Opinion ID: 2074817
Heading Depth: 1
Heading Rank: 3

Heading: Breach of contract and ambiguity of escrow agreement.

Text: Adkins claim the court erred in holding Paragraph 3 of the escrow agreement unambiguous as a matter of law. Adkins believe the paragraph is reasonably capable of more than one meaning, making the agreement ambiguous. In the alternative, they argue that even if the paragraph is unambiguous it has a different meaning than that given to it by the court. When construing a contract, the court must ascertain and give effect to the intention of the parties. Malcolm v. Malcolm, 365 N.W.2d 863 (S.D.1985). That intention is found in the contract language. Id. Unless the language is ambiguous or a different intention is manifested, the language in a contract is to be given its plain and ordinary meaning. See Restatement (Second) of Contracts § 202(3) (1981). Whether contract language is ambiguous is a question of law. Enchanted World Doll Museum v. Buskohl, 398 N.W.2d 149 (S.D.1986). Language is ambiguous when a genuine uncertainty exists as to which of two or more meanings is correct. North River Ins. Co. v. Golden Rule Constr., Inc., 296 N.W.2d 910 (S.D.1980). Contrary to the assertions by Adkins, Paragraph 3 of the escrow agreement does not instruct the Bank to maintain the value of Central. Instead, it instructs the Bank to keep and preserve the certificates. In other words, the concern of the Bank as escrow agent is upon the safety of the certificates rather than the value of the company. Paragraph 5 of the escrow agreement further indicates that the Bank was not meant to regulate the value of Central. That paragraph specifies that Deam Inv. shall have the unrestricted right to vote the shares on deposit with the Bank as long as Deam Inv. is not in default on its payments to Adkins. As a result, the Bank, as escrow agent, has no power over the operation of Central. It could not prevent Deam Inv. from selling any of Central's assets. Consequently, it would be nonsensical to require the Bank to maintain the value of Central without giving it the power to do so. The only reasonable interpretation is that the Bank was not to concern itself with the value of Central, but with the security of the certificates. The court's interpretation of Paragraph 3 also fits within the general definition of an escrow. An escrow account is designed for a third person to hold the property of a promisor for delivery to the promisee upon the happening of a specific contingency or condition. See Rushmore State Bank v. Kurylas, Inc., 424 N.W.2d 649 (S.D.1988). Here, the Bank was obligated to hold the stock certificates so that neither Deam Inv. nor Adkins could dispose of the shares until payment was complete. An escrow agent is not intended to function as an insurer for an agreement gone bad. Therefore, the court did not err in its determination that Paragraph 3 of the escrow agreement was unambiguous or in its interpretation and construction of that paragraph. After consideration of the specific language of Paragraph 3, other provisions of the agreement and the definition of an escrow, it is apparent that the court's interpretation of the paragraph is the only reasonable interpretation.