Isbrandtsen v. North Branch Corp.

• Decision Date: 09 December 1988
• Docket Number: No. 86-168,86-168
• Citation: 556 A.2d 81,150 Vt. 575
• Parties: Patricia C. ISBRANDTSEN v. NORTH BRANCH CORPORATION.
• Court: Vermont Supreme Court

Page 81

556 A.2d 81

150 Vt. 575

Patricia C. ISBRANDTSEN v. NORTH BRANCH CORPORATION.

No. 86-168.

Supreme Court of Vermont.

Dec. 9, 1988.

Fitts, Olson, Carnahan, Anderson & Bump, Brattleboro, for plaintiff-appellant.

Crispe & Crispe, Brattleboro, for defendant-appellee.

Before ALLEN, C.J., PECK, GIBSON and DOOLEY, JJ., and SPRINGER, District Judge (Ret.), Specially Assigned.

GIBSON, Justice.

Plaintiff, as grantee, sued defendant-grantor for declaratory judgment and injunctive relief under a deed executed in 1969. Defendant counterclaimed for similar relief pursuant to a covenant in the deed providing for restrictive use of the property. After trial, the court rendered declaratory judgment in favor of defendant and enjoined plaintiff from renting out her property absent defendant's express written agreement. Plaintiff appeals. We modify the judgment order slightly and, as modified, affirm.

I.

The relevant facts are as follows. Since the early 1960s, defendant has owned and operated an innkeeping business in Dover, Vermont, next to the Mt. Snow ski area. The business originally consisted of four adjoining townhouses, each containing four bedroom units. While each townhouse could be occupied by one family, the bedrooms were designed to open onto a common hallway so that they could also be rented individually.

The ground floor level of the adjoining townhouses contained areas common to all, known as the "club": a kitchen, restaurant and sitting room. The furniture in these common areas, together with the recreational facilities, ski trails, parking areas and assorted outbuildings, were owned and operated by defendant. In order to maintain these facilities and provide necessary services to owners and guests, defendant hired and supervised a staff consisting generally of a chef, food servers, housecleaners and maintenance people.

Although the common areas were the property of defendant, the townhouses were individually owned. Defendant's business depended in part upon rental income derived from lessees of owners of the townhouses who did not use them on a year-round basis. Thus, the development was designed so that temporarily unoccupied townhouses, or parts thereof, could be rented out to paying guests. This benefited the owners, who derived a percentage income from the rentals, and it assured defendant the income required to continue providing the maintenance services necessary to all occupants, both permanent and temporary.

At issue in this case is the following paragraph contained in the deed from defendant to plaintiff:

The premises hereby conveyed shall be used only for private, single-family residence purposes, except that, under express agreement between Grantor and Grantee, the premises may be rented or used for paying guests in connection with Grantor's operations.

The rental arrangements made by defendant were in the form of "Business Use Agreements" executed by the individual townhouse owners. These agreements authorized defendant to rent the properties to paying guests and were an integral part of the corporation's business from its inception.

At trial plaintiff argued that absent an express agreement between herself and defendant, there was no restriction under the deed on her ability to rent her house to paying guests without defendant's knowledge or consent. Defendant argued that this paragraph specifically prohibited any such rental except by and with its express agreement.

The trial court found that the deed's restriction to "private, single-family residence purposes" allowed only residential use of the property, and that the immediately following words made it clear that the grantee could not unilaterally rent the premises for profit. On that basis, the court entered a declaratory judgment in favor of defendant and enjoined plaintiff from using her unit "for purposes other than private single family residence for herself and her immediate family ... except with the express written consent of defendant."

Plaintiff subsequently moved to amend the injunction by striking the words "for herself and her immediate family" on the grounds that this language was unnecessarily restrictive and beyond the intent of the original deed. The trial court denied the motion, finding the amendment unwarranted since the inclusion of the challenged language "in no way inhibits the plaintiff and her immediate family from inviting guests, consistent with the provision of the contract, to use the unit."

Plaintiff raises two issues on appeal. First, she argues that the trial court erred in finding that the disputed language of the deed unambiguously precluded her from renting out the property without the express written consent of defendant. Second, she contends that the court erred in denying her motion to amend the injunction.

II.

The question of whether a contract term is ambiguous is a matter of law for the court to decide. Trustees of Net Realty Holding Trust v. AVCO Financial Services of Barre, Inc., 144 Vt. 243, 248, 476 A.2d 530, 533 (1984). A provision in a contract is ambiguous only to the extent that reasonable people could differ as to its interpretation. Id. Here, plaintiff argues that the deed contains internal inconsistencies which render its terms ambiguous and therefore subject to rules of construction that would warrant judgment in her favor. In particular, plaintiff contends that before the restriction on commercial rental can be given effect, there must first be an agreement between the parties, and that since there is no such agreement, plaintiff is free to do as she wishes.

Before extrinsic evidence may be used to aid in the construction of a written instrument, ambiguity must first be found. Id. at 249, 476 A.2d at 533; see generally Annotation, The Parol Evidence Rule and Admissibility of Extrinsic Evidence to Establish and Clarify Ambiguity in Written Contract, 40 A.L.R.3d 1384, 1389 (1971). In determining whether an ambiguity exists, many courts have adopted the traditional "four corners" test or "plain meaning rule," which states that if a writing appears to be plain and unambiguous on its face, its meaning must be determined from the four corners of the instrument without resort to extrinsic evidence of any nature: "If the term in question does not have a plain meaning it follows that the term is ambiguous." J. Calamari & J. Perillo, The Law of Contracts § 3-10, at 166-67 (3d ed. 1987).

A number of courts, recognizing that "plain meaning" cannot exist in a vacuum, have allowed the admission of evidence as to the circumstances surrounding the making of the agreement as well as the object, nature and subject matter of the writing. See, e.g., Pacific Gas & Elec. Co. v. G.W. Thomas Drayage & Rigging Co., 69 Cal.2d 33, 40, 442 P.2d 641, 645, 69 Cal.Rptr. 561, 565 (1968). This approach has been supported by numerous commentators and authorities. See Restatement (Second) of Contracts § 212 comment b (1981) ("Any determination of meaning or ambiguity should only be made in the light of the relevant evidence of the situation and relations of the parties, the subject matter of the transaction, preliminary negotiations and statements made therein, usages of trade, and the course of dealing between the parties."); J. Calamari & J. Perillo, Contracts § 3-10, at 167 (plain meaning rule criticized because "the meaning of words varies with the 'verbal context and surrounding circumstances and purposes in view of the linguistic education and experience of their users and their hearers or readers (not excluding judges)' ") (quoting 3 A. Corbin, Corbin on Contracts § 579, at 225 n. 74 (1964 supp.)); 3 A. Corbin, Corbin on Contracts § 542, at 100-02 (1960) ("some of the surrounding circumstances always must be known before the meaning of the words can be plain and clear...."); 9A V.S.A. § 2-202, comment 1(c) (in interpreting written instrument, extrinsic evidence of course of dealing, usage of trade, or course of performance may be introduced without necessity of finding ambiguity in language of instrument).

Previous Vermont cases are unclear as to which standard, if any, has been adopted by the courts of this state in determining the presence or absence of ambiguity. Compare, e.g., Pond v. Carter, 126 Vt. 299, 309, 229 A.2d 248, 255 (1967) ("[i]t is not what provisions the [writing] fails to stipulate but rather what they actually do stipulate and the language used to express its terms which controls in deciding the question of ambiguity.") with Freeguard v. Bingham, 108 Vt. 404, 406, 187 A. 801, 802 (1936) ("[b]ut if the language of the instrument, interpreted in connection with, and in reference to, the nature and condition of the subject matter at the time it was executed, and the obvious purpose the parties had in view, is clear and unambiguous, its meaning is a question of law for the court...." ) and Davidson v. Vaughn, 114 Vt. 243, 246, 44 A.2d 144, 146 (1945) (same); cf. Dunsmore v. Co-operative Fire Ins. Ass'n, 131 Vt. 14, 16, 298 A.2d 853, 854 (1972) (basis upon which Court found absence of ambiguity not articulated).

Given this background, we believe it appropriate, when inquiring into the existence of ambiguity, for a court to consider the circumstances surrounding the making of the agreement. Ambiguity will be found where a writing...