Title: Central Bank & Trust Co. v. Kincaid

State: kentucky

Issuer: Kentucky Supreme Court

Document:

617 S.W.2d 32 (1981) CENTRAL BANK & TRUST COMPANY, a Kentucky corporation, as Executor of the Estate of Garvice D. Kincaid, Deceased et al, Movants, v. Joan D. KINCAID, Respondent. Supreme Court of Kentucky. May 26, 1981. As Modified on Denial of Rehearing July 7, 1981. Kincaid, Wilson, Schaeffer & Hembree, P.S.C., Miller, Griffin & Marks, P.S.C., Lexington, Bert T. Combs, Robert K. Cullen, Wyatt, Tarrant & Combs, Louisville, for movants. Ronald L. Gaffney, Barnett & Alagia, Louisville, James Park, Jr., Paul E. Sullivan, Sullivan & Mohr, Lexington, for respondent. STERNBERG, Justice. This is an action to construe a unilateral option contract. In June of 1973 (the exact date is not shown by the record), Joan Kincaid granted an option to G. D. Kincaid for the privilege of purchasing 90,760 shares of stock owned by her in the Lexington Finance Company, for which she had paid $196,424.25. The option is not lengthy, so we copy it in full, to-wit: On November 21, 1975, G. D. Kincaid died testate without exercising his right of purchase. *33 However, the executor of his will, Central Bank & Trust Company, sought to exercise the option and to that end tendered Joan the sum of $181,520. The offer was refused, and on June 19, 1977, Joan filed a suit in the Fayette Circuit Court demanding that the option be declared null and void and of no effect. The executor was made a party defendant, and in its response it demanded that the trial judge not only declare the ownership of the stock but that Joan be required to accept the tendered offer as full payment for said stock. The issue was submitted to the trial court on the executor's motion for summary judgment. The motion was granted and the option was declared to be valid and enforceable by the executor. On appeal to the Court of Appeals of Kentucky, the judgment of the trial court was reversed. On October 28, 1980, this court granted review. The deciding issue which this court gleans from the record and the briefs of the parties is whether the right to purchase the shares of stock was personal to G. D. Kincaid or whether it passed to the executor of his will. First of all we need to determine whether the terms of the option are ambiguous. If they are, then extrinsic evidence may be resorted to in an effort to determine the intention of the parties; if not, then extrinsic evidence may not be resorted to. The criterion in determining the intention of the parties is not what did the parties mean to say, but rather the criterion is what did the parties mean by what they said. An ambiguous contract is one capable of more than one different, reasonable interpretation. The right to contract is a valuable right limited only by constitutional or statutory provisions, public policy, or the desires of the parties. In our effort to determine whether the terms of the option are ambiguous, we have challenged the intention of the parties by every expression and statement contained within the four corners of the instrument. As we do this, any doubt that may have come forth in each instant fades like ectoplasmic vapor when exposed to the light of the option as a complete instrument. We are of the opinion that the option is not ambiguous. Is the right to purchase the shares of stock personal to G. D. Kincaid? An option has long been recognized not as a sale but as a right to exercise a privilege. Three Rivers Rock Co. v. Reed Crushed Stone, Ky., 530 S.W.2d 202 (1975). At the outset we note that there is a five-year restraint on the sale or alienation of the stock to anyone other than G. D. Kincaid. The common-law rule against restraint on alienation was designed to prevent the taking from the owner of the power to alienate property and is not favored in law. Three Rivers Rock Co. v. Reed Crushed Stone, supra. This court has long recognized that the right to purchase, irrespective of the use of words of descent or of alienation, may, where the intent of the parties is so manifest, pass to and be exercised by the heirs, administrator, executor or committee of the optionee. Three Rivers Rock Co. v. Reed Crushed Stone, supra; 91 C. J. S. Vendor and Purchaser, Sec. 14. The option neither states the right of purchase is or is not personal to the optionee, nor does it state that the optionee and he alone possesses the right of purchase. The terms of the option (1) prohibit Joan from selling or encumbering the stock during the term of the option (five years); (2) provide that the purchase price may be paid to Joan or to her executor, administrator or representative; (3) name G. D. Kincaid and he alone as the optionee; (4) provide that "G. D. Kincaid may exercise this. . . option;" and (5) state that the exercise of the option is at the sole discretion of G. D. Kincaid. The option does not provide that the privilege of purchasing the stock is to G. D. Kincaid or his executor, administrator, committee or assigns. It is significant to note that the power to exercise the option did not include or describe any source other than G. D. Kincaid, to-wit: his executor, administrator, committee or assigns. Had the parties desired the option to be *34 exercisable by anyone other than G. D. Kincaid, the necessary descriptive designation could easily have been made. Counsel for respondent has called this court's attention to the case of In re Estate of Sifferman, Mo.App., 603 S.W.2d 30 (1980). Although this case is not on all fours with the subject action, it does present similar questions. Therein, Tom Sifferman owned 200 acres of land. He and his son Ray contracted for Ray to purchase 160 of the 200 acres, with an option to purchase the remaining 40 acres during Tom's lifetime should Tom decide to sell or within one year after Tom's death for the sum of $5,000. The agreement made the option to purchase the 40 acres binding on the heirs, administrators, executors or legal representatives of the owner (optionor), but it was silent as to whether it could be assigned or devised by the optionee or inherited by his heirs in the event the optionee predeceased the owner. The optionee did predecease the owner, his father. After the death of the optionee, his wife attempted to assign any and all rights that she had in the agreement to Bob Sifferman, son of the optionee. Bob filed suit to enforce the terms of the option contending that the right of purchase was not personal but survived the death of the optionee. The trial court held to the contrary. The Missouri Court of Appeals said: In Kuhfeld v. Kuhfeld, S.D., 292 N.W.2d 312 (1980), the Supreme Court of South Dakota considered an agreement "granting an irrevocable option to Edward Kuhfeld to purchase the remainder of the land distributed." The option provided that it "`is agreed and understood by the undersigned that this option shall extend to and be binding upon each of the parties to this option and to their heirs, personal representatives, successors and assignees.'" The court said: The court concluded that "the option to purchase will terminate on the death of the optionee." The case of Waterstradt v. Snyder, 37 Mich.App. 400, 194 N.W.2d 389 (1971), is an action to construe the following language in a deed: "The grantee agrees that if she ever desires to sell the aforementioned property, the grantors herein are to have the right and option to buy the same for $9,000." The grantee died testate without exercising the option to reconvey to the grantors. A suit was brought by the grantors against the executor of the will of the grantee to repurchase the property. The trial court held the option was binding on the executor. The Court of Appeals of Michigan reversed, and in doing so, the court wrote: In Iglehart v. Jenifer, 35 Md.App. 450, 371 A.2d 453 (1977), the sole question presented is, "did the appellant's right of first refusal to purchase certain real estate terminate upon the death of the optionor?" Iglehart and Jenifer entered into an option wherein Jenifer granted to Iglehart, "his heirs and assigns, the irrevocable right, privilege and option to purchase the premises described hereinbelow" when the optionor receives a firm offer to purchase the said premises by another party. The court said: In concluding, the court wrote: "We hold, as did the trial judge, that the agreement terminated upon the death of Mrs. Jenifer." The word "heirs" is a word of art, and the phrase "heirs, personal representatives and assigns is a legal term with a technical meaning. The lack of these words of limitation is evidence of the absence of an intention to permit the right of purchase to be exercised by the executor and restricts the right of purchase to G. D. Kincaid and to him only. Although the manner in which the various jurisdictions approach the issue is not uniform, there is unanimity of purpose in all jurisdictions; that is to arrive at the intention of the parties. This, we are of the opinion we have done. In disposing of the issue, we find it unnecessary to consider the family relationship of the optionor and the optionee. In the absence of any showing in the option itself, we will consider the option as having been negotiated at arm's length. The decision of the Court of Appeals is affirmed, the judgment of the trial court is reversed, and the cause is remanded to the trial court for entry of a judgment consistent herewith. PALMORE, C. J., and AKER, CLAYTON, LUKOWSKY, STEPHENSON and STERNBERG, JJ., sitting. All concur except STEPHENSON, J., who dissents and files herewith a dissenting opinion. STEPHENSON, Justice, dissenting. The majority opinion correctly states the issue here, whether the option was personal to G. D. Kincaid or whether it passed to the executor of his will. I also agree that the option by its terms is not ambiguous. Implicit in the holding that the option was personal and did not pass to the Kincaid estate is that if it was found that the option was not personal the Kincaid estate would prevail. I view the option as a contract and as stated in Williston on Contracts, vol. 3, sec. 415, at p. 69: Also 6 Am.Jur.2d, Assignments, sec. 20, at p. 204: See also Dahl v. Zabriskie, 249 Iowa 584, 88 N.W.2d 66 (1958), and Cochran v. Taylor, 273 N.Y. 172, 7 N.E.2d 89 (1937). There is nothing in this option that shows any relationship or that particular trust or confidence was reposed in the optionee alone. In the absence of these circumstances being shown in the option, it can be assigned; and if it is assignable, I see no valid reason why it would not pass to the Kincaid estate. The foreign cases relied upon in the majority opinion place emphasis on the fact that the option here did not recite to Kincaid's "heirs etc." I do not attach any particular significance to this lack, therefore, I believe the option here was assignable and passed to the Kincaid estate. I would reverse the opinion of the Court of Appeals and affirm the trial court. Accordingly I dissent.