Court Opinion

ID: 6253007
Source: CourtListenerOpinion
Date Created: 2022-02-17 21:21:19.669538+00
Date Added: 2024-06-11T08:59:28.102273
License: Public Domain

Opinion by
Me. Chief Justice Beown,
The words “pro rata” have a clearly defined and well understood meaning, “Pro rata: In proportion; proportionately; according to the share, interest or liability of each”: Webster’s International Dictionary. “Pro rata: Proportionately; according to a certain rate, percentage, or proportion”: Black’s Law Dictionary. In the agreement which is the basis of any claim the appellant has against the appellee, it is first provided that the stock is to be carried until such time as a majority of the signers may desire to dissolve the pool or “pro rate said stock”; the trustee is to apply the dividends received on it to the payment of interest on the loan and “pro rate” any surplus among the eight persons who signed the agreement as parties of the second part. Upon demand by them the party of the first part is to dis*279tribute among them the said stock “pro rata,” and, should he at any time be unable to secure loans upon it, the parties of the second part agree to take up their “pro rata” shares of it; and a further agreement is that, if the dividends received by the appellant should be insufficient to pay the interest on the loan or loans, the parties of the second part agree to pay their “pro rata” share of the deficiency. These words, “pro rate” and “pro rata,” used five times in the brief agreement, are to be given their plain and universally-understood meaning as fixing the liability of each of the eight parties of the second part to the agreement, on the basis of his interest in its subject-matter. If it was the intention of the parties to it that the liability of each was to be the same, such liability could readily, and would naturally, have been fixed by a simple declaration that each one of them was to share equally with the others in the distribution of the stock and be equally liable for the amount of the loan; but, instead of such a provision, there is the studied repetition of an intention that there should not be equal liability, which is never contemplated by the use of the words “pro rate” or “pro rata.” They contemplate a just proportion of liability upon an equitable basis.
While it clearly appears from the face of the agreement that the liability of each of the subscribers to it was to be on some proportionate basis other than one-eighth, it cannot be ascertained from the agreement what that basis was to be,' and-it was, therefore, competent for the defendant to aver in his affidavit of defense the sense in which all the parties to the agreement, at the time it was executed, understood and used the words “pro rate” and “pro rata.” This is not contradicting or varing the terms of the agreement or changing the liability imposed by it; it is merely explaining the intention of the parties to it as to what was to be the basis of the pro rata liability of each. Parol testimony cannot be received to change or impair that liability, *280but, in the absence of anything in the agreement indicating what was the basis of it, parol testimony is admissible to show what was intended by the parties to the agreement to be the basis of it. The term “pro rata” “means — in proportion: in due proportion: Burrill Law Dic. According to the rate, proportion or allowance: Bouv. Law Die. It never means, as applied to persons, equality, or an equal division.......The term used necessarily implies an. unequal division, as between different persons”: Note to Rosenberg v. Frank, 19 Amer. L. Reg. (N. S.), 355. “Tro rata’ means according to a measure which fixes proportions. It has no meaning unless referable to some rule or standard” : Brombacher, et al., v. Berking, et al., 56 N. J. Eq. 253. “The rule, that where the parties finally put their contract in writing an independent contemporaneous oral agreement relating to the subject-matter which is inconsistent with the terms of the instrument, cannot be given effect to vary or modify its purpose, does not, however, conflict with another well-settled rule to the effect that for the purposes of interpretation and application of the terms of a contract, evidence showing the subject-matter with which the parties dealt, and the object which they sought to accomplish, as shown by the preceding negotiation, is competent, not to vary what has been reduced to writing, but to aid in its construction and to make plain in what sense the parties used and understood the language they employed”: 2 Elliot on Contracts, Sec. 1621. “When a matter necessarily pertaining to the subject of the contract is unmentioned therein, parol testimony is admissible to ascertain the meaning. It is a rule of interpretation that the intention of the parties to a contract is to be ascertained by applying its terms to the subject-matter. The admission of parol testimony for such purpose does not infringe upon the rule which makes a written instrument the proper and only evidence of the agreement contained in it......The rule of law which forbids parol evidence to be received to contradict or vary a *281written, instrument has reference to the terms of the writing. Evidence to explain the subject-matter of an agreement is essentially different from that which varies the terms in which the contract is conceived: Barnhart v. Riddle, 29 Pa. 92. Parol evidence is not admissible to alter or contradict what is written, but is admissible to explain and define the subject of a written agreement: Gould v. Lee, 55 Pa. 99”; Centenary M. E. Church v. Clime, 116 Pa. 146.
With the foregoing rule clearly applicable to the written agreement before us, the material averments in the affidavit of defense — which we must assume the defendant will be able to sustain on the trial of the case-are as follows: At the time the agreement of May 15, 1907, was signed, the subscribers to it were stockholders, directors and members of the executive committee, and some of them officers, of the Colonial Trust Company. The 310 shares of stock were treasury stock, remaining unsubscribed for after all other stockholders had been given an opportunity to subscribe for them, and the directors were anxious to sell them, that the trust company might have the use of the money. Pursuant to a resolution of the directors, the stockholders of the company had been requested to subscribe pro rata for all of the treasury stock, of which the 310 shares were a part. The defendant proposed, at a meeting of the executive committee of the trust company, composed of the eight signers to the agreement, that the members present should subscribe for this stock pro rata. At that meeting the defendant offered to purchase and pay for his pro rata share of the stock in case the other members of the executive committee would do the same, the pro rata of each one to be based on the number of shares of capital stock of the said trust company which he then held, just as the other stockholders had been requested and permitted to subscribe. Soon after this proposition, and pursuant thereto, the plaintiff prepared the agreement and asked the defendant to sign it. Neither at the time *282of signing it, nor at any other time, was any suggestion made of equal liability of the signers, nor any suggestion of any other liability than a pro rata one, based on ownership of the stock, and it was understood by all of the signers of the agreement that the pro rata obligation and liability of each subscriber thereto were based on the number of shares of the stock in the said Colonial Trust Company held by him, and not otherwise, varying from 150 shares, held by the defendant, to 3,557 shares, held by E. H. Jennings, another party to the agreement.
To have held that the foregoing averments in the affidavit of defense were insufficient to prevent the entry of judgment for the plaintiff would have been palpable error. The written agreement was executed for the purpose of imposing a pro rata liability upon each one of the parties signing it, but it is not self-interpreting as to the basis of such liability. It is not, however, on that account to be given an effect never intended by those who executed it, if the averments in the affidavit of defense are taken to be true, as they must be, in determining whether they set forth a good defense. The agreement is the evidence of what the parties to it agreed to do, but their manifest intention of a mere pro rata liability cannot be given effect unless it be shown what they all understood and agreed was to be the basis of such liability. In showing this by parol testimony, the written agreement is not varied nor contradicted, but simply explained, that it may be carried into effect as the parties to it intended.
The appeal is dismissed and the order of the court below, discharging the rule for judgment for want of a sufficient affidavit of defense, is affirmed.