Contracts II, Pages 795–801

First National Bank of Lawrence v. Methodist Home for the Aged

Kansas Supreme Court, April 6, 1957
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Facts:

Plaintiff, is the administrator of the will of Ellsworth, deceased. Ellsworth wrote an application for admission to defendant's home and then entered into a written agreement with defendant. This standard form agreement said that Ellsworth gave defendant $10,779.60 without reservation to further defendant's charitable work and that defendant admitted Ellsworth into its home for her natural life. It provided for a two-month probationary period where Ellsworth could leave the home for a refund of her donation except for $80 per month.

Exactly one month after signing the agreement, Ellsworth died. Plaintiff demanded defendant refund the amount paid pursuant to the clause about the probationary period.

Procedural History:

The TFC held that it was purely an interpretation of the contract and rendered judgment for the plaintiff for the amount paid minus $235 for Ellsworth's funeral and $80 for the month she lived there.

Issue:

Did the contract entitle the decedent's estate to a refund if she died within two months?

Defendant's Argument:

The agreement was already fully executed as Ellsworth was admitted and her life membership was paid, so nothing else needed to be done for the payment to vest in defendant.

Rule:

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  1. That doubtful language in a contract is construed most strongly against the party preparing the instrument or employing the words concerning which doubt arises.
  2. That where a contract is susceptible of more than one construction its terms and provisions must, if possible, be construed in such manner as to give effect to the intention of the parties at the time of its execution.
  3. That in determining intention of the parties where ambiguity exists in a contract the test is not what the party preparing the instrument intended its doubtful or ambiguous words to mean but what a reasonable person, in the position of the other party to the agreement, would have understood them to mean under the existing conditions and circumstances.
  4. That the intent and purpose of a contract is not to be determined by considering one isolated sentence or provision thereof but by considering and construing the instrument in its entirety.

Reasoning:

The whole agreement was executed, including the part about a probationary agreement. Under that language, she never attained a life membership status in the home because she died before the probationary period's end.

As the probationary period did not end, it cannot be said whether or not Ellsworth would have chosen to remain in the home or not. A reasonable person would understand that if she did not attain a life membership in the home, that she would receive a return of her money. This applies even if she died as well.

The contract should be interpreted against defendant as the drafter if doubtful.

Holding:

The contract did entitle the decedent's estate to a refund if she died within two months. Affirmed.