Opinion ID: 2207381
Heading Depth: 1
Heading Rank: 2

Heading: ambiguity in loan agreement

Text: A court is not free to speculate about terms absent from a written contract. Craig v. Hastings State Bank, 221 Neb. 746, 380 N.W.2d 618 (1986). Where the parties have clearly expressed an intent to accomplish a particular result, it is not the province of a court to rewrite a contract to reflect the court's view of a fair bargain. Id. at 750, 380 N.W.2d at 621. Ambiguity exists in an instrument when a word, phrase, or provision in the instrument has, or is susceptible of, at least two reasonable but conflicting interpretations or meanings. Knox v. Cook, 233 Neb. 387, 391, 446 N.W.2d 1, 4 (1989). See, also, Dammann v. Litty, 234 Neb. 664, 452 N.W.2d 522 (1990); In re Estate of Walker, 224 Neb. 812, 402 N.W.2d 251 (1987). Whether a document is ambiguous is a question of law initially determined by a trial court. Knox v. Cook, supra, 233 Neb. at 391, 446 N.W.2d at 4. See, also, Dammann v. Litty, supra ; First Nat. Bank in Mitchell v. Kurtz, 232 Neb. 254, 440 N.W.2d 432 (1989); Luschen Bldg. Assn. v. Fleming Cos., 226 Neb. 840, 415 N.W.2d 453 (1987). Regarding a question of law, an appellate court has an obligation to reach a conclusion independent from a trial court's conclusion in a judgment under review. Huffman v. Huffman, 232 Neb. 742, 748, 441 N.W.2d 899, 904 (1989). See, also, Dammann v. Litty, supra ; Boisen v. Petersen Flying Serv., 222 Neb. 239, 383 N.W.2d 29 (1986). We find, as a matter of law, that there is ambiguity in the language of paragraph 7 of the Wurst-Bank loan agreement, namely, the proceeds from the sale of the [farmland] will be applied to and will pay the total indebtedness. On one hand, the language in question is susceptible to the reasonable interpretation that the Bank's receipt of proceeds from the sale of Wursts' land satisfied and discharged the entire Wurst indebtedness to the Bank. However, the indicated language in the loan agreement may also be reasonably interpreted to mean that the Bank's receipt of the sale proceeds constituted a payment on Wursts' debt and resulted in a credit on any unpaid balance of Wursts' indebtedness existing when the Bank received the sale proceeds. When a court has determined that ambiguity exists in a document, an interpretative meaning for the ambiguous word, phrase, or provision in the document is a question of fact for the fact finder. Dammann v. Litty, supra, 234 Neb. at 671, 452 N.W.2d at 527. See, also, First Nat. Bank in Mitchell v. Kurtz, supra; Lueder Constr. Co. v. Lincoln Electric Sys., 228 Neb. 707, 424 N.W.2d 126 (1988). In attempting to ascertain the meaning of ambiguous terms of a contract, a court must determine the actual intent of the contracting parties, considering facts and circumstances which motivated each party to enter the contract, and the nature and subject matter of the contract. Frenzen v. Taylor, 232 Neb. 41, 48, 439 N.W.2d 473, 478 (1989). See, also, Lauritzen v. Davis, 214 Neb. 547, 335 N.W.2d 520 (1983); Lone Oak Farm Corp. v. Riverside Fertilizer, 229 Neb. 548, 428 N.W.2d 175 (1988). When construction of a contractual provision is necessary, a court may consider the conduct of the parties, performing their contract, to ascertain the parties' intent regarding their contract. As this court expressed in Municipal Energy Agency of Neb. v. City of Cambridge, 230 Neb. 61, 65-66, 430 N.W.2d 44, 47 (1988): An aid in interpreting contracts is the course of performance of the parties. In Smith v. Daub, 219 Neb. 698, 703, 365 N.W.2d 816, 820 (1985), we held that in attempting to construe the meaning of a contract ... the interpretation given a contract by the parties themselves while engaged in the performance of it is one of the best indications of the true intent of the contract, and ordinarily such construction of the contract should be enforced. See, also, Lortscher v. Winchell, 178 Neb. 302, 133 N.W.2d 448 (1965). In Omaha P.P. Dist. v. Natkin & Co., 193 Neb. 518, 524-25, 227 N.W.2d 864, 868-69 (1975), this court held: In the construction of questioned provisions in a contract, the rule has long been established in this jurisdiction that the interpretation given to a contract by the parties themselves while engaged in the performance of it is one of the best indications of the true intent of the contract. Ordinarily, such a construction of the contract should be enforced.... This is a rule of justice and equity, and we apply it herein.... See, also, Nowak v. Burke Energy Corp., 227 Neb. 463, 418 N.W.2d 236 (1988); Smith v. Daub, 219 Neb. 698, 365 N.W.2d 816 (1985); Lauritzen v. Davis, supra ; DeFilipps v. Skinner, 211 Neb. 801, 320 N.W.2d 737 (1982). In interpreting a written contract, the meaning of which is in doubt and dispute, the court, in order to determine its meaning, will consider all the facts and circumstances leading up to and attending its execution, and will consider the relation of the parties, the nature and situation of the subject matter, and the apparent purpose of making the contract. Philp v. First Nat. Bank & Trust Co., 212 Neb. 791, 797, 326 N.W.2d 48, 52 (1982). See, also, Lone Oak Farm Corp. v. Riverside Fertilizer, supra . The district court made the factual determination that there was no agreement that the Bank's receipt of proceeds from the sale of Wursts' farmland constituted payment of Wursts' entire indebtedness to the Bank. Embodied in the foregoing conclusion is the district court's determination regarding the actual intent of the contracting parties, considering facts and circumstances which motivated each party to enter the contract, and the nature and subject matter of the contract. See Frenzen v. Taylor, supra, 232 Neb. at 48, 439 N.W.2d at 478. In determining the meaning of paragraph 7 of the loan agreement, the district court undoubtedly considered the parties' interpretative conduct in relation to performance of the loan agreement. When the proceeds of the farmland sale were insufficient to satisfy the indebtedness reflected on the Bank's books, Wursts signed two promissory notes for the balance of the indebtednessconduct which was inconsistent with the later assertion that proceeds from the farmland sale extinguished all their indebtedness to the Bank. The district court most likely concluded that if Wursts' indebtedness were to be extinguished by the farmland sale and the sale proceeds paid to the Bank, Wursts would not have signed the promissory notes in September 1982. Thus, Wursts' extension promissory notes in September 1982, reflecting an unpaid debt of $33,796.95 to the Bank, presented a factual inconsistency concerning Wursts' assertion that the parties intended to extinguish Wursts' entire indebtedness as the result of the Bank's receipt of proceeds from the farmland sale in the preceding July. Moreover, Wursts' allowing the Bank to receive the proceeds from the truck sale arranged by the Bank and retain $35,056.24 out of the sale proceeds, without objection until almost 6 months after the sale and the disposition of sale proceeds, undermines Wursts' position that no indebtedness existed after the farmland sale. Given the ambiguity in the loan agreement, the district court's factual determination regarding the intended meaning of the loan agreement is not clearly erroneous.