Mark V, Inc. v. Mellekas

• Decision Date: 05 January 1993
• Docket Number: No. 20275,20275
• Parties: MARK V, INC., a New Mexico corporation, Plaintiff-Appellant, v. Cynthia Hibbard MELLEKAS, personal representative of the estate of George T. Mellekas, deceased, Defendant-Appellee.
• Court: New Mexico Supreme Court

Page 1232

845 P.2d 1232

114 N.M. 778

MARK V, INC., a New Mexico corporation Plaintiff-Appellant, v. Cynthia Hibbard MELLEKAS, personal representative of the estate of George T. Mellekas, deceased Defendant-Appellee.

No. 20275.

Supreme Court of New Mexico.

Jan. 5, 1993.

[114 N.M. 779] Charles R. Thompson, Clara Ann Bowler, Albuquerque, for plaintiff-appellant.

J. Edward Hollington, Albuquerque, for defendant-appellee.

OPINION

MONTGOMERY, Justice.

This is a dispute between a real estate agency and a property owner over a broker's commission. The case affords an opportunity to review and apply the principles in our recent opinion in C.R. Anthony Co. v. Loretto Mall Partners, 112 N.M. 504, 817 P.2d 238 (1991). Applying C.R. Anthony, we discuss the appropriate methods for a trial court to use in determining whether a contract contains ambiguous terms and in resolving any ambiguities thus discovered.

In this case, the parties to an exclusive-right-to-sell listing agreement signed an addendum to the agreement purporting to "cancel" all obligations between the parties. The real estate agency sued to recover a commission allegedly earned before the addendum was signed, but the trial court held that the addendum canceled the property owner's obligation to pay the commission and awarded her summary judgment. The real estate agency appeals, contending that the court should have considered extrinsic evidence of the circumstances surrounding execution of the addendum in making its decision and should have found the addendum ambiguous. We hold that the district court erred by failing to consider evidence submitted by the real estate agency to show that the meaning of the contract was unclear. Examining the documents ourselves, we also hold that the contract is ambiguous. We therefore reverse and remand for trial to resolve the ambiguities.

I.

On May 3, 1989, George and Cynthia Mellekas, the property owners, entered into a contract with Mark V, Inc., the real estate agency, giving Mark V the exclusive right to sell their residence.¹ The agreement called for Mark V to list the residence with the Albuquerque Board of Realtors Multiple Listing Service at an asking price of $292,200. Mellekas promised to pay Mark V a six percent commission on the sale if, prior to termination of the contract, Mark V secured a purchaser for the property at the asking price and upon Mellekas's terms or for any other acceptable price and terms. The agreement set out Mark V's obligation as follows: "In consideration of the above, Broker agrees to use diligence in procuring a purchaser." The agreement provided that it would "continue irrevocably" until October 31, 1989.

On July 18, 1989, Mark V found a buyer who was willing to satisfy all of Mellekas's terms. The buyer made a written offer, and a Mark V sales agent presented the offer to Mellekas. On the following day, George Mellekas rejected the offer by signing his name under a handwritten notation appearing on each page of the offer, reading: "Rejected 7-19-89 9 AM."

Fifteen minutes after the offer was rejected, George Mellekas and Mark V executed a "Listing Agreement Addendum" ("the addendum") on a standard form prepared by the Albuquerque Board of Realtors. The form consisted of five paragraphs that could be completed and signed by the contracting parties. Paragraphs 1, 2, and 5 were left blank. Paragraph 3, entitled "Withdrawal from the Multiple Listing Service of the Albuquerque Board of Realtors," was crossed out with an "X," presumably because the printed provisions of that paragraph stated that it did not cancel the exclusive right to sell granted to Mark V in the listing agreement. Paragraph 4 of the addendum, entitled "Cancellation Agreement," was the only part of the addendum signed by Mellekas and representatives of Mark V. The Cancellation Agreement provided: "The above mentioned Listing Agreement is hereby terminated effective this date and all obligations agreed to are hereby canceled...." It further provided that if at any time within the next 365 days the property should be sold to any person who had been shown the property during the term of Mark V's listing, Mark V would be entitled to a six percent commission on the sale.

On April 4, 1990, Mark V sued Mellekas for the commission it claimed it had earned by submitting an offer from a qualified buyer willing to meet the price and terms established in the exclusive-right-to-sell agreement. Mellekas moved for summary judgment, arguing that the language in the addendum, "all obligations agreed to are hereby canceled," effectively canceled Mellekas's contractual obligation to pay the commission. Mark V opposed the motion by submitting the deposition of the Mark V supervisor who had executed the addendum to show that Mark V only intended to remove the contract from the multiple listing service as required by the Albuquerque Board of Realtors, that the purpose of the addendum was to cancel all future obligations of Mark V to market the property, and that at the time George Mellekas signed the addendum the supervisor informed him that Mark V was entitled to the commission already earned.

Mark V asked the court to consider evidence of the circumstances surrounding execution of the addendum in making the threshold determination as to whether or not it was ambiguous. The trial court ruled that the evidence presented by Mark V was only admissible if the addendum was ambiguous. The court further ruled that the language of the document was unambiguous, declined to consider the extrinsic evidence offered to aid in its interpretation, and granted summary judgment in favor of Mellekas.

Mark V contends on appeal that the trial court erred in ruling that the listing agreement was unambiguous based on the "four corners" of the document; that even if the addendum was unambiguous, Mark V was entitled to a full evidentiary hearing; and that the court erred in finding that the addendum was effective and enforceable, because any waiver of its commission was ineffective as a matter of law for lack of consideration. Mark V's first two contentions turn on the same point of law and will be disposed of together in our discussion. We agree that the trial court erred in finding that the addendum was unambiguous and in failing to consider extrinsic evidence of the circumstances surrounding its execution in making this determination. We do not agree, however, that a waiver by Mark V of its commission, already earned, would be unenforceable as a matter of law.

II.

We turn first to the issue of whether the court properly found the agreement to be unambiguous. In coming to its decision, the district court apparently relied solely on the face or the "four corners" of the document. See, e.g., Clark v. Sideris, 99 N.M. 209, 212-13, 656 P.2d 872, 875-76 (1982) (court will not look beyond the four corners of the document unless it is ambiguous), overruled by implication in C.R. Anthony, 112 N.M. at 509, 817 P.2d at 243. This was error.

This Court abandoned the "plain-meaning" or "four-corners" standard, under which ambiguity is determined by the court without consideration of any evidence outside the contract itself to explain the purposes or context of the contract, in C.R. Anthony, 112 N.M. at 508-09, 817 P.2d at 242-43. In C.R. Anthony we followed the modern trend and adopted the contextual approach to contract interpretation, in recognition of "the difficulty of ascribing meaning and content to terms and expressions in the absence of contextual understanding." Id. at 508, 817 P.2d at 242. See also Restatement (Second) of Contracts Sec. 214(c) cmt. b (1979) ("Even though words seem on their face to have only a single possible meaning, other meanings often appear when the circumstances are disclosed."). Without a full examination of the circumstances surrounding the making of the agreement, ambiguity or lack thereof often cannot properly be discerned.

Thus, we held in C.R. Anthony that even if the language of the contract appears to be clear and unambiguous, "a court may hear evidence of the circumstances surrounding the making of the contract and of any relevant usage of trade, course of dealing, and course of performance," in order to decide whether the meaning of a term or expression contained in the agreement is actually unclear. 112 N.M. at 508-09, 817 P.2d at 242-43. The court is no longer restricted to the bare words of the agreement in interpreting the intent of the parties to a contract, but may also consider the context in which the agreement was made to determine whether the party's words are ambiguous.

New Mexico law, then, allows the court to consider extrinsic evidence to make a preliminary finding on the question of ambiguity. The present law in this state concerning the interpretation of ambiguous or unclear language in written agreements may be summarized as follows: An ambiguity exists in an agreement when the parties' expressions of mutual assent lack clarity. C.R. Anthony, 112 N.M. at 509 n. 2, 817 P.2d at 243 n. 2. The question whether an agreement contains an ambiguity is a matter of law to be decided by the trial court. Levenson v. Mobley, 106 N.M. 399, 401, 744 P.2d 174, 176 (1987). The court may consider collateral evidence of the circumstances surrounding the execution of the agreement in determining whether the language of the agreement is unclear. C.R. Anthony, 112 N.M. at 508-09, 817 P.2d at 242-43. If the evidence presented is so plain that no reasonable person could hold any way but one, then the court may interpret the meaning as a matter of law. Id. at 510, 817 P.2d at 244. If the court determines that the contract is reasonably and fairly susceptible of different constructions, an ambiguity exists. Vickers v. North Am. Land Dev., Inc., 94 N.M. 65, 68, 607 P.2d 603, 606 (1980). At that point, if the proffered evidence of surrounding facts and circumstances is in dispute, turns on witness credibility, or is...