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Gill v. Benjamin Franklin Realty & Holding Co.

August 13, 1930

GILL
v.
BENJAMIN FRANKLIN REALTY & HOLDING CO.



Appeal from the District Court of the United States for the Eastern District of Pennsylvania; William H. Kirkpatrick, Judge.

Author: Davis

Before BUFFINGTON and DAVIS, Circuit Judges, and JOHNSON, District Judge.

DAVIS, Circuit Judge.

The plaintiff-appellant is a contractor. He sued the defendants in the District Court to recover $1,151,185.53 which he alleged was due him on a contract to build the Benjamin Franklin Hotel at the southeast corner of Ninth and Chestnut streets, Philadelphia. The hotel was completed, and this suit arose over a disagreement as to the amount of the balance due plaintiff and as to whether or not the balance found to be due was payable in bonds or in cash.

The learned trial judge found that $887,643.78 was due the plaintiff, and neither side has appealed from that finding; so the question of amount is not of the case, and the sole issue here is the medium of payment whether this balance due must be paid entirely in cash, as plaintiff contends, or part in cash and part in "second mortgage, Series 'B,' bonds," as defendants contend. The trial judge found that $161,643.78 was payable in cash and the balance of $726,000 was payable in "second mortgage, Series 'B,' bonds."

This issue must be determined by the interpretation given to the following portion of paragraph 13 of the contract:

"It is agreed that payments to be made by the Owner to the Contractor hereunder shall be made in cash up to the sum of Four Million Three hundred fifty Thousand Dol lars ($4,350,000.00), and when that sum shall have been paid in cash, all further payments due from the Owner to the Contractor shall be paid and entirely liquidated by the delivery by the Owner to the Contractor in lieu of cash, of second mortgage, Series 'B,' bonds to be issued by the Owner, which bonds shall be taken at 90 per centum of their face value said bonds shall bear interest at the rate of 6 per centum from the date of delivery, shall be part of a total second mortgage bond issue of $3,400,000.00 subject to a first mortgage bond issue of $6,600,000.00. If, however, for any reason the total price to be paid the Contractor shall exceed $4,375,000.00, such excess up to $50,000.00 shall be paid by the Owner to the Contractor in cash, and any sum beyond said $50,000.00 shall be paid by the owner to the Contractor by the delivery of second mortgage,Series 'B,' bonds at 90 per centum as aforesaid in lieu of cash."

Pursuant to these provisions in the contract, a first mortgage, securing bonds to the extent of $6,600,000, divided into two classes, class A bonds to the amount of $4,300,000, and class B bonds to the amount of $2,300,000, was placed upon the hotel property. The A bonds were given priority in payment of principal and interest over the B bonds. The bonds of both classes were secured by the lien of this mortgage.

A second mortgage, securing bonds to the amount of $3,400,000, divided into two classes, class A bonds to the amount of $2,100,000 and class B bonds to the amount of $1,300,000, was also placed on the hotel property. The class A bonds were given priority in payment over the class B bonds, both in principal and interest. Both the A and B bonds were secured by the lien of the second mortgage.

The bonds which the contractor agreed to take in lieu of cash over and above $4,350,000 were to be "second mortgage, Series 'B,' bonds," which were to be taken at 90 per centum of their face value, bear interest at 6 per centum from the date of delivery, and be part of a total second mortgage bond issue of $3,400,000, subject to first mortgage bond issue of $6,600,000.

The division of the bonds secured by the mortgages into class A and class B bonds did not increase the amount of the lien of either mortgage and so did not in this respect violate the terms of the contract.

The appellant says that he is not required to accept the bonds which have been issued, set aside, and kept for him because they do not conform to the terms of the contract; that, because of the nature of the liens which the Hotel Company has placed upon its property, it is now impossible for it to create and issue such bonds as are described in the contract, and it must therefore be held to have elected to pay in cash the balance due plaintiff.

The question at once arose as to whether or not parol evidence would have to be admitted in order to interpret the terms of the contract so as to determine whether or not the bonds set aside for the plaintiff are those described in the contract. The appellant says that parol evidence was not admissible because the contract provisions relative to payment in bonds to the contractor are clear and unambiguous and cannot be varied or added to by parol evidence. The trial judge held that the words "Series 'B,'" qualifying the word "bonds," are ambiguous.

We cannot dogmatically say what "Series 'B'" means when applied to the position of the lien of bonds secured by a second mortgage. The testimony clearly shows that these words do not have any generally accepted meaning when thus used. They ...


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