Opinion ID: 1799699
Heading Depth: 1
Heading Rank: 5

Heading: Ambiguity of the instrument

Text: The Sturgises argue that the Chancellor failed to apply the established rule of law that an ambiguity in an instrument is construed against the drafter. The foreclosure action concerned a credit agreement between the Sturgises and NBC executed on June 14, 1985. It was executed using a pre-printed form with certain typewritten provisions concerning the amounts of the obligation, the interest rate, the security, and the following statement with respect to the terms of repayment: $675,000 line of credit for twelve months at NBC prime plus 1% adjusted quarterly with monthly interest and rights of renewal for two additional years. Repayment will be $200,000 due January, 1986; $237,500 due January, 1987; and $237,500 due April, 1988. The Chancellor's letter opinion dated June 16,1993, stated: 7. While some of the terms appear ambiguous, the $675,000 promissory note dated June 14, 1985, contains unambiguous repayment terms. 8. The parties treated the note as unambiguous repayment terms of the June 14, 1985 note as a mechanism for repaying that loan and acted in a manner consistent therewith. 9. That the promissory note dated June 14, 1985, does not contain language which would allow a pay down/borrow back feature as would be necessary to constitute a revolving line of credit. The Sturgises focus on that portion of paragraph seven which states that some of the terms appear ambiguous. They argue the Chancellor did not apply the proper rules of construction to ambiguous instruments, citing Stacy v. Williams, 38 Ark.App. 192, 834 S.W.2d 156 (1992), which holds that ambiguities in a contract are construed strictly against the drafter of the contract. Further, if there is an ambiguity between printed provisions and typewritten provisions, typewritten provisions prevail over printed ones. Id., citing Leonard v. Merchants and Farmers Bank, 290 Ark. 571, 720 S.W.2d 908 (1986). The typewritten portion provided that the instrument was a line of credit and the plaintiffs state that language is not ambiguous. They argue that, if there is any ambiguity, it is in the terms of the provision. Thus, if the provision had been construed against the bank and all doubts resolved in favor of plaintiffs, the Chancellor would have been obligated to find that the instrument constituted a line of credit. We do not agree with that analysis. While it is true that the Chancellor did not recite the rule requiring an ambiguity to be construed in favor of the party who did not draft the agreement and against the party who did, we cannot say that the Sturgises would have prevailed in view of the Chancellor's recitations concerning the conduct of the parties and the clear repayment provisions. The Chancellor found that the note contained unambiguous repayment terms, and that the Sturgises and NBC treated the terms as a means of repaying the loan and acted consistent with those provisions. In RAD-Razorback Ltd. Partnership v. B.G. Coney Co., 289 Ark. 550, 556, 713 S.W.2d 462 (1986), which concerned conflicting clauses in a contract, we wrote: In seeking to harmonize different clauses of a contract, we should not give effect to one to the exclusion of another even though they seem conflicting or contradictory, nor adopt an interpretation which neutralizes a provision if the various clauses can be reconciled. The object is to ascertain the intention of the parties, not from particular words or phrases, but from the entire context of the agreement. Id., citing Wynn v. Sklar & Phillips Oil Co., 254 Ark. 332, 493 S.W.2d 439 (1973). If there is an ambiguity, a court will accord considerable weight to the construction the parties themselves give to it, evidenced by subsequent statements, acts, and conduct. Id. at 555, 713 S.W.2d 462. The Chancellor found that the Sturgises made payments in accord with the typewritten provision, and when they needed more money, they filled out additional loan documents and signed new promissory notes. If the instrument had evidenced a line of credit, they would simply have paid the principal amount down and then again drawn upon it when they needed more money. The properly admitted testimony seems to resolve the ambiguity, based upon the actions of the parties. Thus, the appellants cannot show that the Chancellor would have been reversed on this issue. See also Tyson Foods, Inc. v. Adams, 326 Ark. 300, 930 S.W.2d 374 (1996).