Contract Term Is Ambiguous If It Is Reasonably Susceptible To More Than One Meaning
CURIA v. NELSON (November 20, 2009)
Kenneth Nelson owned two car dealerships -- Auto Plaza and Auto Mall. In 1989, he and Richard Curia entered into an agreement whereby Curia agreed to pay $100,000 for 1000 (of 8180) shares in Auto Plaza and 144 (of 1200) shares in Auto Mall. The agreement also gave Curia three separate options to buy additional stock in both dealerships, up to 100% of each. Curia exercised the first of the options in 1990. A few years later, in 1993, Nelson and Curia modified the agreement, apparently because the total number of shares in the two companies had increased. The 1993 agreement also provided that Curia could purchase additional shares "upon those terms and conditions subsequently agreed upon." A later agreement terminated Curia's rights to acquire any additional Auto Mall stock. In 2005, however, Curia attempted to exercise his options to acquire all of the stock in Auto Plaza. Nelson filed a declaratory judgment action contesting Curia's right. Curia counterclaimed for breach of contract. The court granted summary judgment to Curia. Nelson appeals.
In their opinion, Judges Kanne, Williams and Sykes reversed and remanded. The issue identified by the Court was whether Curia's 1989 options survived the 1993 modification. The Court noted that both Nelson and Curia argued that the 1993 agreement was unambiguous and supported his own interpretation. The parties, however, do not control whether a contract term is ambiguous. It is a question of law for the court. Here, the Court found the 1993 language reasonably susceptible to more than one meaning -- and therefore ambiguous. Both of the interpretations are reasonable readings of the contract language. The ambiguity must be resolved with reference to extrinsic evidence -- not on summary judgment.
