Colonial Mortg. Co. of Indiana, Inc. v. Windmiller, 3-376A64

• Decision Date: 05 June 1978
• Docket Number: No. 3-376A64,3-376A64
• Citation: 376 N.E.2d 529,176 Ind.App. 535
• Parties: COLONIAL MORTGAGE COMPANY OF INDIANA, INC., Defendant-Appellant, v. George J. WINDMILLER, Plaintiff-Appellee.
• Court: Indiana Appellate Court

Page 529

376 N.E.2d 529

176 Ind.App. 535

COLONIAL MORTGAGE COMPANY OF INDIANA, INC., Defendant-Appellant, v. George J. WINDMILLER, Plaintiff-Appellee.

No. 3-376A64.

Court of Appeals of Indiana,Third District.

June 5, 1978.

Stephen L. Williams, Roger W. Hultquist, Snouffer, Haller & Colvin, Fort Wayne, for defendant-appellant.

George P. Roberts, South Bend, for plaintiff-appellee.

GARRARD, Presiding Judge.

Windmiller recovered judgment against Colonial for bonus compensation due under an employment contract, and Colonial appeals.

Colonial hired Windmiller in February 1968 as a commercial loan sales representative. He worked with commercial borrowers in putting together "loan packages" which were designed to apprise potential lenders of the economic feasibility of a project. When completed, the loan package was presented to long term lenders to induce them to supply the necessary risk capital for the venture. Upon a successful placement Colonial received fees from both the borrower and the lender for its services and for servicing the loan thereafter.

On January 1, 1969 after some eleven months in Colonial's employ, Windmiller entered into a written contract of employment with Colonial. The contract provided for a monthly salary, a "bonus" based upon the fees earned by Colonial on loans Windmiller originated, a monthly advance against the earned bonus and reimbursement of business expenses in return for Windmiller's services. These terms were subsequently modified to increase the bonus percentage and base salary and decrease the monthly advance against bonus. The contract provided that subject to certain conditions the bonus would be payable "at the time a loan is closed and disbursed, or earlier, at the option of the company . . . ." "Closed and disbursed" referred to that time when the long term mortgage was executed and delivered in return for the loan proceeds.

Colonial ordinarily paid its sales representatives, including Windmiller, their bonuses before the loan was "closed and disbursed." However, there were exceptions when it appeared that the loan might not in fact close, or if payments to Colonial prior to closing were not made in cash.

In November 1974, Windmiller's employment with Colonial was terminated. At the time of his termination, Windmiller had completed the services to be performed by him for two construction projects known as Castlepoint and Concord Square. ¹ Although there was some question about the possibility of modification and Colonial's fees had been paid in part by promissory notes, commitments from lenders had been received for the projects. These loans were not "closed and disbursed" prior to Windmiller's separation. Colonial refused to pay Windmiller a bonus upon them.

The Employment Contract

It is Colonial's position that under the provisions of Windmiller's employment contract, he was not entitled to bonus on these projects because they were not "closed and disbursed" before his termination. They rely upon the following provision contained in the written contract:

"If you remain in the employ of the company through December 31, 1969 and have neither served nor been served by the company with notice of termination of employment hereinafter described, you will receive in addition to the compensation heretofore described, a bonus, based on commercial loans originated by you, as follows:

At the time a loan is closed and disbursed, or earlier, at the option of the company, you will receive credit for gross fees applicable to the loan, including origination fees from the borrower as well as fees paid by an investor, but less any brokerage fees paid or owing. Your annual bonus will be based on 10% of the net income generated, i.e. gross fees less expenses."

(emphasis supplied)

Contrary to Colonial's assertion, it must be recognized that Windmiller's bonus arrangement was contractually enforceable. The amount and terms for the bonus were sufficiently specific and clearly provision for bonus payments was in contemplation of services yet to be performed by Windmiller. See Spickelmier Industries, Inc. v. Passander (1977), Ind.App. 359 N.E.2d 563.

The question remaining is whether the opening clause of the provision requires a forfeiture to bonus rights because Windmiller was terminated before the loans were closed and disbursed, although he had performed the services he was supposed to perform and the loans were eventually completed.

In interpreting a written contract our purpose is to determine the intent of the parties at the time the contract was made as disclosed by the language they employed to define their rights and duties. Fort Wayne Bank Bldg., Inc. v. Bank Bldg. & Equip. Corp. (1974), 160 Ind.App. 26, 309 N.E.2d 464. However, if the terms of the contract are ambiguous, rules of contract construction or extrinsic circumstances may be resorted to in giving effect to the parties'reasonable expectations. House v. Lesow (1975), Ind.App., 339 N.E.2d 86. The test for determining the existence of such an ambiguity is whether reasonably intelligent persons could come to different conclusions as to its meaning. Tastee Freeze Leasing Corp. v. Milwid (1977), Ind.App., 365 N.E.2d 1388. The central issue in the present case is whether there is ambiguity concerning the necessity of Windmiller's continued employment as a condition precedent to Colonial's obligation of payment. If so, well settled rules of construction require us to conclude that Windmiller's termination of employment does not affect his right to commissions otherwise payable under the contract.

Our reading of the language in question suggests that it is reasonably susceptible of two different interpretations. The first is that asserted by Colonial, i.e., that in addition to remaining in Colonial's employ through December 31, 1969, Windmiller was required to be employed with the company when the bonus became payable. The second is that the clause beginning ". . . and have neither served nor been served . . ." merely requires that for bonus compensation to be due, notice of termination by either the company or Windmiller not be given as of December 31, 1969. The ambiguity arises because it is unclear whether the "and" joins two separate and independent conditions or whether it simply further modifies the requirement that Windmiller remain in Colonial's employ through December 31, 1969. ² Contributing to this ambiguity is the fact that the language relied upon by Colonial refers not to continued employment per se but only to serving "notice of termination." Compare Montgomery Ward & Co. v. Guignet (1942), 112 Ind.App. 661, 45 N.E.2d 337. In short, the requirement that Windmiller must continue to be employed with Colonial at the time a loan is "closed and disbursed" to be entitled to his commission is not clear and explicit.

As Windmiller points out, ambiguous terms in a contract will normally be construed against the party who employed the language. City of South Bend v. Blue Lines (1942), 219 Ind. 462, 38 N.E.2d 573; McMahan Constr. Co. v. Wegehoft Bros., Inc. (1976), Ind.App., 354 N.E.2d 278; Mandle v. Owens (1975), Ind.App., 330 N.E.2d 362. In the present case this would indicate that we should adopt the reasonable interpretation favoring Windmiller.

That indication is buttressed by the disfavor with which the law views forfeiture provisions. Such provisions will be enforced where the contract clearly requires, but if there is doubt we favor the construction avoiding a forfeiture. Western & Southern Life Ins. Co. v. Vale (1938), 213 Ind. 601, 611, 12 N.E.2d 350, 354; Franklin Life Ins. Co. v. Wallace, Admr. (1883), 93 Ind. 7, 11; Standard Life Ins. Co. v. Grigsby (1923), 80 Ind.App. 231, 235, 140 N.E. 457, 458. Colonial's interpretation of the contract would amount to a forfeiture because it would deny Windmiller the bargained-for compensation from Colonial, although it received the bargained-for benefits. Thus, under Colonial's interpretation it could, at any time, have deprived Windmiller of commissions for his services by giving him termination notice before a loan (or loans) was closed and disbursed. While the parties might agree to such provisions, they must employ unequivocal language to that effect if they intend to seek enforcement in the courts. See Montgomery Ward v. Guignet (1942), 112 Ind.App. 661, 45 N.E.2d 337.

The court did not err in its construction of the contract.

Finally, Colonial contends that in construing the contract, the court went outside the issues that were framed by the pre-trial order. We disagree.

The pre-trial order disclosed that it was Windmiller's contention that the contract had been modified as to when the bonus became payable. However, it was also his contention that he had earned the commissions on the Castlepoint and Concord Square projects. Similarly, Colonial contended that the contract had not been modified, and that Windmiller was not entitled to commissions because of the contract language dealing with employment through 1969 and notice of termination. Thus, the issues presented the question...