Toyota's position is that the trial court correctly interpreted paragraph two to mean that it had a right to discontinue the payments and that the only consequence was that Shattuck was released from the restriction on competition. This interpretation is plainly in error. It is a general rule that the construction of a contract is a question for the court when its terms are plain and unambiguous on its face. Ridara Livestock Co. v. Agricultural Products Co., 61 Ariz. 473, 475, 150 P.2d 761 (1944). The trial court's interpretation of the noncompetition agreement is erroneous for two reasons. First, and most important, the agreement is unambiguous. The sublease and noncompetition agreement when read together are consistent. They clearly set forth the rights and duties of the parties. The sublease calls for monthly rental payments of $775.00 and the noncompetition agreement calls for $1,000.00 per month for a minimum of three years in return for Shattuck's withdrawal from competition in an area in Tucson. Such being the case, the contract must be given effect as written. Second, the trial court's interpretation makes the promises made by Precision-Toyota illusory. It is hornbook that an illusory contract is unenforceable for lack of mutuality. A Connecticut court put it this way: It is a long-standing policy of the law to interpret a contract whenever reasonable and possible in such a way as to uphold the contract. Hall v. Rankin, 22 Ariz. 13, 15, 193 P. 756 (1920). A more reasonable interpretation of the noncompetition agreement and one which avoids making the agreement void is that paragraph two is simply a specification of Shattuck's obligation under the agreement. It plainly says that as long as Shattuck receives the payments specified in the agreement he will not compete with Precision-Toyota in the sale of new recreational vehicles. This language of paragraph two is essential, since by the option in paragraph one the term of the agreement could be extended from 36 to 60 months. The judgment of the Superior Court is reversed and the cause is remanded for proceedings not inconsistent with this opinion. CAMERON, C.J., and HAYS, HOLOHAN and GORDON, JJ., concur.