Opinion ID: 2507160
Heading Depth: 2
Heading Rank: 1

Heading: the contractual term surplus property is ambiguous

Text: ¶ 12 In the proceedings below, Armory argued that the term surplus property is unambiguous on its face and clearly shows the parties' intent to use only federal surplus property to satisfy the contract. Deep Creek, on the other hand, argued that the term unambiguously evinces the parties' intent to use both federal and state surplus property. The district court ruled that the term is unambiguous and refers to both state and federal property. Further, it held that Armory is liable for breach of contract for failing to provide either state or federal surplus property to Deep Creek. We examine these legal conclusions for correctness. ¶ 13 A contractual term is ambiguous if, looking to the language of the contract alone, it is reasonably capable of being understood in more than one way such that there are tenable positions on both sides. [4] While the contract does not explicitly define the term surplus property, it calls for Armory to provide to Deep Creek Credit to acquire Surplus Property in compliance with the Federal Property and Administrative Services Act of 1949 as amended. The Federal Property and Administrative Services Act of 1949 [5] (the Act) is only applicable to federal surplus property. [6] Nevertheless, it does not follow that surplus property as used in the contract necessarily refers only to federal property; the reference to the Act might apply to federal property used to satisfy the contract only to the extent that federal property is used. Any state surplus property used would not be out of compliance with the Act because it is not subject to the Act. ¶ 14 Deep Creek points to paragraph 2(a) of the contract, which permits Deep Creek to screen any Surplus Property available to the State of Utah through DRMO, GSA and/or any other State or Federal surplus agency available to the State of Utah. Deep Creek argues that because both federal and state agencies are listed, it is clear that both federal and state surplus property may be used. But the Act requires states to designate a state agency to handle transfers of federal surplus property to state agencies. [7] Thus, the phrase could reasonably mean federal surplus property that is handled by the designated state agency and not necessarily state surplus property. ¶ 15 Clearly, there are tenable positions on both sides, and the language within the four corners of the contract is insufficient to resolve the issue. As a matter of law, therefore, the term surplus property is ambiguous on its face, and the lower court erred in ruling that the term is unambiguous. ¶ 16 Because the language of the contract is unclear as to the meaning of surplus property, the intent of the parties must be ascertained from extrinsic evidence. [8] The district court, having ruled as a matter of law that the contract is unambiguous, did not make this determination. We therefore remand for it to do so. As we explain in the sections that follow, while the resolution of this factual issue is not necessary to establish whether Armory is liable, it does bear on whether specific performance is possible.