Unpublished Disposition, 908 F.2d 977 (9th Cir. 1990)

MEMORANDUM^* 

Appellant Transamerica Development Corporation ("Transamerica") appeals the district court's decision granting summary judgment as to its causes of action based on breach of contract, bad faith denial of the existence of a contract, fraudulent inducement, and fraudulent concealment. We affirm.

* This case turns largely upon the interpretation of the term "continue." The agreement in question provides that

Intermark shall have no obligation to pay ... if the transaction is not closed within two (2) years of the date of this Agreement, or such later date as we might agree upon in writing if after this period discussions continue.

(Emphasis added.) Transamerica argues that this single word (continue), in the context of the additional language, was intended to convey two meanings. First, it was intended that if ongoing negotiations failed to result in a closed transaction within the two-year term, an extension could be agreed upon to allow for the additional time necessary for the transaction to be closed. Therefore, in this case, if Intermark and GAC were actually engaged in negotiations between March 1981 and January 1983, this provision would apply.

As we have held,

to withstand a motion for summary judgment, the non-moving party must show that there are 'genuine factual issues that properly can be resolved only by a finder of fact because they may reasonably be resolved in favor of either party.'

California Architectural Bldg. Products, Inc. v. Franciscan Ceramics, Inc., 818 F.2d 1466, 1468 (9th Cir. 1987), cert. denied, 108 S. Ct. 698 (1988) (emphasis in original) (quoting Anderson v. Liberty Lobby, Inc., 106 S. Ct. 2505, 2511 (1986) (emphasis added)). However, Transamerica has offered very little evidence to indicate that there were ongoing negotiations between Intermark and GAC during this period. In fact, Transamerica's only evidence consists of Vaz's claim that both Hallwyler and Lee admitted to him over the telephone in August 1983 that negotiations had been going on prior to the expiration of the agreement. On the other hand, both Hallwyler and Lee deny Vaz's claim. They, like everyone else actually involved in the transaction, contend that no negotiations occurred between GAC and Intermark until March 1983. Telephone records for Intermark also indicate that there were no telephone communications between the two parties during the period in question. In fact, during this period, two other corporations were negotiating with GAC. Intermark suggests that Hallwyler and Lee may have referred to the extensive period in which GAC had been involved in negotiations with these prior suitors and that Vaz misinterpreted them to be referring to Intermark.

"No longer can it be argued that any disagreement about a material issue of fact precludes the use of summary judgment." Id. Based on the evidence presented, we cannot say that the issue of whether there were ongoing negotiations "may reasonably be resolved in favor of either party."

The second meaning Transamerica attributes to the term "continue" does not depend on Transamerica's ability to show that there were ongoing negotiations. Rather, the term would also apply to a situation where negotiations had broken off prior to the end of the two-year period but were resumed within a reasonable time after that period. Therefore, even assuming Intermark and GAC did not communicate with each other between Intermark's initial investigation in March 1981 and March 1983, two months after the expiration of the agreement's stated two-year period, the provision would apply as their discussion had "continue [d]." Not surprisingly, Intermark contests this second meaning attributed to the term "continue" and argues that unless there were ongoing negotiations at the end of the two-year period, the agreement expired by its own terms.

The finder's fee agreement provides that California law shall govern disputes such as this one. Under California law,

[t]he interpretation of a written instrument, even though it involves what might properly be called questions of fact (see Thayer, Preliminary Treatise on Evidence, pp. 202-204), is essentially a judicial function to be exercised according to the generally accepted canons of interpretation so that the purposes of the instrument may be given effect. (See Civ.Code, Secs. 1635-1661, Code Civ.Proc., Secs. 1856-1866.) Extrinsic evidence is 'admissible to interpret the instrument, but not to give it a meaning to which it is not reasonably susceptible' [citations], and it is the instrument itself that must be given effect. (Civ.Code, Secs. 1638, 1639; Code Civ.Proc., Sec. 1856.) It is therefore solely a judicial function to interpret a written instrument unless the interpretation turns upon the credibility of extrinsic evidence.

Parsons v. Bristol Develop. Co., 62 Cal. 2d 861, 865, 44 Cal. Rptr. 767, 770, 402 P.2d 839, 842 (1965) (citations omitted).

Apparently, the district court in this case rejected Transamerica's second interpretation. In reviewing the district court's interpretation of a contract,

[a]n appellate court will accept or adhere to the interpretation of a contract adopted by a trial court where parol evidence was introduced in aid of its interpretation; where the evidence is conflicting and supports the trial court's construction; or where the trial court's interpretation appears to be consistent with the intent of the parties. Moreover, in such cases the reviewing court will not substitute another interpretation, though the other interpretation seems equally tenable.

14 Cal.Jur., Contracts Sec. 153 at p. 392 (1974).

The primary goal in contract interpretation is to ascertain the true intent of the parties as it existed at the time of contracting. Id. at 406-07. Where the parties' mutual intention is clearly expressed on the face of the written agreement it will be followed. Id. at 408. However, where the agreement is ambiguous on its face,

the court will look at the situation and motives of the parties making the agreement, its subject matter, and the object to be attained by it, and will allow these circumstances to be shown by parol evidence notwithstanding the contract is in writing.

Id. In fact, in making its initial determination of whether or not a written agreement is ambiguous,

the court may consider all credible evidence offered to prove the intention of the parties, including testimony as to the circumstances surrounding the making of the agreement, such as the object, nature and subject matter of the writing, so that the court can place itself in the same situation at which the parties found themselves at the time of contracting. In other words, the ambiguity which permits the introduction of extrinsic evidence may itself be exposed by a preliminary consideration of extrinsic evidence.

Id.

Here, as the district court made no oral or written findings in granting summary judgment, it is unclear whether the court determined that the agreement was unambiguous or rather that, although it was ambiguous, Intermark's interpretation was the one intended by the parties at the time they entered into the agreement. However, in either event, we affirm the district court's judgment.

In reaching its determination, the district court presumably considered Vaz's declaration introduced in opposition to Intermark's motion for summary judgment. Vaz acknowledges that he added the language in question, but claims that he was revising the agreement, pursuant to a previous telephone conversation with Kramers, to provide for the negotiation of an extension of the agreement even if there were no previous or ongoing discussions but discussions did begin within a reasonable time after the two-year period.

Transamerica argues that Vaz's claim is actually supported by his use of the word "continue." Webster's Third New World Dictionary defines this word as follows:

1a: to be steadfast or constant in a course or activity: keep up or maintain esp. without interruption a particular condition, course, or series of actions ... b: to keep going: maintain a course, direction, or progress ... 2: to be permanent or durable: remain in existence: endure, last ... 3: to remain in a place or condition ... abide, stay ... 4: to proceed to discourse esp. after intermission ...

As Transamerica notes, the accepted definitions include one consistent with its position, namely: "4: to proceed to discourse esp. after intermission." It is noteworthy, however, that the other definitions (three of the four given for the intransitive form of the word) seem to support Intermark's position.

The most common meaning of the word "continue"--that which first comes to mind--is most consistent with the concept of ongoing, uninterrupted discussions. Additionally, it is unlikely that the parties would rely on this single word within the added language to provide for both situations for which Transamerica argues negotiations would be required. In fact, substituting the word "resume," which Transamerica argues is synonymous with its use of the word "continue," illustrates the implausibility of this use of the word in the agreement, as the added language then appears to require further explanation. On the other hand, when the word as used in the agreement is understood as consistent with its other definitions, it requires no further explanation.

Moreover, Transamerica's interpretation would render the two-year provision meaningless as there would be no requirement that anything have occurred within two years, but only that discussions occur within some reasonable period of time longer than two years. On the other hand, under Intermark's interpretation, if no discussions had occurred or if previous discussions had broken off within the two-year period, the agreement would expire. This interpretation gives meaning to the two-year language in the agreement and is more plausible given the concerns of the two parties.

Although Transamerica clearly desired to extend Intermark's liability for as long a period as possible, given its concern that "negotiations for the acquisition of companies can sometimes take years before there is a deal consummated," Intermark just as clearly did not want to be bound indefinitely. Consistent with its concerns, Intermark initially proposed a set nine-month period. In response to Transamerica's complaints, it revised the agreement to provide for a set period of two years. Transamerica then voiced its concern that negotiations might take longer than two years to culminate in a closed transaction. Intermark's interpretation represents the most plausible compromise between these conflicting concerns.

Further, California courts have held that " [i]n cases of uncertainty ..., the language of a contract should be interpreted most strongly against the party who caused the uncertainty to exist." 1 Witkin, Summary of California Law, Contracts Sec. 698, at p. 631 (9th ed. 1987) (emphasis in original). Transamerica admits that it was responsible for the language in question. Its Chief Executive Officer, Vaz, was an experienced businessman who added the language so as to protect Transamerica's interests. Transamerica should not benefit from the uncertainty resulting from its own imprecision in drafting this language.

Because the finder's fee agreement, as correctly interpreted by the district court, did not provide for the negotiation of an extension where there were no ongoing discussions at the end of the set two-year period, the agreement had, in fact, expired at the time Intermark contacted GAC. Therefore, there was no obligation on the part of Intermark to negotiate an extension of the agreement with Transamerica, and there is no basis for estopping Intermark from relying on the limitations of the agreement.

II

Transamerica also argues that the district court erred in granting summary judgment with respect to its cause of action for bad faith denial of the existence of a contract and "stonewalling." This argument also fails.

Transamerica states that it is not alleging a cause of action for the bad faith breach of the covenant of good faith and fair dealing; rather, its cause of action is actually for two separate torts: (a) adopting a "stonewall" position without probable cause and with no belief in the existence of a defense; and (b) bad faith denial of the existence of a contract to negotiate for an extension of the finder's fee agreement. However, Transamerica failed to articulate its second cause of action as two separate torts before the district court. We have held that as a general rule we will not consider an issue raised for the first time on appeal. Bolker v. Commissioner, 760 F.2d 1039, 1042 (9th Cir. 1985).

Moreover, Transamerica gains nothing in dividing its cause of action. Its "stonewalling" argument, that Intermark adopted an unmeritorious defense in bad faith to justify its purposely failing to inform Transamerica of its negotiations with GAC, fails because Intermark's defense is actually meritorious. Bad faith should not be presumed from a litigant's adoption of a reasonable interpretation under such circumstances.

Transamerica's claim that Intermark denied in bad faith the existence of a contract to negotiate for the extension of the finder's fee agreement also fails. As described above, the agreement had expired by its terms prior to the time at which Intermark contacted GAC; therefore, there was no binding agreement in existence requiring Intermark to inform Transamerica and to negotiate an extension. Additionally, Transamerica has failed to introduce any evidence of bad faith. Transamerica does not claim that Intermark denied the existence of an original finder's fee agreement, but rather that it denied the existence of a separate, severable contract requiring it to negotiate an extension of the original agreement. Under Intermark's interpretation of the original agreement, it had expired and Intermark had no further obligation with respect to Transamerica. Consequently, its denial of the existence of a separate contract requiring it to negotiate an extension to the original agreement should hardly support a finding of bad faith.

Further, within nine days of the telephone conversation between Vaz and Kramers, Woodbury, Intermark's general counsel, sent a letter to Vaz acknowledging the existence of a mechanism for extending the original agreement but contending that the effective period of the entire agreement had expired prior to Intermark's negotiations with GAC. Consequently, Transamerica can hardly claim that it was harmed by Intermark's denial of the existence of an agreement to negotiate for the extension of the finder's fee agreement.

III

Transamerica further argues that Intermark fraudulently induced it to enter into an oral agreement and to perform thereunder in disclosing GAC's identity. Transamerica claims that Intermark never intended to pay the finder's fee and that it reduced the oral agreement to writing merely to lull Transamerica into a sense of complacency. This claim lacks merit as Transamerica has failed to introduce any evidence of fraudulent intent. In fact, in putting the agreement in writing, Intermark agreed to extend the duration of the agreement from nine months to two years and to negotiate a further extension if ongoing negotiations had failed to culminate in a closed transaction by the end of the two-year period. Intermark had not yet contacted GAC at this point; it can hardly be assumed that it anticipated delaying any discussions with GAC for over two years at the time it entered into the oral or written agreements.

Further, given the total cost of the transaction ($9.4 million) and the fact that two other corporations were negotiating for the purchase of GAC during the two-year period, it is highly unlikely that Intermark would risk the opportunity to purchase GAC merely to avoid paying a $150,000 finder's fee.

IV

Finally, Transamerica argues that Intermark fraudulently concealed the fact that it had begun negotiations with GAC and that they had resulted in a closed transaction. However, given the fact that the agreement had expired and that there is no evidence of Intermark fraudulently inducing Transamerica to enter into the agreement, there is no basis for imposing a duty on Intermark to disclose the fact of its negotiations or the consummation of the acquisition of GAC.

AFFIRMED.