Court Opinion

ID: 160647
Source: CourtListenerOpinion
Date Created: 2010-08-14 06:48:45+00
Date Added: 2024-06-11T17:15:30.192469
License: Public Domain

F I L E D
                                                                   United States Court of Appeals
                                                                           Tenth Circuit
                     UNITED STATES COURT OF APPEALS
                                                                           JAN 19 2001
                            FOR THE TENTH CIRCUIT
                                                                      PATRICK FISHER
                                                                                 Clerk

    RAY EUGENE WILCOX,

                Plaintiff-Appellee,

    v.                                                   No. 00-2042
                                               (D.C. No. CIV-99-125-BRB/LFG)
    BARBER-COLMAN COMPANY,                                (D. N.M.)

                Defendant-Appellant.

                            ORDER AND JUDGMENT            *

Before TACHA, Chief Judge, EBEL , and BRISCOE , Circuit Judges.

         After examining the briefs and appellate record, this panel has determined

unanimously that oral argument would not materially assist the determination of

this appeal.   See Fed. R. App. P. 34(a)(2); 10th Cir. R. 34.1(G). The case is

therefore ordered submitted without oral argument.

*
      This order and judgment is not binding precedent, except under the
doctrines of law of the case, res judicata, and collateral estoppel. The court
generally disfavors the citation of orders and judgments; nevertheless, an order
and judgment may be cited under the terms and conditions of 10th Cir. R. 36.3.
      Defendant-appellant Barber-Colman Co. appeals the district court’s grant of

summary judgment to plaintiff Ray Eugene Wilcox on his breach of contract suit.

Our jurisdiction arises under 28 U.S.C. § 1291, and we reverse.

      Because the parties are familiar with the details of this matter, we begin

with the sale, in October 1997, of Mr. Wilcox’s business, DataTalk, to

Barber-Colman. The October sale was structured through a Share Purchase

Agreement which provided for a maximum purchase price of approximately

$4,500,000. Two months later, the parties executed a “Consulting Agreement,”

the effective term of which was from October 1, 1997, through October 2000, and

provided for annual compensation to Mr. Wilcox of $340,000 and for certain

performance incentive bonuses. When combined, the amounts from the Share

Purchase Agreement, the consulting fees, and the performance bonuses would

approach, and could exceed, the $6,000,000 Mr. Wilcox had consistently

demanded for the sale of his business.

      After working as a consultant under the agreement for approximately one

year, Mr. Wilcox notified Barber-Colman of his intention to terminate the

contract. When Barber-Colman refused to pay him the annual compensation of

$340,000 per year for the remaining two years, Mr. Wilcox brought suit.

      The Consulting Agreement provides in relevant part:

            The Sieve Environmental Controls (“S.E.C.”) division of
      Barber Colman Company hereby agrees to use the services of Ray E.

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Wilcox (“Consultant”) for the management and technical direction of
the Development Engineering efforts of the group formerly operated
as DataTalk Development Corporation. The following terms and
conditions shall apply:

     1.      Term. This agreement shall become effective
October 1st, 1997 and continue in effect until October 2nd, 2000.

       2.    Termination of Agreement. S.E.C. and Consultant shall
have the right to terminate this agreement, with or without cause,
with the issuance of a 90 day written notice of termination. In the
event of such termination, Consultant shall be entitled to receive
from S.E.C. the remaining balance of the compensation terms
outlined below unless the termination is for wilful misconduct.

      3.     Payment. For services rendered hereunder, S.E.C. shall
pay Consultant the compensation set forth in the attached Schedule
A, which is incorporated herein by reference.

       4.    Task Assignment and Effort. Consultant agrees to serve
faithfully and exclusively to the best of his ability, energy, skill and
specialized knowledge in the execution of this agreement.

....

      9.     Entire Agreement. This agreement contains all
commitments and major understandings between the parties hereto
and with respect to the subject matter hereof and may not be
modified except in writing and signed by Consultant and the duly
authorized representative of S.E.C.

      10.    Other Agreement. The existence, performance or non-
performance of this agreement shall not effect [sic] the obligations of
the parties under the Share Purchase Agreement executed
concurrently herewith.

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Schedule “A”   1
                   provides:

           1.    Annual compensation of $340,000, plus applicable New
      Mexico gross receipts tax, payable on a monthly basis.

             2.     Wilcox may earn an additional performance incentive of
      $152,000 for the first year for achieving certain performance goals.
      For the first year of the agreement, the goals are as set forth in page
      2 of this Schedule “A”. For the remaining two years of the
      agreement, Wilcox may earn an additional incentive of $100,000 per
      year for achieving certain performance goals. Barber-Colman and
      Wilcox will agree, in good faith, to suitable and reasonable
      performance goals regarding this performance incentive for the
      remaining two years.

Appellant’s App. Vol. I at 41.

      The crux of the problem resulting in this lawsuit is the language in

paragraph number 2 of the consulting agreement, relating to termination.

Mr. Wilcox argues that, in the event of termination by either party, he was

entitled to the remaining balance of the compensation; Barber-Colman maintains

that only if it terminated the agreement could Mr. Wilcox rightfully make such a

claim. Otherwise, Barber-Colman argues, Mr. Wilcox had to perform under the

agreement in order to be paid.

1
      Confusingly, there are two schedule A’s to this Agreement: one designated
simply Schedule A and the other Schedule “A.” Schedule “A” is the relevant
schedule for our immediate purposes; the other Schedule A defines various
incentives based on identified deliverables.

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      After examining the surrounding circumstances,            see Mark V, Inc. v.

Mellekas , 845 P.2d 1232, 1235 (N.M. 1993),        2
                                                       the district court determined that

the contract was unambiguous and that a reasonable person could reach only one

conclusion as to its meaning. It therefore construed the contract as a matter of

law and held that, upon termination by either party, Mr. Wilcox was entitled to

receive the remaining balance of the compensation. The court then denied

Barber-Colman’s motion for summary judgment and granted summary judgment

to Mr. Wilcox.

      We review the grant of summary judgment de novo to determine whether

there are any genuine issues of material fact and whether the movant was entitled

to judgment as a matter of law.         Simms v. Okla. ex rel. Dep’t of Mental Health &

Substance Abuse Servs. , 165 F.3d 1321, 1326 (10th Cir.),          cert. denied , 528 U.S.

815 (1999). “An issue of material fact is genuine if a reasonable jury could return

a verdict for the non-movant.”      Neustrom , 156 F.3d at 1062 (quotation omitted).

We also subject the district court’s construction of the contract as a matter of law

to the same de novo review.       Id.

2
       The district court applied New Mexico law in accordance with the
assumption of the parties. “Because the parties proceed on the assumption that
[New Mexico] substantive contract law applies, we apply that law without further
analysis.” Neustrom v. Union Pac. R.R. Co. , 156 F.3d 1057, 1062 (10th Cir.
1998).

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      In New Mexico, the question of ambiguity is one of law and involves

“whether a contractual term or provision is susceptible to reasonable but

conflicting meanings.”   C.R. Anthony Co. v. Loretto Mall Partners   , 817 P.2d 238,

243 (N.M. 1991).

             Ambiguity, as it has been used in [New Mexico], is best
      understood as a proxy for describing lack of clarity in the parties’
      expressions of mutual assent. The term, as it has been employed,
      incorporates a variety of conceptual problems including the
      distinctive notions of ambiguous syntax, ambiguous terms,
      vagueness, and general lack of clarity.

Id. at 243 n.2. Based on these standards, we disagree with the district court’s

conclusion that the termination provision of the consulting agreement is

unambiguous.

      It is clear from the first sentence of the termination paragraph that either

side can terminate the agreement without cause upon proper notice. The

ambiguity is created by the first phrase of the second sentence: “In the event of

such termination.” Does that mean termination by either party, referencing back

to the termination discussed in the first sentence? If that is the true meaning, then

Mr. Wilcox could terminate the agreement and still get paid the “remaining

balance of the compensation.” This was the conclusion of the district court.

      Or does the phrase “[i]n the event of such termination” contemplate only

termination by Barber-Colman upon proper notice, in which case Mr. Wilcox gets

paid only if Barber-Colman terminates but not if he does?    This interpretation

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makes some sense given other language in the contract.    See Nearburg v. Yates

Petroleum Corp. , 943 P.2d 560, 570 (N.M. Ct. App. 1997) (“In interpreting a

contract, the court must consider the contract as a whole and give significance to

each part.”).

      In the first paragraph, Barber-Colman promises to use the services of

Mr. Wilcox for management and technical direction; in paragraph three,

Barber-Colman promises to pay Mr. Wilcox “for services rendered” according to

the compensation package specified in an attached schedule; Mr. Wilcox

promises in paragraph four “to serve faithfully and exclusively to the best of his

ability, energy, skill and specialized knowledge . . . .” Appellant’s App. Vol. I at

41.

      Additionally, the “wilful misconduct” language at the end of the second

sentence is difficult to understand in the context of termination by Mr. Wilcox.

If “such termination” in the first phrase of the second sentence is read as

termination by either party, and if the defendant corporation were somehow

guilty of “wilful misconduct,” then Mr. Wilcox would not be entitled to the

remainder of the compensation due if he were to terminate--surely an

incongruous result. In that context, the termination referred to in the last phrase

of the second sentence seems to refer only to termination of Mr. Wilcox by

Barber-Colman.

                                           7
       Because the phrase, “in the event of such termination,” is “susceptible to

reasonable but conflicting meanings,”      see C.R. Anthony , 817 P.2d at 243, we hold

that it is ambiguous under New Mexico law and that the district court erred in

determining it to be otherwise.

       Having found the term to be ambiguous, it is now the province of a

fact-finder to determine the meaning of the termination provision.       See Mark V,

Inc. , 845 P.2d at 1235. Had there been no conflicting evidence regarding the

circumstances surrounding the execution of the agreement, the court would be

free to determine the meaning of the termination provision as a question of law by

resorting to grammar, syntax, and traditional canons of contract construction.      Id.

at 1236. Here, however, the record is replete with conflicting evidence from the

parties regarding their intent in entering into the consulting agreement.

       Plaintiff’s evidence indicates that the intent of the parties was to ultimately

pay the Wilcoxes $6,000,000 for DataTalk so that they could realize

approximately $4,000,000 after taxes. Appellant’s App. Vol. II at 164-65, 170.

One of defendant’s employees, Mr. Armbrust, acknowledged that he knew

Mr. Wilcox wanted $ 6,000,000 for his business,      id. at 189-90, and would not

consider selling for less than that,   id. at 193. He also remembered that “putting

those two events together” (presumably the stock purchase and the consulting

agreement), would get Mr. Wilcox close to $6,000,000.        Id. at 194. Mr. Wilcox’s

                                             8
evidence could further establish that when defendant could not come up with the

$6,000,000 without approval from its board of directors, the parties crafted the

consulting agreement as a vehicle to funnel additional monies to Mr. Wilcox.

Vol. I at 100; Vol. II at 222, 227. The consulting agreement was simply another

way of allocating funds to Mr. Wilcox that defendant could justify internally, Vol.

I at 128, without a lengthy corporate approval process, Vol. II at 192-93. The

sale of the business and the consulting agreement were tied together and

represented a total package payment for DataTalk. Vol. I at 102; Vol. II at 172.

Further, the letter of intent to sell the business provided that Mr. Wilcox would be

employed by Barber-Colman for three years at $200,000 per year, Vol. I at 46,

and that delivery of employment contracts for Mr. Wilcox and nine other

engineers was part of Mr. Wilcox’s consideration in the sale of DataTalk,       id.

Mr. Wilcox testified that he felt he could sign the consulting agreement and then

immediately tender his resignation and still be paid the monies specified in the

agreement. Id. at 55.

       On defendant’s side, the evidence is that Mr. Wilcox had to work as a

consultant in order to be eligible for the monies specified in the agreement.     Id. at

134. Barber-Colman wanted Mr. Wilcox to help with product development and to

generally contribute to the business,   id. at 52; Vol. II at 342, and specifically

expected him to run the Albuquerque office during the term of the contract,       id. at

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197. All acquisitions by defendant had to be approved, not just those over

$3,000,000, id. at 205, and defendant’s president had not previously experienced

problems from corporate superiors in exceeding $3,000,000 for an acquisition,     id.

at 93. The consultant fees contemplated in the agreement were not intended to

compensate Mr. Wilcox for the share purchase.      Id. at 233. Mr. Wilcox was to be

paid for his services, id. at 336, and the second sentence of the termination

paragraph was to protect him from being fired arbitrarily by Barber-Colman,     id. at

342.

       In summary, we hold that the termination paragraph of the consulting

agreement is ambiguous and, because of the conflicting evidence in the record,

the meaning of that paragraph must be resolved by a fact-finder. The judgment of

the United States District Court for the District of New Mexico is REVERSED,

and this case is REMANDED for further proceedings consistent with this order

and judgment.

                                                      Entered for the Court

                                                      Deanell Reece Tacha
                                                      Chief Judge

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