Kirks La Shelle Co. v. Paul Armstrong Co.

Supreme Court of New York, Trial Term · Contracts

Contractscontract interpretationscope of agreementrevivalsproductionmotion picture rightstalkie rightsimplied negative covenant

Facts

Plaintiff had previously obtained a money judgment against the author of the play "Alias Jimmy Valentine," and in 1921 the parties settled a further action based on that judgment through an agreement drafted by plaintiff's attorneys. The agreement gave plaintiff one-half of all moneys defendants were entitled to receive from any revivals of the play, including productions in New York City, on the road, or in stock, and gave plaintiff approval rights over future arrangements affecting dramatic rights, expressly excluding motion picture rights. At the time of contracting, the silent motion picture rights had already been sold and were expressly excluded, and sound-synchronized motion pictures had no commercial value and talkies as then known later did not exist. Defendants later received money for confirming and granting sound or talkie movie rights in the motion picture production of the play, and plaintiff claimed a contractual right to half of that payment.

Issue

Did the 1921 settlement agreement, which entitled plaintiff to one-half of money from revivals and gave approval rights over future arrangements affecting dramatic rights exclusive of motion picture rights, extend to money defendants later received for sound or talkie movie rights? Could the agreement also be read to imply a negative covenant or a joint-adventure fiduciary duty restricting defendants' disposition of those rights?

Rule

A contract must be construed as a whole and according to the meanings and understandings the parties attached to its terms at the time it was made. Courts may not extend such an agreement to cover new sources of revenue or rights not within the parties' contemplation, and a negative covenant or fiduciary joint-adventure relationship will not be implied where the agreement fairly and reasonably does not support it.

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In 1919, after settling a debt dispute in Chicago, Lena Torres obtained an agreement from playwright Owen Marsh entitling her to 40% of all money he received from any future "revivals" of his stage comedy in New York, "on tour," or "in stock," and to approve future arrangements affecting dramatic rights, expressly excluding motion picture rights. In 1931, Marsh received a large fee for licensing radio-broadcast performance rights in a filmed version of the comedy, a technology with no commercial use in 1919.

Is Torres entitled to 40% of the radio-broadcast film license fee under the agreement?

Explanation. The controlling rule is that the contract must be construed as a whole according to the meaning the parties attached to its terms when made. Terms such as "revivals," "on tour," and "in stock" refer to live stage performances as then understood, and the court will not add coverage for later-developed media or revenue streams not within the parties' contemplation. The approval clause does not transform a limited proceeds interest into ownership of unrelated media rights. (Derived from Kirks La Shelle Co. v. Paul Armstrong Co. (n.d.).)