Montwood Corporation, Formerly Known as Arrow Development Co., Inc. v. Hot Springs Theme Park Corporation

766 F.2d 359, 1985 U.S. App. LEXIS 21334
CourtCourt of Appeals for the Eighth Circuit
DecidedJune 28, 1985
Docket84-2008
StatusPublished
Cited by7 cases

This text of 766 F.2d 359 (Montwood Corporation, Formerly Known as Arrow Development Co., Inc. v. Hot Springs Theme Park Corporation) is published on Counsel Stack Legal Research, covering Court of Appeals for the Eighth Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Montwood Corporation, Formerly Known as Arrow Development Co., Inc. v. Hot Springs Theme Park Corporation, 766 F.2d 359, 1985 U.S. App. LEXIS 21334 (8th Cir. 1985).

Opinions

JOHN R. GIBSON, Circuit Judge.

This case involves a dispute over back rents after Montwood Corporation first leased and then sold a six-coach, launched-loop amusement ride (the “Roaring Tornado”) to the Hot Springs Theme Park Corporation. Montwood and Hot Springs disagreed whether the sales price included back rents owed on the lease. The district court,1 finding that the written contract evidencing the sale was ambiguous, allowed Hot Springs’ president and manager to describe the negotiations involved in the sale. After a jury verdict, judgment was rendered for Hot Springs. Montwood appeals, arguing primarily that the district court should not have allowed the parol evidence. We affirm the judgment of the district court.

In 1980, the Hot Springs Theme Park Corporation leased for ten years an elaborate amusement ride from Montwood Corporation. Unfortunately, Hot Springs had business problems, failed to make full payments to Montwood, and by June 1982 owed nearly $289,000. Since Montwood wanted out of the amusement park ride business, the parties then negotiated the sale of the ride to the park. On June 10, 1982, Montwood and Hot Springs executed an instrument releasing Hot Springs from certain obligations under the lease, and [361]*361Montwood executed a bill of sale of the ride to the H.S. Ltd. Partnership, a somewhat nebulous entity2 apparently created to facilitate the purchase, for $500,000.3 The documents were prepared by Mont-wood’s vice-president, Donald L. Thomas, and were reviewed and approved by Mont-wood’s in-house lawyers. After Montwood was paid the $500,000, it claimed Hot Springs still owed it additional back rent. Hot Springs, however, claimed that the $500,000 price included the back rent owed.

Montwood then brought suit on the original lease. Hot Springs replied that the instruments of June 10 voided that original agreement. The crucial paragraph appears in the “Mutual Release”:

Subject to execution by Hot Springs, Montwood agrees that the Lease is can-celled and hereby releases Hot Springs from any continuing obligations under the Lease, and agrees to make no claims against Hot Springs for rental payments under the Lease which would apply to the period following the date of this release.

It has been Montwood’s constant position that this provision of the release does not affect the past rents owed and, thus, that it was entitled to judgment as a matter of law on the original lease. The district court, however, denied Montwood’s motions seeking such and allowed witnesses for Hot Springs to testify about the sale of the ride. Paul Burge and Doyle Wolfe, president and manager, respectively, of the park at the time of the sale, testified that inclusion of the back rents in the sales price was specifically negotiated and agreed to by Montwood. Burge also testified that he had not seen the documents before the June 10 meeting and did not discuss their language with Thomas before they were executed. Thomas testified that he purposefully did not bring up the question of the past due rents at the meeting until the documents were executed and the $500,000 was transferred to Montwood.

At the conclusion of the trial, a special interrogatory was posed to the jury: “Do you find by a preponderance of the evidence that the contract of sale included the past due rent payments in the purchase price of the ride?” Following its answer in the affirmative, judgment was entered for Hot Springs. Montwood appeals, arguing primarily that admission of the testimony about the negotiations violated the parol evidence rule.

I.

The parties agree that the law of Arkansas applies in this diversity case. In Arkansas, in a suit upon a written contract, the parol evidence rule “requires, in the absence of fraud, duress, mutual mistake, or something of the kind, the exclusion of all prior or contemporaneous, oral or written evidence that would add to or vary the parties’ integrated written contract, which is unambiguous.” Walt Bennett Ford, Inc. v. Dyer, 4 Ark.App. 354, 631 S.W.2d 312, 313 (1982). The rule gives stability to written contracts, Arkansas Rock & Grav[362]*362el Co. v. Chris-T-Emulsion Co., 259 Ark. 807, 536 S.W.2d 724, 727 (1976); but there may be situations where the language of the contract itself is so ambiguous and uncertain, see Blount v. McCurdy, 267 Ark. 989, 593 S.W.2d 468, 469-70 (Ct.App. 1980), or simply silent about an independent, collateral fact involved in the transaction which it evidences, see Lane v. Pfeifer, 264 Ark. 162, 568 S.W.2d 212, 215 (1978), that parol evidence should not be excluded. The question is whether such exceptions to the rule should apply to the case before us.

Montwood simply urges that the provision of the contract in controversy is clear and unambiguous. Focusing on that portion of the document which releases Hot Springs from liability for payments “which would apply to the period following the date of this release,” Montwood argues that this clause “is not mere surplusage,” that “[t]hus, those lease payments due and owing prior to the release date are specifically excluded,” and that such exclusion is “expressly provide[d].” There is, of course, no specific or express exclusion of such payments.4 Rather, Montwood can properly argue only that the implication of the contested clause is that prior payments were still due and payable.

We believe, however, that, as a matter of law, the correct implication to be drawn from the contractual language was so uncertain that the district court properly found that other evidence was needed to determine the meaning of the contract. The release recites as its purpose, pointblank and without reservation, that “the parties desire to dissolve their contractual relationship under the Lease” and does expressly state in the contested paragraph that upon execution Hot Springs is released “from any continuing obligations under the Lease” (emphasis added). The document leaves unclear whether this language refers only to payments that would become due after the execution of the release or, in addition, to payments already due but which Hot Springs, until the release, continued to be obliged to pay. In the presence of such ambiguity, parol evidence is admissible. Shamburger v. Union Bank, 8 Ark.App. 259, 650 S.W.2d 596, 598 (1983). To expressly provide for the release of future rents does not equate with or create a non-release of back rents. To so provide for future rents alone is simply to remain silent as to back rents. As noted above, however, in the face of such contractual silence, parol evidence becomes admissible. See Younger v. Thomas International Corp., 275 Ark. 327, 629 S.W.2d 294, 298 (1982); Lane, 568 S.W.2d at 215; Gallion v. Toombs, 268 Ark. 955, 597 S.W.2d 842, 843 (Ct.App.1980).

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766 F.2d 359, 1985 U.S. App. LEXIS 21334, Counsel Stack Legal Research, https://law.counselstack.com/opinion/montwood-corporation-formerly-known-as-arrow-development-co-inc-v-hot-ca8-1985.