Court Opinion

ID: 2978078
Source: CourtListenerOpinion
Date Created: 2015-09-22 18:18:59.033653+00
Date Added: 2024-06-11T11:21:37.414046
License: Public Domain

NOT RECOMMENDED FOR PUBLICATION
                              File Name: 09a0456n.06

                                       No. 08-3767

                         UNITED STATES COURT OF APPEALS
                              FOR THE SIXTH CIRCUIT                              FILED
                                                                              Jul 02, 2009
                                                                         LEONARD GREEN, Clerk
COMTIDE HOLDINGS, LLC,

       Plaintiff-Appellant,

v.                                                   On Appeal from the United States
                                                     District Court for the Southern
BOOTH CREEK MANAGEMENT CORP.,                        District of Ohio.

       Defendant-Appellee.
                                            /

BEFORE:       RYAN, GIBBONS, and SUTTON, Circuit Judges.

       RYAN, Circuit Judge.        The plaintiff, Comtide Holdings, LLC, asks that we

reverse the district court’s judgment dismissing the case for failure to state an actionable

claim. We agree that the district court erred and we will reverse the judgment for the

defendant.

                                                I.

       In 2004, the defendant, Booth Creek Management Corp., contacted J. Daniel

Schmidt, the sole owner and principal of Comtide Holdings, LLC, about selling his auto

dealership in Ohio. Although Schmidt was not interested in selling his dealership, he

agreed to help Booth Creek find another dealership to buy.

       On March 9, 2005, Schmidt and Booth Creek agreed in writing that if Schmidt found

a dealership within the twelve-month term of the agreement that Booth Creek later
(No. 08-3767)                              -2-

purchased, Booth Creek would pay Schmidt five percent of the purchase price of the

dealership. Paragraph 5 of the agreement, certainly not a model of clarity, states:

              CLOSING. Broker shall receive reasonable notice of closing. The
       BROKER's fee referred to in Paragraph 4 above is payable in full to the
       BROKER only upon closing of the escrow/settlement account and payment
       of the consideration to the SELLER, and the BROKER shall be paid his fee
       when such consideration is paid, if BUYER buys from, invests in, or
       manages operations for any SELLER during the term of this agreement, or
       within twelve (12) months after the termination of this agreement if the
       BUYER was advised of the SELLER by Broker before termination of this
       agreement and before BUYER learns of such SELLER from any other
       source.

(Emphasis added.)

       Schmidt introduced Booth Creek to the owner of Berlin City, a New England

dealership, and negotiations between Booth Creek and Berlin City soon followed. Schmidt

alleges that Booth Creek and Berlin City agreed to the material terms of their sale by June

2005, a little over three months after the Schmidt/Booth Creek brokerage agreement was

signed. Schmidt also alleges that Booth Creek and Berlin City signed formal transaction

documents for the sale of the dealership on March 2 and March 7, 2007. On August 1,

2007, twenty-nine months after Schmidt and Booth Creek signed their brokerage

agreement, Booth Creek and Berlin City closed their deal and Booth Creek purchased

Berlin City for $86,000,000.

       On August 13, 2007, Booth Creek informed Schmidt that it did not intend to pay him

a commission. Schmidt assigned his contractual rights to Comtide, which then initiated suit

in the Court of Common Pleas of Franklin County, Ohio, demanding $4,300,000, or five

percent of the $86,000,000 sale. Booth Creek removed the suit to federal court on the

basis of diversity jurisdiction and moved the district court to dismiss Comtide’s complaint
(No. 08-3767)                                -3-

under Fed. R. Civ. P. 12(b)(6). The district court granted the motion, and Comtide now

appeals.

                                              II.

       We review de novo the district court’s judgment granting a Rule 12(b)(6) motion to

dismiss. CBC Companies, Inc. v. Equifax, Inc., 561 F.3d 569, 571 (6th Cir. 2009).

Dismissal is appropriate when a plaintiff fails to state a claim upon which relief can be

granted. Fed. R. Civ. P. 12(b)(6). We assume the factual allegations in the complaint are

true and construe the complaint in the light most favorable to the plaintiff. Bassett v. Nat’l

Collegiate Athletic Ass’n, 528 F.3d 426, 430 (6th Cir. 2008).

       The district court held that the contractual language concerning Schmidt’s broker’s

commission clearly and unambiguously requires judgment for the defendant. Whether a

contractual term is ambiguous is a question of law, Astor v. International Business

Machines Corp., 7 F.3d 533, 539 (6th Cir. 1993), and so, we review de novo the district

court’s finding that the contractual language is clear and unambiguous, North American

Specialty Insurance Co. v. Myers, 111 F.3d 1273, 1278 (6th Cir. 1997).

       We will apply Ohio contract law because a federal court sitting in diversity applies

the substantive law of the forum state. See Gahafer v. Ford Motor Co., 328 F.3d 859, 861

(6th Cir. 2003). In Ohio, a contract is ambiguous “where the language of [the] contract is

reasonably susceptible of more than one interpretation.” Brown v. Columbus All-Breed

Training Club, 789 N.E.2d 648, 653 (Ohio Ct. App. 2003). When a contract is deemed

ambiguous, the meaning of the contract—that is to say, the intent of the parties—is a

factual question ordinarily proved by extrinsic evidence. Shifrin v. Forest City Enters., Inc.,

597 N.E.2d 499, 501 (Ohio 1992).
(No. 08-3767)                                -4-

       The district court held, and the defendant agrees, that Schmidt did not earn a

commission because under the terms of the brokerage agreement, Schmidt would be

entitled to a commission only if a deal for the purchase and sale of a dealership located

by Schmidt was closed within twenty-four months of March 9, 2005. Since the deal closed

on August 1, 2007, twenty-nine months after the brokerage agreement was entered,

Schmidt had no claim for a commission.

       Schmidt’s position is that under Paragraph 5 of the brokerage agreement he is

entitled to the five percent commission as long as 1) Schmidt introduced the seller to Booth

Creek within the twelve month period of the contract, and 2) Booth Creek purchased the

dealership within twelve months after that, regardless of when the sale closed. In other

words, Schmidt interprets the term, “buys” to mean something other than “closing,” and

argues that for all intents and purposes, Booth Creek bought Berlin City before the twenty-

four-month period expired.

                                              III.

       This court’s duty is to decide whether the language of Paragraph 5 is clear and

unambiguous—that is to say, free from contrary reasonable interpretations. The district

court stated that “[t]he contract at issue is perfectly clear. . . . could not be clearer.” But

what is “perfectly clear” to the district court is hopelessly abstruse to us.

       One plausible interpretation of Paragraph 5 is that the parties intended Schmidt to

have earned the commission 1) only if he introduced Booth Creek to a dealership for sale

within twelve months of March 9, 2005, 2) Booth Creek made a deal to buy the dealership,

and 3) a deal closed “the escrow/settlement account and pa[id] [] the consideration to

SELLER” within twenty-four months of March 9, 2005.
(No. 08-3767)                                -5-

       Another reasonable interpretation is that Schmidt would have earned his

commission if he had introduced Booth Creek to a dealership/seller within twelve months

of March 9, 2005, and Booth Creek “b[ought] from, invest[ed] in, or manage[d]” that

dealership within twenty-four months of March 9, 2005. In this interpretation, Schmidt

would have earned his commission at one date, and would be entitled to receive payment

of it at a later date (closing).

       It seems clear that Schmidt’s right to a commission is conditioned, at the very least,

upon Booth Creek “buy[ing]” the Berlin City dealership within twenty-four months of March

9, 2005. What is unclear, however, is what the parties intended “buy[ing]” to mean. Did

they mean the point at which an agreement to purchase the dealership was formed, or did

they instead mean the point when the deal was closed and the consideration paid? Put

differently, did they mean that Schmidt was entitled to claim a commission provided that

Booth Creek bought the Berlin City dealership within twenty-four months of March 9, 2005,

but was not entitled to actually receive it, until the closing took place; or, did they mean he

was entitled to receive his fee and was entitled to payment of the fee at the time of closing?

       The language of Paragraph 5 is confusing and ambiguous. It requires interpretation

and fact finding as to what the parties intended. The purchase agreements and other

extrinsic evidence may shed some light on what the parties intended “buys from” to mean,

and what, if any, other condition applied to Schmidt’s entitlement to his fee. The district

court granted the motion to dismiss before Comtide had an opportunity to discover the

purchase agreements and depose any witnesses who might properly shed light upon the

intention of the parties.

                                              IV.
(No. 08-3767)                            -6-

      We hold that the contract is ambiguous as a matter of law and that the judgment as

a matter of law for the defendant was inappropriate. Consequently, we REVERSE the

district court’s judgment and REMAND for further proceedings.