Ingram v. Century 21 Caldwell Realty , 52 Ark. App. 101 ( 1996 )

James R. 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.

1 The dissenting opinion makes much of the absence of an explicit determination by the trial court that the agreement was ambiguous. However, it clearly appears from the record that the trial judge overruled the objection and allowed testimony concerning the intent of the parties into evidence. Had the appellant desired an express statement of the trial court’s conclusion concerning the ambiguity of the agreement, he could have requested one pursuant to Ark. R. Civ. P. 52(a). Our review of the record discloses no such request. We will therefore indulge the long-standing presumption that the trial court acted properly and made the findings necessary to support its judgment. See Kindrick v. Capps, 196 Ark. 1169, 121 S.W.2d 515 (1938); see generally First National Bank v. Higginbotham Funeral Service, Inc., 36 Ark. App. 65, 818 S.W.2d 583 (1991) (Cracraft, J., dissenting).

2 The dissenting judge argues that the agreement is not ambiguous because, by its terms, the appellant could be terminated only for failure to act in good faith in protecting the assets and reputation of the corporation. The fallacy of this view appears on the face of the agreement, which expressly permits termination during 1988 for gross mismanagement. While the essence of “good faith” is honesty of intention and best efforts, see McEwen v. Everett, 6 Ark. App. 32, 637 S.W.2d 617 (1982); Black’s Law Dictionary 822 (4th ed. 1968), “mismanagement” encompasses poor performance or incompetence without regard to the actor’s intent. See Webster’s New Collegiate Dictionary 729 (1973). The distinction between these terms is elementary.

Although neither term is nebulous, ambiguity may arise by means other than indistinctness or uncertainty of meaning; for example, ambiguity may also result where the clear wording of conflicting clauses seem to indicate inconsistent results. See, e.g., Williams v. City of Pine Bluff, 284 Ark. 551, 683 S.W.2d 923 (1985); Smith v. Smith, 229 Ark. 579, 317 S.W.2d 275 (1958). The ambiguity of the agreement in the case at bar is of the latter sort.