Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca10-90-01113/USCOURTS-ca10-90-01113-0/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 

---

REED 

v. 

HERTZ 

LED 

UNITED STATES COURT OF APPEALS United States Court of Appeals TMth Ci:.r:i1ft 

FOR THE TENTH CIRCUIT 

MILLER, INC.; DARREN CYPHERS, ) 

) 

Plaintiffs-Appellees, ) 

) 

) 

) 

SYSTEMS, INC., ) 

) 

Defendant-Appellant. ) 

ORDER AND JUDGMENT* 

FEB 2 7 199 

ROBERT L. HOECKER 

Clerk 

No. 90-1113 

(D.C. No. 88-N-862) 

(D. Colo.) 

Before LOGAN, MOORE, and BALDOCK, Circuit Judges. 

After examining the briefs and appellate record, this panel 

has determined unanimously that oral argument would not materially 

assist the determination of this appeal. See Fed. R. App. P . 

34(a); 10th Cir. R. 34.1.9. 

submitted without oral argument. 

The case is therefore ordered 

This appeal arises from a contractual dispute between 

plaintiffs, Reed Miller, Inc. and Darren Cyphers, and defendant 

Hertz Systems, Inc. Plaintiffs are licensees operating a Hertz 

rental car agency in Grand Junction, Colorado. They filed suit 

seeking both monetary and declaratory relief after Hertz alleged 

* This order and judgment has no precedential value and shall 

not be cited, or used by any court within the Tenth Circuit, 

except for purposes of establishing the doctrines of the law of 

the case, res judicata, or collateral estoppel. 10th Cir. R. 

36.3. 

Appellate Case: 90-1113 Document: 010110028882 Date Filed: 02/27/1991 Page: 1 
they owed approximately $40,000.00 in licensing fees. The 

district court ruled in favor of plaintiffs. We affirm the 

district court on the merits, but remand for the limited purpose 

of assessing interest on the breach of contract damages. 

BACKGROUND 

The dispute underlying this lawsuit arose out of the 

classification of vehicles in plaintiffs' rental business. 

Pursuant to the licensing agreement between the parties, 

plaintiffs are obligated to pay Hertz four percent of the gross 

monthly revenue they receive from renting passenger cars. 

However, they are only obligated to give Hertz three percent of 

the revenue derived from rental trucks. The controversy here 

involved the proper classification of Ford Broncos, Chevrolet 

Blazers, and Suburbans. Plaintiffs have always treated these 

vehicles as trucks for fees purposes, while Hertz asserts they 

must be classified as passenger cars. 

The parties signed this licensing agreement in 1977. 1 From 

that time through 1987, these vehicles were classified as trucks 

and fees were paid accordingly. Hertz never objected to this 

practice. In fact, as late as 1985, Hertz conducted an audit of 

plaintiffs' business and did not raise the classification issue. 

At trial, however, Hertz submitted company memoranda dated in 1983 

which stated the company's new policy that all Broncos, Blazers, 

and like vehicles be classified as passenger cars. There was no 

1 Darren Cyphers is the original licensee. 

assigned his interest to Reed Miller, Inc. Both 

treated as licensees for purposes of this appeal. 

2 

He immediately 

parties will be 

Appellate Case: 90-1113 Document: 010110028882 Date Filed: 02/27/1991 Page: 2 
' 

evidence that plaintiffs ever received a copy of this policy. The 

licensing agreement has no provision expressly addressing the 

classification issue. 

In 1987, Hertz conducted another audit and discovered 

plaintiffs were paying the three percent truck fee on Broncos, 

Blazers, and Suburbans. Hertz assessed plaintiffs $40,614.00 as 

back payments owed. When plaintiffs would not pay this amount, 

Hertz took the money from the licensees' "RENT IT HERE/LEAVE IT 

THERE" national charge account. This account is maintained for 

the purpose of depositing monies paid by customers using Hertz 

credit cards. In certain circumstances, Hertz has the authority 

to debit money from this account. However, the company clearly 

did not have authority in this instance. 

Plaintiffs filed this action asserting claims for breach of 

contract and conversion, in addition to a claim seeking 

declaratory relief. The district court ruled in favor of 

plaintiffs on both claims and granted declaratory relief, ruling 

that Broncos, Blazers, and Suburbans are considered trucks for 

purposes of assessing fees under the existing licensing agreement. 

Hertz appeals all of these rulings. 

DISCUSSION 

Under the express provisions of the licensing agreement, the 

law of New York governs the breach of contract claim. In New 

York, where the agreement is clear, contractual interpretation is 

a question of law. See Quinn v. Buffa, 468 N.Y.S.2d 173, 174 

(A.O. 2 Dept. 1983). Where the contract is ambiguous, however, 

3 

Appellate Case: 90-1113 Document: 010110028882 Date Filed: 02/27/1991 Page: 3 
.. 

interpretation of the document is reserved for the factfinder. 

Id. Determinations regarding whether a contract is ambiguous on 

its face are for the court. Schmidt v. Magnetic Head Corp., 468 

N.Y.S.2d 649, 653 (A.O. 2 Dept. 1983). In this regard, the mere 

omission of an item from the contract does not create an 

ambiguity. Id. at 654. Rather, whether an ambiguity exists must 

be ascertained from the face of the contract without resort to 

extrinsic evidence. Id. It is with these principles in mind that 

we examine Hertz's claims. 

Here, the district court appeared to accept plaintiffs' 

argument that the contract was ambiguous because it contained no 

provision addressing vehicle classification. We have reviewed the 

licensing agreement and hold, as a matter of law, that the 

contract was not ambiguous. The omission regarding classification 

does not render this otherwise clear agreement ambiguous. 

However, guided by these principles of contract law, we are still 

persuaded the district court's disposition was correct. 

The district court determined this contract, read in its 

entirety, does not allow Hertz to unilaterally change the 

classification of vehicles. On appeal, Hertz argues that the 

broad contract language outlining "The Hertz System112 and allowing 

2 The opening paragraph of the 

System." It states: 

contract outlines the "Hertz 

WHEREAS, Hertz operates a plan or system ("Hertz 

System") for conducting the business of renting or 

leasing vehicles without drivers ("Vehicle Renting 

Business"), which plan or system includes furnishing to 

licensees of Hertz and informing and advising them 

regarding, among other things, methods of operation and 

accounting, advertising and publicity service, courtesy 

(continued on next page) 

4 

Appellate Case: 90-1113 Document: 010110028882 Date Filed: 02/27/1991 Page: 4 
.. 

for its amendment give the company total discretion to mandate 

vehicle classification. While we do not believe this licensing 

agreement is ambiguous, we agree with the district court that the 

"Hertz System" as delineated in the contract does not include the 

ability to unilaterally alter the classification of vehicles so as 

to affect profits. The contract simply does not address the 

issue. 

From 1977 through 1987, plaintiffs paid fees based on the 

classification of these vehicles as trucks. Hertz obviously was 

aware, or should have been aware, of this practice. Because this 

was standing procedure, and the contract does not allow unilateral 

change, the attempted reclassification necessarily constitutes an 

amendment to the contract. Pursuant to the explicit language of 

Article XIII of the licensing agreement, no "amendment, change or 

variance" to the agreement can be made unless it is executed in 

writing and signed by both parties. It is undisputed that no 

attempt was made to do this. 3 We therefore agree with the 

district court that Hertz's $40,614.00 assessment and collection 

constituted a breach of the licensing agreement. 

appropriate for plaintiffs to recover this amount. 

It 

(continued from previous page) 

and charge card service, 

style and character of 

appliances for conducting a 

and . . . 

insurance programs and the 

equipment, furnishings and 

Vehicle Renting Business; 

was 

3 As a corollary, we note that even if the contract allowed for 

modification without plaintiffs' consent, it would not be valid 

here because there is no evidence that plaintiffs were ever 

informed of what was clearly a change in policy. 

5 

Appellate Case: 90-1113 Document: 010110028882 Date Filed: 02/27/1991 Page: 5 
.. 

Our disposition of the breach of contract claim necessarily 

dictates the result of the other two claims. First, we uphold the 

district court's declaratory determination that the contract and 

course of dealings between these parties allowed for 

classification of Chevrolet Blazers, Ford Broncos, and Suburbans 

as trucks. This was standing practice which could not be altered 

unilaterally. 

Second, our disposition of the breach of contract claim 

alleviates the need to address the conversion claim. We have 

already determined plaintiffs are entitled to recoupment of the 

monies taken from the "RENT IT HERE/LEAVE IT THERE" account. 

These were the only damages the court granted. For this reason, 

we need not consider the conversion claim. We do note, however, 

that the district court granted interest on the judgment based on 

Colorado statute. Because we are affirming the district court on 

the breach of contract claim, New York law should apply to any 

interest on the judgment. See N.Y. CIVIL PRACTICE LAW AND RULES 

§§ 5001, 5004 (McKinney 1981). 

The judgment of the United States District Court for the 

District of Colorado is REMANDED for the limited purpose of 

calculating interest on the judgment. 

other respects AFFIRMED. 

The judgment is in all 

ENTERED FOR THE COURT 

John P. Moore 

Circuit Judge 

6 

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