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August 24, 1983


From the Circuit Court of Phelps County; Civil Appeal; Judge Eugene E. Northern.

Before Maus, P.j., Hogan, Prewitt, JJ.

The opinion of the court was delivered by: Maus

By this action the plaintiff seeks a declaration that instruments executed by her deceased father-in-law, Jack G. Butler, did not create an option in favor of James H. Meredith. She further contends that even if an option was created, it is invalid because of the absence of a time limitation upon its exercise. Meredith answered and asked for a judgment declaring the existence of an option and that he had exercised the same. Defendant Centerre Trust Company, as the personal representative of the estate of Butler, filed a similar pleading. The remaining defendants are others interested in the estate of Butler. They did not appear. The trial court found the issues in favor of Meredity and entered judgment accordingly. The plaintiff appeals.

During the trial of this case, plaintiff has insisted that evidence of the circumstances surrounding the parties at the time of the execution of the two instruments involved should not be considered. She has based her arguments solely upon a construction of the language of those instruments. It is not necessary to recognize and reconcile all of the statements in the cases and texts concerning the admissibility of such extrinsic evidence. The more recent statements hold that such evidence is always admissible.

Where the principals to a negotiated contract dispute the effect of the agreement, a court--quite apart from ambiguity or nonambiguity--is entitled to look at more than only the words of undertaking. The situation of the principals and the context of the transaction are relevant to interpret the prevalent meaning of the words used for contract. . . . That evidence does not vary written terms of contract but only aids to discern the prevalent sense of the terms and, hence, the reasonable expectations of the principals. Spychalski v. MFA Life Ins. Co., 620 S.W.2d 388, 394 (Mo. App. 1981) (Citations omitted).

Also see Morgan, Basic Problems of Evidence, p. 416. It is clear such evidence was admissible in this case. Tri-State Gas Co. v. Kansas City Southern Railway Co., 484 S.W.2d 252 (Mo. 1972). A brief summary of that evidence follows, excluding evidence asserted to violate the parol evidence rule and to be inadmissible under the Dead Man's Statute. § 491.010.

The defendant Meredith is a lawyer and for more than 20 years has been a distinguished Judge of the United States District Court for the Eastern District of Missouri. Butler was a banker with the Bank of St. Louis. For many years prior to his retirement, he was the chief executive officer of that bank. From 1955 until his appointment as Judge, Meredith served on its Board of Directors. Butler and Meredith were friends. They hunted and fished together. They were said to be "as close as two men could be and not be brothers."

Meredith became interested in buying land in Phelps County for hunting and fishing and as a retreat from city life. Butler joined Meredith in this venture, although initially he was not very interested in using the property personally. They bought 520 acres and a jeep type vehicle. Of that land, 80 to 100 acres were open and the balance was in brush and small timber. There was a dwelling on the land. In 1968, Butler's wife died. After that he frequently spent time at the property. On October 17, 1969, the parties executed an agreement setting forth the terms upon the basis of which Meredith conveyed his 1/2 interest to Butler. This instrument will be referred to as the "Original Agreement." After Butler retired in 1973 or 1974, he spent even more time on the property. About 1975, he moved there. Meredith continued to use the property and was a frequent visitor. On April 13, 1976, the parties executed an instrument amending the Original Agreement. The latter instrument was entitled and will be referred to as the "Amendatory Agreement."

Butler died April 15, 1981. As stated, Centerre Trust Co. is the personal representative of his estate. By his will, Butler granted the personal representative power to sell real and personal property. There is no contention made that if the Original Agreement and the Amendatory Agreement granted Meredith an option to purchase the 520 acres, he has not effectively exercised that option. Meredith has tendered and stands ready to pay the personal representative $35,000 pursuant thereto. The personal representative concedes the existence of an option and its exercise and is prepared to convey the property to Meredith.

After the premises, the Original Agreement in paragraph 1 provides Meredith will sell the property to Butler for $15,000. Paragraph 2 provides that Meredith shall have the right to use the property, including "all furnishings in all structures thereon, alone or in the company of his family or friends, for hunting, fishing, other recreation and social purposes" revocable only "upon the happening of Event A or Event B or Event C." These Events read as follows:

Event A. The Property is sold by J. G. Butler in accordance with the provisions of this Agreement.

Event B. James B. Meredith dies and J. G. Butler pays his estate $5,000.00 cash; and the obligation to pay said sum shall be a debt of the estate of J. G. Butler.

Event C. J. G. Butler dies and James H. Meredith declines to purchase the Property from the estate or heirs of J. G. Butler for the total price of $35,000.00 cash, which purchase he is hereby given the right to make, and the estate or heirs of J. G. Butler upon such declination buys the right of use from James H. Meredith for the total price of $5,000.00 cash, which sum James H. Meredith must forthwith accept in consideration of the termination of said right of use if he does not effect purchase of the Property for said $35,000.00 price within ninety (90) days after he is presented with evidence that the estate or heirs of J. G. Butler are able to convey merchantable title to the Property.

Paragraph 3 provided that if Butler desired to sell the property during Meredith's life, Meredith would have the first refusal. If Meredith elected to purchase, he would receive a credit of $5,000.00 upon the purchase price. If Meredith did not elect to purchase, he would be paid ...

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