ATTORNEYS FOR APPELLANT: ATTORNEYS FOR APPELLEES:
J. BRADFORD McILVAIN ROBERT D. MacGILL
JOHN J. HIGSON ANNE C. McGOWN
Dilworth Paxson LLP TERRI L. BRUKSCH
Philadelphia, Pennsylvania Barnes & Thornburg
DAVID B. VORNEHM
RICHARD S. PITTS
Drewry, Simmons, Pitts & Vornehm
IN THE COURT OF APPEALS OF INDIANA
DICK CORPORATION, ) ) Appellant-Plaintiff, ) ) vs. ) No. 29A03-0206-CV-212 ) GORDON H. GEIGER, EDUARDO CALANOG, ) and ALBERT LUCAS, ) ) Appellees-Defendants. )
APPEAL FROM THE HAMILTON SUPERIOR COURT
The Honorable Jerry M. Barr, Judge
Cause No. 29D02-9911-CP-657
Appellants Appendix at 315a.
In November 1998, Qualitech submitted notice in accordance with its credit agreement with its lenders that it was requesting a term loan in the amount of $41,815,790 from which it would prepay the outstanding revolving credit loan of $13,500,000 thereby leaving it with net proceeds of $28,315,790 to pay project costs. In further compliance with the credit agreement, Qualitech prepared a Use of Advance Certificate for its lenders in which it certified that the loan would be used only to pay project costs that had been incurred or were scheduled to be incurred along with supporting documentation. Appellants Appendix at 342a. The lenders refused to fund the November 4 draw request until receiving further information concerning Qualitechs open invoices. On November 13, 1998, a revised draw request was sent to the lenders, which included project costs that had not been paid, including DCs final invoice for $4.399 million. The draw request was still not funded because the lenders again requested more detailed information. A second revised draw request was submitted on November 16, 1998, and on or about November 17, 1998, the lenders wired $28,315,790 to Qualitechs operating account at Mellon Bank.
Despite the designation of the $4.399 million for payment to DC, Qualitech did not make final payment. Aware that Qualitech had received funding, DC wrote in a December 18, 1998 letter to Qualitech that it had been awaiting final payment (excluding pending change orders) for almost three months and that if payment was not received by December 23, 1998, DC would have no choice but to declare Qualitech in default and [to] exercise all available legal remedies to secure and recover the funds due us. Appellees Appendix at 165B. On December 23, 1998, Geiger and Peter Matt of Credit Suisse First Boston met at the Pittsburgh airport with Ken Martin, Roger Peters, Esq., and Ken Burk, all with DC, to discuss Qualitechs financial situation, the outstanding final payment, and efforts Qualitech was taking to arrange payment. The next day, DC sent Qualitech a letter in which it thanked Qualitech for the meeting and its candor concerning its financial situation, declared Qualitech in default, and expressed the desire to resolve the outstanding final contract payment of $4.399 million and open change orders.
Negotiations between the parties occurred in January, and on February 4, 1999, DC sent a letter to Qualitech confirming their agreement with respect to the final contract payment of $4.399 million and payment for the outstanding change orders in the amount of $3 million. DC requested a Qualitech signature on the letter agreement, which Geiger executed and returned to DC. Appellees Appendix at 181-182B. By letter dated February 5, 1999, DC sent its Change Order No. 106 (Settlement Change Order), which confirmed the previous letter agreement. The Settlement Change Order was executed on February 25, 1999 by Qualitech and on March 1, 1999 by DC. Attachment A to the Settlement Change Order contains four paragraphs, one of which is a mutual release of claims and three of which provide for payment in the event of: 1) Qualitechs continued operation; 2) Qualitechs sale of the business or assets and/or additional investment; and 3) Qualitechs bankruptcy.
Qualitech filed for bankruptcy on March 22, 1999. DC submitted a claim for over $7 million, which amount represents the $4.399 million final payment and the $3 million change order agreement less the total amount of $550,000 paid by Qualitech in February 1999. See footnote Qualitech does not dispute the claim, and the bankruptcy court has not confirmed a final plan.
On November 12, 1999, DC filed its complaint against Defendants alleging constructive fraud, conversion, and negligent misrepresentation. Defendants subsequently filed their motion for summary judgment, and following a hearing on May 9, 2002, the trial court granted summary judgment in favor of Defendants on DCs conversion claims and denied them summary judgment on the constructive fraud claim.
Appellees Appendix at 188B. Attachment A to the Settlement Change Order establishes
the funding mechanism for the parties revised agreement. It provides the method
of payment under the following three scenerios: 1) Qualitechs continued operation; 2)
Qualitechs sale of the business or assets and/or additional cash investment; and 3)
Qualitechs filing of bankruptcy. Appellants Appendix at 189B. The fourth paragraph
of Attachment A containing the release specifically provides: The execution by Qualitech
and Dick of a mutual release of any and all claims relating to
this Project excluding a release of Qualitechs obligations included in this letter agreement
and a release of Dick Corporations warranty obligations. Appellants Appendix at 189B.
This provision contemplated a separate release, which was contained in the Settlement
The third paragraph of Attachment A to the Settlement Change Order provided that if Qualitech filed for bankruptcy, it would acknowledge DCs claim for outstanding amounts due under the Settlement Change Order. Defendants initially argue that they did not dispute or object to DCs $7,014,602.55 bankruptcy claim. Therefore, they maintain that Qualitech acknowledged its payment obligations as contemplated by the Settlement Change Order. They further argue that the plain and unambiguous language of the release provisions establish the parties intent to mutually release the other party, subject only to Qualitechs obligation to pay DC the $4.399 million contract price plus the additional $3 million for change orders. According to Defendants, reading the release provisions together establishes that the parties intended only to exclude Qualitech Steels payment obligations from the scope of the release, not to make payment a condition precedent to the release. Appellees Brief at 37 (emphasis in original). Defendants thus contend that the parties did not intend the mutual release to be conditioned upon actual payment and that it is error to read the release in a way that makes payment a condition precedent.
DC, by contrast, maintains that the release language is written so as to create the express condition of DCs receipt of payment from Qualitech. DC states that Defendants interpretation of the release provisions is inconsistent with the plain language of the release. The plain and unambiguous provisions of the Settlement Change Order, according to DC, establish that the release was expressly conditioned on the satisfaction of the obligations of Qualitech to pay Dick as set forth in Attachment A. Appellees Appendix at 188B. It is undisputed that Qualitech did not pay DC pursuant to the scheduled payment structure for the change orders in the first paragraph of Attachment A with the exception of $350,000 paid in February 1999. Therefore, DC claims the condition precedent to the release was not satisfied. The release did not become effective until Qualitech made the scheduled payments as specified in Attachment A, which it did not.
The courts of this state have a long tradition of recognizing and respecting the freedom to contract. Our courts have consistently expressed their commitment to advancing the public policy supporting the enforcement of contracts. Zollman v. Geneva Leasing Assocs Inc., 780 N.E.2d 387, 391 (Ind. Ct. App. 2002) (citing Trimble v. Ameritech Publg, Inc., 700 N.E.2d 1128, 1129 (Ind. 1998); Fresh Cut, Inc. v. Fazli, 650 N.E.2d 1126, 1129 (Ind. 1995); Candlelight Props. LLC v. MHC Operating Ltd. Pship, 750 N.E.2d 1, 10 (Ind. Ct. App. 2001), trans. dismissed). There is a very strong presumption of enforceability of contracts representing the freely bargained agreement of the parties. Id. (citing Trotter v. Nelson, 684 N.E.2d 1150, 1152 (Ind. 1997); Contl Basketball Assn, Inc. v. Ellenstein Enters. Inc., 669 N.E.2d 134, 139 (Ind. 1996)). This principle is based upon the rationale that it is in the best interest of the public for courts not to unnecessarily restrict the freedom to contract. Id. at 392. Further, Indiana has long allowed contracting parties to enter into any agreement they desire so long as it is not illegal or against public policy. Id. (citing Cowper v. Collier, 720 N.E.2d 1250, 1255 (Ind. Ct. App. 1999)).
The standard of review for reviewing a contract on appeal is well established. In most cases, the intent of the parties to a contract is to be determined by the four corners of the contract. Keithleys Auction Serv. v. Children of Jesse Wright, 579 N.E.2d 657, 659 (Ind. Ct. App. 1991). Where the language of an instrument is unambiguous, we give effect to the intentions of the parties as expressed in the four corners of the document. Art Country Squire, L.L.C. v. Inland Mortgage Corp., 745 N.E.2d 885, 889 (Ind. Ct. App. 2001); Orme v. Estate of Kruwell, 453 N.E.2d 355, 356 (Ind. Ct. App. 1983). Clear, plain, unambiguous terms are conclusive of that intent. Art Country Squire, 745 N.E.2d at 889. We will neither construe clear and unambiguous provisions nor add provisions not agreed upon by the parties. Id. The meaning of a contract is to be determined from an examination of all of its provisions, not from a consideration of individual words, phrases, or even paragraphs read alone. Id.
If an ambiguity arises because of the language used in a contract and not because of extrinsic facts, construction of the contract is purely a question of law to be resolved by the court. Merrillville Conservancy Dist. ex rel. Bd. of Dirs. v. Atlas Excavating, Inc., 764 N.E.2d 718, 724 (Ind. Ct. App. 2002) (citing First Fed. Sav. Bank v. Key Markets, 559 N.E.2d 600, 603 (Ind. 1990)). An ambiguous contract will be construed against the party that drafted it. Id. (citing Keithleys, 579 N.E.2d at 659). However, the terms of a contract are not ambiguous simply because a controversy exists between the parties concerning the proper interpretation of terms. Ostrander v. Bd. of Dirs. of Porter County Educ. Interlocal, 650 N.E.2d 1192, 1196 (Ind. Ct. App. 1995), trans. denied.
At issue here is the construction of a release provision. A separate release agreement is a species of contract that surrenders a claimants right to prosecute a cause of action. Zollman, 780 N.E.2d at 392. Our supreme court has stated that upholding releases serves an important public policy because it facilitates the orderly settlement of disputes. Id. (quoting Prall v. Indiana Natl Bank, 627 N.E.2d 1374, 1377 (Ind. Ct. App. 1994)). Interpretation of a release, like any other contract, is determined by the terms of the particular instrument, considered in light of all facts and circumstances. Id. (citing Prall, 627 N.E.2d at 1377). Absent an ambiguity, release provisions are interpreted as a matter of law, and we look only to the instrument to ascertain the parties intent. Id. If the contract is ambiguous and the ambiguity arises from extrinsic facts and a genuine issue exists as to those facts, summary judgment is inappropriate. Id.
Here, DC does not argue that the release provision was ambiguous. Further, there is no evidence in the record before us on appeal that the bargaining between the parties was not free and open. Instead, the record reveals that both DC and Defendants were sophisticated parties and were adequately represented by legal counsel during the arms-length negotiation of the release. Nonetheless, the parties on appeal disagree as to whether the release was meant to exclude the payment obligation or whether payment was a condition precedent to the release.
If judges could interpret a release to mean something that is contrary to the plain language because one party intended for it to mean something else, then parties would be discouraged from signing releases because they could not have confidence that a court would enforce the releases plain language. Id. at 393 (quoting Estate of Spry v. Greg & Ken, Inc., 749 N.E.2d 1269, 1275 (Ind. Ct. App. 2001)). Our paramount goal is to ascertain and give effect to the intent of the parties as reasonably manifested by the language of the agreement. Id.
The plain and ordinary language of the release establishes that payment was not a condition precedent to the effectiveness of the release. The language of release as contained in Attachment A provides that the execution of a mutual release of claims would exclude only Qualitechs obligations included in the letter agreement (i.e., its obligation to pay the contract price) and DCs warranty obligations. The scope of release is therefore everything except these two events. The language of release in the Settlement Change Order states that the release is [s]ubject only to the obligations of Qualitech to pay DC as set forth in Attachment A and DCs warranty obligations. Appellees Appendix at 188B. The Settlement Change Order with Attachment A became an amendment to the parties agreement with the purpose to limit what was in dispute with respect to the outstanding change orders and to establish a payment mechanism. Construing these documents together, the release was intended only to exempt from release the payment obligation of Qualitech. Given the language subject only to the obligations . . . to pay and excluding a release of Qualitechs obligations, the parties did not intend the release to be conditioned upon actual payment by Qualitech. No other language in the release contradicts the notion that the parties intended to exclude Qualitechs payment obligations from the scope of the release and instead make payment a condition to the release.
We further note that DC used the Settlement Change Order to its advantage by relying upon the amount Qualitech still owed DC under the negotiated agreement when filing its claim for over seven million dollars in the bankruptcy court. In negotiating the Settlement Change Order, the parties considered the possibility of Qualitechs bankruptcy and pursuant to the third paragraph of the Settlement Change Order agreed that if Qualitech filed bankruptcy it would acknowledge a claim for the unpaid amount (i.e., acknowledge its obligation to pay). Qualitech has not disputed this claim. Because DC pursued its right to payment in the bankruptcy court by relying upon the Settlement Change Order, DC cannot now consistently maintain that Qualitechs failure to pay amounted to a breach of the agreement.
Given the clear and unambiguous provisions of the Settlement Change Order and the importance of the public policy underlying release provisions, we conclude that the release is effective. Moreover, given that we may not rewrite the contract for the parties and will apply contractual provisions according to their plain language, we hold that the release provision is fully applicable and that the trial court should have properly applied the release in its summary judgment determination to find that all claims had been released. Accordingly, that portion of the summary judgment order granting summary judgment to Qualitech on the conversion claims is affirmed; that portion of the order denying summary judgment to Qualitech on the constructive fraud claim is reversed, and this cause is remanded to the trial court with instructions to enter summary judgment in favor of Defendants on this claim.
Affirmed in part, reversed in part, and remanded for further proceedings consistent with this opinion.
ROBB, J., and BAILEY, J., concur.