Title: Idaho Migrant Council, Inc. v. Warila

State: wyoming

Issuer: Wyoming Supreme Court

Document:

Idaho Migrant Council, Inc. v. Warila1995 WY 15890 P.2d 39Case Number: 94-64Decided: 02/17/1995Supreme Court of Wyoming

 

IDAHO MIGRANT COUNCIL, INC., Appellant 
(Defendant),

v.

James WARILA and June Warila, husband and wife, 
Appellees (Plaintiffs).

 

Appeal 
from District Court, Washakie County, Gary P. Hartman, 
J.

Mark J. Murphy, Sheridan, for appellant.

William R. Shelledy of 
Scott, Shelledy & Luhm, P.C., Worland, for appellees.

Before GOLDEN, C.J., and THOMAS, MACY, TAYLOR and 
LEHMAN, JJ. 

TAYLOR, 
Justice.

[¶1]      This appeal 
concerns a disputed lease agreement. A provision in the lease agreement found 
ambiguous by the district court was construed against appellant, as the drafting 
party, to reach the conclusion that a breach of the lease had occurred. Damages 
were awarded to appellees. Appellant argues that the lease agreement is 
unambiguous and allows appellant to terminate the lease at will. In the 
alternative, appellant argues that the district court should have enforced an 
oral settlement agreement reached by the parties' attorneys prior to 
trial.

[¶2]      We 
affirm.

I. 
ISSUES

[¶3]      Appellant 
presents the following issues:

1. Did the trial court err by finding that the lease 
was ambiguous?

2. Did the trial court err in the application of the 
doctrine of "contra proferentum?"

3. Did the trial court commit reversible error when 
it refused to enforce the settlement agreement?

II. 
FACTS

[¶4]      Appellant, Idaho 
Migrant Council, Inc. (IMC), entered into a five-year lease agreement with 
appellees, James and June Warila (the Warilas), in June of 1991. The lease 
agreement provided that IMC would rent the Warilas' property in Worland, 
Wyoming, for use as a Migrant Head Start Center. The lease agreement contained a 
provision allowing IMC, under certain circumstances, to terminate the lease 
without penalty.

[¶5]      In 1992, IMC 
notified the Warilas of its intent to terminate the lease. IMC paid rent through 
the end of September, 1992 and vacated the property. The Warilas sued IMC for 
breach of contract.

[¶6]      In an attempt to 
negotiate a settlement, attorneys for both parties reached an oral agreement 
that the attorneys thought would be acceptable to both of their clients. IMC's 
attorney prepared a written settlement agreement, based on the oral agreement 
between himself and the Warilas' attorney, and forwarded it to the Warilas. The 
Warilas disagreed with the terms and refused to sign the settlement 
agreement.

[¶7]      IMC moved to have 
the oral settlement agreement negotiated between the attorneys enforced. The 
district court found no mutual agreement between the Warilas and IMC to settle 
or compromise and denied IMC's motion.

[¶8]      A bench trial was 
held on December 15, 1993. The district court found that the termination 
provision in the lease agreement was ambiguous. The district court construed the 
termination provision against IMC, the drafter of the provision, and found that 
IMC had breached the lease agreement. The district court terminated the lease 
and awarded the Warilas $21,322.52 for two years' rent, costs for utilities, 
lawn restoration and attorney's fees. IMC appeals.

III. 
DISCUSSION

STANDARD 
OF REVIEW

[¶9]      Interpretation of 
an alleged ambiguity in a lease agreement is a question of law for the reviewing 
court. Prudential Preferred Properties v. J and J Ventures, Inc., 859 P.2d 1267, 
1271 (Wyo. 1993). The district court's decision not to enforce the alleged 
settlement agreement is also a question of law that will be reviewed de novo. 
The district court's factual findings, however, will be upheld unless those 
findings are clearly erroneous or contrary to the great weight of the evidence. 
Bowles v. Sunrise Home Center, Inc., 847 P.2d 1002, 1004 (Wyo. 1993) (quoting 
Pancratz Co., Inc. v. Kloefkorn-Ballard Construction/Development, 720 P.2d 906, 909 (Wyo. 1986)).

LEASE 
INTERPRETATION

[¶10]   IMC argues that the district court 
erred when it found the lease agreement ambiguous. An ambiguous contract 
contains language that conveys a double meaning. McNeiley v. Ayres Jewelry Co., 
855 P.2d 1242, 1244 (Wyo. 1993). Disagreement between parties regarding the 
meaning of a contract does not establish an ambiguity. Moncrief v. Louisiana 
Land and Exploration Co., 861 P.2d 516, 524 (Wyo. 1993). Whether a contract 
contains an ambiguity is a question of law for the reviewing court. Prudential 
Preferred Properties, 859 P.2d  at 1271.

[¶11]   Contract interpretation is the 
process of ascertaining the meaning of the words used by the parties to express 
their intent. Doctors' Co. v. Insurance Corp. of America, 864 P.2d 1018, 1023 
(Wyo. 1993). We generally look to the "four corners" of an instrument to 
determine the intent of the parties. Id. at 1024. However, this rule is only 
applicable where the language clearly and unambiguously expresses the intent of 
the parties. Rouse v. Munroe, 658 P.2d 74, 77 (Wyo. 1983). If the meaning of a 
provision in a contract is not readily apparent, the court may resort to 
competent evidence of extraneous circumstances to explain the ambiguity. Wilder 
v. Cody Country Chamber of Commerce, 868 P.2d 211, 216 (Wyo. 1994) (quoting 
Alexander v. Phillips Oil Co., 707 P.2d 1385, 1387 (Wyo. 
1985)).

[¶12]   The dispute between IMC and the 
Warilas involves the "TERM" provision in the lease 
agreement:

2. TERM: The term of this lease shall be for sixty 
(60) months commencing on [the] 10th day of June, 1991, and termination on June 
9, 1996. However, should Lessee's 
Migrant Head Start Center funding for this site or desired use cease, Lessee 
may terminate his lease without penalty by giving thirty (30) days written 
notice to Landlord in accordance with paragraph 12 below.

(Emphasis 
added.)

[¶13]   The provision conveys a double 
meaning and is, therefore, ambiguous. McNeiley, 855 P.2d  at 1244; Busch 
Development, Inc. v. City of Cheyenne, 645 P.2d 65, 68 (Wyo. 1982). IMC argues 
that the disputed language created a lease term of five years terminable at the 
option of the lessee if IMC no longer desired use of the property or if funding 
for the Migrant Head Start program ceased. The Warilas argue that the lease is 
terminated only if funding ceases, and that funding can cease for the site or 
for its desired use, either of which would allow IMC to terminate. The district 
court found the term, "desired use," ambiguous. The provision readily lends 
itself to more than one interpretation. The district court did not, therefore, 
err in concluding that the term "desired use" was 
ambiguous.

[¶14]   Nor did the district court err in 
construing the ambiguity against IMC. We have repeatedly held that a contract 
will be construed most strongly against the party who drafted the contract. 
McNeiley, 855 P.2d  at 1244; Brazelton v. Jackson Drug Co., Inc., 796 P.2d 808, 
810 (Wyo. 1990); Kelliher v. Herman, 701 P.2d 1157, 1159 n. 1 (Wyo. 1985). James 
Warila testified regarding the drafting of the lease agreement. IMC originally 
drafted the lease agreement with a ten year term. The Warilas rejected that 
lease agreement and suggested a five year term. The Warilas made no changes to 
the "desired use" language at issue today.

[¶15]   The district court's finding that 
IMC drafted the operative language of the contested clause is not clearly 
erroneous. Bowles, 847 P.2d  at 1004. The district court construed the language 
of the lease agreement against IMC and determined that IMC could not terminate 
the lease at their option. We agree with that determination and hold that the 
ambiguity in the contract was properly construed against IMC and that the lease 
could not be terminated at IMC's option.

SETTLEMENT 
AGREEMENT

[¶16]   IMC argues that the Warilas are 
bound by the oral settlement agreement negotiated by their attorney. We 
disagree. The question of whether the settlement agreement is binding on the 
Warilas is controlled by a contract formation analysis. Offer, acceptance and 
consideration are required to form a contract. Lavoie v. Safecare Health 
Service, Inc., 840 P.2d 239, 247 (Wyo. 1992) (quoting Miller v. Miller, 664 P.2d 39, 40 (Wyo. 1983)). When these elements are established, courts conclude that 
there has been a meeting of the minds and an enforceable contract exists. 
Anderson Excavating and Wrecking Co. v. Certified Welding Corp., 769 P.2d 887, 
889 (Wyo. 1988). The Warilas never accepted IMC's offer of settlement, thus, 
there was no meeting of the minds and no contract. The alleged settlement 
agreement IMC seeks to enforce represents nothing more than failed 
negotiations.

[¶17]   When the Warilas' attorney asked 
James Warila about the settlement agreement he and his wife refused to sign, 
James Warila testified:

I 
read them over briefly. And I was ready to sign them, and as a matter of fact I 
got up to sign them and my wife said "just a minute", she said "where is the 
$9000." And so I read the document again and it wasn't there. And I asked your 
secretary and she said well it must have been an error, it should have been in 
there. I said, well, we will go ahead and sign it and they can add it. Then we 
decided not to, so, and now it's this way.

[¶18]   The record demonstrates that the 
Warilas refused to accept IMC's offer; therefore, there is no contract because 
there was no meeting of the minds. See, Lavoie, 840 P.2d  at 248. The district 
court properly denied IMC's motion to enforce the settlement 
agreement.

[¶19]   IMC argues in its reply brief that 
the purpose of the lease agreement was frustrated. Our rules of appellate 
procedure limit reply briefs to the issues and arguments raised by appellees. 
W.R.A.P. 7.03. We, therefore, decline to address IMC's frustration of purpose 
argument.

IV. 
CONCLUSION

[¶20]   IMC's Migrant Head Start Center is 
a commendable program that provides early education for children whose parents' 
jobs require frequent relocation. IMC's laudable, non-profit motive, however, 
does not exclude it from the rules of contract law. We agree with the district 
court's conclusion that the lease agreement entered into by IMC and the Warilas 
contained an ambiguity. IMC drafted the ambiguous provision. Therefore, the 
district court properly construed that ambiguity in favor of the Warilas. Our 
rules of contract law also apply to the contested settlement agreement. When an 
offer is refused, there is no meeting of the minds and, therefore, no contract 
to enforce.

[¶21]   Affirmed.

MACY, 
Justice, specially concurring.

[¶22]   I agree with the result reached by 
the majority but for a different reason. I believe that the language of the 
termination clause is unambiguous and that the language did not permit the 
tenants to terminate the lease.

[¶23]   The phrase "should Lessee's . . . 
desired use cease" which was contained in the lease did not mean "should 
Lessee's . . . desire to use this site cease." The tenants attempted to 
terminate the lease because they no longer desired to use this site, not because 
their desired use ceased.