T-M Oil Co., Inc. v. Pasquale

• Decision Date: 28 June 1978
• Docket Number: T-M
• Citation: 388 A.2d 82
• Parties: OIL CO., INC., et al. v. Annie E. PASQUALE et al.
• Court: Maine Supreme Court

Page 82

388 A.2d 82

T-M OIL CO., INC., et al. v. Annie E. PASQUALE et al.

Supreme Judicial Court of Maine.

June 28, 1978.

Platz & Thompson, P.A. by Pasquale F. Maiorino (orally), Lewiston, for plaintiffs.

Orestis, Garcia & Young, P.A. by Peter M. Garcia (orally), Lewiston, for intervenor.

Skelton, Taintor & Abbott, P.A. by Bryan M. Dench (orally), John B. Cole, Lewiston, for Annie Pasquale.

Before McKUSICK, C. J., and POMEROY, WERNICK, ARCHIBALD, DELAHANTY and NICHOLS, JJ.

McKUSICK, Chief Justice.

In May 1977 plaintiff T-M Oil Co., Inc. (T-M Oil) commenced this action in Superior Court (Androscoggin County) seeking a declaratory judgment against defendant Annie E. Pasquale adjudicating their relative rights as lessee and lessor, respectively, under a certain "land lease." T-M Oil also sought a temporary restraining order to enjoin Mrs. Pasquale from interfering with plaintiff's rights to the leased premises by leasing to a third party. The temporary restraining order was granted, ¹ and subsequently Fortunato's, Inc., the third party interested in leasing the premises, was permitted to intervene as a party defendant. By agreement of the parties, the declaratory judgment action was tried to a referee. See Rule 53(b), M.R.Civ.P. The Superior Court, over the objections of all parties, ² entered judgment adopting in their entirety the referee's findings that plaintiff T-M Oil and defendant Mrs. Pasquale "are entitled and obligated to execute a lease on the terms and conditions proffered by defendant (Fortunato's, Inc.)" and "that intervenor Fortunato's is without right or valid claim in and to the leased premises." ³ Fortunato's filed the first notice of appeal from that judgment, followed by timely notices of cross-appeal by both T-M Oil ⁴ and Mrs Pasquale. ⁵

We deny the appeal and the cross-appeals.

From the evidence considered by the referee the following somewhat complicated, albeit undisputed, facts appear. In 1967 the Sun Oil Company (Sun) entered into a written lease of a parcel of land at Main Street and Montello Street Extension in Lewiston owned by Anthony and Annie E. Pasquale. ⁶ The initial term of the lease was to run for fifteen years from the date Sun finished certain improvements to the property, including the erection of a gasoline service station. The lease was thereafter automatically renewed for two five-year terms unless Sun gave notice to the contrary. Rent was set at $200 per month for the first fifteen-year term, increasing to $215 per month during the first five-year renewal period and $230 per month during the second renewal period.

Sometime in 1969 the improvements were completed, and in 1973 Sun, which had been granted the right to sublet the premises or assign the lease, sublet the station to John P. Fortunato and his wife, the sole owners of Fortunato's Inc., the intervenor in this proceeding. The Fortunatos operated the station under annually renewed subleases from Sun, the last of which expired June 1, 1977. Prior to that date, namely, on March 1, 1977, Sun assigned all its right, title and interest in the underlying lease to the plaintiff, T-M Oil.

Sometime in the spring of 1977 Fortunato's, Inc. commenced negotiations with the defendant, Mrs. Pasquale, for a new direct lease of the subject premises to commence on June 1, 1977, upon expiration of the Fortunatos' existing sublease from Sun. ⁷ As authority for entering into a new lease running directly to Fortunato's, Inc. from Mrs. Pasquale, and at the same time for terminating the existing lease held by T-M Oil, Mrs. Pasquale and Fortunato's, Inc. relied upon paragraph 7(e) of the original Pasquale-Sun lease. That provision, the proper interpretation of which sparked the present litigation, reads as follows:

"If at any time during the term of this lease or any extension or renewal thereof, the Lessor shall receive a bona fide offer to lease the demised premises, or other property of the Lessor of which the demised premises are a part, for any term including a term to begin subsequent to the present demised term or any extension or renewal thereof, and Lessor desires to accept such offer, the Lessor shall submit to Company a photostatic copy of such offer and the Company shall have thirty (30) days following receipt thereof in which to elect to lease said premises upon the said terms and conditions contained in such offer."

In due course Fortunato's, Inc. made an offer to Mrs. Pasquale to lease the "demised premises" at a rent of $400 per month for an initial term of five years commencing June 1, 1977, followed by two successive automatic renewal periods of five years apiece at accelerated rents. On April 26, 1977, Mrs. Pasquale, in keeping with her reading of paragraph 7(e), transmitted to T-M Oil a photostatic copy of the proposed lease offered to her by Fortunato's, along with a letter indicating her desire to accept the offer. Subsequent communications between the parties, insofar as material to the issues on appeal, are discussed later in this opinion.

I. Meaning of Paragraph 7(e)

The focal point of the parties' disagreement is that language in paragraph 7(e) of the Pasquale-Sun lease which dictates certain consequences if Mrs. Pasquale, the lessor, "at any time during the term or any renewal or extension thereof," wishes to accept a bona fide offer from a third party to lease the premises therein demised "for any term including a term to begin subsequent to the present demised term or any extension or renewal thereof." (Emphasis added) Fortunato's and Mrs. Pasquale insist that the emphasized phrase "for any term" be given its literal meaning, with the result that Mrs. Pasquale may, if T-M Oil does not elect to lease on the same terms within thirty days of notice, make the proposed lease with Fortunato's to commence immediately, notwithstanding the fact that the original lease term has not expired. The referee found that indeed paragraph 7(e) does have the meaning placed upon it by Fortunato's, the lessee hopeful, and by Mrs. Pasquale, the lessor. On this record we cannot say that the referee erred in that interpretation of the disputed lease provision.

Contract language that is unambiguous must be given its plain meaning, and the question of that meaning is purely one of law. E. g., Lewiston Fire Fighters Ass'n, Local 785 v. City of Lewiston, Me., 354 A.2d 154 (1976). However, when the contract language is ambiguous and that ambiguity does not disappear when examined in the context of the other provisions in the instrument, see, e. g., Sun Oil Co. v. Franklin Co., Me., 311 A.2d 269 (1973), it is proper for the factfinder to entertain extrinsic evidence casting light upon the intention of the parties with respect to the meaning of the unclear language. Cf. Fitzgerald v. Baxter State Park Authority, Me., 385 A.2d 189, 197-99 (1978).

In the Pasquale-Sun lease, we cannot say that the disputed paragraph 7(e) is completely free of ambiguity. The phrase "for any term" is immediately followed by the language "including a term to begin subsequent to the present demised term or any extension or renewal thereof." (Emphasis added) That language makes the initial "for any term" phrase open to at least two plausible interpretations. On the one hand, the phrase beginning with "including a term" can be regarded as merely illustrative of the timing of those leasehold estates which may be the subject of a "bona fide offer" to lease. According to that interpretation, the phrase "for any term" would be given the broadest possible meaning and would be only illustrated, and not limited, by the phrase that follows it. On the other hand, however, the word "including" can be read to mean "which includes," an interpretation to some degree supported by the absence of a comma between "for any term" and "including." If read in the latter sense, the "including" phrase would limit the term for which a supervening lease offer could be entertained to only those terms that in length extend beyond the termination date of the original lease's term, plus any extension or renewals thereof. ⁸

Although we have scrutinized the remaining terms of the lease for guidance in interpreting paragraph 7(e), that inquiry has not been of material assistance. True, we can infer from the lease as an entirety that Sun made a substantial investment when it leased the Pasquales' unimproved property and constructed the service station on it. That fact to some extent militates favorably toward plaintiff's contention that Sun would have accepted a provision permitting the divestment of its leasehold at any time only on the condition that the new lease extend in length beyond the maximum remaining term of Sun's leasehold. By contrast, however, the somewhat modest rent set in the original lease supports a construction of paragraph 7(e) as a type of "competitive optional acceleration clause" empowering the lessor at any time during the existing term to escalate the rent upon receipt of a bona fide offer "for any term . . .", which latter phrase, to implement fully the acceleration scheme, must be construed in the way contended for by Fortunato's and Mrs. Pasquale. ⁹

In short, the inherent ambiguity in paragraph 7(e) cannot be resolved from the four corners of the lease itself. Although extrinsic evidence would clearly have been admissible on the question of the parties' intent, none saw fit to offer any such evidence. Lacking any guidance that such evidence might have provided, we see no reason in the present case not to consider our decision controlled by the familiar principle of construction requiring the wording of a written instrument, in the event of ambiguity, to be construed against the drafter of the disputed provision. See, e. g., Lincoln Pulp & Paper Co., Inc. v. Dravo Corp., 436 F.Supp. 262, 270-71 (D.Me.1977); Hills v. Gardiner Savings Institution, Me., 309 A.2d 877, 881 (1973). As we have heretofore made clear:

"The rule that an ambiguous contract...