Opinion ID: 162926
Heading Depth: 1
Heading Rank: 2

Heading: The Franchise Fee Credit

Text: 9 The parties dispute the amount of the royalty fee credit provided by the addenda to the 1996 franchise renewals. On appeal Century 21 challenges the district court's first-day-of-trial grant of partial summary judgment adopting Meraj's interpretation of the addenda. 10 When the two franchise agreements were renewed in 1996, the following addendum was attached to each agreement: 11 Franchisor and Franchisee hereby agree that Franchisee will be afforded a credit against royalty fees payable to Franchisor under Paragraph 8A of the Agreement in the aggregate amount of Twenty Thousand Dollars ($20,000). This credit will be applied to royalties which accrue after the Commencement Date on a monthly basis at the rate of fifty percent (50%) until the full credit amount is applied. Accordingly, Franchisee shall be required to pay to Franchisor only 50% of the first Forty Thousand Dollars ($40,000) of royalties accrued under the Agreement after the Commencement Date. Thereafter all royalty payments will return to the full amount provided for under the Agreement. 12 Aplt's App. at 101. 13 Central to this case is whether the two addenda together granted Meraj only one $20,000 credit, to be shared by the two franchises, or whether each franchise was to receive its own $20,000 credit. If Office # 370 itself was entitled to a full $20,000 credit, then Meraj may not have defaulted in paying royalty fees to Century 21 and termination of the franchise was likely improper. If, on the other hand, a single credit was allocated for the use of both franchises, then Office # 370 was in default. 14 The meaning of the addendum first came before the district court when Century 21 filed a motion in limine six days before trial. The motion asked the court to exclude Azharian's proposed testimony on the parties' intentions with respect to the franchise fee credit. Century 21 argued that the contract language was unambiguous and that an integration clause in the franchise agreement precluded extrinsic evidence of the contract's meaning. The only supporting evidence provided by Century 21 was a copy of the integration clause and a copy of the addendum. 15 Three days later, the Friday before the Monday trial date, Meraj filed a pleading that both responded to Century 21's motion and sought a partial summary judgment that each addendum created a separate credit. Thus, Meraj argued, it was entitled to two $20,000 credits, one for each franchise. In support of that argument, Meraj produced evidence that Century 21 maintained each franchise agreement in a separate file and that Century 21's representative had signed each addendum separately. It also produced excerpts from the deposition testimony of Eric Schmaltzbach, a Vice President of Cendant Corporation, Century 21's parent corporation. Century 21 had designated Schmaltzbach under Federal Rule of Civil Procedure 30(b)(6) as the person who would testify about the $20,000 credit. In his deposition Schmaltzbach indicated that the phrase the Agreement, as used in the addenda (granting a credit against royalty fees payable to Franchisor under Paragraph 8A of the Agreement), referred only to the franchise agreement to which the individual addendum was attached. 16 On the morning of trial the district court ruled that each addendum applied to each franchise agreement. Century 21 challenges the district court's ruling on both procedural and substantive grounds. It contends that the court improperly granted Meraj's summary judgment motion without giving Century 21 ten days to respond, and it argues that the court misconstrued the addendum.
17 Federal Rule of Civil Procedure 56(c) states that a motion for summary judgment shall be served at least 10 days before the time fixed for the hearing. Century 21 claims that the district court violated this provision by ruling on Meraj's motion for partial summary judgment three days after it was filed. It argues that if it had been provided the time to which it was entitled, it could have produced evidence establishing the correctness of its interpretation of the franchise agreement addenda. 18 We assume, without deciding, that the district court's ruling on the meaning of the addendum was in fact a partial summary judgment. Even if Rule 56 applies, however, Century 21 waived the Rule's ten-day notice requirement. 19 The entire colloquy before the court on the motion for partial summary judgment was as follows: 20 THE COURT: All right. Well, you filed a blizzard of papers last week in this case. There's some things that need ruling before we proceed with the selection of the jury. First of all, it wasn't until I reviewed these papers for trial, I think, that I was aware that there are two franchises and two different offices. Now, is it the fact that only one of the franchise agreements is in dispute here? 21 MERAJ: Yes, Your Honor. Century 21 has brought its claims with regard to Office 370. We have brought our counterclaims only as to Office 370. 22 CENTURY 21: Your Honor, I agree with that with one clarification and that is our argument in the case is that the defendant was only entitled to a single $20,000 credit and that that credit was drawn down by both franchises. 23 THE COURT: Well, there are two agreements. 24 CENTURY 21: Yes. 25 THE COURT: The other office is still going. Is that right? 26 CENTURY 21: No, actually, both offices have been terminated. 27 THE COURT: Well, I don't understand this case, then. I was informed in this case by the pleadings that Office 370 was the office that we're in dispute about. 28 CENTURY 21: That's correct, Your Honor, but the defendants have asserted a defense that the plaintiff didn't — 29 THE COURT: Well, what happened to the other office? 30 CENTURY 21: Both offices have been terminated and are no longer operating. 31 THE COURT: The second office was terminated and there's no dispute? 32 CENTURY 21: That's correct. 33 THE COURT: All right. That's my question and you've answered it. This matter of whether there's 40,000 or 20,000, it seems clear to me that each addendum applied to each franchise agreement. So I don't see what that dispute is all about. 34 CENTURY 21: Well, your Honor, if the Court is going to rule that way, then Office 301 would not be an issue in this trial. 35 THE COURT: Yes. Well, that's the way I rule. I can read the papers. 36 CENTURY 21: Okay. 37 Aples' Supp.App. at 98-100. At no time during trial did counsel for Century 21 ask for additional time to respond or in any way complain about the timing of the court's ruling. 38 A litigant preserves its right to the protection of Rule 56's notice requirement if it timely objects to proceeding in violation of the ten-day mandate. Osbakken v. Venable, 931 F.2d 36, 37 (10th Cir.1991). But if a litigant fails to object at the hearing on the motion, the notice requirement is waived. See Summers v. State Farm Mut. Auto. Ins. Co., 864 F.2d 700, 703-04 (10th Cir.1988), overruled on other grounds by McKennon v. Nashville Banner Pub. Co., 513 U.S. 352, 115 S.Ct. 879, 130 L.Ed.2d 852 (1995); Jarvis v. Nobel/Sysco Food Serv. Co., 985 F.2d 1419, 1423-24 (10th Cir.1993). The general requirement of timely objections is essential to prevent unnecessary retrials and to protect against sandbagging. Century 21 here waived its right to ten days' notice because it failed to object to the court's interpreting the addenda when the court raised the matter or even after the court gave its ruling. 39 Relying on precedent from other circuits, Green v. White, 693 F.2d 45 (8th Cir.1982); Thacker v. Whitehead, 548 F.2d 634 (6th Cir.1977); and Hoopes v. Equifax, Inc., 611 F.2d 134 (6th Cir.1979), Century 21 contends that waiver occurs only when the nonmoving party actually briefs or argues the issues raised in the motion and is not prejudiced by the lack of notice. We do not read these opinions to so hold. In any event, to the extent that they hold that the notice requirement can be waived only by a party not prejudiced by insufficient notice, the opinions are contrary to the law of our circuit. In this circuit, when, as here, the nonmovant has waived the notice requirement, we need not consider whether it has suffered prejudice.
40 Century 21 next contends that even if the district court could properly rule on the meaning of the addenda when it did, its interpretation of the addenda was erroneous. We disagree. On the record before the court at the time of its ruling, the court's interpretation was the only reasonable interpretation. 41 The parties' briefs discuss whether the language of the addenda is unambiguous, and must therefore be interpreted by the court as a matter of law, without resort to any evidence outside the four corners of the document, or whether it is ambiguous and must be construed by the factfinder in light of extrinsic evidence. The question whether a contract is unambiguous can be a difficult one. It is not that rare for language to seem clear and definite until some extrinsic evidence demonstrates that the contracting parties used that language to mean something rather different. See generally 5 Margaret N. Kniffin, Corbin on Contracts § 24.7 (rev. ed.1998). 42 In this case, however, we are spared that difficulty. As we explain below, at the time of the district court's ruling the only extrinsic evidence before it simply confirmed the natural reading of the language of the addenda. Therefore, either (1) the language is unambiguous and bears the meaning given it by the district court; or (2) the language is not so unambiguous as to foreclose the use of extrinsic evidence to aid in its construction, but the extrinsic evidence before the district court resolved any ambiguity in favor of the court's interpretation. Either way, we affirm the district court's interpretation. See Grant v. Pharmacia & Upjohn Co., 314 F.3d 488, 491 (10th Cir.2002). 43 We begin with the natural reading. To repeat the language, each addendum states: 44 Franchisor and Franchisee hereby agree that Franchisee will be afforded a credit against royalty fees payable to Franchisor under Paragraph 8A of the Agreement in the aggregate amount of Twenty Thousand Dollars ($20,000). This credit will be applied to royalties which accrue after the Commencement Date on a monthly basis at the rate of fifty percent (50%) until the full credit amount is applied. Accordingly, Franchisee shall be required to pay to Franchisor only 50% of the first Forty Thousand Dollars ($40,000) of royalties accrued under the Agreement after the Commencement Date. Thereafter all royalty payments will return to the full amount provided for under the Agreement. 45 Aplt's App. at 101. The addendum grants a credit against royalty fees. The royalty fees to which the credit applies are those payable under Paragraph 8A of the Agreement. Because each agreement concerns only one franchise — either Office # 301 or Office # 370 — the credit certainly would seem to apply only to that franchise. When the addendum speaks of a credit in the aggregate amount of $20,000, it is aggregating the monthly credits, not the credits under multiple distinct franchise agreements. Indeed, neither agreement makes any reference to the other franchise. 46 We are not persuaded by Century 21's contention that the addendum is ambiguous because it could have explicitly stated that the credit was exclusively applicable to Office # 370. The task of contract interpretation is not a game in which a party succeeds only by drafting a perfect contract. It is almost always possible to write a contract provision with greater precision, although often the possibility is not apparent until a dispute has arisen. Contract interpretation is an altogether human endeavor to determine what is communicated by a given set of words. What is communicated here is rather clear. As the district court stated, I don't see what that dispute is all about. In some cases extrinsic evidence can demonstrate that the natural reading is not the reading intended by the parties to the contract. But that was not the situation here. The only extrinsic evidence presented to the district court when it ruled was that (1) the addendum attached to each agreement was signed separately by the Century 21 representative (one addendum was not just a photocopy of the other); (2) Century 21 maintained the agreements in separate files; and (3) Schmaltzbach admitted that each credit addendum referred only to the agreement to which it was attached. This evidence did not undermine the natural reading of the addenda language — it confirmed the reading that each addendum provided an independent credit. 47 Thus, the district court ruled properly on the interpretation of the addendum. Later in the trial additional evidence might have led the court to reconsider its interpretation. But if such evidence was admitted at trial, it was Century 21's responsibility to ask the court to reconsider its earlier decision in light of the new evidence. To preserve an issue for appeal, a party must alert the district court to the issue and seek a ruling. See Tele-Communications, Inc. v. Commissioner, 104 F.3d 1229, 1232-33 (10th Cir.1997). Because Century 21 made no request for reconsideration, it cannot now rely on evidence submitted at trial after the district court interpreted the addendum. We find no error in the district court's ruling.