Opinion ID: 146068
Heading Depth: 1
Heading Rank: 8

Heading: Big Box Store Commissions

Text: Dogswell argues the district court erred by holding Dogswell liable to Profit Pet for commissions on sales to big-box storesTarget and United Natural Foods, Inc. (UNFI). The district court held that the contract says [Profit Pet] gets commissions for materials or goods delivered into the territory to those accounts. And so I think he's entitled to those commission payments as a matter of law (TR 60). We find the Agreement to be ambiguous on this point and reverse the district court's holding. Under Michigan law, whether a contract is ambiguous is a question of law properly determined by the court. See Sault Ste. Marie Tribe of Chippewa Indians v. Engler, 146 F.3d 367, 373 (6th Cir. 1998). In making such a determination, a district court should read the contract as a whole and give the contract language its ordinary and natural meaning. See Comerica Bank v. Lexington Ins. Co., 3 F.3d 939, 942 (6th Cir.1993). However, a court's role in construing the terms of a contract is not unqualified. Where [a contract's] meaning is obscure and its construction depends upon other and extrinsic facts in connection with what is written, the question of interpretation should be submitted to the jury, under proper instructions. D'Avanzo v. Wise & Marsac, P.C., 223 Mich.App. 314, 319, 565 N.W.2d 915, 918 (1997) (internal citations and quotation marks omitted). The fact-finder must interpret the contract's terms, in light of the apparent purpose of the contract as a whole, the rules of contract construction, and extrinsic evidence of intent and meaning. In resolving such a question of fact, i.e., the interpretation of a contract whose language is ambiguous, the finder of fact is to consider relevant extrinsic evidence. Klapp v. United Ins. Group Agency, 468 Mich. 459, 469, 663 N.W.2d 447, 453-54 (2003). The Agreement, a printed form modified by handwritten notes and cross outs, is not a model of clarity. The parties drafted it without the aid of an attorney, and frankly it is doggone messy. A number of fill-in spaces are left blank, including the commission rate, a not insignificant contract term. Whole sections are deleted by hand with the notation VOID and the parties' initials. Some sections, such as the penalty payment discussed below, are written entirely by hand and squeezed into what little white space existed between typed sections. It is no wonder that ambiguity and inconsistency is the result. Of course, the Agreement must be read as a whole and, in so doing, we find there are conflicting, but reasonable, interpretations whether Profit Pet is entitled to commissions on sales to big box stores. If the words in a contract are equally susceptible to at least two reasonable interpretations, then the court must reverse the grant of summary judgment. Mayor of City of Lansing v. Mich. Pub. Serv. Comm'r, 470 Mich. 154, 166, 680 N.W.2d 840 (2004). Here, the Agreement does not consistently define terms. Certain terms are defined by placing the term in quotes in a parenthetical after the definition. For example, it does so for Principal and Agency in the preamble, Products and Territory in Section 1, Sales Policies in Section 2, and aggrieved party in Section 7.1.2. Section 6 has the header Commissions, but fails to similarly define the term, nor is commissions consistently capitalized when used. (The Agreement treats the terms orders and notices in Sections 3 and 9, respectively, in similar fashion.) Certainly Sections 4 and 6, read together, define commission in a way which comports to the common understanding of how commissions are earned and paid. Coates v. Bastion Bros., Inc., 276 Mich.App. 498, 504, 741 N.W.2d 539, 544 (2007) (Dictionary definitions may be used to ascertain the plain and ordinary meaning of terms undefined in an agreement.). The word commission (in the sense of a payment) is understood in common parlance as a payment made to an agent regarding a sale for which the agent is responsible. The Webster's Third New International Dictionary (1986) defines commission as a fee paid to an agent or employee for transacting a piece of business or performing a service; especially: a percentage of the money received from a total paid to the agent responsible for the business. Section 6.1, standing alone, is ambiguous. That Section states: Commissions are earned ... on all `accepted orders' solicited within and/or delivered to the Territory, whether the orders are sent by the Agency, received by the Principal by the mails, taken at the Principal's place of business or otherwise. Does this provision limit commissions to those earned by Profit Pet performing its duties under Section 4? That Section explains that Profit Pet must promote orders and reorders of [Dogswell's] products and services in the Territory and the long term goodwill of [Profit Pet], and that Profit Pet diligently and faithfully work the Territory in an endeavor to secure business for [Dogswell] and use its best efforts to promote [Dogswell's] products. It is undisputed that Profit Pet never secured big box store business, nor sought to promote Dogswell's products to the big box market. Therefore, one interpretation is that Profit Pet did not earn a commission for big box sales. A different and also reasonable interpretation of the Agreement was found by the district court: namely, that Profit Pet would be entitled to commissions on all orders delivered to the Territory, regardless of whether Profit Pet had affected those sales. This interpretation was reached by focusing on the broad language of Section 6.1. In sum, the Agreement is ambiguous as to big box store commissions. The issue is one for the trier of fact to decide. [2] Having determined the Agreement is ambiguous, the trier of fact can also consider evidence outside the four corners of the Agreement, including the parties' course of conduct. The parties agree that Profit Pet never represented Dogswell's products to Target or UNFI, and Profit Pet never received or demanded a commission on such sales until after this lawsuit. This past pattern of conduct between the parties during the pendency of the Agreement supports the reasonable interpretation that big box store commissions were not included in the Agreement. See Detroit Greyhound Employees Fed. Credit Union v. Aetna Life Ins. Co., 381 Mich. 683, 692, 167 N.W.2d 274, 279 (1969) (whatever is done by the parties during the period of the performance of the contract is done under its terms as they understood and intended it should be). Finally, the parties stipulated to a damage amount in light of the district court's ruling that Profit Pet was entitled to big box commissions, resulting in the judgment of $209,039.56 in favor of Profit Pet. That stipulation does not specify the amount attributable to big box commissions. There is no mention of the value of the big box commissions in the briefing or elsewhere in the record. Therefore, should the trier of fact find big box commissions inappropriate, a recalculation of damages would be necessary (deducting any dollar amount for big box commissions).