Rohrbacher's Estate , 168 Pa. 158 ( 1895 )

Opinion by

Mr. Justice Fell,

The proceeding in the orphans’ court was to require the specific performance of an agreement entered into by the decedent and the appellant. In 1869 Frederick Rohrbacker and Ferdinand Hormann entered into a partnership for the purpose of manufacturing glassware. On October 22, 1880, they made an agreement which provided that in the event of the death of either the survivor should have the option of purchasing the business. Rohrbacker died in April, 1892, leaving a will made in December, 1880, in which his executors were directed to carry out and fulfill the agreement made with his partner. The option was properly exercised, and upon the refusal of the executors to convey, a petition for a decree for specific performance was presented. This petition was referred to a master, and after hearing on exceptions to his report was dismissed.

The contention relates to the construction to be given to that part of the agreement by which the valuation of the real estate and plant is to be determined. The agreement provides: first, that bills receivable shall be taken by the survivor at their face value, materials in stock at cost, good accounts at a discount of five and manufactured articles at a discount of ten per cent. It then proceeds: “ And it is hereby further agreed that all property not enumerated or specified in the aforesaid statement, such as lands, buildings (subject to' the encumbrances now thereon, being three several yearly ground rents amounting in the aggregate to the sum of $800,12 per annum), stationary fixtures, boiler, engine, machinery of all kinds and descriptions, decorating machines and all things belonging thereto, patterns, plates, wagons, horses, carriages and all tools and implements belonging to the manufacturing of glass in the different departments in which we are engaged, shall be valued at the sum of $25,000, and if any or all of the said yearly ground rents shall be extinguished or any other premises shall be purchased in the name of the firm after the execution of this agreement, the said sum of $25,000 shall be increased in amount to the sum expended either in the extinguishment of any or all of the said yearly ground rents or in the purchase of any other premises, and if any portion of the premises in the name of the firm shall be sold or encumbered after the execution of this agreement, then said sum of $25,000 to be reduced in amount the sum realized from the sale or encumbrance thereof. And the executor or administrator shall by good and sufficient deed grant and convey unto the-party so surviving all the property not enumerated or specified in said statement, and the surviving party shall make and execute and deliver unto the executor or administratrix of the one so dying for the benefit of his estate a bond and mortgage to the sum of one half of the aforesaid sum of $25,000, or the one half of the sum so increased or diminished as above set forth.”

The dispute relates to this part of the agreement. During the period of eleven years and a half between the making of the agreement and the death of one of the partners ground rents had been extinguished, more land purchased, additions and improvements added to old buildings, and new buildings erected. The petitioner concedes that the valuation of $25,000 should be increased by $5,452.09 paid for the extinguishment of ground rents and also by $2,000 expended in the purchase of additional real estate. The executors claim that to these amounts should be added about $16,000 used by the firm after 1880 in the erection of new buildings and in making additions and improvements to the plant.

The first part of the agreement provides for the valuation in detail of what was personal property pure and simple, the-notes, accounts, manufactured articles and raw material, the actual value of which was easy of ascertainment. The second part of the agreement provides for the valuation in bulk of all the remaining property of the firm. This was property used-in carrying on the business. It consisted of real estate, and fixtures, machinery, tools and implements, patterns, plates, horses and wagons. The value of the different items of personal property which went to make up the whole would vary from time to time, as the old became worn out and were replaced by new, and the value of the whole would vary with the fluctuations of business. Additions to fixtures, machinery and tools would become worn and useless, and at their best their value to the business was their value in place and for the uses for which they were designed. This was the case, differing in degree only, with the additions to the buildings. Of the things of material value used in the business and named there was but one which had anything like a stable value for other-purposes. That was the real estate. It had a value irrespective of its use in the business, and a value that would be permanently increased by addition to it or by the extinguishment of ground rents, and lessened by the incumbrance or sale of any portion of it. This change in value was provided for in the agreement, and it seems to have been the only change contemplated by the parties.

Omitting the parts of the agreement which do not aid in ascertaining its meaning, and preserving the phraseology, it. would read: “It is agreed that all property .... such as lands, buildings (subject to the incumbrances now thereon being three several yearly ground rents) .... stationary fixtures of all kinds .... patterns, plates, wagons, horses, carriages and all tools .... shall be valued at the sum of Twenty five thousand dollars, and if anyone or all of the said yearly ground rents shall be extinguished or any other premises shall be purchased in the name of the firm .... then said sum of Twenty five thousand dollars shall be increased in amount to the sum expended either in the extinguishment of any or all of the said yearly ground rents or in the purchase of any other premises. And if any portion of the premises in the name of the firm shall be sold or encumbered .... then said sum of Twenty five thousand dollars shall be reduced in amount the sum realized from the sale or encumbrance thereof.” The increase provided for is that which would result from the extinguishment of ground rents and the purchase of other premises ; the decrease that which would be caused by the incumbrance or sale of part of the premises. An intention that the cost of new buildings should be added cannot be gathered from the words used unless by the “ purchase of other premises ” was meant the cost of erecting new buildings. This was the construction adopted. The word premises was used to denote the thing which might be purchased, sold or incumbered. Its natural and ordinaiy use in this connection would seem to be to denote an estate in lands purchased, sold or incumbered. It might well be supposed that the firm would buy materials and construct buildings, but not that it would purchase, sell or incumber them as buildings merely; and any acquisition or disposition of them as real estate was expressly provided for. The words, the context and the subject-matter all indicate that they were speaking of the real estate only, and no provision was made for a change in its value except as they here stipulated. A considerable part of the sum of $16,000 which it is claimed should be added was expended in alterations of old buildings, the largest item being “cost of new and improved furnace and alterations and improvements to the factory, $5,629.82.”

Prior to 1880 an inventory of the assets and liabilities had been made annually. The value of $25,000 fixed by the agreement of October of that year was not based upon the appraised value of the things enumerated. In 1879 they had been appraised at over $54,000. It was a value fixed irrespectively of the actual value, which would change from year to year, and which they considered it just that the survivor should pay and the estate of his deceased partner receive. Neither could know to whom the option to purchase would fall; and if during the running of the agreement, because of large additions or deductions, the price might become inequitable either party had the remedy in his own hands, as without his assent they could not be made. The agreement was in force over eleven years before the death of one of the parties. During this time the annual net profits varied from $20,255.25 in 1882 to $4,424.50 in 1889. In 1880, the year of the agreement, they were over $15,000. During all these years the salable value of the plant was affected by the conditions of the business.

A careful examination of the testimony has led us to the belief that the learned judge before whom the account was audited was misled by the auditor’s report in finding as evidence of the construction which the parties themselves placed upon the agreement that after Oct. 20,1880, a real estate account was opened, the first item of which was the agreed value of $25,000, and that to this were added various items of expense, to the end that it would show the correct value of the plant at the death of either of the partners. Such an account appears as an exhibit attached to the answer to the petition, but it does not appear on the books of the firm. It was made up from entries culled from the books. The cash expenditures for improvements and new buildings were carried to the ledger and posted under different heads. The entry of $25,000 appears neither in the books norm the inventories subsequently made. Annual inventories were made after 1880 as before, and the price fixed by the agreement did not enter into them. In the inventory made Jan. 1, 1881, the real estate was carried at $26,225. All of this together with personal property appraised at about $14,000, making an aggregate of over $40,000, had by the agreement of the previous October, and for the purpose of that agreement, been valued at $25,000. Subsequent inventories followed the same form, and from time to time the original lots were carried at an increased valuation. As to these it must be conceded that there could be no addition for increased value- These inventories furnish no ground for an inference of an intention that the valuation fixed by the agreement was to be departed from. The account referred to represented the opinion of the witness who made it, but not the views of the partners. It is therefore of no value as indicating their understanding of the agreement.

We are left then to the construction of the agreement as it is written. Considering the condition of the property at the time, the mutual interest of the parties and the end they had in view, their desire to make certain the price at which the survivor could take and their knowledge that the cost would not be a criterion of the value, we think that they meant to say that the valuation of $25,000 was to remain, subject only to the conditions which they imposed, the fixed value for the purpose of the agreement. What is of much more and of primary importance in interpretation, we find that this is what they did say.

We see no want of equity in the agreement, nor any hardship to result from its performance which should lead a chancellor to deny the prayer for specific performance. There was no inequality of terms; it applied to both alike, and the advantage to be gained by the survivor was not more certain than that which would result to the estate of the deceased. The parties, with full knowledge of the condition of the firm property, acquiesced in the agreement for over eleven years, and when in 1892 its enforcement was asked the net profits of the business were but one third as large as they had been in 1880, when the agreement was made.

The order of March 24,1894, dismissing the petition of Ferdinand Hormann is reversed and set aside, and the record is remitted in order that a decree may be entered in the orphans’ court in accordance with this opinion.