Opinion ID: 197449
Heading Depth: 2
Heading Rank: 1

Heading: Was the Participation Agreement Ambiguous?

Text: 10 The parties agree that pursuant to the participation agreement, Vermont law governs this dispute. See Miniter Ins. Agency, Inc. v. Ohio Indemnity Co., 112 F.3d 1240, 1245 (1st Cir.1997) (indicating that where parties agree as to what law governs, federal court sitting in diversity is free to forego an independent analysis and may accept the parties' agreement). The parties also agree that the participation agreement misidentified several terms of the actual agreement, specifically, the amount of the loan and the origination and maturity dates. Baybank characterizes these as scrivener's errors and contends that under Vermont law the participation agreement reflects no substantive ambiguity. 11 In Vermont, whether a contract is ambiguous is a question of law. 2 See Breslauer v. Fayston Sch. Dist., 163 Vt. 416, 659 A.2d 1129, 1135 (1995); Isbrandtsen v. North Branch Corp., 150 Vt. 575, 556 A.2d 81, 83 (1988). Vermont law, however, does not restrict courts making that inquiry to the four corners of a written agreement. Instead, courts may consider extrinsic evidence of the circumstances surrounding the making of the agreement as well as the object, nature and subject matter of the writing, Breslauer, 659 A.2d at 1135 (internal quotation omitted), and will find ambiguity in the event that a writing in itself supports a different interpretation than that which appears when read in light of the surrounding circumstances, See Isbrandtsen, 556 A.2d at 84. Both interpretations, however, must be reasonable in order to establish ambiguity. See id. 12 On its face the participation agreement seems unambiguous. The parties, however, agree that the amounts and dates in the agreement do not reflect their actual understanding, and each party directs us to extrinsic evidence suggesting competing interpretations of the agreement. That we must resort to extrinsic evidence to determine the intent of the parties renders the contract necessarily ambiguous. 3 13 Baybank argues unpersuasively that consideration of the participation certificate in conjunction with the participation agreement renders the latter unambiguous in Baybank's favor. We recognize that the participation certificate, executed on the same date as the participation agreement, correctly states the amount of Baybank's participation and explicitly refers to the June 5, 1986 note which had a maturity date of June 5, 1988. The participation certificate, however, neither references the participation agreement nor explicitly sets any parameters on Baybank's participation. The certificate, in other words, does not definitively resolve the agreement's ambiguity. 14 Even if we assume that consideration of these two documents together results in one reasonable interpretation of the participation agreement, a host of extrinsic evidence in the record supports an alternative but equally reasonable interpretation. Much of this evidence also bears on the substance of Baybank's breach of contract claim and we discuss it fully in our analysis of that claim. We note only that Vermont law directs us to consider the circumstances surrounding the agreement; it does not direct us to select a single circumstance which if considered in a vacuum might resolve the ambiguity. See Breslauer, 659 A.2d at 1135 (directing courts to consider evidence on the circumstances surrounding the making of the agreement as well as the object, nature and subject matter of the agreement itself). 15