Court Opinion

ID: 9704209
Source: CourtListenerOpinion
Date Created: 2023-08-26 00:26:49.678211+00
Date Added: 2024-06-11T18:21:58.543859
License: Public Domain

MORAN, P. J., dissenting: The majority opinion says that “Paragraph 8 states clearly and unequivocally that nothing shall be done which might impose liability on the defendant” and holds that this language means that the defendant is exonerated from sharing in the losses even though Paragraph 10 clearly states that after all the items enumerated in Paragraph 10 are paid, the net profit or loss of the corporation shall be distributed. I disagree. The principal purpose of the contract was to wind up the obligation of the corporation, which at that time consisted of eight jobs described in Paragraph 10 of the agreement. After these jobs were completed by J. & R. and after the parties were paid items A through E as provided by Paragraph 13, the losses were to be distributed in the same priority as the income and profits. This is the plain meaning of the contract as provided by Paragraphs 10, 11, 12 and 13 of the contract. All of the provisions of the contract, being 1 through 9 and 14, were subordinate to the main purpose of the contract which was the completion of the business of the corporation and the distribution of the profit and losses. This is borne out by the following language from Paragraph 10: “. . . It is mutually agreed that The Corporation will continue in business hereafter for the principal purpose of completing the jobs above noted, collecting the accounts receivable, paying the accounts payable, paying the Investment Accounts, and then distributing the net profit or loss of the Corporation. The balance of this Agreement has to do with such continued operation.” Paragraphs 1, 2, 3, 5 and 6 of the contract covered the removal of the defendant from the active management and control of the business. Paragraphs 7 and 9 mutually obliged the defendant and the plaintiff to make all the necessary transfers required by the contract. Paragraph 14 required a monthly accounting to defendant. The final remaining two paragraphs of the contract, 4 and 8, mutually obligated the defendant (in Paragraph 4) and the plaintiff (in Paragraph 8) to not deal with the assets of each other or of the corporation in such a manner as to make the other liable thereby. The obvious and evident purpose of these two paragraphs, which were ancillary to the basic purpose of the contract as stated above, was to protect the parties from each other in relation to any other business activities which they might separately be carrying on (unrelated to the winding up of the business of the corporation) and the possibility of one party involving the other on account of or in connection with their prior association together. It is obvious that these two paragraphs did not in any way relate to the winding up of the business and the distribution of the net profit or loss which was provided for in Paragraphs 10 to 13 inclusive, but pertained only to outside activities, unrelated to the corporation, that would be carried on by the plaintiff and defendant in their continuing separate businesses. A comparison of the language of the two paragraphs will probably illustrate this point more clearly: Paragraph 4 reads: “Allison further agrees that when the terms and provisions of the first two paragraphs herein have been met that it will not in any manner whatsoever deal with the assets or liabilities of J. & R., and will do nothing which might give rise to any suit, claim, claim for lien, lien, or the like whatsoever, and will not in any manner whatsoever make any contract, undertake any obligation, borrow any money, pledge any asset of any nature whatsoever, or in any way encumber any asset in any manner whatsoever of The Corporation or of J. & R. which might in any manner whatsoever make J. & R. or The Corporation liable or responsible in whole or in part therefor.” Paragraph 8 reads: “J. & R agrees that it will not in any manner whatsoever deal with the assets or liabilities of Allison, and will do nothing which might give rise to any suit, claim, claim for lien, or the like whatsoever, and will not in any manner whatsoever make any contract, undertake any obligation, borrow any money, pledge any asset of any nature whatsoever, or in any way encumber any asset in any manner whatsoever of The Corporation or of Allison which might in any manner whatsoever make Allison liable or responsible in whole or in part therefor.” Paragraph 4 is obviously an undertaking by Allison that Allison will not make the corporation or J. & R. liable to others by the future operation of Allison’s business, and Paragraph 8 is a mutual agreement by J. & E. that it will not in the future obligate Allison to third parties by reason of the operation of its own business or that of the corporation. By no stretch of the imagination can the language of Paragraph 4 be construed to exonerate J. & R. from sharing in the losses of the corporation, and likewise, since the language and intent of Paragraph 8 was similar to Paragraph 4, by no stretch of the imagination can the language of Paragraph 8 be construed to exonerate Allison from sharing in the future losses of the corporation. Neither Paragraph 4 nor Paragraph 8 of the agreement pertains to a division of the profits, losses, assets or liabilities, but rather to a mutual agreement between J. & R. and Allison not to obligate each other in the future operation of each one’s business. In other words, Paragraph 4 and Paragraph 8 are reciprocal agreements by Allison and J. & R„ not to pledge the assets of each other to people that each may be doing business with in the future. The intent of the parties in Paragraphs 10 and 13, when considered with the entire agreement, is clear, namely: If the windup of the business resulted in a profit that profit was to be shared by and paid to the plaintiff and the defendant and, on the other hand, if the windup resulted in a loss, that loss was to be shared by and paid for by the plaintiff and defendant. I would affirm the judgment of the trial court.