Studio Film Service, Inc. v. Filmercial Productions, Inc.

FILES, J. This is an action for a balance alleged to be due under a written contract relating to the termination of a joint venture. Defendant has appealed from the judgment after a court trial. We have concluded that the judgment must be reversed because the trial court erroneously concluded that this agreement was unambiguous and refused to allow defendant to introduce evidence to aid in its interpretation.

In 1957 plaintiff and defendant, both of whom are corporations, entered into a written agreement whereby they associated themselves in a joint venture to produce television film commercials. At that time both parties had available certain equipment, manpower and facilities which would be useful in that business. The agreement provided that each party would initially contribute capital in an unspecified amount, and in addition to the capital contribution each party would furnish to the joint venture such talents, manpower, equipment and facilities as were available and needed for the activities of the joint venture. Such facilities, etc., were to be furnished at cost. Paragraph 8 of the agreement stated: “The Joint Venture shall bill the customer and receive the proceeds for any service performed or product sold by the Joint Venture and shall thereupon pay, to the extent funds are available therefrom, to each of the parties hereto the expenses, costs or charges which have been incurred by each. ... In the event such funds are not available to repay the expenses, costs or charges of each party with re[788]spect to a given project, then such funds as are available shall be paid to the parties in the ratio such expenses bear to the sums so available. ’ ’

After a period of operation the parties entered into a written agreement to terminate the venture as of May 31, 1958. It was agreed that after that date defendant was to own all of the property of the joint venture. Paragraph 3 of the termination agreement stated: “You [defendant] agree to undertake to pay all outstanding bills of the joint venture whether such bills are owed to us [plaintiff] or to others and we shall have no liability or obligation with respect to any obligation of the joint venture. ’ ’

Following the execution of this agreement it was ascertained that the receipts of the joint venture were not sufficient to reimburse plaintiff for all of the facilities which it had furnished. The record does not disclose whether this condition was known or anticipated by the parties when they agreed to terminate. It is undisputed that the amount of plaintiff’s unreimbursed expenses is $4,530.13, and that plaintiff’s pro rata share of the funds on hand is $1,040.31.