Court Opinion

ID: 9478541
Source: CourtListenerOpinion
Date Created: 2023-08-05 06:51:46.402943+00
Date Added: 2024-06-11T17:46:29.294572
License: Public Domain

WILLIAMS, Circuit Judge,
dissenting:
Simon Hershon and Lawrence B. Gold-stein engaged over the years in a series of complex business transactions. Their relations deteriorated, to put it mildly, so that by the summer of 1984 there were five lawsuits pending between them. In the hopes of resolving those conflicts, they and various related parties entered into a Mutual Release and Discharge Agreement on August 24, 1984. Apparently the Release successfully disposed of the conflicts to which it was addressed.
At the time of the Release, however, Hershon and several relations and associates (his mother, his ex-wife, and a business associate (Anton Vierling) and his wife) were the obligors on promissory notes payable to Gibraltar Building & Loan Association (a firm controlled by Goldstein) and secured by deeds of trust on several condominiums in the Admiral Dupont building in Washington. The loans amounted to about $300,000. The trial court found (and it appears undisputed) that during the negotiations looking toward the Release no one mentioned the condominium loans. Joint Appendix (“J.A.”) at 79. The loans were never in dispute between the parties and are in no way related to the lawsuits disposed of by the Release. No documents relating to the loans were delivered or signed under Paragraph 12 of the Release, which limited the parties’ agreement to the Release, “together with the other documents and transactions executed simultaneously herewith.” Significantly, a promissory note concerning a disputed indebtedness was delivered and cancelled under Paragraph 12. See id. at 79 (trial court finding); id. at 143 (list of items for delivery under Paragraph 12, captioned, “Her-shon, et al. — Goldstein, et al./Settlement of Disputes”); Goldstein deposition at 52. The borrowers dutifully made the monthly payments due on these loans for September 1, 1984. J.A. at 77, 79. As to the Vierling loan, Anton Vierling on August 29, 1984 wrote to ask Gibraltar “to re-issue the loan under your currently more favorable terms.” Id. at 77, 79 (trial court finding); id. at 153 (letter). Not until mid-September did the borrowers reveal their discovery that the Release could be construed to cancel the loans.
Thus it is not seriously in dispute that the parties did not intend the Release to cover the condominium loans. Counsel for the borrowers at oral argument made no claim to the contrary. Instead, relying on sweeping generalities in the Release, the borrowers invoked the parol evidence rule. Although that rule is normally viewed as an aid for effecting the parties’ intent, the court here allows it to be transformed into a device for thwarting that intent. I dissent.
Even without regard to extrinsic evidence, the Release itself is ambiguous. Its specific focus is plainly on the five pending lawsuits enumerated in Paragraph 4, which introduces them as follows:
4. It is expressly agreed that this Mutual Release and Discharge is, and shall be, a full and complete termination, settlement and satisfaction of any and all Claims alleged and matters in dispute in [the enumerated cases]....
Moreover, the absence of the condominium notes from among the instruments delivered under Paragraph 12 and the delivery and cancellation of a note that was in dispute between the parties strongly suggest the absence of any intent to cancel the condominium loans.
In addition, of course, the Release contains some very broad terms, obviously *855cobbled together from form books. Paragraph 1(d) most patently illustrates the cut- and-paste approach by gratuitously repeating the term “debts.” See text quoted in Maj.Op. at 849. The phrases used are very expansive, e.g., “of any kind or nature whatsoever, known or unknown, tangible or intangible, fixed or contingent.” See id. (quoting Paragraph 1(d)). But none of the broad clauses of Paragraphs 1(d) and 6, see id. at 849, 850, expressly encompasses what is at stake here: debts that were both (1) absolutely free from dispute and (2) totally unrelated to the lawsuits being settled.
Where broad general terms are used in juxtaposition with specific ones, the lawyer’s mind turns naturally to the maxim ejusdem generis. This expresses the idea that where a legal document employs generalities but offers specific examples, the generalities may well refer only to cases “of the same class or general nature” as the specifics. See Maryland v. One Hundred & Fifty-Eight Gaming Devices, 304 Md. 404, 499 A.2d 940, 953 n. 12 (1985) (use of the maxim in statutory interpretation); see also Neuman v. Travelers Indemnity Co., 271 Md. 636, 319 A.2d 522, 527 (1974) (use in the interpretation of a contract). Here that principle would call for excluding from the Release obligations that were neither in dispute nor related to the five lawsuits.
The Maryland courts have used the ejus-dem generis maxim to limit words that appeared facially unambiguous. In LeRoy v. Kirk, 262 Md. 276, 277 A.2d 611 (1971), a testator left “all of my personal property, including my automobile, boat and the contents of my house and outbuilding,” to the appellant. Id. at 612. Just as with the Release, the court could have read the phrase “all of my personal property” in its standard sense, i.e., encompassing intangible as well as tangible personal property. The court rejected that approach as “too simplistic” and found the phrase limited to tangible personal property. Id. at 614.
Ejusdem generis is typically used when the general words appear in the same sentence or provision as the more specific words. The Release poses a slightly different problem, in that Paragraphs 4 and 12 (taken together with the documents executed under the latter) focus on the hotly disputed lawsuits, while the sweeping language appears in other Paragraphs (1(d) and 6). But this fact scarcely renders irrelevant the insight into mental operations on which ejusdem generis rests: that when persons concentrate their attention on solving a specific problem, their use of broader terms may reflect that focus. The solid problem bends the generality as a prism bends light.
To some extent that insight as to distorting focus may be phrased in terms of carelessness. Here, a surmise of carelessness is strengthened by the sloppy redundancy in Paragraph 1(d) and by the fact that the parties rushed the drafting of the instrument to enable Simon Hershon to complete it before he left for a trip to Europe at the end of August 1984. (A costly courtesy, it proves!) Indeed, the plaintiff parties here, with the exception of Simon Hershon, signed the signature page without seeing the full document. J.A. at 75-76.
I invoke ejusdem generis in this context, of course, not to resolve the interpretive question posed by the document, but merely to establish its existence. But see Maj.Op. at 852, 853 (denying any ambiguity).
Thus I find an ambiguity in the instrument itself (with attachments under Paragraph 12), as did the trial court. In his opinion delivered from the bench, Judge Hogan concluded:
In reviewing the Release document, ... the Court, based upon the factual findings it has made, has considered ... the term ‘Claims’ as to whether or not it relates only to those types of Claims under consideration in Paragraph Four, specific enumerated lawsuits, and the Claims set forth otherwise in the attached documentation at the time of settlement between the parties, or whether it refers to reading Paragraph (1)(D) as to Claims meaning any debt, any contract, any obligation, any responsibility, any interest of any kind, known *856or unknown, generally could be read to cover the deeds of trust and promissory notes in this case as ambiguous on its face.
J.A. at 85-86 (emphasis added). The particular finding of fact on which the judge rested his conclusion that the Release was facially ambiguous was that “Mr. Hershon did not raise any question at the settlement conference that these deeds of trust were to be released and the promissory notes cancelled, although he asked that the promissory notes in a related corporation ... be supplied to him at that settlement conference.” Id. at 79.1
Under every formulation of the parol evidence rule, a finding of ambiguity in the contract justifies admission of parol evidence to resolve the ambiguity. Because of possible doubt as to the existence of an ambiguity in the agreement, however, I turn to Maryland law to inquire whether extrinsic evidence is admissible to reveal an ambiguity.
As the court here correctly notes, Maryland subscribes to the standard precept that the parol evidence rule requires that evidence which “varies, alters, or contradicts the clear meaning of the writing” be excluded from the factfinder. Maj.Op. at 852 (quoting Admiral Builders Sav. & Loan Ass’n v. South River Landing, 66 Md.App. 124, 502 A.2d 1096, 1099 (Ct.Spec.App.1986)). But the court does not dispute the offsetting precept of Maryland law— that extrinsic evidence is relevant to identifying the existence of an ambiguity within the language of the contract. See Maj.Op. at 851 (citing the famous Peerless case, Raffles v. Wichelhaus, 2 Hurl. & C. 906, 159 Eng.Rep. 375 (Ex.1864)); see also Admiral Builders Sav. & Loan Ass’n, 502 A.2d at 1099 (correct to use extrinsic evidence in making the “primary” finding of ambiguity); 4 Williston on Contracts § 600A, at 299 (3d ed. 1961) (“In interpreting contracts or clauses set forth in ‘clear and unambiguous’ language, the courts do not confine themselves to a mere inspection of the document. Before committing themselves, the courts carefully examine the surrounding circumstances, prior negotiations, and all other relevant incidents bearing on the intent of the parties.”) (citations omitted).
Judicial statements that parol evidence may not be used to contradict the plain or clear language of a contract obviously are in tension with others to the effect that extrinsic evidence is admissible to ascertain whether the language is clear or plain. Corbin and Williston explain the contradiction, suggesting (as I read them) that the no-contradiction rule is invoked by courts to support the conclusion (once they have reached it) that the extrinsic evidence failed to raise a sufficient question about the apparent meaning of the agreement. As Corbin says, “No parol evidence that is offered can be said to vary or contradict a writing until by process of interpretation it is determined what the writing means.” 3 Corbin on Contracts § 579 (1960). And Williston writes,
It is a fair inference that when, after exposing the writing to the myriad facets of interpretation, the court applies the principle that a ‘clear and unambiguous’ writing may not be varied or amplified, it has come to the conclusion that whatever the extrinsic evidence might show, it could not change the intent of the parties as expressed in the writing at the time the agreement was made.
4 Williston on Contracts § 600A, at 301-03 (emphasis added).
The American Law Institute is perhaps blunter, saying, in effect, that extrinsic evidence may in proper cases override superficially explicit language:
*857The purposes of the parties to a contract are not always identical; ... the parties often have divergent or even conflicting interests. But up to a point they commonly join in a common purpose of attaining a specific factual or legal result which each regards as necessary to the attainment of his ultimate purposes.... Determination that the parties have a principal purpose in common requires interpretation, but if such a purpose is disclosed further interpretation is guided by it. Even language which is otherwise explicit may be read with a modification needed to make it consistent with such a purpose.
2 Restatement (Second) of Contracts § 202, comment c (1981) (emphasis added); see also 2 id. § 212, comment b (reliance on surrounding circumstances “not limited to cases where it is determined that the language used is ambiguous”); White v. Roughton, 689 F.2d 118 (7th Cir.1982) (quoting and applying Restatement), cert. denied, 460 U.S. 1070, 103 S.Ct. 1524, 75 L.Ed.2d 947 (1983); Alliance to End Repression v. Chicago, 742 F.2d 1007 (7th Cir.1984) (en banc) (same).
Maryland cases in fact indicate a readiness to vary the explicit terms of an agreement. See Rinaudo v. Bloom, 209 Md. 1, 120 A.2d 184 (1956) (in rescission action, buyer allowed to prove payment of $25,000 on purchase price of $100,000, as against contract recitation of only $10,000 paid on $85,000 price); Dinsmore v. Maag-Wahmann Co. of Baltimore, 122 Md. 177, 89 A. 399 (1914). The Maryland Court of Appeals has characterized these cases as ones “allowing extrinsic proof of the original price and of credits allowed against it,” see Rinaudo, 120 A.2d at 192, and referred to them as creating an “exception” to the parol evidence rule, id. at 193. As the Maryland cases do not explain why such evidence is conceptually different from any other parol evidence, the explanation may be simply that so far the only cases in which the extrinsic evidence actually established the ambiguity have involved that fact pattern.
It is worth noting that some of the facts characterized here as extrinsic evidence occurred after the Release was signed — the borrowers’ payment of September 1 installments and the Vierlings’ request for re-financing. Plainly these are not covered by the parol evidence rule as normally conceived, i.e., relating to antecedent agreements or negotiations. Indeed, Corbin views the rule as manifesting little more than the truth that prior agreements cannot modify later ones:
No contract whether written or oral can be varied, contradicted, or discharged by an antecedent agreement. Today may control the effect of what happened yesterday; but what happened yesterday cannot change the effect of what happens today. This, it is believed, is the substance of what has been unfortunately called the “parol evidence rule.”
3 Corbin on Contracts § 574, at 371-72; see also E. Allan Farnsworth, Contracts § 7.2, at 451 (1982) (same).
Nonetheless, courts treat post-contract conduct quite similarly to pre-contract acts, saying that the parties’ “practical construction” of an agreement is inadmissible to vary its unambiguous terms. See, e.g., Food Fair Stores, Inc. v. Blumberg, 234 Md. 521, 200 A.2d 166, 170 (1964) (plaintiffs concede that “the practical construction of an agreement as evidenced by the acts and conduct of the parties is only available in the event of an ambiguity”); compare Mateer v. Reliance Ins. Co., 247 Md. 643, 233 A.2d 797 (1967) (insurer’s prior payment of claim admissible to prove that policy insuring against loss by “flood” encompassed damage to items on shelves injured by drops of water en route from burst water main to floor). We may infer, again, that a court will disregard the extrinsic evidence only when it is convinced that the conduct is in fact insufficient to disturb the construction at which it would otherwise have arrived. (Of course the later conduct may in some cases amount to a modification of the agreement, see Food Fair, 200 A.2d at 171, which could not be true of antecedent agreements or communications.)
Thus, still assuming that the language of the Release and the documents executed under Paragraph 12 did not alone establish *858an ambiguity, the critical question would be simply whether those facts, together with the events before and after execution of the Release, undermine the borrowers’ claim that it unambiguously released them from their condominium loans. The majority concludes that the district court “failed to identify any facts or external evidence to support its conclusion that the Release was facially ambiguous.” Maj.Op. at 852. While the district court’s oral opinion may have lacked precision, it seems clearly (and by my lights correctly) to have initially found ambiguity in the clash between the Release’s general terms, on the one hand, and, on the other, its specific focus on the disputed lawsuits and the absence of the condominium notes from the documents delivered under Paragraph 12. See above at 4-5, quoting J.A. at 79, 85-86. It then proceeded to resolve the ambiguity, on the basis of those facts plus the testimony as to the prior negotiations’ never having addressed the condominium loans, the borrowers’ continued payment of monthly installments under the loans, and the Vier-lings’ post-Release request for refinancing of their loan. J.A. at 86-88. The evidence is ample to support a finding that the Release did not plainly, clearly, or unambiguously release the loans and relieve the borrowers of nearly $800,000 of previously uncontested indebtedness.
Under Rule 52(a) of the Federal Rules of Civil Procedure we are not to set aside such findings unless “clearly erroneous.” This deference is appropriate for findings “whether based on oral or documentary evidence,” id., or, as the Restatement puts it, whether the interpretation “depends on the credibility of extrinsic evidence or on a choice among reasonable inferences to be drawn from extrinsic evidence,” 2 Restatement (Second) of Contracts § 212(2).
The majority, understandably uneasy with the “harsh consequences” of the rule as it has applied it, invokes a higher good— the importance of enabling parties to “rely on the explicit language of written contracts” and “[t]he public interest in certainty and finality.” Maj.Op. at 853-54. If the parol evidence rule were designed to achieve such a higher good, or (perhaps) if I were persuaded that it could be recruited into its service, I might be ready to sacrifice the parties on that altar. Neither is true. Its purpose is, as Farnsworth puts it, to give “legal effect to whatever intention the parties may have had to make their writing a complete expression of their agreement.” Farnsworth, Contracts § 7.2, at 451. Corbin too saw the rule as aimed at implementing the parties’ intent. In the supplement to his treatise, he offered a number of general principles as an introduction to the study of the rule, including:
1. The primary and ultimate purpose of interpretation is to determine and make effective the Intention of the Contracting Parties.
2. No contract should ever be interpreted and enforced with a meaning that neither party gave it.
4. No party to a contract should ever be bound by an interpretation that is determined exclusively by the linguistic education and experience of the judge.
6. When a court enforces a contract in accordance with an interpretation that seems “plain and clear” to the court and excludes relevant convincing evidence that the parties intended a different interpretation, it is “making a contract for the parties”, one that they did not make.
3 Corbin on Contracts § 572B (Supp.1971) (emphasis and capitalization in original). The rule asks judges to find intent, not to blind themselves to it.
Were it plausible that draconian decisions such as the present one would chasten lawyers, induce better drafting, eliminate ambiguity, or spare courts the need for seeking out the parties’ intent, the decision would not be so unfortunate. But I see no reason to expect such beneficent results. Complex factual arrangements will continue not to yield to lawyers’ phrasing; focus on immediate problems will cause parties to ignore the potential sweep of generalities; and parties with much at stake will try to persuade courts that the *859surrounding circumstances justify a reading different from that to which a reader of the language might initially leap. Often they will succeed, as I believe they should have here.

. The majority states that counsel for appellees conceded during oral argument that the district court "failed to identify any facts or external evidence to support its conclusion that the Release was facially ambiguous." Maj.Op. at 852. Such a concession of course could not alter the content of the district court’s opinion. In any event, counsel’s remark, "He does not articulate them, Judge," cannot in full context be taken as such a concession. Indeed, a few minutes earlier, appellees’ counsel had argued that "Judge Hogan found that there is no document or documents signed at the settlement table that were referenced in Paragraph 12 of the Release and referenced in the agenda." He attempted to discuss other findings but was interrupted.