Court Opinion

ID: 9884346
Source: CourtListenerOpinion
Date Created: 2023-10-06 02:53:48.722273+00
Date Added: 2024-06-11T07:48:37.839118
License: Public Domain

Mr. Justice Klingbiel delivered the opinion of the court: This action was brought by Borg-Warner Corporation for specific performance or, in the alternative, money damages, on an alleged contract between plaintiff and Anchor Coupling Co. and its chief officers, Charles L. Conroy and Walter Fritsch. The amended complaint was dismissed on the ground that plaintiff had failed to allege a completed contract capable of specific performance or a cause of action for damages. This appeal was transferred to this court from the Appellate Court, Second District, for the reason that a freehold is involved, certain real property being among the assets of defendant which were the subject of the alleged contract. Since the propriety of the lower court’s dismissal of the case depends solely on the sufficiency of plaintiff’s amended complaint, it is necessary to set forth the facts as alleged in said complaint in some detail. Plaintiff and defendant, Anchor Coupling Co., hereinafter called Anchor, are corporations organized under the laws of Illinois and engaged in the business of manufacturing. Anchor has issued and outstanding 4,400 shares of stock, owned as follows: Walter Fritsch 1,649 shares, John Fritsch (son of Walter Fritsch) 396 shares, Charles L. Conroy 2,045 shares, Wier (uncle of Charles L. Conroy) 145 shares, and Leubkeman 165 shares. Defendant Fritsch dealt with and represented the stock owned by his son, John Fritsch, as though it were his own, and defendant Fritsch, John Fritsch and defendant Conroy owned at all relevant times 92.96 per cent of Anchor’s stock. For ten years defendants Conroy and Fritsch have constituted two of the three directors of Anchor and have dominated and exercised complete control over all the affairs and acts of Anchor with the acquiescence and consent of the other shareholders and the board. The third director, Albrecht, an employee of Anchor, has never owned any shares in the company. Prior to February 20, 1956, plaintiff engaged in conferences and negotiations with defendants Conroy and Fritsch, as controlling shareholders of Anchor and its chief executive officers and directors, respecting the purchase by plaintiff of all of the property and assets of Anchor. As a result of these negotiations an oral agreement was reached that defendants would sell to plaintiff all of said property and assets for the sum of $4,023,500, if the results of a survey and investigation of Anchor’s assets were satisfactory to plaintiff. On February 20, 1956, plaintiff wrote a letter to Anchor setting forth a detailed agreement giving plaintiff a 60-day option to purchase all of Anchor’s business and assets. This was not signed by Anchor, but instead, on February 29, 1956, a letter was sent to plaintiff on Anchor’s letterhead and signed by defendants Conroy and Fritsch. Since the decision in this case turns chiefly upon the interpretation to be placed on this letter, we quote its significant parts in full: “Gentlemen: This letter will outline and confirm our conversation at luncheon today with your Messrs. Porter, Murphy, Steg and Peifer. We are unwilling to enter into a formal option with your company as proposed in your letter of February 20, 1956. This is not for the purpose of horse-trading, but rather to avoid the damage which a turn-down by you would cause both internally and in our market. We would be willing to sell the assets of our company to you for $4,025,000 in accordance with the terms of paragraphs 3, 5, 6, 7, 8, 9, 11, 13, 14 and 17 of your letter of February 20, 1956, if such an offer were made today without the reservations elsewhere contained in that letter, and subject to the exceptions noted below. You may consider this as a letter of intent authorizing you to make the survey you deem necessary to make your offer a firm and binding one; and we assure you of our full cooperation in making it. We suggest that it be completed as quickly as possible. ❖ * * You are assured that should you make a firm offer within fifty days from this date, we are willing to enter into a contract with you on the basis of the terms of the above numbered paragraphs of your letter of February 20, 1956, with the following exceptions: (a) That suitable assurances are given for the retention of the lower level executive personnel; (b) That mutually satisfactory arrangements are made for the continued employment of Charles L. Conroy; (c) That J. D. Leubkeman shall not be a party to any restrictive covenant as outlined in paragraph 8 of your letter of February 20, 1956; and (d) That any purchase price adjustment mentioned in paragraph (7) of your letter of February 20, 1956, shall be made only by mutual agreement between us.” Plaintiff thereafter inquired of defendants whether their letter of February 29 was correctly understood by plaintiff as a firm offer which would not be revoked during the period stated in said letter (which period was later extended to April 26, 1956) and which plaintiff could accept within said period so as to create a binding contract of sale, and whether plaintiff could make its survey of Anchor’s business operations in reliance thereon. In response thereto, defendants Conroy and Fritsch, by their agent, assured plaintiff that plaintiff had “in effect an option”; that said letter was “in legal effect * * * an offer by us [defendants] to enter into a contract with those four very minor things [referring to paragraphs (a) through (d) of defendants’ letter of February 29] still to be agreed on’; that the further agreements referred to were not intended to prevent said offer from being a complete offer capable of acceptance but were minor details which, upon the acceptance of said offer, the parties would be obligated to work out in good faith in a reasonable manner, and that if plaintiff within fifty days made an offer in conformity with said letter, defendants would be obligated, subject only to the conditions that the acceptance be delivered within the time limited and that the investigation be conducted in secrecy, to accept such offer. On March 14, 1956, plaintiff wrote a letter to Conroy, Fritsch and Anchor saying, “You indicate that our offer on the basis outlined will be accepted if made within fifty days from this date” and asking that the fifty days time be extended to April 26 and that the purchase price be adjusted to $4,024,000. This letter was initialed by Conroy and Fritsch and returned to plaintiff. Finally, on April 26, 1956, plaintiff wrote to defendants saying that plaintiff had decided to proceed in the acquisition of Anchor’s assets. This letter read in part: “Please consider this our formal offer, therefore, to enter into an agreement in accordance with our letters to you of March 14th, and February 20th and your letter to us of February 29th. Our letter to you of March 14th, the terms of which were accepted by you indicates that this offer will be accepted by you if mailed on April 26th.” Plaintiff alleges that at this point a completed contract came into existence. Plaintiff also alleges that in various subsequent conversations defendants represented and agreed that there was a complete contract between plaintiff and defendants until on August 1, 1956, defendant Conroy raised objections to the performance of said contract, and on September 27, 1956, refused to perform said contract, Defendant Fritsch filed an answer admitting the allegations of plaintiff’s complaint and stating that “he did believe that he did enter into a contract and agreement, that the same was fair, open and truly performed on its part by the plaintiff, and this defendant does again reiterate his willingness to perform the same for and on behalf of the shares of stock owned by him and by his son, John Fritsch.” Defendants Conroy and Anchor filed motions to dismiss plaintiff’s' amended complaint. On these facts, the trial court dismissed the amended complaint on the ground that it appeared on the face of the pleadings that the parties had failed to agree on material terms of the proposed contract, vis.: (a) The failure to agree on the retention of lower level executive personnel, and (b) failure to make mutually satisfactory arrangements for the continued employment of Conroy. Further, the court held that there was no ambiguity in the written correspondence between the parties and therefore the Statute of Frauds and the parol evidence rule barred consideration of any parol evidence pleaded by plaintiff. First, let us analyze the correspondence between the parties in terms of the contract rules of offer and acceptance. Plaintiff’s letter of February 20, setting forth the detailed option agreement, was an offer by plaintiff. This offer was not accepted by defendants, but instead, defendants Conroy and Fritsch wrote a letter to plaintiff stating that they would be willing to sell the assets of Anchor in accordance with certain paragraphs of plaintiff’s February 20th letter, that plaintiff could consider this a “letter of intent,” and that if plaintiff should make a firm offer within fifty days, defendants would enter into a contract with them on the basis of the enumerated paragraphs of the February 20 letter, with the exceptions: (a), (b), (c) and (d). This letter varied the terms of plaintiff’s offer and thus constituted a counteroffer. (Snow v. Schulman, 352 Ill. 63, 71.) Although it spoke In terms of plaintiff making an offer, it must be viewed as an offer itself, asking that plaintiff’s acceptance be worded as an offer. This is clear from the fact that defendants referred to plaintiff’s offer as a “firm and binding” one. The only way it could be firm and binding would be that it legally constituted an acceptance. As requested, plaintiff accepted by submitting a “formal offer” on April 26. Was this acceptance sufficient to create a contract at this point or, as defendants contend, did exceptions (a) and (b) prevent the formation of a contract? The answer depends on what the parties intended. (1 Corbin on Contracts, 1st ed. 1950, p. 69.) Were defendants asking that contracts of employment between plaintiff and the lower level executive personnel and between plaintiff and Conroy actually had to be agreed to as conditions precedent to the existence of the contract? Or, were defendants merely asking that plaintiff, by a general acceptance, give assurance as to the retention of lower executive personnel and agree that mutually satisfactory arrangements would be made for the employment of Conroy? In this regard, we find the offer in the February 29 letter to be ambiguous. Thus this case falls within the well-recognized exception to the parol evidence rule that if the terms and provisions of a contract are ambiguous, or if the writings are capable of more than one construction, parol evidence is admissible to explain and ascertain what the parties intended. (Street v. Chicago Wharfing and Storage Co. 157 Ill. 605; 32 C.J.S., Evidence, sec. 959.) This applies to contracts within the Statute of Frauds as well as to any other contract. Plaintiff is not seeking to add terms to the writings by parol, but is merely trying to explain what the parties intended by the written words. The trial court was in error in holding that the parol evidence pleaded by plaintiff could not be considered. The question then is whether the written correspondence, together with the facts pleaded explaining the terms of the written communications, taken in its most favorable aspect, disclose a contract. We believe the following factors, if proved, are sufficient to support a finding that a completed contract came into existence at the time plaintiff submitted its formal offer on April 26. In so holding, it is impossible to place great reliance on other cases except insofar as they state general principles of law. Contract cases, particularly, must each turn on their own particular facts. As said by Professor Corbin, “A transaction is complete when the parties mean it to be complete. It is a mere matter of interpretation of their expressions to each other, a question of fact.” 1 Corbin on Contracts, 1st ed. 1950, P-6g- Both plaintiff and defendant Fritsch intended that a general acceptance by plaintiff was all that was necessary for a contract to come into existence. Fritsch has so admitted by his answer stating that he believes there was a binding contract. Although we do not believe this admission is determinative of the case, it is extremely significant as tending to show that the parties so intended. The fact that plaintiff spent large sums of money in conducting a survey of Anchor’s business certainly tends to indicate that it believed a mere acceptance of defendants’ offer would be sufficient to form a contract. If plaintiff had believed that employment contracts had first to be agreed upon, one would seriously question whether it would expend such large sums without attempting to negotiate such contracts. Furthermore, plaintiff was not unreasonable in its belief. Defendants’ letter of February 29 was sprinkled with “assurances” to induce plaintiff to expend substantial money in making a survey. It referred to plaintiff’s right to make a “firm and binding” offer and defendants’ offer to “enter into a contract with you.” Such language warranted a reasonable belief on the part of plaintiff that a contract would be completed by its acceptance of the offer. Defendants themselves quote Professor Corbin as saying: “Even though one of the parties may believe that the negotiations have been concluded, all items agreed upon, and the contract closed, there is still no contract unless he is reasonable in his belief and the other party ought to have known that he would so believe.” (1 Corbin on Contracts, sec, 29, 1st ed. 1950, p. 66.) (Emphasis supplied.) We are of the opinion that plaintiff was reasonable in its belief and that defendants, knowing of plaintiff’s large expenditures, “ought to have known that (plaintiff) would so believe” that its acceptance of defendants’ terms would create a contract. Another important factor is the allegation that plaintiff specifically inquired whether defendants’ February 29 letter was intended as a firm offer which plaintiff could accept within fifty days so as to create a binding contract. In response, defendants, by their agent, assured plaintiff that it had “in effect an option” and that exceptions (a) through (d) were not intended to prevent said offer from being a complete offer capable of acceptance but were minor details which, upon the acceptance of said offer, the parties would be obligated to work out in good faith in a reasonable manner. Such facts clearly support plaintiff’s contention that the parties intended that all that was necessary to complete the contract was plaintiff’s general acceptance of defendants’ terms. Plaintiff further alleges that subsequent to its acceptance of April 26, defendants, by their actions and conversations, represented that there was a completed contract between the parties. If, as the above evidence indicates, the parties intended that a general acceptance by plaintiff would complete the contract, the fact that the employment contracts of Conroy and other executive personnel were left for future agreement does not preclude the existence of an enforceable contract. See Welsh v. Jakstas, 401 Ill. 288, 297, where this court said: “The option, when accepted, resulted in a present contract for the sale of real estate. The provisions of the option agreement then constituted the contract of sale and stated in clear and unambiguous language, the price, terms and conditions of the sale. A contract is not rendered void because the parties thereto contract or agree to contract concerning additional matters." (Emphasis supplied.) We are of the opinion that on the allegations of the complaint, the trier of fact could find that there was a binding contract of sale in the instant case. Plaintiff therefore was entitled to a trial on the question of the existence of the contract. Where it is necessary to have recourse to parol evidence to determine the meaning of language used in letters or telegrams which are relied upon as evidencing a contract, the question as to the factual meaning of such language is for the jury if opposite conclusions may be drawn. Brown v. M’Gran, 14 Pet. (U.S.) 479, 493. If, upon a trial, it is found that there was a binding contract, we see nothing to prevent the specific performance of that contract. Defendants’ argument that the contract is not specifically enforceable because it did not purport to bind defendant corporation is without merit. Whether Anchor was bound or not is not controlling since plaintiff is seeking a decree requiring Conroy and Eritsch (who own 93 per cent of the stock) personally to carry out the steps necessary to cause Anchor to transfer its assets. In Schmidt v. Schmidt Bros. Co. 272 Ill. 340, where a similar argument was made, this court said: “While the agreement of the parties to sell the property of the corporation was not sufficient to transfer the legal title to such property, their contract, upon sufficient consideration, to do any lawful act was binding. While the sale of the tools for $1,000 did not transfer the title to them, this fact does not relieve John E. Schmidt from the obligation of his contract. He agreed to wind up the corporation in a lawful manner within three months, to pay all accounts and bills of the corporation and not to use its name for any new work. It was within his power to do or not to do these things. There was nothing unlawful in his agreement and the contract is one which a court of equity will enforce.” Neither do we think the contract was too indefinite to be capable of specific enforcement. The only thing left for future agreement was the employment contract of Conroy. Under the terms of the offer and acceptance, the parties have agreed that Conroy is to be employed under “mutually satisfactory arrangements.” A mutually satisfactory arrangement is a reasonable arrangement. “The phrase ‘mutual satisfaction’ means reasonable satisfaction. * * * Assuming that mutual satisfaction is equivalent to satisfaction to each party independently, that mutual satisfaction necessarily would have to be reasonable satisfaction * * *. The burden we have here is to find out whether the parties have reserved the right to be arbitrary or whether they have such right for a reasonable satisfaction controlling upon both contracting parties. We think that we should construe ‘mutual satisfaction’ as reasonable satisfaction and thus uphold the contract.” (Bondy v. Harvey, (2d Cir. 1933) 62 F.2d 521, 524, cert. den. 289 U.S. 740.) A promise to render performance satisfactory to a reasonable man is not too indefinite. (3 Williston, Contracts, section 675A.) Cases relied on by defendants in which promises were held too indefinite for enforcement because the contract reserved a unilateral right to satisfaction by one party are not in point here where the contract provides that the arrangement will be mutually satisfactory. If the parties cannot agree, proof of Conroy’s present terms of employment, of the prevailing rates of compensation and other terms of employment of persons in a similar standing in similar businessses, and of established prior practices at Anchor, would enable a court or jury to fix reasonable terms of employment. Thus the contract, if established, is capable of specific performance. For the aforesaid reasons, the decree is reversed and the cause is remanded to the trial court with directions to overrule defendants’ motions to dismiss and to order defendants to answer. Reversed and remanded, with directions.