Kraatz v Heritage Imports et al

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IN THE UTAH COURT OF APPEALS

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William Anthony Kraatz,

Plaintiff, Appellant, and Cross-appellee,

v.

Heritage Imports, a Utah corporation dba Heritage Honda; O. Bryan Wilkinson; and Jeffrey J. Wilkinson,

Defendants, Appellees, and Cross-appellants.

MEMORANDUM DECISION

(Not For Official Publication)

Case No. 971044-CA

F I L E D

(March 11, 1999)

1999 UT App 070

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Third District, Salt Lake Department

The Honorable J. Dennis Frederick

Attorneys: Kent B. Linebaugh, Michael N. Zundel, and Jennie B. Garner, Salt Lake City, for Appellant

Donald J. Winder and Jennifer L. Falk, Salt Lake City, for Appellees

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Before Judges Bench, Billings, and Davis.

BENCH, Judge:

When interpreting a contract, the court first determines, as a matter of law, whether the contract is ambiguous. See Interwest Constr. v. Palmer, 923 P.2d 1350, 1358 (Utah 1996). "'A contract provision is ambiguous if it is capable of more than one reasonable interpretation because of "uncertain meanings of terms, missing terms, or other facial deficiencies."'" Id. at 1359 (quoting Winegar v. Froerer Corp., 813 P.2d 104, 108 (Utah 1991) (quoting Faulkner v. Farnsworth, 665 P.2d 1292, 1293 (Utah 1983))). The court may consider extrinsic evidence only if the contract is ambiguous. See id.

Here, the trial court determined that the contract was "ambiguous as to the skills and experience [Kraatz] was to provide as general manager of the Dealership to develop and maintain the dealership." The trial court then heard extrinsic evidence "to clarify the intentions of the parties with respect to the skills, personality traits and management skills [Kraatz] was to provide as general manager." However, in the recitals of the agreement, the parties recognized that Kraatz already possessed all the necessary skills and traits to be a general manager: "WHEREAS, [Kraatz] has skills, personality traits and management skills, which are conducive to development and maintenance of such interpersonal relations, management of personnel, financing and sales and operating an automobile dealership." (Emphasis added.) Thus, the trial court did not need to hear extrinsic evidence to determine whether Kraatz had the requisite skills, personality traits, and management skills to manage the business.

Furthermore, in Article I of the contract, the parties detailed Kraatz's duties as general manager:

(a) [Kraatz] shall be employed as General Manager . . . and shall provide day-to-day management over the operations of the Dealership . . . . [Kraatz] shall have responsibility and authority over all aspects of the daily operations.

(b) The duties of [Kraatz] shall include, but not be limited to, the responsibility to provide management training to persons selected by [Heritage] to enable said persons to become qualified dealers or managers acceptable to American Honda, Incorporated. . . .

(c) [Kraatz] shall contribute his best professional skill to perform the Services at all times for the business and benefit of [Heritage.]

In view of the clear provisions of the contract, we hold that the trial court erred in determining the contract is ambiguous.

When "the language of the contract is unambiguous, 'then the parties' intentions must be determined solely from the language of the contract.'" Taylor v. Hansen, 958 P.2d 923, 928 (Utah Ct. App. 1998) (quoting Ward v. Intermountain Farmers Ass'n, 907 P.2d 264, 268 (Utah 1995)). Also, "'the ordinary and usual meaning of the words used is given effect.' The ordinary meaning of contract terms is often best determined through standard, non-legal dictionaries." Warburton v. Virginia Beach Fed. Sav. & Loan, 899 P.2d 779, 782 (Utah Ct. App. 1995) (quoting Berman v. Berman, 749 P.2d 1271, 1273 (Utah 1988)).

Here, the contract obligated Heritage to pay Kraatz for five years. Article II of the contract provides that Heritage could terminate Kraatz only for fraud, dishonesty, refusal "to fulfill his employment responsibilities described in Article I of this Agreement," or disability. The trial court concluded that "given the language [in Article I] requiring the performance of the service, the interpretation of refusal consistent with this paragraph is that [Kraatz]'s failure to perform the services under the Agreement is a breach of the Agreement and constitutes cause for termination." We disagree. Under its plain meaning, "refuse" means "to show or express a positive unwillingness to do or comply with." Webster's Third New Int'l Dictionary 1910 (1986). Kraatz did not refuse to do anything specified in Article I. Although the trial court found that Heritage fired Kraatz for his "refusal to work Saturdays when scheduled by B. Wilkinson," the contract expressly provided that Kraatz "shall have responsibility and authority over all aspects of the daily operations." Nothing in the contract suggests that anyone other than Kraatz would have authority to set work schedules. Thus, Kraatz's refusal to work Saturdays is not cause for his termination.

Our conclusion remains the same even if we depart from the plain meaning of "refuse" and accept the trial court's interpretation that "refuse" means "fail." "Failure" means "omission of performance of an action or task; [especially]: neglect of an assigned, expected, or appropriate action." Id. at 815. The trial court found that Heritage fired Kraatz for numerous failures. For example, the trial court determined that Heritage fired Kraatz for "failure to make a profit." However, the contract provides simply that the general manager "shall provide day-to-day management over the operations of the Dealership" and "shall have responsibility and authority over all aspects of the daily operations." The duties of a general manager, as specified in the contract, do not include making a profit.

The trial court stated that Kraatz admitted that his duties included making a profit. A close reading of the record, however, shows that Kraatz's response to the profitability question was consistent with his contractual duties as general manager.

Q: [The general manager is] responsible for the production of income from the dealership, right?

A: Overseeing those people that generate the sales within the dealership, I think it's his responsibility, yes.

Thus, the contract does not authorize Heritage to terminate Kraatz for cause for failing to make a profit.

The trial court also found that Heritage fired Kraatz for his "failure to train J. Wilkinson and Jeff Gorringe." The contract expressly provides that "[t]he duties and responsibilities of [Kraatz] shall include, but not be limited to, the responsibility to provide management training to persons selected by [Heritage] to enable said persons to become qualified dealers or managers acceptable to American Honda, Incorporated." The record contains no evidence suggesting that J. Wilkinson or Jeff Gorringe were unacceptable to American Honda, Incorporated. Further, even if Kraatz had, up to that point, failed to train the named individuals according to Honda's standards, he still had thirty-three months left on his contract to complete the training. Although the record shows that J. Wilkinson may have been difficult to train, it does not reflect that Kraatz failed to train him during the contract term. Thus, failure to train is not cause for termination.

We have considered Heritage's cross-appeal and the other reasons mentioned as cause for termination, and conclude, as a matter of law, that they have no merit. See Duncan v. Howard, 918 P.2d 888, 895 (Utah Ct. App. 1996) (noting court may decline to address arguments without merit on appeal).

We hold that the trial court erred in considering extrinsic evidence because the language of the contract is unambiguous. Our review of the record reveals no evidentiary basis for terminating Kraatz for cause. We therefore reverse and remand for a determination of Kraatz's damages under the contract, including reasonable attorney fees.

Russell W. Bench, Judge

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WE CONCUR:

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Judith M. Billings, Judge

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James Z. Davis, Judge