Meyers v. SOUTHERN NATIONAL BANK OF NORTH CAROLINA

204 S.E.2d 30 (1974)

21 N.C. App. 202

E. W. MEYERS, Jr. v. SOUTHERN NATIONAL BANK OF NORTH CAROLINA, Administrator C.T.A. of G. F. Landgraf, Deceased.

No. 7411SC29.

Court of Appeals of North Carolina.

April 3, 1974.

Writ of Certiorari Denied June 4, 1974.

*31 McDermott & Parks by George M. McDermott, Sanford, for plaintiff-appellant.

Pittman, Staton & Betts by J. C. Pittman and R. Michael Jones, Sanford, for defendant-appellee.

Writ of Certiorari Denied by Supreme Court June 4, 1974.

BRITT, Judge.

Plaintiff contends that the option in question dealt with the quantum of stock existing at the time of the execution of the *32 agreement and that, therefore, a subsequent change in the number of shares constituting that quantum requires an appropriate adjustment of the agreed price per share. In support of this contention plaintiff cites Trust Co. v. Mason, 151 N.C. 264, 65 S.E. 1015 (1909), on reh., 152 N.C. 660, 68 S.E. 235 (1910).

In Trust Co. the seller contracted on 23 December to sell four shares of common stock at $650 per share "allowing the January dividend to [the seller]." Unknown to either party to the contract, the corporation had on 16 December declared cash dividends and a stock dividend, in addition to a regular semi-annual cash dividend, payable to shareholders of record on 2 January of the following year. The Supreme Court held on rehearing that a construction of the quoted phrase reserved in the seller the cash dividends but not the stock dividends. The court drew a distinction between cash and stock dividends, and, quoting Gibbons v. Mahon, 136 U.S. 549, 10 S. Ct. 1057, 34 L. Ed. 525 (1890), adopted the principle that a cash dividend is deemed income of each share but that a dividend in stock is deemed to be capital.

We feel that the facts in the instant case distinguish it from Trust Co. In this case the original agreement of 11 January 1957 provides: "WHEREAS, the Shareholders own the number of shares of Common Stock of Trion set opposite their names below, which shares together with all shares of Common Stock of Trion received as a stock dividend thereon or in exchange therefor and all shares of Common Stock of Trion hereafter acquired by the Shareholders are hereinafter referred to as the Stock."

Further, the parties agreed in paragraph number 1 of this same agreement that "[u]pon the death of a Shareholder the surviving Shareholder shall have an option to purchase the Stock of the deceased Shareholder during a period of 60 days after the date of death at the applicable price as set forth in paragraph 3 below." Paragraph 3 provided:

"The price of the Stock shall be determined jointly by the Shareholders and the Board of Directors of Trion semiannually at the meeting of said Board next following September 1 and April 1 of each year. Such price shall be based primarily upon the then current market value but consideration shall also be given to other factors normally considered in determining a fair value such as book value, earnings, prospects, and the like. The price shall be recorded in the minutes of the meeting at which it is determined and such price shall apply to any purchase hereunder until the next semiannual price is determined."

In every instance in which the price of the stock was set in accordance with the agreement, we find that the stock was priced at so much per share as opposed to a block price. The best evidence of the intention of the parties to a contract is the practical interpretation given to their contract by the parties while engaged in their performance. Peaseley v. Coke Co., 282 N.C. 585, 194 S.E.2d 133 (1973); State v. Cook, 263 N.C. 730, 140 S.E.2d 305 (1965); Construction Co. v. Crain and Denbo, Inc., 256 N.C. 110, 123 S.E.2d 590 (1962).

A clear reading of the agreement, and an interpretation thereof with the conduct of the parties ante litem motam in mind, leads us to the conclusion that the parties intended a purchase of Landgraf's stock at a price of so much per share regardless of the original holdings of the parties.

The judgment appealed from is

Affirmed.

PARKER and VAUGHN, JJ., concur.