Opinion ID: 2971924
Heading Depth: 2
Heading Rank: 2

Heading: “Acceptable Offer” Requirement

Text: The Syndicate Agreement, a copy of which is attached to Never Tell’s complaint, expressly provides that “[t]his Agreement, as well as all instruments pertaining to any right or interest created hereunder, shall be governed by and construed under the laws of the Commonwealth of Kentucky.” JA 21. Under Kentucky law, a written instrument free of ambiguity will be enforced strictly according to its terms. The reviewing court must interpret unambiguous contract terms by assigning language its ordinary meaning without resort to extrinsic evidence. Frear v. P.T.A. Industries, Inc., 103 S.W.3d 99, 106 (Ky. 2003). If, on the other hand, an ambiguity exists, “the court will gather, if possible, the intention of the parties from the contract as a whole, and in doing so will consider 6 the subject matter of the contract, the situation of the parties and the conditions under which the contract was written, by evaluating extrinsic evidence as to the parties’ intentions.” Id. (footnotes omitted). A contract provision will be deemed ambiguous only if it is susceptible to two or more reasonable, but inconsistent interpretations. Id. at n.12. In dismissing Never Tell’s complaint for failure to state a valid claim, the district court necessarily concluded that the relevant terms of the Syndicate Agreement are not ambiguous. This conclusion is understandable, considering each party’s respective insistence that § 4.1 is clear and unambiguous. Yet, despite the seeming clarity of the § 4.1 language, the present controversy undeniably stems from two fundamentally different views of the meaning of “acceptable offer,” as applied to the Blooming Hills offer. If, upon viewing § 4.1 in the light most favorable to Never Tell, its proffered construction of “acceptable offer” is not shown to be patently unreasonable, then the term cannot be deemed unambiguous, and dismissal of Never Tell’s claim based on the pleadings, i.e., without giving the parties opportunity to demonstrate their intentions through extrinsic evidence, is inappropriate. The Syndicate Agreement does not define “acceptable offer” or, in particular, “acceptable.” Kentucky courts often refer to dictionary definitions in order to determine the ordinary meaning of undefined contract terms. See Commonwealth of Kentucky v. Whitworth, 74 S.W.3d 695, 700 (Ky. 2002); United States Fire Ins. Co. v. Kentucky Truck Sales, Inc., 786 F.2d 736, 739 (6th Cir. 1986); Ayers v. C & D General Contractors, 237 F.Supp.2d 764, 770 (W.D. Ky. 2002). “Acceptable” is defined primarily as meaning “capable or worthy of being accepted.” Merriam-Webster Online Dictionary, available at http://www.m-w.com/cgi-bin/dictionary?acceptable. This definition highlights precisely the difference between the parties’ instant positions. 7 Never Tell essentially contends that an offer is “acceptable” within the meaning of § 4.1 only if it is capable of being accepted. Never Tell therefore argues that because the Blooming Hills offer, as conditioned, was not capable of being accepted by Brereton Jones or Airdrie when it was received on September 22, 2003, for lack of assent of at least 35 co-owners, it was not an “acceptable offer” at that time. It follows then, Never Tell argues, that the September 23, 2003 memorandum could not possibly constitute notice of receipt of an acceptable offer necessary to trigger the 10-day period for exercise of its first right to purchase. Airdrie and Blooming Hills, on the other hand, maintain that an offer is acceptable if it is worthy of being accepted. They insist that because co-owner Jones, on behalf of Syndicate Manager Airdrie, received an offer from Blooming Hills that was, in his opinion, worthy of being accepted, he had received an “acceptable offer.” Accordingly, the September 23, 2003 memorandum, advising the syndicate members that co-owner Jones deemed the offer worthy of acceptance, is said to constitute the required notice of an acceptable offer. In our opinion, neither construction of “acceptable offer” is unreasonable; both are plausible readings of the § 4.1 language. Further, we recognize that most offers that syndicate members receive from third parties are likely to be “acceptable” in both senses of the word. Yet, as applied to the Blooming Hills offer, the two constructions are plainly inconsistent. That is, on September 23, 2003, when Jones, on behalf of Syndicate Manager Airdrie, gave notice of Blooming Hills’ offer to the other co-owners, he gave notice of an offer that was at once worthy of acceptance, but not capable of acceptance. Whether the offer was “acceptable,” therefore, within the contemplation of § 4.1, depends on which of the two reasonable, but different constructions is actually consistent with the parties’ intentions. In the context of this dispute, it thus appears that “acceptable offer,” a term 8 of seemingly clear and definite meaning, is actually possessed of latent ambiguity. The district court side-stepped the question, focusing instead on whether Never Tell received sufficient notice of Blooming Hills’ offer to enable it to exercise its first right to purchase. The district court held “the only notice Never Tell was entitled to receive was the notice of an offer to purchase.” JA 40. The court went on to reason that “no reasonably prudent person could conclude that Plaintiff did not receive sufficient notice.” Id. In effect, the district court’s ruling could be viewed as reading the adjective “acceptable” right out of § 4.1, such that notice of receipt by a co-owner of any offer, whether acceptable or not, would be deemed sufficient to trigger other co-owners’ 10-day period for exercise of their first right to purchase. Such a construction, deleting or ignoring the word “acceptable,” is at odds with the court’s duty under Kentucky law to construe the agreement as a whole, “giving effect to all parts and every word in it if possible.” City of Louisa v. Newland, 705 S.W.2d 916, 919 (Ky. 1986); Cantrell Supply, Inc. v. Liberty Mut. Ins. Co., 94 S.W.3d 381, 384-85 (Ky. App. 2002). Alternatively, the district court’s ruling could be viewed as an implicit endorsement of Airdrie’s and Blooming Hills’ proffered construction of the term “acceptable offer” as more reasonable than Never Tell’s. Yet, irrespective of which construction may be more reasonable, the point is that such an assessment cannot be made on the present record at the pleading stage. Having identified the latent ambiguity in § 4.1 and finding that Never Tell’s construction is not implausible or unreasonable, we conclude that Never Tell is entitled under Kentucky law to the opportunity to substantiate its construction of § 4.1 through resort to extrinsic evidence. The district 9 court erred by denying Never Tell this opportunity.2