Ingram v. Century 21 Caldwell Realty

• Decision Date: 21 February 1996
• Docket Number: No. CA,CA
• Citation: 52 Ark.App. 101,915 S.W.2d 308
• Parties: , 11 IER Cases 1875 Gene INGRAM, Appellant, v. CENTURY 21 CALDWELL REALTY, Appellee. 95-189.
• Court: Arkansas Court of Appeals

Page 308

915 S.W.2d 308

52 Ark.App. 101, 11 IER Cases 1875

Gene INGRAM, Appellant, v. CENTURY 21 CALDWELL REALTY, Appellee.

No. CA 95-189.

Court of Appeals of Arkansas En Banc.

Feb. 21, 1996.

Appeal from Garland Circuit Court; Hon. Tom Smitherman, Judge.

Richard L. Slagle, Hot Springs, for appellant.

Ronald G. Naramore, Hot Springs, for appellee.

COOPER, Judge.

The appellant in this contract case entered into an employment agreement in January 1988 to act as managing broker for the appellee realty. The term of the agreement was "for as long as gross commission annually exceeds that of 1987." At all times after execution of the agreement, the appellee had commissions exceeding those earned in 1987. The appellant was terminated in September 1991 because the business was experiencing severe financial problems. The appellant filed suit against the appellee realty for money damages arising out of an alleged breach of the employment contract. After a bench trial, the circuit judge found that the appellant was terminated for legitimate and proper cause, and entered judgment for the appellee. From that decision, comes this appeal.

For reversal, the appellant contends that the circuit judge erred in admitting parol evidence to determine what cause would justify termination under the contract, and in finding that the appellant was discharged for legitimate and proper cause. We find no error, and we affirm.

Over the appellant's objection, the president of the appellee agency, Carol Caldwell, was permitted to testify regarding her understanding of the reasons that would permit the appellant's termination after 1988 pursuant to the employment contract. The appellant argues that the admission of parol evidence was erroneous because the agreement was not ambiguous with regard to the grounds for termination. Although parol evidence is admissible only if an ambiguity exists, Singh v. Riley's, Inc., 46 Ark.App. 223, 878 S.W.2d 422 (1994), the initial determination of the existence of an ambiguity rests with the court. ¹ Minerva Enterprises v. Bituminous Casualty Corp., 312 Ark. 128, 851 S.W.2d 403 (1993). In the case at bar, the agreement was ambiguous with respect to the circumstances under which the appellant could be terminated after 1988. The contract expressly provided that it would in no case be terminable in less than one year (i.e., during 1988) except in the case of gross mismanagement by appellant. Clearly, then, the contract envisioned that some degree of incompetence or neglect of duty would provide grounds for termination. The failure to specify the degree of mismanagement that would justify termination after 1988 rendered the agreement ambiguous. ² Consequently the circuit judge did not err in admitting parol evidence to resolve it. See Minerva Enterprises, supra.

The appellant next contends that the circuit judge erred in finding that he was terminated for good cause. The findings of fact of a circuit judge sitting as a jury will not be set aside on appeal unless they are clearly against the preponderance of the evidence. Ark.R.Civ.P. 52(b). There was evidence that the appellant was responsible for the fiscal management of the office and that he had introduced a number of new expenses in the year preceding his termination. For example, he had procured additional insurance, engaged new referral services, enlarged the office telephone system, placed out-of-state advertisements, obtained an 800 number, and purchased a fax machine. These additional expenses contributed to a fiscal crisis when, during the first quarter of 1991, the gross commissions totalled only $8,000. The record shows that, immediately prior to the appellant's termination, the business was in such serious financial distress that the sum of the bills which needed to be paid at once exceeded the amount of available cash by a wide margin. Utilities had threatened to shut off service and advertisers were refusing to take listings.

By its terms, the employment agreement required the appellant to perform the duties of a broker and manager and to act in good faith in protecting the assets and reputation of the corporation. We think it significant that, in the midst of this financial emergency, the appellant intentionally misrepresented the situation to his employer. By his own testimony, the appellant did not accurately report the extent of the fiscal crisis but instead "exaggerated to try to get her attention." We think this misrepresentation was material because it was his employer's perception of the firm's financial distress which prompted the appellant's termination. Given this evidence of bad faith on the part of the appellant, we cannot say that the trial court clearly erred in finding he was terminated for legitimate and proper cause.

Affirmed.

PITTMAN, ROGERS, and STROUD, JJ., agree.

GRIFFEN, J., dissents.

ROBBINS, J., not participating.

GRIFFEN, Judge, dissenting.

I disagree with the result reached by the majority in this case and the reasoning employed in reaching it. The result is obtained by disregarding the parol evidence rule and the related principles that govern the interpretation of parties' intent to written agreements. That error is compounded by the lack of evidentiary support for the conclusion reached by the trial judge that the appellant was terminated for failing to "act in good faith in protecting the assets and reputation of" the firm that employed him.

The trial judge permitted appellant and Carol Caldwell, president of Century 21 Caldwell Realty, to testify about their understanding concerning the grounds upon which appellant could be terminated from the post of Principal Broker and General Manager for the firm under his written employment agreement dated January 18, 1988. Appellant made timely objections to that testimony ¹, and argues on his appeal that the trial court committed reversible error by admitting it because the written employment agreement was not ambiguous about the terms for his termination. The trial court overruled appellant's objections and ultimately entered judgment for appellee. The court concluded that the contract called for appellant to be employed for a specific time, that he could only be discharged for cause, and that he was terminated for "legitimate and proper cause."

The pertinent provisions of the written agreement state:

Gene Ingram agrees to act as Principal Broker and General Manager of Century 21 Accredited Realty. He agrees to perform the duties and assume the responsibilities usually expected of that position. He will act in good faith in protecting the assets and reputation of that corporation.

....

The term of this agreement shall be for as long as gross commission annually exceed that of 1987. In no case will this agreement terminate in less than one year, except in the case of gross mis-management [sic] by Broker....

(Emphasis added).

The trial court allowed parol testimony from appellant and Caldwell despite appellant's objections that there had been no ruling that the contract was ambiguous. The findings contained in the opinion letter issued by the trial judge do not mention ambiguity at all. Indeed, the record is void of any conclusion that the contract is ambiguous concerning the grounds on which appellant could be terminated. Instead, the trial judge specified in his opinion letter that the agreement between the parties not only allowed for appellant's discharge if annual gross commissions would fall below the 1987 baseline, but also required that appellant act in good faith to protect the assets and reputation of the firm. ² These were the very terms that the parties wrote into their agreement.

Arkansas law clearly holds that parol evidence is admissible only if an ambiguity exists in a written agreement. Absent ambiguity concerning a term within a written contract, it is reversible error to permit parol evidence in order to explain the meaning of contractual terms. See Minerva Enter., Inc. v. Bituminous Casualty Corp., 312 Ark. 128, 851 S.W.2d 403 (1993); Pizza Hut of America, Inc. v. West Gen. Ins. Co., 36 Ark.App. 16, 816 S.W.2d 638 (1991). In this case, the trial court made no finding that the agreement between the parties was ambiguous about the grounds for appellant's termination. The agreement specified the term of his employment and the performance expected of him. Therefore, appellant's objections to the testimony abduced from him during cross-examination and from Caldwell on direct examination should have been sustained. The agreement plainly states what the parties intended regarding the term of appellant's employment and what performance would be considered grounds for his termination, so extrinsic proof from the parties about what they understood the grounds for termination to be was improperly admitted into evidence.

In the words of the majority, the "failure to specify the degree of mismanagement that would justify termination after 1988 gave rise to an ambiguity" in the parties' agreement. To the contrary, the explicit wording of the agreement is clear. The parties agreed that appellant would "perform the duties and assume the responsibilities usually expected" of a Principal Broker and General Manager, and added that he "will act in good faith in protecting the assets and reputation of [the] corporation." These words are not unclear or subject to a double meaning, nor do they fail to specify the degree of management expected of appellant in his work. A failure to "act in good faith in protecting the assets and reputation of that corporation" is anything but a nebulous phrase demanding parol evidence to explain its meaning. ³ Even though appellee disagrees with appellant about whether his performance met the clear standard stated in their agreement, that disagreement requires proof of how appellant has failed to act in good faith in protecting the assets and reputation of the firm. The parties certainly could not deny knowing...