Bergkamp v. Carrico ( 1980 )

BAKES, Justice.

This is an appeal from an order granting summary judgment in favor of defendant respondents. We reverse.

In July of 1974 plaintiff appellants Bergkamps, for brevity referred to herein as lessees, entered into a written lease agreement with Gruener, Inc., hereinafter referred to as lessor, whereby the lessees obtained a leasehold interest in lessor’s property, commonly known as the “Alpine Club,” a restaurant in Ketchum, Idaho. The lease contained a variety of standard provisions, including an option to renew for an additional five years after the original term of five years expired. A final paragraph in the lease is the heart of this controversy:

“21. Termination on Sale. If the premises, or the controlling stock in Gruener, Inc., the owner, shall be sold to anyone other than George Spence, John Thornton and Cliff Noxon or any of them or to a group of which one of them is a member, then this lease may be terminated by notice in writing by the new owner or owners, such termination to take effect twelve (12) months after said notice. Upon such termination the Lessee shall receive the sum of $10,500.00, as reimbursement for his additions and improvements.

“Lessee shall further receive the reasonable value of his inventory based on its value used on the premises; Lessee shall also receive 12V2% of gross sales in excess of $60,000.00 for the twelve (12) months prior to the effective termination date. If the parties cannot agree to the inventory value, it shall be determined by arbitration.”

Elizabeth Gruener, sole stockholder of Gruener, Inc., did in fact sell Gruener, Inc., in November, 1974, to Spence, Thornton & Noxon, who thereafter changed the name of the corporation to SNT, Inc. In June, 1976, SNT in turn sold the Alpine Club to the Carricos, defendant respondents. On May 26, 1977, Carricos sent a letter to Bergkamps advising them that they were terminating the lease pursuant to paragraph 21. The Carricos in turn sold to defendant respondents Michael and Karin Martin on November 8, 1977. On November 10, 1977, the Martins sent a letter to the Bergkamps, lessees, again purporting to terminate the lease.

In December, 1977, the Bergkamps filed a complaint in district court seeking: (1) damages for unjust enrichment resulting from Bergkamps’ improvements and from breach of the lessors’ covenant of quiet enjoyment; and/or (2) a declaratory judgment that the lease could not be terminated.

The parties stipulated to the factual background of the case, and agreed that the court could on cross motions for summary judgment determine the issue of interpretation of the disputed paragraph 21. The parties requested a declaratory judgment which would determine whether the defendants had the right to terminate the lease. Holding paragraph 21 of the lease agreement to be unambiguous, the district court construed it unfavorably against the lessee and entered a decree cancelling the lease.

The intended meaning of paragraph 21 is not apparent on its face. Its provisions are susceptible to differing interpretation. It can just as easily be read to imply a continuing reservation in any subsequent owner of the power to terminate the lease as it can be read to imply a limited reservation in certain parties only.

Where the terms of a contract are ambiguous, its interpretation and meaning is a question of fact and extrinsic evidence may be considered in attempting to arrive at the true intent of the contracting parties. Roberts v. Hollandsworth, 582 F.2d 496 (9th Cir. 1978); Werry v. Phillips Petroleum Co., 97 Idaho 130, 540 P.2d 792 (1975); Ridley v. VanderBoegh, 95 Idaho 456, 511 P.2d 273 (1973). Moreover, the court must try to discover that intent and may scrutinize circumstances surrounding the contract’s formation. Transamerica Leasing Corp. v. Van’s Realty Co., 91 Idaho 510, 427 P.2d 284 (1967).

Resolution of this ambiguity issue requires further proceedings in which oral and documentary evidence may be presented on the question of the true intent of the parties at the time of the execution of the contract.

The cause is reversed and remanded to the district court for further proceedings consistent herewith. Costs to appellants. Any award of attorney fees to abide final determination in the district court.

DONALDSON, C. J„ and SHEPARD, J, concur.