Angus Realty v. Exxon Corporation CV-92-304-B 08/11/93

UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF NEW HAMPSHIRE

Angus Realty Corporation

v. Civil No. 92-304-B

Exxon Corporation

O R D E R

In this diversity action, plaintiff Angus Realty Corporation

("Angus") seeks, among other things, specific performance of a

contract under which defendant Exxon Corporation ("Exxon") was

given an Option to purchase certain real property from Angus.

The Complaint is in three Counts: Count I alleges that Exxon

terminated the contract without cause or justification; Count II

claims that Exxon breached the contract by failing to appear in

the New Hampshire Supreme Court to contest an appeal brought by

an entity not a party to the contract; and Count III asserts that

Exxon's termination was in bad faith. Two motions are pending at

this juncture: Exxon's Motion for Summary Judgment and Angus'

Cross-Motion for Summary Judgment on Count II. For reasons

discussed below, I grant Exxon's motion for summary judgment as to Count II but deny the motion as to Counts I and III. Angus'

motion for summary judgment is also denied.

I. BACKGROUND

The facts relevant to the disposition of these motions are

as follows. On March 8, 1991, Exxon entered into an Option to

purchase real property located in Salem, New Hampshire, from

Angus for the purpose of constructing a service station and

convenience store. Kenny Aff. 5 2.1 The purchase price was

1Section one of the Option provides in pertinent part:

If the Zoning Approvals and the Permit Approvals are denied or are not granted within one hundred eighty (180) days after Exxon's exercise of the Option, or, if granted, the Zoning Approvals or the Permit Approvals contain any gualification or condition which is not acceptable to Exxon, Exxon may at its election either:

(a) commence and prosecute appeals or other proceedings to contest such denial, gualification, or condition; or

(b) terminate this Contract by giving written notice of termination to Seller.

Seller shall cooperate with Exxon in obtaining the Zoning Approvals and Permit Approvals, including executing instruments reasonably reguested by Exxon; assisting Exxon, at Exxon's expense, in prosecuting such applications; and, upon reguest by Exxon, appearing at administrative proceedings in support of such applications.

2 $700,000. Kenny Aff. Ex. A at 1. On May 1, 1991, the Option was

amended to extend the option period to November 1, 1991. Kenny

Aff. Ex B at 1. Exxon wanted the extension because it did not

have funds available in 1991 to pay for the property. Kenny

Dep., Pl.'s Ex. C at 30-31.

During the permitting process, Maureen Masson, the president

of Ganonogue Water Corporation ("Ganonogue") appeared at a June

1991 Salem Planning Board ("Board") hearing and stated that she

was concerned that the proposed service station could contaminate

Ganonogue's water system. Kenny Dep., Pl.'s Ex. C at 56. This

was the first time that Exxon and Angus were made aware of

Ganonogue's concerns. Yameen Aff., Pl.'s Ex. B 1 16; Kenny Dep.,

Pl.'s Ex. C at 56.2 Four months later, Exxon exercised its

option to purchase the property by giving written notice to

Angus. Kenny Aff. Ex. C at 1.

This Contract and the obligations of Exxon hereunder shall be conditioned upon all Zoning Approvals, Permit Approvals, and Subdivision Approvals being validly and irrevocably granted without gualification or condition except such as may be acceptable to Exxon and no longer subject to appeal.

Kenny Aff. Ex. A at 2.

2Neither Ms. Masson nor Ganonogue were on the list of abutters. See Pl.'s Ex. H.

3 On November 14, 1991, the Board approved Exxon's site plan

and issued the requisite approvals and permits on the following

condition: Exxon was required to "[p]ost $155,000 bond to

protect against contamination of Ganonaque [sic] Wells by Exxon

. . . ." No one at Exxon expressed concern over the amount that

was required. Kenny Dep., Pl.'s Ex. C at 58. However, on

December 5, 1991, Ganonogue appealed the Board's approval to the

Rockingham Superior Court. On January 7, 1992, the Superior

Court denied the appeal. Three days later, Ganonogue moved for

reconsideration, which was denied on January 27, 1992. Ganonogue

then appealed to the New Hampshire Supreme Court. When Exxon

failed to contest Ganonogue's notice of appeal, Angus moved to

appear as amicus curiae and moved for summary affirmance on May

8, 1992. A month later, on June 2, 1992, the Court declined to

accept Ganonogue's notice of appeal.

Angus claims that during the Ganonogue appeals, Exxon

proposed that Angus retain the property, construct the station at

Angus' expense, and either operate it or lease it to some other

entity. Angus also contends that Ms. Masson stated in April 1991

that Ganonogue might be satisfied if it were connected to the

town water line. Although Angus agreed to "either bond or place

in escrow the necessary funds to assure the installation of the

4 town water line," Letter from Shaheen to Hekimian of 4/2/92,

Pl.'s Ex. J at 1, it claims that Exxon failed to respond.

Finally, Angus asserts that while it notified Exxon that the Town

Attorney for Salem stated that "Exxon [could] seek and . . .

receive a building permit from the Town so that [it could]

commence construction," Letter from Shaheen to Hekimian of

3/26/92, Pl.'s Ex. K at 1, Exxon failed to even make an attempt

to obtain the permit. In any event, on April 27, 1992, while the

Ganonogue appeal was still pending, Exxon notified Angus in

writing that it was terminating the Option.

II. DISCUSSION

A. Standard of Review

I assess the parties' motions according to the following

principles. Summary judgment is appropriate "if the pleadings,

depositions, answers to interrogatories, and admissions on file,

together with the affidavits, if any, show that there is no

genuine issue as to any material fact and that the moving party

is entitled to judgment as a matter of law." Fed. R. Civ. P.

56(c). A "genuine" issue is one "that properly can be resolved

only by a finder of fact because [it] may reasonably be resolved

in favor of either party." Anderson v. Liberty Lobby, Inc., 477

, 250 (1986); accord Garside v. Osco Drug, Inc., 8

(1st Cir. 1990). A "material" issue is one that

"affect[s] the outcome of the suit . . . ." Anderson, 477 U.S.

at 248. The burden is upon the moving party to aver the lack of

a genuine, material factual issue, Finn v. Consolidated Rail

Corp.,

(1st Cir. 1986), and the court must view

the record in the light most favorable to the non-movant,

according the non-movant all beneficial inferences discernable

from the evidence. Oliver v. Digital Equip. Corp.,

(1st Cir. 1988). If a motion for summary judgment is

properly supported, the burden shifts to the non-movant to show

that a genuine issue exists. Donovan v. Agnew,

(1st Cir. 1983).

B. Basic Tenets of NewHampshire Contract Law

The New Hampshire Supreme Court has repeatedly held that a

contract should be interpreted to reflect the intention of the

parties at the time it was made. Parkhurst v. Gibson,

(1990); R. Zoppo Co v. City of Dover,

(1984); Trombly v. Blue Cross/Blue Shield,

(1980). However, what matters in contract interpretation is

"objective or external criteria rather than [the]. . .

unmanifested states of mind of the parties." Tentindo v. Locke

6 Lake Colony Ass'n.,

(1980); Kilroe v. Troast,

(1977) .

The language of a contract must be the starting point in

contract interpretation. Accordingly, extrinsic evidence will

not be consulted to interpret a contract in the absence of fraud,

duress, mutual mistake, or ambiguity. Parkhurst,

;

Miller v. Miller,

(1990); Logic Assoc., Inc. v.

Time Share Corp.,

(1984). In construing

contract language, a court must consider the contract as a whole,

viewed from the perspective of the parties at the time the

contract was formed. R. Zoppo C o ., 124 N.H. at 671. Moreover,

contract language will be given its common meaning. Logic Assoc.,

Inc., 124 N.H. at 572, and will be construed from the perspective

of a reasonable person. Gamble v. University of N.H.,

(1992). The interpretation of an unambiguous contract

presents a guestion of law for the court. See Gamble,

.

If contract language is ambiguous, extrinsic sources may be

consulted to determine the objective intent of the parties. See

MacLeod v. Chalet Suisse Int.'l, Inc.,

(1979) .

Contract language has been held to be ambiguous "when the

contracting parties reasonably differ as to its meaning."

7 Laconia Rod & Gun Club v. Hartford Accident & Indem. Co., 12

, 182 (1983). Although the court must determine whether

contract language is ambiguous, the interpretation of an

ambiguous contract ordinarily will be left to the trier of fact.3

Public Serv. Co. of N.H. v. Town of Seabrook,

(1990); MacLeod,

; In re Navigation Technology

Corp.,

(1st Cir. 1989)(construing New

Hampshire contract law).

With these basic principles in mind, I turn to the specific

guestions of contract interpretation presented by the parties'

respective motions for summary judgment.

C. Application

1. Count I

Exxon relies upon two provisions in the contract to support

its claim that it was authorized to terminate the Option

contract. First, it cites a provision permitting termination 180

31he only circumstance in which the meaning of ambiguous contract language may be determined by the court is if, after considering all of the evidence, including extrinsic evidence not considered in construing unambiguous contract language, a rational finder of fact could resolve the ambiguity in only one way. See Gamble,

(court determined the meaning of an ambiguous contract term where, upon all of the evidence, any other reading would lead to an unreasonable result). days after Exxon agreed to purchase the property if the permit

approvals "contain any qualification or condition which is not

acceptable to Exxon. ..." According to Exxon, the Ganonogue

appeal was a qualification or condition on the permit approval

entitling Exxon to terminate the contract because the appeal had

not been resolved within 180 days of Exxon's agreement to

purchase the property. Second, Exxon relies upon a provision

providing that "the obligations of Exxon hereunder shall be

conditioned upon all . . . Permit Approvals . . . being . . . no

longer subject to appeal." Exxon imputes to this provision the

180-day limitation contained in the earlier provision and argues

that it was authorized to terminate the contract because the

appeal had not been resolved within 180 days. I find neither

argument persuasive.

Exxon's argument that the Ganonogue appeal was a

"qualification" or "condition" is easily addressed.

Qualifications and conditions on permit approvals are limitations

imposed by the permitting authority. Such terms cannot

reasonably be read to include an appeal taken by a third party

from an approval with no unacceptable conditions. Thus, I

decline to accept this argument. Exxon's second argument is more difficult. Although the

Option unambiguously conditions Exxon's obligation to perform

upon the resolution of all appeals, no time limit is expressly

set by which appeals must be resolved in order for Exxon's

obligations to become unconditional. Exxon reasonably argues

that the 180-day limitation contained in an earlier paragraph in

the same section also establishes the time by which all

outstanding appeals must be resolved. However, this

interpretation is not the only reasonable reading of the Option

agreement. Another reasonable interpretation is that the 180-day

limitation was intended to apply only to events described in the

paragraph in which it is contained and no time limitation was to

be applied to the exhaustion of appeals provision. Under this

interpretation, if Exxon's application for site plan approval had

been denied or if it had not been granted with satisfactory

conditions within 180 days, Exxon would have been free to

terminate the agreement. However, because a satisfactory

approval was obtained within 180 days and the appeal was

eventually resolved in Exxon's favor, Exxon remained obligated to

perform under the Option agreement.

10 The latter interpretation is a reasonable reading of the

contract for several reasons. First, if Exxon had intended to

make the resolution of appeals subject to the 180-day time limit,

it could have simply and unambiguously done so. The fact that

Exxon chose to place the exhaustion of appeals condition in a

paragraph not containing the 180-day limitation suggests that

Exxon did not intend that the exhaustion of appeals reguirement

would be subject to the 180-day limitation.

Second, unlike the interpretation proposed by Exxon, Angus'

interpretation is reasonable because it would not place Angus at

Exxon's mercy simply because an abutter took an unfounded appeal.

It is virtually impossible in New Hampshire to obtain site plan

approval and resolve an appeal taken by an abutter within 180

days. See, e.g.,

(allowing the

planning board 90 days to approve or disprove an application for

site plan approval with the possibility of additional

extensions);

(allowing an aggrieved

party 30 days to appeal from a planning board decision) ; New

Hampshire Supreme Court Rule 7 (granting a party aggrieved from a

decision of the Superior Court 30 days from the clerk's written

notice of decision to file a notice of appeal); New Hampshire

Supreme Court Rule 22 (allowing an unsuccessful appellant 10 days

11 from the date of the Court's opinion in which to seek

reconsideration). Accordingly, if the contract were interpreted

to permit Exxon to terminate the Option if an appeal was still

pending 180 days after the Option agreement was signed, it would

vest Exxon with the broad discretion to terminate the contract in

virtually all cases where an appeal was taken from the approval

of a site plan application. Such an interpretation is

inconsistent with the accepted rule of statutory construction

that the court will construe a contract whenever possible so as

not to place one party at the mercy of the other. Gamble,

.

Finally, there are valid reasons why Exxon might reserve the

right to terminate the contract if site plan approval was not

obtained after 180 days, but agree to remain obligated under the

contract until any appeal taken from a timely approval was

resolved. When Exxon signed the Option agreement, it presumably

was aware that a site plan approval could not be overturned on

appeal unless a court determined that the planning board acted

unreasonably or unlawfully.

.

Under such circumstances, Exxon might justifiably have had a high

degree of confidence that it would eventually be able to build at

the site once it obtained site plan approval. Thus, Exxon might

12 have been willing to agree to wait for the resolution of an

appeal if it obtained site plan approval from the planning board.

Moreover, Exxon might well have believed that such a concession

was necessary to obtain a commitment from Angus, since it is

unlikely that Angus would have knowingly signed an Option that

vested Exxon with broad discretion to terminate the contract

simply because an abutter appealed from a decision of the

planning board.

Because the exhaustion of appeals provision is reasonably

susceptible to more than one meaning, I determine that the

provision is ambiguous.4 The resolution of this ambiguity will

have to await trial since New Hampshire law dictates that the

choice between two reasonable interpretations of a contract must

be left to the trier of fact.

2. Count II

Exxon argues that the Option agreement did not obligate it

to defend any appeals taken by abutters from Exxon's site plan

approval. Angus responds that the Option reguired Exxon to apply

4Since I find that the contract is ambiguous for the above­ stated reasons, I need not address Angus' argument that the contract is ambiguous because it does not address the possibility that an appeal would be taken by a third party such as Ganonogue.

13 for site plan approval, and this obligation includes an implied

duty to defend the approval on appeal. Angus also argues that

since the Option agreement obligates Angus to assist Exxon, at

Exxon's expense, in obtaining the permits and approvals, Exxon is

impliedly obligated to defend all appeals. I agree with Exxon

that the unambiguous language of the Option agreement does not

reguire Exxon to defend all appeals. Accordingly, I deny Angus'

motion for summary judgment and grant Exxon's motion as to Count

II.5

3. Count III

Exxon has not persuaded me that it is entitled to summary

judgment with respect to Angus' claim that Exxon breached its

duty of good faith and fair dealing. A genuine factual dispute

exists as to whether Exxon improperly declined Angus' offer to

take steps that would have promptly resulted in the successful

resolution of the Ganonogue appeal. This evidence, coupled with

the other evidence produced by Angus in opposition to Exxon's

motion for summary judgment, reguires that the resolution of

Angus' good faith and fair dealing claim be left to the finder of

5I take no position on whether Exxon was obligated by its duty of good faith and fair dealing to defend the Ganonogue appeal to a conclusion.

14 fact. Accordingly, Exxon's motion for summary judgment as to

Count III is denied.

III. CONCLUSION

Exxon's Motion for Summary Judgment (document no. 6) is

granted with respect to Count II and denied with respect to

Counts I and III. Angus' Cross-Motion for Summary Judgment on

Count II (document no. 12) is denied.

SO ORDERED.

Paul Barbadoro United States District Judge

August 11, 1993

cc: Martha Gordon, Esg. Peter Callaghan, Esg.

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