Opinion ID: 2640085
Heading Depth: 2
Heading Rank: 2

Heading: determination of ambiguity

Text: ¶24 Having found that the Release is integrated, we now turn to an analysis of ambiguity. This case gives us the opportunity to discuss the standard for determining contractual ambiguity. In Ward v. Intermountain Farmers Ass'n, 907 P.2d 264 (Utah 1995), we established a standard for determining ambiguity in two separate contexts: facial ambiguity and ambiguity with regard to intent. To the extent that our ruling in Ward has created confusion as to the proper relationship between relevant, extrinsic evidence reviewed by the judge in making a determination of facial ambiguity and the plain language within the four corners of the contract, we take this opportunity to clarify. After clarifying the Ward rule, we will apply the rule to the facts in the present case.
¶25 A contractual term or provision is ambiguous if it is capable of more than one reasonable interpretation because of `uncertain meanings of terms, missing terms, or other facial deficiencies.' WebBank v. Am. Gen. Annuity Serv. Corp., 2002 UT 88, ¶ 20, 54 P.3d 1139 (quoting SME Indus., Inc. v. Thompson, Ventulett, Stainback & Assocs., Inc., 2001 UT 54, ¶ 14, 28 P.3d 669). In Ward, we indicated that contractual ambiguity can occur in two different contexts: (1) facial ambiguity with regard to the language of the contract and (2) ambiguity with regard to the intent of the contracting parties. 907 P.2d at 268. The first context presents a question of law to be determined by the judge. WebBank, 2002 UT 88, ¶ 22. The second context presents a question of fact where, if the judge determines that the contract is facially ambiguous, parol evidence of the parties' intentions should be admitted. Winegar v. Froerer, 813 P.2d 104, 108 (Utah 1991); see also SME Indus., Inc., 2001 UT 54, ¶ 14. Thus, before permitting recourse to parol evidence, a court must make a determination of facial ambiguity. Ward, 907 P.2d at 268; Winegar, 813 P.2d at 108. Because the question of ambiguity begins with an analysis of facial ambiguity, we address Ward's a rticulation of the test for determining facial ambiguity. ¶26 In Ward we set forth a two-part standard for determining facial ambiguity. First, we indicated that [w]hen determining whether a contract is ambiguous, any relevant evidence must be considered. Otherwise, the determination of ambiguity is inherently one-sided, namely, it is based solely on the `extrinsic evidence of the judge's own linguistic education and experience.' Ward, 907 P.2d at 268 (internal quotation marks omitted) (quoting Pac. Gas & Elec. Co. v. G.W. Thomas Drayage & Rigging Co., 442 P.2d 641, 643 (Cal. 1968)). Second, after a judge considers relevant and credible evidence of contrary interpretations, the judge must ensure that the interpretations contended for are reasonably supported by the language of the contract. Ward, 907 P.2d at 268. ¶27 In articulating the Ward rule, we sought to establish a balanced, better-reasoned approach to an analysis of facial ambiguity that would allow judges to consider the writing in the light of the surrounding circumstances. Id. However, we did not intend that a judge allow surrounding circumstances to create ambiguity where the language of a contract would not otherwise permit. In other words, our statement that [r]ational interpretation requires at least a preliminary consideration of all credible evidence, id. (internal quotation marks omitted), does not create a preference for that evidence over the language of the contract. See Saleh v. Farmers Ins. Exch., 2006 UT 20, ¶ 17, 133 P.3d 428 (stating that alternative interpretations of contractual language must be supported by the usual and natural meaning of the language used). Thus, under Ward, a finding of ambiguity after a review of relevant, extrinsic evidence is appropriate only when reasonably supported by the language of the contract. Ward, 907 P.2d at 268. ¶28 Our holding in Ward demonstrates the proper application of the rule. In that case, we found ambiguity in the phrase of safflower. Id. at 269. Ward contracted with Intermountain Farmers Association (IFA) to spray his safflower field with fertilizer and herbicide. Id. at 265. The sprayer used on Ward's field had previously been used to spray Velpar L, an herbicide strong enough to kill safflower. Id. The sprayer was not properly cleaned before it was used to spray Ward's field. Id. After his field was sprayed, a significant amount of Ward's safflower crop died. Id. In negotiating a settlement, IFA presented Ward with a release stating that upon receipt of payment for damages, Ward would release and hold harmless Intermountain Farmers Association for any and all damages caused by the spraying of [Ward's] nineteen acres of safflower. Id. at 265-66. In his affidavit, Ward testified that he initially refused to sign the release because he was concerned about the lingering effects of the Velpar L on the field in which the safflower was planted and not just for the damage done to his safflower crop. Id. at 266. In his affidavit, Ward indicated that IFA told him not to worry and that he should go ahead and plant beans in the field. Id. The next year, Ward's bean crop, planted in the same field, began to die. Id. IFA did not compensate Ward for the damages to his bean crop and Ward filed suit for breach of contract. Id. We concluded that the language of the agreement, specifically the phrase of safflower, was susceptible to two interpretations: Although the phrase `of safflower' could be read to simply define the field, it could also be construed to specify the damage subject to release. Id. at 269. In finding ambiguity in Ward, we considered the extrinsic evidence offered by Ward in order to view the writing in light of the surrounding circumstances. Id. at 268. However, our analysis of the evidence offered by Ward was ultimately circumscribed by the language of the agreement  specifically by the phrase of safflower. Id. at 269. ¶29 In addition to finding ambiguity in the express terms of a release, we have also found ambiguity in a contract taken as a whole, WebBank, 2002 UT 88, ¶¶ 27-29 (remanding for the admission of parol evidence because we found it [was] unclear from the language and provisions contained in the security agreement and promissory note whether [the parties] intended to effectuate a genuine secured transaction or whether they intended to create a sale or an assignment); where there are missing terms in a contract, Nielson v. Gold's Gym, 2003 UT 37, ¶ 14, 78 P.3d 600 (finding ambiguity because a contract was silent as to responsibility for key improvements significant to the agreement); and in the parties' course of conduct, Peterson v. Sunrider Corp., 2002 UT 43, ¶¶ 22-23, 48 P.3d 918 (finding ambiguity in contractual terms because of a history of bonus payments even when express obligations articulated in the agreement had not been met). In WebBank, Nielson, and Sunrider Corp., contrary interpretations of the agreement were checked against the plain language of the contract. Thus, each time we found ambiguity, we found that the contrary interpretations were reasonably supported by the language of the contract. Ward, 907 P.2d at 268. ¶30 Likewise, in cases where we have not found ambiguity, the language of the contract or release was not susceptible to contrary, tenable interpretations. WebBank, 2002 UT 88, ¶ 27 (quoting SME Indus., Inc., 2001 UT 54, ¶ 15); see also Saleh, 2006 UT 20, ¶ 18 (finding no ambiguity because plaintiff's interpretation would effectively change a key term of the release); Peterson v. Coca-Cola USA, 2002 UT 42, ¶ 12, 48 P.3d 941 (finding that the release [was] unambiguous because it [was] not `capable of more than one reasonable interpretation' (quoting Winegar, 813 P.2d at 108)). Since our articulation of the Ward rule, our consideration of extrinsic evidence offered to demonstrate ambiguity has been circumscribed by the requirement that the interpretations argued for must be reasonably supported by the language of the contract. Ward, 907 P.2d at 268. Thus, a correct application of the Ward rule to determine what the writing means begins and ends with the language of the contract. [5] ¶31 As illustrated by our line of facial ambiguity cases, the two-part Ward rule requires that a judge first review relevant and credible extrinsic evidence offered to demonstrate that there is in fact an ambiguity. After reviewing the evidence offered, the Ward rule justifies a finding of ambiguity only if the competing interpretations are reasonably supported by the language of the contract. Ward, 907 P.2d at 268. Conversely, there can be no ambiguity where evidence is offered in an attempt to obscure otherwise plain contractual terms. See Saleh, 2006 UT 20, ¶ 17 (stating that contractual language cannot be ambiguous because parties seek to endow [it] with a different interpretation according to [their] own interests (citing Alf v. State Farm Fire & Cas. Co., 850 P.2d 1272, 1274-75 (Utah 1993))). Thus, even though we permit admission of extrinsic evidence to support a claim of ambiguity in contractual language, the claim must be plausible and reasonable in light of the language used. First Am. Title Ins. Co. v. J.B. Ranch, Inc., 966 P.2d 834, 837 (Utah 1998). ¶32 We now apply the two parts of the Ward rule to the Release in the present case.
¶33 Applying the Ward rule and examining the evidence in a light most favorable to Daines, we affirm the trial court's directed verdict and find that the Release is unambiguous as a matter of law. ¶34 The plain language of the Release states that Daines will release West Valley Surgical Center, LLC or any of its members from any and all liabilities and or claims in connection with services provided . . . for the organization, development and operation of an ambulatory surgical center in the West Valley and any services connected with the same in exchange for $50,000 to be paid by the real estate developer. Consistent with the first part of the Ward rule, we review extrinsic evidence offered by Daines in support of his claim of ambiguity. Daines offers evidence in the form of a series of documents and instruments written or executed in the days before he signed the Release. These include an invoice for $6,000 with a balance of $44,000 to be paid by Boyer, e-mails and letters regarding the second oral agreement, and the check for $6,000. Daines argues that this evidence indicates that when he signed the Release, he was considering only the amount due under the oral agreement with Boyer. Daines argues that the Release therefore did not cover any other obligations owed to him by WVSC or its members. Specifically, Daines argues that the Release does not cover the oral agreement for eight shares in WVSC. Applying the second part of the Ward rule, we find that the language of the Release is not reasonably susceptible to Daines' interpretation. Under the terms of the Release, Daines agreed to release WVSC and any of its members from any and all liabilities or claims in connection with services provided . . . for the organization, development and operation of an ambulatory surgical center in the West Valley. The language of the Release establishes two hurdles which the evidence offered by Daines fails to clear. ¶35 First, the evidence offered by Daines fails to indicate how ASC is not a member of WVSC. Conversely, Daines stipulated that at the time he signed the Release, he knew that ASC was a member of WVSC. Additionally, the term sheets, with which Daines admits he was very familiar from the beginning of the process, make it clear that ASC operated from the understanding that it would be a member of WVSC as soon as it was formed. ASC's membership in WVSC was, at all times during the negotiations, a foregone conclusion. In other words, there was never a time in the entire process where ASC either was not a member of WVSC or was not operating under the assumption that it would become a member of WVSC as soon as it was formed. [6] To hold that ASC was not a member for the purposes of the Release would be to impose a meaning not reasonably supported by the language of the Release. [7] Ward, 907 P.2d at 268. ¶36 Second, the evidence offered by Daines fails to demonstrate how the oral agreement for eight shares does not fall under the clause releasing ASC from any and all liabilities or claims in connection with services provided . . . for the organization, development and operation of an ambulatory surgical center in the West Valley. Daines admits that the oral agreement was made in substitution for the agreement covered by the MOU. The MOU states that Daines will provide ASC with a list of surgeons for the purpose of building and operating a surgical center. The MOU and the subsequent oral agreement both fall under the plain language of the Release covering any and all claims in connection with the organization, development and operation of the surgical center. Daines' argument for ambiguity asks us to find that the phrase any and all somehow does not encompass his claim under the MOU or the oral agreement for the eight shares or that, conversely, his agreement to provide a list of surgeons for the purpose of building and operating a surgical center somehow does not fall under the phrase organization, development and operation of an ambulatory surgical center. Applying the Ward rule and comparing Daines' proposed interpretation with the contractual terms, we find that Daines' argument is not reasonably supported by the language of the Release. ¶37 In accordance with the Ward rule, we affirm the trial court's directed verdict and find that the Release is unambiguous as a matter of law. As a result, we do not need to resort to the admission of parol evidence on the question of intent, because absent a finding of facial ambiguity, the parties' intentions must be determined solely from the language of the contract. Ward, 907 P.2d at 268. Looking at the language of the contract releasing WVSC or any of its members from any and all liabilities and or claims in connection with services provided by Daines for the organization, development, and operation of the surgical center, we hold that Daines unambiguously released ASC from any claims he had against it, including his claim for the eight shares under the first oral agreement.