Court Opinion

ID: 9776423
Source: CourtListenerOpinion
Date Created: 2023-08-29 19:34:49.825813+00
Date Added: 2024-06-11T07:32:38.435344
License: Public Domain

Frank Holt, Justice. The appellant instituted this action for rescission of a written contract between him and appellee’s deceased husband. The Chancellor denied rescission, found the contract to be severable in its terms, and reduced the agreed purchase price for Wafer’s accounting business. From that decree appellant brings this appeal and appellee cross-appeals. For reversal appellant contends that the contract is completely unenforceable because it is one for personal services. On cross-appeal appellee asserts that the contract is enforceable in its entirety. The deceased, Rufus Wafer, was a public accountant. On August 19, 1969, appellant and Wafer made a written agreement “preliminary in nature” by which appellant purchased Wafer’s “accounting business and equipment including all accounts in connection therewith” being conducted by Wafer from his offices. It was agreed that subsequently the parties would “execute a security agreement note covering this transaction.” The purchase price was $30,000. A down payment of $5,000 was made at the time of this written agreement and the $25,000 balance was “to be paid annually on or before April 16 of each year beginning in 1970 and continuing for a period of five years.” Wafer, the seller, agreed “to remain active in the accounting business with buyer [appellant] for a period of two years during which time Buyer shall pay” Wafer an annual salary of $1,625 to be paid at the rate of $125 per week “for thirteen consecutive weeks beginning January 1, 1970 and January 1, 1971.” Further it was agreed that Wafer would receive 1/2 of the income from any new business which he brought to appellant, and this percentage would apply as long as the new account continued with appellant. Wafer also agreed “to cooperate fully with the Buyer if effecting a satisfactory transfer of accounts including introduction of Buyer to clients and giving all encouragement possible to the continuation of business relations.” It appears from the oral argument that on December 1, 1969, or about 3 1/2 months after the written agreement, Wafer moved from his offices and business address and began occupying offices with appellant. From the record it appears that on January 1, 1970, in accordance with their preliminary agreement, appellant and Wafer executed additional writings which consisted of a promissory note for the $25,000 balance and a security agreement. The latter acknowledged Wafer to have a security interest in all the equipment, supplies and accounts he had sold to appellant “and all additions and accessions thereto” to secure the balance of the purchase price reflected in the promissory note. The note was payable in annual installments in accordance with the terms of the original agreement. Less than a month thereafter, or on January 27, 1970, Wafer died. Thereupon appellant filed his complaint seeking a rescission of the contract of sale and cancellation of the note on the basis that the contract was contingent upon Wafer providing personal services and that Wafer’s death made performance impossible. The appellee answered and counter-claimed for specific performance of the contract. Appellant’s demurrer to appellee’s counter-claim was denied and following a trial on the merits of the case, the Chancellor reduced the $25,000 purchase price balance to $12,500. In reply to appellant’s argument that the contract is unenforceable because it is one for personal services, the appellee asserts that the contract provides only for the sale of the accounting business and the transfer was performed and effected before Wafer’s death. Appellee argues that the only personal characteristics of the contract consisted of Wafer’s agreement that he would work for appellant as a salaried employee for 2 years and Wafer would receive 1/2 of the income from any new business he brought to appellant. Appellee contends that these aspects of the contract were not “conditions precedent to the transfer of the business.” Neither the appellant nor the appellee on cross-appeal favors us with an abstract of the testimony. The appellant designates the pleadings and decree. Both parties rely upon the written instruments to support their respective contentions. The contracts before us consist of the preliminary writing on August 19, 1969, and the note and security agreement dated January 1, 1970. When we analyze these writings, we are of the view that it was contemplated by the parties that the contract embodied and provided for the personal services of Wafer, the seller. We have long recognized the principle that when parties contract for personal services the death of one who is to render these services will result in the contract being unenforceable. Arlington Hotel Co. v. Rector, 124 Ark. 90, 186 S.W. 622. There we stated: “It is a well settled principle in the interpretation of contracts that where parties contract for a service that is purely personal, or with reference to the continued existence of some particular thing constituting the subject matter of the contract, if the person dies or the thing ceases to exist, then the performance of the contract will be excused because impossible...” See also Collins v. Woodruff, 9 Ark. 463. In 17A C.J.S., Contracts § 465, the general rule is: “Contracts to perform personal acts are considered as made on the implied condition that the party shall be alive and capable of performing the contract, so that death or disability, including sickness, will operate as a discharge, termination of the contract, or excuse for nonperformance. . .” In the case at bar, the contract provides for the sale of a professional accounting business with the understanding that the seller would remain active in the business and assist the buyer for two years. Beginning January 1, 1970, the seller was to receive an annual salary of $1,625, which was to be paid at the weekly rate of $125 during the first 13 consecutive weeks of each of the 2 years. We think this specific provision for this particular period of time is significant because it coincides with the time of the year when income taxes are due and payable. It is during this time, of course, that the servicing of an accountant’s customers’ accounts for income purposes is particularly important. Furthermore, the $5,000 annual payment was due on or before April 16 of each year. This provision also reflects the importance of this period of time to the parties. Inasmuch as Mr. Wafer died on January 27, 1970, or within a month following completion of these writings, we must hold that his death cancelled the personal services aspect of the contract. Of course, his death at this time made it impossible to “cooperate fully” with appellant in effecting “a satisfactory transfer of accounts,” which included introduction of Wafer’s clients to appellant and “giving all encouragement possible to the continuation of business relations” (emphasis added). Appellant specifically contracted for Wafer’s services for a period of two years. In the circumstances, we agree with the Chancellor that the contract is severable and can be apportioned. See Jones v. Gregg, 226 Ark. 595, 293 S.W. 2d 545 (1956); Harris Lbr. Co. v. Wheeler Lbr. Co., 88 Ark. 491, 115 S. W. 168 (1908); Duffie v. Pratt, 76 Ark. 74, 88 S.W. 842 (1905); Collins v, Woodruff, supra. Therefore, the sale of the physical assets for the separately agreed contract price of $4,682.20 is enforceable. It appears that these physical assets consisted of office equipment and supplies necessary in appellant’s accounting business. The contract being unenforceable with reference to personal services and enforceable with respect to the sale of the physical assets, the decree is accordingly affirmed as modified. Fogleman and Jones, JJ., dissent.