908 p.2d 102
(Colo. 1995)
Chief Justice
Vollack
Plaintiff: Mel T. Nelson, president and sole shareholder of Metro Auto and Metro Toyota dealerships
Defendant: John A. Elway and Rodney L.
Buscher
Issue at Trial Court level: Breach of
contract by Elway and Buscher as to “Service Agreement”
Trial Court Holding: Summary Judgment
granted on all counts upon defendants motion.
Issue on Appeal: Appellate Court: Trial
Court’s error in granting defendant’s motion for Summary Judgment
Appellate Court Holding: No error by
Trial Court, Summary Judgment stands.
Issue on Appeal (2): Supreme Court: Whether Appellate Court erroneously upheld Trial Court’s entry of summary judgment on plaintiff’s claim.
Supreme Court Holding: Affirmed Summary Judgment, no error by court of Appeals.
Facts: Nelson engaged John J. Pico as a broker for the sale of one or both of his dealerships. Pico negotiated with Elway and Buscher for the purchase of Metro Toyota and the land it was situated on. An agreement for the buy-sell as well as a separate agreement for the sale of the land was reached and signed as of March 14, 1991, closing date set for April 15, 1991.
Pico
received approval to negotiate further for the additional sale of Metro Auto to
Elway and Buscher. Elway and Buscher were unable to pay the full purchase price
for both dealerships. Nelson, taking Pico’s suggestion, agreed to sell both
dealerships with Metro Auto being sold at a greatly reduced rate in return for
the agreement of the buyers (Elway and Buscher) to compensate him with $50 from
the sale of every vehicle from both dealerships for the next seven years. This
agreement was the “Service Agreement”; it was reduced to writing, but never
signed by either party, although both parties orally agreed to the terms of it.
On
March 16, 1991 the parties signed the agreement for the sale and purchase of
Metro Auto and a separate agreement for the purchase of the land that Metro
Auto was situated on, but the buy-sell agreement did not incorporate the terms
of the “Service Agreement” into it.
Due
to a debt of over $3 million owed to GMAC, which was the underwriting financier
for Nelson’s dealerships, Nelson was forced to execute “keeper letter” agreements to GMAC. GMAC
imposed this upon Nelson in return for agreeing to rollover the debt owed by
both dealerships to Elway and Buscher. The “keeper letters” gave GMAC
significant control over both dealerships.
On
April 8, 1991 GMAC informed Elway and Buscher that it would only agreed to the
financing as long as Nelson received no proceeds from the sale of either
dealership. Elway and Buscher notified Nelson that they would be unable to
enter into the “Service Agreement” despite their past assurances to Nelson that
they would honor it.
At
the closing on April 12, 1991, the Service Agreement was not executed along
with the two buy-sell agreements and land contracts for Metro Auto and Metro
Toyota. Nelson demanded that Elway and Buscher honor the Service Agreement and
when they refused brought action against them for breach of contract.
Legal Rules: Integration clauses allow
contracting parties to limit disputes to issues expressly provided for in
contract.
Terms
of contract intended to represent final integration are enforceable and
extrinsic evidence is inadmissible.
Even
if extrinsic evidence is admissible, it cannot be used to show contrary intent.
Holding: Merger clauses preclude
consideration of extrinsic evidence to ascertain intent. No extrinsic evidence
will be looked at to determine intent of merger clauses. The contract will be
interpreted within the 4-corners of the document with a literal reading of the
language therein.
Minority Opinion: When parties disagree
as to whether a document expresses the complete agreement of the parties and a
court finds that the evidence is conflicting or shows more than one inference
of the agreement, the resolution of the parties’ dispute requires a factual
determination to look at extrinsic evidence to determine the parties’ true
intent.
Reasoning
of Minority Opinion in this case: The merger clauses in the buy-sell agreements
are at odds with the real estate contracts that were within the scope of the
buy-sell agreement. This appeared to absolve the exclusitivity disclaimer
showing that the parties intended that the final ultimate agreement would
include other contracts in addition to the buy-sell agreement.