Court Opinion

ID: 9643830
Source: CourtListenerOpinion
Date Created: 2023-08-22 20:41:19.456717+00
Date Added: 2024-06-11T18:11:04.348449
License: Public Domain

SNYDER, Presiding Judge,
dissenting.
I respectfully dissent and would affirm the trial court judgment because the limited partnership agreement is indeed ambiguous and extrinsic evidence should be considered in determining the intent of the parties. The express provisions of the articles of limited partnership, together with evidence adduced at the trial, furnish substantial evidence that the parties intended for Laclede Investment Corporation, the respondent here, to be a third party beneficiary of the promise made by appellants to complete the development and .to furnish any monies required to complete the project over and above the amount loaned by respondent.
The majority opinion concludes this case presents an exception to the “law of the case” doctrine. It finds the ruling of this court in the decision handed down on an appeal from the first trial of this case, Laclede Inv. Corp. v. Kaiser, 541 S.W.2d 330 (Mo.App.1976), to be incorrectly decided, out of harmony with other decisions and that adherence to the earlier incorrect ruling would cause manifest injustice and create a precedent having serious and unwarranted consequences to the law of contracts. In the earlier decision it was held that plaintiff made a submissible case on its third party beneficiary theory.
If the contract is ambiguous, as I believe it is, then the “law of the case” doctrine must apply, extrinsic evidence of the intent of the parties should be permitted and the trial court judgment should be affirmed.
In interpreting contracts, the court’s duty is to ascertain the intention of the parties. When the language of a contract is plain and unambiguous it is the duty of the court as a matter of law to state its meaning. J. E. Hathman, Inc. v. Sigma Alpha Epsilon Club, 491 S.W.2d 261, 264 (Mo. banc 1973); *45House of Tools and Engineering, Inc. v. Price, 504 S.W.2d 157, 160 (Mo.App.1973). It is only where the contract is ambiguous and not clear that resort to extrinsic evidence is proper to resolve the ambiguity. J. E. Hathman, Inc., supra, 264. Whether an ambiguity exists is a question of law for the court. Slotkin v. Willmering, 464 F.2d 418, 422 (8th Cir. 1972). An ambiguity will be found if the language is reasonably susceptible to different meanings looking at the whole instrument, including writings made a part of the contract by reference. J. E. Hathman, Inc., supra, 264; Grantham v. Rockhurst University, 563 S.W.2d 147, 150 (Mo.App.1978).
If the contract is found to be ambiguous and extrinsic evidence received, and if the evidence is conflicting or if different conclusions might reasonably be drawn from it, a question of fact is raised which must be decided by the court in a court-tried case or by a jury. Commerce Trust Company v. Howard, 429 S.W.2d 702, 705 (Mo.1968).
There is no dispute about the legal principles involved, either as to interpretation of contracts or the third party beneficiary theory. Admittedly if the contractual relationship here can be determined as a matter of law from the content of the instruments then it is not ambiguous and the judgment should be reversed, if as a matter of law plaintiff was not an intended beneficiary or was at best an incidental beneficiary.
My dispute is with the finding that the written contract is not ambiguous. The cases cited in the majority opinion lend very little aid to the solution of the ambiguity problem.
Uhrich v. Globe Surety Co. of Kansas City, 191 Mo.App. 111, 166 S.W. 845 (1914) concerned a performance bond in a construction contract which was interpreted by the court as a matter of law and is authority for the proposition that it is necessary to find an intent for the promisor in a contract to assume a direct obligation to the third party beneficiary in order for the third party to recover.
As a matter of fact, and as noted in the majority opinion, Uhrich was overruled to the extent that it was contrary by La Salle Iron Works, Inc. v. Largen, 410 S.W.2d 87 (Mo. banc 1966) in which the Missouri Supreme Court liberalized the third party beneficiary theory by allowing materialmen to recover on construction contract performance bonds when the bonds contain explicit promises by the principal to pay the costs of labor and material on construction projects. We are not dealing with a construction contract, but the promise of appellants to furnish any additional funds required and to complete the development can be compared to the promise of a contractor in a performance bond to furnish the funds to pay for labor and materials.
The bond contract terms in La Salle Iron Works, Inc. did not clearly express that the contracting parties intended the third party to be the beneficiary of performance of the contract and much less did they clearly express that the third party beneficiary had a right to maintain an action on the contract. In discussing performance bonds, referring to 77 A.L.R. 21 and 118 A.L.R. 57, quoting Professor Arthur L. Corbin in 38 Yale Law Journal 1 and 3, the court states at page 90 that “if there is an actual promise by the obligors to pay the third party, either by express words or by reasonable implication, there is no need to speculate for whose benefit the undertaking was made.” In La Salle Iron Works, Inc., the court construed the bond as evidence of an intent to confer a right of action upon materialmen against the surety.
The majority opinion cites Dill v. Poindexter Tile Company, 451 S.W.2d 365, 373 [18] (Mo.App.1970) apparently for the undisputed principle that a court “must ascertain and give effect to the intention of the parties as it is gleaned from within the four corners of the agreement and the surrounding conditions and circumstances.” There was no third party beneficiary in Dill. However, the court there did permit extrinsic testimony of the parties as to the surrounding conditions and circumstances and as to their respective intentions.
Again, Stephens v. Great Southern Savings & Loan Ass’n, 421 S.W.2d 332 (Mo.App.*461967) is quoted on the question of intent with which I have no quarrel. Stephens is factually dissimilar but the third party beneficiary principles apply. The case concerned a loan agreement which was never carried out by the parties themselves. The original party to the contract could not have enforced it, much less a third party beneficiary.
The majority opinion speaks generally of ambiguity in referring to Article 9.2 of the articles of limited partnership and says flatly that respondent relinquished any right it had against appellants for loss sustained as a result of its loan, but otherwise it does not refer specifically to the contract sought to be enforced.
In the articles of limited partnership, which incorporated the loan agreement between respondent and the limited partnership, Laclede Investment Corporation is referred to by name in five very important articles which are paraphrased in part below:
Article 9.1. The loan agreement between Laclede Investment Corporation and the partnership is incorporated in the articles.
Article 9.2. Appellants agree to complete the project as rapidly as practical and further agree to provide any monies that are required to complete the project over and above the amount of the loan made by Laclede Investment Corporation.
Article 10.1. Appellants agree to make additional capital contributions based on net losses so long as any loans of Laclede Investment Corporation remain unpaid.
Article 10.2. The distribution of cash flow in a certain manner is agreed upon while any loans by Laclede Investment Corporation to the limited partnership remain unpaid.
Article 10.3. The cash flow of the limited partnership is to be divided in a different manner when all of the loans of Laclede Investment Corporation to the limited partnership have been repaid in full with interest.
Of course the loan agreement which is incorporated into the partnership articles by reference is a loan agreement between Lac-lede Investment Corporation and the limited partnership. To say that as a matter of law there was no intent to benefit Laclede Investment Corporation and that there was no ambiguity in the contract as to this issue is unreasonable at best. In fact, considering all the circumstances a case might be made that respondent was a third party beneficiary as a matter of law. At the very least, extrinsic evidence should be considered, as it was by the trial court, in accordance with the earlier ruling of this court, Laclede Inv. Corp., supra. When the extrinsic evidence is considered, there was substantial evidence to support the judgment of the trial court that the parties intended respondent to be a direct beneficiary of the contract.
In addition to the provisions of the contract paraphrased above, appellant Kaiser testified at the first trial as follows:
“Q: You signed an agreement which said if it [County Fair project] was not completed with funds available that you would put up the money, you and your partner here, would put up the additional monies to complete it, didn’t you?
A: Yes, sir.
Q: And you knew that was in the contract when you signed it; didn’t you?
A: Yes.
Q: And you put that there knowing that the people from Laclede Investment will rely on your integrity and honesty to abide by your obligations; didn’t you?
A: Yes, sir. .
Q: And you intended them to rely on that; didn’t you?
A: Yes, sir.
Later, in the same series of questions, Kaiser testified in further response to questions asked by the attorney for Laclede Investment:
*47“Q: And you say, you say now you agreed to furnish monies necessary to complete the project, right?
A: Yes.
Q: You intended that Laclede Investment and Laclede Development would act in reliance on that; right?
A: Yes.
Q: In other words, they are not going to come up with $400,000 or $500,-' 000 if you are going to walk away from the project and not let it get completed are they? You wouldn’t do that; would you?
A: No.
Q: And you wouldn’t expect anybody else in their right mind to do it; would you?
A: No.”
On redirect examination, Kaiser again acknowledged the promise to complete the project to the attorney for Laclede Investment:
“Q: And after you decided it might take $500,000.00 to complete the project that’s when the contract was modified into its final form and you and your partner sat down there and said, ‘If it takes anything over and above Laclede’s money to complete this project, we will put it up and we will put it up as capital contributions;’ is that not so?
A: Yes, sir.”
Kaiser’s testimony at the first trial was received in evidence at the second trial by stipulation of the parties. Kaiser testified at the second trial to the accuracy of his testimony during the first trial.
At the second trial, Kaiser again admitted the obligation imposed by Article 9.2 to the attorney for Laclede Investment:
“Q: When you signed this agreement, loan agreement, and the Articles of Limited Partnership which contained reference to this document and incorporated it by reference, you knew that all throughout the transactions there was an obligation imposed upon you and your partner to furnish money to complete the project free and clear of liens; is that not true?
A: Yes."
It does not require speculation to arrive at the conclusion that respondent was an intended beneficiary. There would have been no loan at all without the articles of limited partnership. This is obvious from the documentary evidence itself. No additional testimony is needed to support this reasoning.
A Mississippi case, Burns v. Washington Savings, 251 Miss. 789, 171 So.2d 322 (1965) is cited by the majority for the proposition that the right of the third party beneficiary to maintain an action on a contract must spring from the terms of the contract itself. There is no dispute. The statement is true unless the contract is ambiguous as the articles of limited partnership were.
In Burns, however, the court sets forth three factors which should be present if a third party beneficiary is to be allowed to recover: (1) when the terms of the contract include the third party either by name or as one of a specified class; and (2) the third party was within the intent of the terms so used, and the third party will be within the contract’s benefits if (3) the promisee had in fact a substantial, articulate interest in the welfare of the third party in respect to the subject of the contract. The three conditions are met by respondent. It is named in the very important sections of the contract which contain the promise of appellants relating to completion and additional funds, additional capital contributions by appellants and the distribution of cash flow during the period loans by respondent remained unpaid.
Respondent was within the intent of the terms by being named in those paragraphs of the articles; and it is indisputable that the promisee (Laclede Development Company) had a substantial and articulate interest in the welfare of the respondent in respect to the subject of the contract, i. e. the development itself and particularly the *48completion of the project and the providing of additional funds if required.
No cases have been cited with which an affirmance would be out of harmony. Mertens v. MGR Inc., 507 S.W.2d 433 (Mo.App.1974) is cited as denying third party beneficiary relief in a case where there was a much more identifiable promise to the purported beneficiary. Not so. Of course it would be almost impossible to find a case with a fact situation similar to the one we have here and the Mertens facts are distinguishable. But even more distinguishable is the intent factor. In Mertens the contract was among three shareholders of a corporation, one of whom bought out the other two. Under the terms of the agreement the purchaser of the shares agreed to pay certain outstanding corporate indebtedness. A creditor not named in the contract who claimed to be a third party beneficiary sued the purchaser of the shares. The intent of the contracting parties was to hold harmless the selling parties from any liability for a bank loan which they had personally guaranteed and other debts of the corporation. This court held there was no indication of an intent to make a gift or confer a right on the plaintiffs. The case at bar is different in many respects. The articles of partnership read alone are ambiguous as to the intent of the parties. Therefore, evidence of the surrounding circumstances and facts should be admissible to permit the court to resolve the ambiguity.
The express unambiguous language respondent used in relinquishing any rights it had against appellants for loss sustained as a result of its loan was applicable only to the obligation on the note. The reliance of the majority opinion on the language in the note is misplaced. The note was not part of the articles. In many credit arrangements notes may be uncollectible but additional security assures the lender against loss. In this case the intent of the parties was to provide additional security to the respondent by the appellants’ promises to complete the project and furnish additional funds if they were required. This is what the trial court found after hearing all the evidence.
I do not share the concern of the majority as to the establishment of an unwarranted precedent. It would require a tortured analysis of the facts to include the first mortgage lender, the general contractor, subcontractors and materialmen as a class of third party beneficiaries. The first mortgage lender is mentioned in the partnership agreement only incidentally as a party to a separate construction and disbursing escrow agreement and the others not at all. They did not lend money based on the articles of partnership and loan agreement and without question would be incidental beneficiaries. An affirmance in this case would not endanger the practice of non-recourse financing.
A jury in the first trial found for respondent. The judge in the second trial from which this appeal is taken found for respondent. I would also find for respondent and affirm.