Opinion
DOCKET NUMBER WD 53114, (Consolidated with WD 53186).
Filed: May 27, 1997.
Appeal from the Circuit Court of Jackson County, The Honorable Thomas C. Clark, Judge.
James Yeretsky, Suite 1810, 1100 Main, KCMO 64105, for Appellant.
Thomas Scott Stewart, Suite 2500, 2345 Grand, KCMO 64108, John Kilroy, Jr., 120 W. 12th Street, KCMO 64105, for Respondents.
BEFORE BRECKENRIDGE, P.J., SPINDEN and HOWARD, JJ.
After this court reversed the circuit court's declaratory judgment for the defendants and dismissal of the plaintiff's cause of action in two previous appeals, we consider this case once again. This time the circuit court has granted summary judgment for the defendants in this contract dispute. The plaintiff, Preferred Physicians Mutual Management Group, Inc. (Management Group), appeals. We reverse and remand for further proceedings.
Our previous decisions have been recorded at 916 S.W.2d 821 and at 918 S.W.2d 805.
Management Group's dispute with the defendants in this lawsuit centers on a contract Management Group entered into in July 1991 with Preferred Physicians Mutual Risk Retention Group, Inc., (Risk Retention Group). Management Group agreed to provide comprehensive management and operational services to Risk Retention Group. Management Group contends that Risk Retention Group first breached the contract by not paying management fees on March 1, 1994. Management Group sued on April 1, 1994, to enforce the contract.
Management Group sued Risk Retention Group for specific performance and breach of contract. It also sued Gerald F. Touhy for breach of fiduciary duty; Risk Retention Group, Touhy, and Touhy Management Services, Inc., for tortious interference with contract; Risk Retention Group for misappropriation of business opportunities; and Touhy and Edward C. Mills for civil conspiracy.
The contract made these provisions concerning duration and termination:
The initial term of this Agreement shall be until January 1, 1995; provided, however, that this Agreement shall automatically be renewed for terms of five (5) years thereafter, unless terminated as permitted by [this contract by Risk Retention Group for cause] or both of the parties hereto give written notice of their intent not to renew this Agreement[.]
The circuit court agreed with Risk Retention Group's contention that these provisions should be interpreted as making the contract of indefinite duration because it did not provide for a definite termination date. Because it deemed it to be a contract for indefinite duration, the circuit court concluded that it was terminable at the will of either party, so Risk Retention Group had a right to terminate the contract. It granted summary judgment for Risk Retention Group. The circuit court noted:
Clearly, agreement to abide until January 1, 1995, has little impact thereafter if the agreement shall "automatically be renewed for terms of five years thereafter." . . . Accordingly, determination of the term, if any, of this contract cannot be ascertained by the language used by the parties because a termination date that is automatically renewable is meaningless, inconclusive and indeterminate[.]
We agree with the circuit court that the contract is unusual in that it has the "markings" of both a contract in perpetuity and a contract of a set duration. The set termination date suggests a contract of definite duration; however, its provision that the contract would "automatically be renewed" unless both parties agreed to terminate it suggests that the parties may have contemplated that it would run in perpetuity.
Management Group contends that the contract was perpetual that the parties set in motion an agreement which ended only when both parties agreed to end it. Risk Retention Group contends that it was an indefinite contract — that is, a contract with no termination date intended to continue for an indefinite duration. We disagree with both.
To conclude that the contract ran in perpetuity would render meaningless the termination clause which declared that "[t]he initial term of this Agreement shall be until January 1, 1995." The set termination date suggests a contract of set duration. "[I]t seems to be the law in this state that, where the intention to [impose a perpetuity of obligation] is unequivocally expressed, the contract will be upheld. . . . But in this jurisdiction, . . . courts will only construe a contract to impose an obligation in perpetuity when the language of the agreement compels that construction." Paisley v. Lucas, 143 S.W.2d 262, 270-71 (Mo. 1940) (quoting James MacCalum Printing Company v. Graphite Compendius Company, 130 S.W. 836, 838 (Mo.App. 1910)) (emphasis added). The contract is equivocal concerning duration. Its language does not compel a conclusion that the parties intended perpetual performance. Given the rarity with which courts will interpret a contract to impose a perpetual obligation, Superior Concrete Accessories, Inc. v. Kemper, 284 S.W.2d 482, 490 (Mo. 1955), we do not find that this was such a contract.
The Supreme Court noted that "[o]nly in such negative promises as to forbear suit or not to carry on a business or occupation is so broad an interpretation likely to be permissible." Id. (quoting 1 Williston, Contracts, Revised Edition, § 38).
Management Group notes that in Judson Roberts Company v. Seaboard Allied Milling Corporation, 435 S.W.2d 26, 27 (Mo.App. 1968), the court construed a contract providing for "continuation of . . . services unless cancelled 60 days prior to August 27, 1965, for an additional year." Management Group argues that the court in that case "found that the contract was renewed for an additional year and awarded damages to the plaintiff for breach." That contract, however, did not provide for a termination date. The parties obviously expected it to continue unless one of them cancelled at least 60 days before a set date. That is a far cry from the contract in this case.
The Supreme Court of Vermont has noted that "[t]he word `automatically' . . . conveys the idea of involuntary action, without thought or conscious intention. In its usual sense it does not point to perpetuity." Rutland Amusement Company, Inc. v. Seward, 248 A.2d 731, 734 (Ver. 1968). That a contract would need renewal belies any contention that it was to run in perpetuity — or indefinitely, for that matter. A contract that runs forever or indefinitely has no need for renewal.
This is partly why we also disagree with Risk Retention Group's contention that this is a contract of indefinite duration. It had a set duration of five years with a definite terminate date for the initial period. This is a fixed criterion which belies a contract of indefinite duration. In concluding that this was a contract of indefinite duration, the circuit court relied on several cases, but, unlike this case, the contracts in all of those cases contained no term or termination date and certainly did not provide for automatic renewal. Given the fixed date of duration of this contract and the parties' apparent belief that their contract would be in need of renewal after January 1, 1995, we do not deem it to be a contract of indefinite duration.
Superior Concrete Accessories, Inc. v. Kemper, 284 S.W.2d 482 (Mo. 1955); Paisley v. Lucas, 143 S.W.2d 262 (Mo. 1940); Haith v. Model Cities Health Corp. of Kansas City, 704 S.W.2d 684 (Mo.App. 1986).
That leaves only a contract for a fixed, definite duration, and we conclude that this is what the parties intended. What are we to make, then, of the language that the contract "shall automatically be renewed for terms of five . . . years [after January 1, 1995], unless terminated as permitted by [this contract] or both of the parties hereto give written notice of their intent not to renew this Agreement"? We deem this part of the contract unenforceable because it lacked the mutuality of assent necessary to renew a contract.
To renew a contract means to substitute "in place of one engagement . . . a new obligation on the same terms and conditions; the establishment, extension, or reestablishment of a particular contract for another period of time." 76 C.J.S. Renewal 1165 (1952). Renewal contemplates the mutual assent required for the making of an enforceable contract.
"A meeting of the minds, mutual assent, is necessary to the making of a contract." Fulton v. Bailey, 413 S.W.2d 514, 518 (Mo. 1967) (quoting Stone v. Stone, 176 S.W.2d 464, 468 (Mo. 1944)).
If the contract provided that it would be automatically renewed unless one of the parties gave written notice of their intent not to renew it, we would have the assurance of mutual assent. By requiring written notice of both parties' intent not to renew, the contract would be renewed even if one of the parties did not want to renew it. This is contrary to mutual assent.
Of course, the parties had mutual assent when they originally entered into the contract. Obviously, they contemplated that the contract might continue after its termination on January 1, 1995. That they wanted the contract to end on January 1, 1995, was also obvious. As the circuit court noted, they could not have it both ways: They could not have the mutual purpose to form a contract which terminated in five years and would be in need of renewal, and, at the same time, have the mutual purpose to have a perpetual contract. When they formed the contract, either they intended to have a definite, fixed contract, or they intended to have a perpetual contract — but not both. They are mutually exclusive. We must choose to enforce one or the other, and, in the face of such apparent double-mindedness, we must opt, as a matter of law, for a nonperpetual contract over a perpetual one. Paisley, 143 S.W.2d at 270-71. Whatever will the parties had to extend the contract beyond January 1, 1995, was cancelled out by their equivocation and is unenforceable. That one of the parties has already endeavored to end the contract certainly belies any assent to extend the contract beyond January 1, 1995.
This causes us to conclude that the only enforceable portion of the termination clause is the initial period of five years. Because the circuit court rested its summary judgment on a conclusion that the contract was terminable at will and did not seek to enforce the five-year period, we reverse the circuit court's judgment and remand for further proceedings. Because we reverse the trial court's grant of summary judgment, we need not address the merits of Management Company's third point regarding time for discovery.
Breckenridge, P.J., and Howard, J., concur.