Opinion ID: 564114
Heading Depth: 2
Heading Rank: 1

Heading: Whether the District Court Improperly Drew Factual Inferences

Text: 19 Plaintiffs argue first that the district court could not have concluded that the duty to perform certain obligations lay with Spectrum rather than Pinecrest if the court had not employed inferential reasoning favorable to the party seeking dismissal. In doing so, plaintiffs assert, the court went beyond what is allowed under Rule 12(b)(6). 20 [W]hen reviewing a 12(b)(6) motion we must accept as true all factual allegations in the complaint. Kerasotes Michigan Theatres, Inc. v. National Amusements, Inc., 854 F.2d 135, 136 (6th Cir.1988). [A] complaint should not be dismissed for failure to state a claim unless it appears beyond doubt that plaintiff can prove no set of facts in support of his claim which would entitle him to relief. Conley v. Gibson, 355 U.S. 41, 45-46 (1957) (footnote omitted); see also Hammond v. Baldwin, 866 F.2d 172, 175 (6th Cir.1989). 21 In the present case, the district court dismissed the Schaffs' claims that were predicated on paragraphs 2, 3, 4, and 7 of the letter agreement and under paragraph 3 of the consulting agreement, holding that the obligations included in these paragraphs were the responsibility of Spectrum and not Pinecrest. The plain language of these paragraphs indicates the nature of this agreement. These paragraphs state in pertinent part: 22 2. Spectrum, KOG and I will enter into a consulting agreement, which agreement will be guaranteed by Spectrum at an annual compensation of $96,000 per year, commencing on October 1989 through September 30, 1990. 23 3. I will receive cash payments in the amount of $35,000 from Spectrum within 60 to 90 days of the execution of the Agreements. 24 4. I will receive the following cash payments from Spectrum as soon as practicable.... 25 .... 26 7. Spectrum shall pay on a timely basis and Pinecrest Group shall guarantee the balance of the loan to Spectrum and Morton and Barbara Schaff.... Spectrum will also pay the existing balance on a Spectrum American Express Card having a present balance of approximately $22,000, which amount is personally guaranteed by Mr. Morton Schaff. 27 (App. at 44-45) (emphasis added). The district court pointed further to the introductory paragraph of the consulting agreement as being consistent with the obligations of the parties contained in the agreement: THIS CONSULTING AGREEMENT ... is made and entered into this 30 day of August, 1989 by and between Spectrum Resources, Inc., a Delaware corporation ... and Morton Schaff.... (App. at 48). 28 Each of these contracts was specifically incorporated by the Schaffs in their amended complaint. Moreover, [a] copy of any written instrument which is an exhibit to a pleading is a part thereof for all purposes. Fed.R.Civ.P. 10(c). Finally, Kentucky law states that, when a cause of action is based upon a written contract that is incorporated in the pleadings, the provisions of the contract supersede any contrary allegations in the pleadings. Ingram v. State Property & Bldgs. Comm'n, 309 S.W.2d 169, 172 (Ky.1957). 3 Viewed against this legal backdrop, the district court was correct in examining the plain language of the contract and concluding that there could be no set of facts which supported plaintiffs' claims. 29 Plaintiffs nonetheless suggest that it is the responsibility of the finder of fact to determine the parties' intent in a contract dispute. Plaintiffs argue that it is clear these agreements envisioned circumstances where Pinecrest and Spectrum would essentially merge into one entity with Pinecrest having the post-takeover responsibility for Spectrum. Kentucky law, however, clearly has established that [t]he intention of the parties to a [written instrument] must be determined from the words used in the instrument. Parol evidence cannot be considered to determine the intention of the parties unless the words used in the instrument are ambiguous. Kentucky-West Virginia Gas Co. v. Browning, 521 S.W.2d 516, 517 (Ky.1975). When a contract is clear and unambiguous on its face, it is a violation of the parol evidence rule to allow introduction of extrinsic evidence concerning the intent of the parties. Porter v. Citizens Fidelity Bank & Trust Co., 554 S.W.2d 397, 399 (Ky.App.1977) (barring introduction of letter written several years after creation of a trust). Further, in cases where there is a dispute about intent, Kentucky leans toward relying on the actual language of the document. 30 [W]hen two intelligent parties have read the contract before signing it, and one thereafter says it meant something different, or was subject to some unexpressed condition, reservation, limitation, proviso, or understanding, but the other says it meant just what it said, no more and no less, it is our opinion that stability and a salutary confidence in the written word requires the instrument itself to prevail. 31 O.P. Link Handle Co. v. Wright, 429 S.W.2d 842, 847 (Ky.1968). 32 In the present case, the language of the contract makes clear that Spectrum is the obligor, not Pinecrest. [I]t is not the function of the judiciary to change the obligations of a contract which the parties have seen fit to make. Id. (citing 4 S. WILLISTON, A Treatise on the Law of Contracts SEC. 610A (3D ED. 1961)). PLAINTIFFS OFFER NO EVIDENCE THAT THE DISTRICT COURT RELIED ON INFERENTIAL REASONING NOR DID ANYTHING BUT APPLY THE LETTER OF THE CONTRACT.T. T. 33