Lead Opinion
In this сase, we decide whether the Michigan Court of Appeals case, Romska v Opper,
I. FACTS AND PROCEDURAL BACKROUND
Plaintiff, Thomas Shay,
Plaintiff filed suit, naming five defendants: Officers Aldrich, Plemons, and Miller (“the Melvindale Officers”), as well as Officers Allbright and Locklear (“the Allen Park Officers”). With respect to the Melvindale Officers, plaintiff alleged that they committed an assault and battery. As for the Allen Park Officers, plaintiff alleged that their inaction during the alleged assault amounted to gross negligence.
The Melvindale and Allen Park Officers, and their respective municipalities, were covered by different insurance companies and different insurance polices. Additionally, the Melvindale and Allen Park Officers, and their respective municipalities, were represented by separate defense counsel. Plaintiff, the Melvindale Officers, and the Allen Park Officers agreed to appear for a case-evaluation hearing. After the hearing, the following awards, based on each defendant’s respective liability, were issued: $500,000 against Melvindale Officer Aldrich, $500,000 against Melvindale Officer Plemons, $450,000 against Melvindale Officer Miller, $12,500 against Allen Park Officer Allbright, and $12,500 against Allen Park Officer Locklear.
Plaintiff accepted the case-evaluation awards against the Allen Park Officers, and both Allen Park Officers agreed to the awards. Plaintiff additionally accepted the case-evaluation award against Melvindale Officer Miller, but rejected the case-evaluation awards against Melvindale Officers Aldrich and Plemons. All three of the Melvindale Officers rejected the case-evaluation
Plaintiff executed two releases, one naming Allen Park Officer Allbright and one naming Allen Park Officer Locklear. The two releases were identical in all respects except for the named Allen Park Officer indicated in the document. The release naming Officer Locklear read in part as follows:
For the sole consideration of TWELVE THOUSAND FIVE HUNDRED AND NO/100 ($12,500.00) DOLLARS to me in hand paid by Michigan Municipal Liability and Property Pool do for ourselves, executors, administrators, successors and assigns, discharge, ALLEN PARK POLICE OFFICER KEVIN LOCKLEAR and Michigan Municipal Liability and Property Pool, insurer, together with all other persons, firms and corporations, from any and all claims, demands and actions which I have now or may have arising out of any and all damages, expenses, and any loss or damage resulting from an incident occurring on September 8, 2004.
Each release also stated that “the execution of this agreement shall operate as a satisfaction of my claims against such other parties to the extent that such other parties are or may be entitled to recover, by way of contribution, indemnity, hen or otherwise, from the parties herein released.” Additionally, each release stated that plaintiff further agreed to “indemnify and hold harmless the above-named released and discharged parties ....” Plaintiff signed the releases, and the trial court entered a stipulated “Order for Dismissal with Prejudice as to Defendants, Allen Park Police Officer Albright and Allen Park Police Officer Locklear, Only.”
Approximately two months later, the Melvindale Officers moved for summary disposition under MCR 2.116(C)(7), relying on the Allen Park Officers’ re
The Melvindale Officers moved to amend their affirmative defenses in order to include the language of the releases as a defense. The Melvindale Officers relied heavily on Romska. In Romska, the Court of Appeals majority held that the language “all other parties” in a release was unambiguous and, therefore, there was “no need to look beyond the . . . language of the release” to determine its scope.
The trial court denied the Melvindale Officers’ motion to amend their affirmative defenses and rejected their argument that the language of the releases was broad enough to release them as well. The trial court instead found the releases to be ambiguous, noting that the names of the Allen Park Officers and their insurance carrier were in capital letters and bold type, which suggested the limiting nature of the language. This bold
After concluding that the releases were ambiguous and, therefore, that parol evidence was admissible, the trial court noted that the dismissal order entered as a result of the releases was entitled “Order for Dismissal with Prejudice as to Defendants, Allen Park Police Officer Albright and Allen Park Police Officer Locklear, Only.” The order also indicated that the “entry of this Order does not resolve the last pending claim between the parties and does not close the case.” Additionally, the trial court acknowledged an affidavit from the attorney for the Allen Park Officers explaining that he had intended to negotiate the releases with plaintiff for the Allen Park Officers only.
The trial court further indicated that the amount of consideration for the releases indicated that they were not meant to dispose of claims against the Melvindale Officers. The case-evaluation awards against the Melvindale Officers totaled $1,450,000, while the releases were executed in exchange for the $25,000 combined case-evaluation amount against the Allen Park Officers. The trial court reasoned that it was unlikely that plaintiff would forgo his claims against the Melvin-dale Officers for just $25,000.
Plaintiff filed an emergency motion to reform the releases. However, before any dеcision on that motion, the Melvindale Officers filed an application for leave to appeal in the Court of Appeals. The Court of Appeals found Romska instructive and concluded
Plaintiff filed an application for leave to appeal in this Court. We ordered that oral argument be heard on the application, directing the parties to address “whether Romska v Opper,
II. STANDARD OF REVIEW
This Court reviews de novo decisions on motions for summary disposition.
A. THE ROMSKA DECISION
In Romska, the plaintiff was driving her car when she was struck by a car driven by Veliko Velikov.
The plaintiff was unable to reach a settlement with Opper’s carrier, American States Insurance Company.
In a split decision, the Court of Appeals held that the language of the Farm Bureau release was unambiguous.
The majority noted that the plaintiff provided and received adequate consideration under the release and, thus, the release was valid.
The majority went on to reason that the settling parties likely included broad language in the release for the purpose of avoiding future legal burdens that could potentially arise out of lawsuits brought by the plaintiff against third parties.
In contrast, the partial dissent opined that when a “stranger” to a release seeks to apply broad language contained in a release to bar claims against the stranger, it is appropriate for a court to consider parol evidence of intent in order to determine the true scope
The partial dissent acknowledged that an unambiguous document must generally be interpreted “solely on the basis of the information contained within its four corners,” but it noted that this situation “is not always the case.”
Indeed, this Court, too, has stated that it agrees with “the majority of courts which hold that the parol evidence rule cannot be invoked either by or against a stranger to the contract.” Denha v Jacob,179 Mich App 545 , 550;446 NW2d 303 (1989), citing 30 Am Jur 2d, Evidence, § 1031, pp 166-167. Therefore, because the parol evidence rule is operative only with respect to parties to a document, it cannot be invoked either by or against a stranger to the contract. Hence, in order to determine the intentions of the parties about the scope of a general release, extrinsic evidence should be allowed to determine whether a stranger may rely on the omnibus language “all other parties, firms, or corporations” that is contained within a release.[28]
B. WHETHER ROMSKA AND THIS CASE WERE CORRECTLY DECIDED
In Romska, the majority and partial dissent presented opposing views regarding a question critical to
At common law, the release of one joint tortfeasor effectively released all other joint tortfeasors.
This Court has traditionally applied theories of contract law to disputes regarding the terms of a release.
In this case, the trial court found the broad release language ambiguous and denied the Melvindale Officers’ motion for summary disposition after considering extrinsic evidence that neither plaintiff nor the Allen Park Officers had intended that the Melvindale Officers would also be released by the documents executed. The Court of Appeals, however, noted that the releases “use the same broad language as the release at issue in Romska, and they also employ the word ‘all.’ ”
First and foremost, it is undisputed that the Melvin-dale Officers were not involved in the Allen Park Officers’ settlement negotiations with plaintiff, were not named in the executed releases, and did not sign the releases. The parties negotiating the releases included plaintiff and the Allen Park Officers only. Plaintiff presented an affidavit from counsel for the Allen Park Officers stating:
My only intent with regard to the Release, Settlement and Order of Dismissal was to release my clients, defendant Allen Park Officers Albright and Locklear, from liability in this matter for the consideration of the $25,000.00 Case Evaluation Award.
The Melvindale Officers have not asserted that they were parties to the release negotiations and executions; rather, they simply seek to benefit from the boilerplate language contained in the Allen Park Officers’ releases. Again, the Melvindale Officers concede that neither plaintiff nor the Allen Park Officers intended to release them from liability.
Acknowledging that they were not parties to the releases, the Melvindale Officers argue that they were nevertheless released from liability by the Allen Park Officers’ releases because they are third-party beneficiaries of the agreement between plaintiff and the Allen Park Officers. MCL 600.1405 governs the rights of third-party beneficiaries in Michigan and states, in pertinent part:
Any person for whose benefit a promise is made by way of contract, as hereinafter defined, has the same right to enforce said promise that he would have had if the said promise had been made directly to him as the promise.
(1) A promise shall be construed to have been made for the benefit of a person whenever the promisor of said promise had undertaken to give or to do or refrain from doing something directly to or for said person.
This Court has interpreted the applicable statutory language as follows:
In describing the сonditions under which a contractual promise is to be construed as for the benefit of a third party to the contract in § 1405, the Legislature utilized the modifier “directly.” Simply stated, section 1405 does not empower just any person who benefits from a contract to enforce it. Rather, it states that a person is a third-party beneficiary of a contract only when the promisor undertakes an obligation “directly” to or for the person. This language indicates the Legislature’s intent to assure that contracting parties are clearly aware that the scope of their contractual undertakings encompasses a third party, directly referred to in the contract, before the third party is able to enforce the contract. [40]
This Court has additionally explained that “a third-party beneficiary may be a member of a class, but the class must be sufficiently described.”
An objective standard must be used to determine from the release documents whether plaintiff executed the releases directly for the benefit of the Melvindale Officers.
While the trial court acknowledged that the release in Romska contained similar broad language, it concluded that Romska was distinguishable from the present case for various reasons. The trial court noted that the Melvindale Officers rejected the case-evaluation awards against them, a trial date was set for them, and the court entered a consent order indicating that plaintiffs case was dismissed agаinst the Allen Park Officers only. Therefore, it is undisputed that the Melvindale Officers remained parties to plaintiffs lawsuit after the Allen Park Officers were released.
The trial court correctly concluded that plaintiff, the Allen Park Officers, and the Melvindale Officers were aware that the Melvindale Officers would remain parties to plaintiffs lawsuit after the releases were executed. However, as previously explained, this Court has long held that the standard for determining whether a person is a third-party beneficiary is an objective standard and must be determined from the language of the contract only.
This rule reflects “the Legislature’s intent to ensure that contracting parties are clearly aware that the scope
Given this Court’s long history of interpreting the third-party-beneficiary statute to require an objective interpretation of the language, we conclude that the Melvindale Officers qualify as third-party beneficiaries under the applicable statute because on its face, the release language unambiguously releases “all other persons.”
Once it has been determined that a party qualifies as a third-party beneficiary, we must address the significance of this determination. This Court has held that the significance of a party being recognized under the third-party-beneficiary statute is that the status confers on parties a cause of action and the right to sue.
The third-party-beneficiary statute expressly provides that the rights of the third-party beneficiary are “subject always to such express or implied conditions, limitations, or infirmities of the contract to which the rights of the promisee or the promise are subject.”
Accordingly, an objective test is used to determine whether a third party is entitled to pursue a cause of action for enforcement of a contract promise, but that
As previously stated, releases are generally treated as contracts under Michigan law and, thus, subject to the parol evidence rule, which prohibits the use of extrinsic evidence to interpret unambiguous language within a document.
An ambiguity may either be patent or latent. This Court has held that extrinsic evidence may not be used to identify a patent ambiguity because a patent ambiguity appears from the face of the document. However, extrinsic evidence may be used to show that a latent ambiguity exists.
A latent ambiguity, however, is one “that does not readily appear in the language of a document, but instead arises from a collateral matter when the document’s terms are applied or executed.” Because “the detection of a latent ambiguity requires a consideration of factors outside the instrument itself, extrinsic evidence is obviously admissible to prove the existence of the ambiguity, as well as to resolve any ambiguity proven to exist. ” [56]
A latent ambiguity exists when the language in a contract appears to be clear and intelligible and suggests a single meaning, but other facts create the “ ‘necessity for interpretation or a choice among two or more possible meanings.’ ”
There is no more useful, just and practical rule of law, than that which admits evidence of surrounding circumstances and collateral facts, within certain well defined limits, for the purpose of enabling courts to ascertain and carry into effect the intention of contracting parties. The cases in which this rule has been applied are almost innumerable.
This Court has applied the latent-ambiguity doctrine when extrinsic evidence demonstrates that there is an ambiguity concerning the identity of the intended beneficiary of a promise in a contract. In Hall v Equitable Life Assurance Society of the United States, in the context of an insurance contract, this Court stated “ ‘[w]here from the evidence which is introduced, there arises a doubt as to what party or parties are to receive the benefit of the policy, parol evidence is admissible to determine such fact.’ ”
We do not dispute that the Melvindale Officers are “persons,” as the term is used in the releases. In fact, it is possible that any person in the world could fall into this broadly defined group of “all other persons.” However, this conclusion alone does not dictate that we must apply the release language to the Melvindale Officers without even considering whether an ambiguity arises from the undisputed extrinsic evidence presented by plaintiff.
Plaintiff presented extrinsic evidence to support his argument that the release language is ambiguous, including the following facts: (1) the Allen Park Officers and the Melvindale Officers were represented by different counsel, (2) it was expressly agreed that plaintiff would accept the combined $25,000 case-evaluation awards with respect to the Allen Park Officers, but would not accept the $1.5 million award with respect to the Melvindale Officers, (3) counsel for the Allen Park Officers explained to plaintiff that the releases were drafted in order to settle plaintiffs claims against his clients, (4) a stipulation and order dismissing the Allen Park Officers only was entered, and (5) the Melvindale Officers remained parties to plaintiffs lawsuit with a trial date set for plaintiff to proceed against them. The extrinsic evidence is further bolstered by the affidavit from counsel for the Allen Park Officers — the drafter of the releases — indicating that when he drafted the releases, he had not intended to provide for the release of the Melvindale Officers as well.
Again, a latent ambiguity has been described as one that “ ‘arises not upon the words of the will, deed or other instrument, as looked at in themselves, but upon
The extrinsic evidence presented here is not disputed by the Melvindale Officers, and it undeniably reveals the clear intent of the parties. Furthermore, the language of the releases expressly contemplates a situation in which the Allen Park Officers might be liable by way of contribution or indemnity to another party. This language implies the existence of the continued lawsuit against other parties. Given the undisputed extrinsic facts that the Melvindale Officers remained parties to plaintiffs lawsuit and were former codefendants of the Allen Park Officers, it would be entirely reasonable for the Allen Park Officers to include language in the releases that would protect them from actions for contribution or indemnity by remaining parties. Considering the language of the releases and the extrinsic evidence presented, it is clear that the settling parties did not include the term “persons” in the releases in
It is an elementary rule of construction of contracts that in case of doubt, a contract is to be strictly construed against the party by whose agent it was drafted.
This is simply not a case in which a stranger to a contract or release comes forward sometime after the formation of the contract or release and seeks to benefit from its terms. Instead, the Melvindale Officers were readily ascertainable codefendants in a pending lawsuit by plaintiff. In addition, this is not a case in which there is any legitimate dispute about the settling parties’ intent. Defendants do not even dispute the parties’ actual intent.
Under the facts of this case, if plaintiff were not permitted to present extrinsic evidence in order to ascertain the intent of the settling parties, the settling parties’ intent would undoubtedly be perverted.
In this case, plaintiff has shown that the circumstances surrounding the execution of the releases created a latent ambiguity about whom the parties intended to include within the scope of the releases. All the contracting parties agree that neithеr plaintiff nor the Allen Park Officers intended the releases to have any effect on the Melvindale Officers’ liability. Even the Melvindale Officers themselves did not believe that the releases were intended to include them.
In sum, to determine whether an unnamed party is released from liability by broad or vague release language, the party’s status as a third-party beneficiary must be established by an objective analysis of the release language. However, traditional contract principles continue to apply to the release, and courts may consider the subjective intent of the named and unnamed parties to the release under certain circumstances, such as when there is a latent ambiguity. The third-party-beneficiary statute indicates that the Legislature intended to allow parties who are direct beneficiaries to sue to enforce their rights, but the statute expressly states that third-party beneficiaries have only the “same right” to enforce as they would if the promise had been made directly to them. MCL 600.1405. That is, the statute creates a cause of action, but it is not
If this Court were to extend the оbjective test it has adopted for determining whether there is a third-party beneficiary to interpreting the scope of the rights of the third-party beneficiary, it would be contrary to the statute in instances in which, as here, because of the latent-ambiguity doctrine, the subjective intent of the party would be relevant to determining the party’s rights if the promise had been made directly to the party. Thus, while the objective approach for determining whether a party is a third-party beneficiary must be applied, traditional contractual principles, including the latent-ambiguity doctrine, must also be applied in order to determine the scope of the third-party beneficiary’s rights.
IV CONCLUSION
In lieu of granting leave to appeal, we reverse the judgment of the Court of Appeals and overrule Romska to the extent that it prohibits a court from considering extrinsic evidence of the intended scope of a release when an unnamed party seeks to enforce third-party-beneficiary rights based on broad language included in a release from liability and an ambiguity exists with respect to the intended scope of that release. Accordingly, we remand this case to the trial court for further proceedings in conformity with this opinion.
Reversed and remanded.
Notes
Thomas Shay died approximately four months after oral argument on his application for leave to appeal in this Court, and Nicole Shay, the personal representative of his estate, was substituted as plaintiff. References to “plaintiff” in this opinion are to Thomas Shay.
Romska,
Shay v Aldrich, unpublished opinion per curiam of the Court of Appeals, issued March 5, 2009 (Docket No. 282550), pp 3-4.
Id. at 4.
Id. at 5.
Shay v Aldrich,
Herald Co v Bay City,
Kuznar v Raksha Corp,
In re Egbert R Smith Trust,
Romska,
Id.
Id. at 513-514.
Id. at 514.
Id.
Id.
Id.
Id. at 515. The Court of Appeals majority opinion was authored by then Judge Markman and joined by Judge Saad. Judge Hoekstra authored a partial concurrence and partial dissent.
Id.
Id. at 516.
Id. at 516-517.
Id.
Id. at 517-518.
Id.
Id. at 533 (Hoekstra, J., concurring in part and dissenting in part).
Id. at 527.
Id. at 528.
Id. at 531.
28 Id. at 533.
Slater v Ianni Constr Co,
MCL 600.2925d(a).
See Denton v Utley,
McIntosh v Groomes,
Grosse Pointe Park v Mich Muni Liability & Prop Pool,
Id. at 198.
Romska, 234 Mich. App at 515-516.
Id. at 516.
Shay, unpub op at 4.
Id. at 5.
During oral argument, defense counsel conceded that neither plaintiff nor the Allen Park Officers intended to release the Melvindale Officers from liability. Nevertheless, defense counsel requested that this Court conclude that the broad release language created third-party-beneficiary rights in the Melvindale Officers.
40 Koenig v South Haven,
Id. at 680.
See id. at 683.
Brunsell v Zeeland,
See, e.g., Guardian Depositors Corp v Brown,
See Schmalfeldt v North Pointe Ins Co,
Brunsell,
See Koenig,
See id. at 684, Lidke v Jackson Vibrators, Inc,
MCL 600.1405.
MCL 600.1405(2)(a).
See, e.g., Lidke,
See MCL 600.1405(2)(a).
See, generally, Paul v Univ Motor Sales Co,
Grosse Pointe Park,
Id. at 198-201; McCarty v Mercury Metalcraft Co,
56 Grosse Pointe Park,
McCarty,
Goodwin, Inc v Orson E Coe Pontiac, Inc,
Id. at 206, 209-210.
Hall v Equitable Life Assurance Society,
Id.
In Meyer, the disputed language was given a meaning by the courts that was inconsistent with the plain meaning of the language itself because the seller in the contract at issue was designated as “Meyer Bros.” when, in fact, the extrinsic evidence indicated that “Herman C. Meyer” was the intended seller and that “Meyer Bros.” was no longer in existence.
Id. at 424-425.
The Third Restatement of Torts expressly addresses what it characterizes as the “frequently occurring problem” of “a plaintiff [who] enters into a release with a defendant that releases the defendant and provides that it also releases ‘all persons’. . ..” Restatement Torts, 3d, Apportionment of Liability, § 24, comment g, p 302. The reporter’s note to comment g states that some jurisdictions inquire “into the intent of the parties to the settlement agreement” and “[s]ome require a showing by the plaintiff that the ‘all persons’ language is ambiguous or constitutes a mistake . ...” Id. at 307.
Grosse Pointe Park,
Hall,
Id. at 411 (citation omitted).
W O Barnes Co, Inc v Folsinski,
Id. at 377.
Mich Chandelier Co v Morse,
Meyer,
The dissent, authored by Justice Markman, who also authored Romska in the Court of Appeals, is unpersuasive, despite its 32 pages in length, because the arguments are rеpetitive of Justice Markman’s analysis in Romska, which we have rejected today. The dissent claims that this decision is inconsistent with the law of this state. To support this claim, the dissent merely provides a string citation to Court of Appeals decisions decided after Romska. Given that these lower court decisions were bound by Romska, it is hardly remarkable that they utilized Romska’s legal analysis. The only other citations offered by the dissent in support of its claim are federal cases. In fact, it is the dissent’s limited formulation of the latent-ambiguity doctrine that is inconsistent with cases in which this Court has applied that doctrine. See, e.g., Keller v Paulos Land Co,
This Court has held that when interpreting an ambiguity, it is significant if the relevant parties were aware of the circumstances. See,
Dissenting Opinion
(dissenting). Not all cases that come before this Court are defined in terms of their core
I. MICHIGAN CONTRACT LAW
A. FUNDAMENTAL PRINCIPLES
It has been the rule in Michigan for well over a century that the first and foremost principle of contract law is that unambiguous contracts are not open to judicial construction and must be enforced as written, unless the contract violates public policy. See, e.g., Henderson v State Farm Fire & Cas Co,
Extrinsic evidence may be admitted to determine the intent of the parties when a contract is ambiguous. New Amsterdam Cas Co v Sokolowski,
“Ambiguity in written contracts can fairly be said to consist of two types: patent and latent.” Grosse Pointe Park v Mich Muni Liability & Prop Pool,
A latent ambiguity, on the other hand, “ ‘arises not upon the words of the will, deed, or other instrument, as looked at in themselves, but upon those words when applied to the object or to the subject which they
“[a]n omission or mistake is not an ambiguity. Parol evidence under the guise of a claimed latent ambiguity isnot permissible to vary, add to or contradict the plainly expressed terms of this writing or to substitute a different contract for it to show an intention or purpose not therein expressed.” [Citation omitted.]
Similarly, this Court in Hall, in finding a latent ambiguity, explained that “ ‘[a]n ambiguity is properly latent, in the sense of the law, when the . . . extrinsic circumstances to which the words of the instrument refer [are] susceptible of explanation by a mere development of extraneous facts without altering or adding to the written language . . . Hall, 295 Mich at 409 (citation omitted) (emphasis added). Under this proper understanding of the latent-ambiguity doctrine, a court does not “cross the point at which the written contract is altered under the guise of contract interpretation.” Grosse Pointe Park,
A related and equally settled principle of Michigan contract law is that “ ‘one who signs a contract will not be heard to say, when enforcement is sought, that he did not read it, or that he supposed it was different in its terms.’ ” Farm Bureau,
There are reasons why these fundamental principles have withstood the test of time and have served as the bedrock of contract law in this state from time immemorial. Courts adhere to these fundamental rules— enforcing contracts according to their unambiguous terms, responsibly and diligently executing their judicial duty in determining if a contract is ambiguous, and insisting that parties read their contracts — because “doing so respects the freedom of individuals freely to arrange their affairs via contract.” Rory v Continental Ins Co,
It draws strength from common-law roots and can be seen in our fundamental charter, the United States Constitution, where government is forbidden from impairing the contracts of citizens, art I, § 10, cl 1. Our own state constitutions over the years of statehood have similarly echoed this limitation on government power. It is, in short, an unmistakable and ineradicable part of the legal fabric of our society.
It is precisely because these fundamental principles are so well settled and so essential to a free society, governed by the equal rule of law, that our citizens’ reliance on them is so great. Courts rightly adhere to these rules so as not to upend the expectations of the citizenry in an area of the law that touches upon their personal and commercial relations every day in myriad ways.
B. ROMSKA
With these well-settled principles of Michigan contraсt law to guide it, our Court of Appeals in Romska v Opper was asked to give effect to an unambiguous release that included, in the very first sentence of the document, language releasing “ ‘all other parties, firms, or corporations who are or might be hable Romska,
Because defendant clearly fits within the class of “all other parties, firms or corporations who are or might be liable,” we see no need to look beyond the plain, explicit, and unambiguous language of the release in order to conclude that he has been released from liability. “There cannot be any broader classification than the word ‘all,’ and ‘all’ leaves room for no exceptions.” [Id. at 515-516 (citation omitted).][3]
The Court of Appeals partial dissent would have departed from the majority’s “common-law” rule by adopting what it termed as an “intent rule,” explaining:
While it is generally correct that an unambiguous document must be interpreted solely on the basis of the information contained within its four corners, that is not always the case. When a stranger to a release attempts to rely on omnibus language contained within the document, as in this case, parol evidence is admissible to establish whether the parties intended thе release to apply to the nonparty.
[Id. at 531 (HOEKSTRA, J., concurring in part and dissenting in part) (citation omitted).] [4]
In response to this proposed rule, and specifically questioning the appropriateness of the partial dissent’s adoption of the “intent rule” nomenclature, the Rom-ska majority stated:
[I]n our judgment, the common-law rule better deserves this description. The common-law rule holds that a general release of “any and all persons” unambiguously releases “any and all parties.” The common-law rale holds that the language of a release should be accorded meaning. It is predicated on the intentions of the parties but, unlike the rale of the dissent, derives such intentions from the language of the release to which they have freely assented. [Id. at 517 (majority opinion).]
When Romska was appealed in this Court, we denied the plaintiffs application for leave to appeal. Romska v Opper,
II. APPLICATION OF PRINCIPLES
It is against this legal backdrop that this Court is now called upon to give effect to the releases at issue that each include a provision releasing “all other persons . .. from any and all claims . . . resulting from an incident occurring on September 8, 2004.” Plaintiff, represented by counsel, signed two identical, self-contained, two-page releases, each containing this language in the context of accepting a case-evaluation award with respect to the Allen Park police officers, Wayne Allbright (or Albright) and Kevin Locklear, who were also represented by counsel. Two months after signing the releases, plaintiff provided them to the Melvindale police officers, John Aldrich, William Plemons, and Joseph Miller, who then moved for summary disposition, claiming that the releases’ reference to “all other persons” released them from liability. The Court of Appeals unanimously reversed the trial court’s denial of summary disposition because it concluded that the language of the releases was unambiguous and operated to bar plaintiffs claims against the Melvindale officers.
I would affirm the Court of Appeals because that court engaged in the proper analysis under Michigan law and correctly determined that the releases here contained no ambiguity and thus, as a matter of law, accomplished what they stated. The burden on the majority is therefore to refute that the releases mean what they say, and to demonstrate that they are somehow ambiguous because they contain either a patent or
The majority is less clear in its own determination of whether the releases are patently ambiguous, which, it should be remembered, implicates a court’s primary duty in addressing a legal instrument. The majority variously disparages the release language (1) as “broad,” albeit without any explanation of why being “broad” is bad or in any way legally suspect, (2) as “vague,” without identifying any specific language that is unclear or imprecise, and (3) as “boilerplate language,” absent either any justification for this characterization or any explanation of the consequences of such a characterization.
Not to be deterred by the obviously unambiguous language of the releases, the majority offers the novel argument that the releases contain a latent ambiguity. Before discussing the merits of the majority’s application of this doctrine, it is important to recognize just how very novel the majority’s argument is. Not only was it not raised by any of the parties or lower courts in this case, according to the available caselaw, it has never even been mentioned by any court, or by any party, that has ever addressed the issue of whether a release containing the language “all other persons,” or some variation thereof, is enforceable as written under Michigan law.
Turning to the merits of the majority’s latent ambiguity argument, I find no reason to conclude that the majority today gets it right, while every other judge who has addressed this issue has gotten it wrong. The majority concludes that “plaintiff has shown that the circumstances surrounding the execution of the releases created a latent ambiguity about whom the parties intended to include within the scope of the releases.” Central to the majority’s conclusion is its assertion that “[a]ll contracting parties agree that neither plaintiff nor the Allen Park Officers intended the releases to have any effect on the Melvindale Officers’ liability. Even the Melvindale Officers themselves did not believe that the releases were intended to include them.” This is simply not true. The majority not only
While the subjective intent of the parties may conceivably have been in accord with that of their attorneys, there are several reasons why it may not be appropriate to reflexively conflate the intent of one with the other, as the majority does. First, given that plaintiff might conceivably have a legal malpractice claim against his attorney if the releases were read to mean what they say, the latter’s assertions regarding his client’s intentions should be approached with some measure of caution, absent clearer evidence in this regard. Second, it would hardly be remarkable to suppose that there might be some sense of empathy on the part of police officers in one community toward police officers in a neighboring community who have become the target of a lawsuit alleging assault and battery, such a lawsuit being an occupational hazard for even those
However, even if the majority’s consideration of the extrinsic evidence presented in this case were sound, it still could not salvage its latent ambiguity analysis because no latent ambiguity exists in these releases; that is, no ambiguity is created when the unambiguous words “all other persons” are “ ‘applied to the object or to the subject which they describe.’ ” Zilwaukee Twp,
There is no such latent ambiguity, of course, a conclusion that is confirmed when the purported latent ambiguity here is compared to actual latent ambiguities that courts have properly found in other cases, some of which the majority cites in support of its decision. For instance, in Raffles v Wichelhaus, 2 Hurl & C 906; 159 Eng Rep 375 (1864), the textbook latent-ambiguity case, such an ambiguity was created when the contractual provision stating that the shipment was “ ‘to arrive ex “Peerless” ’ ” was applied to the subject it described because unbeknownst to the parties, there happened to be two ships named Peerless sailing on that particular day. In Hall, this Court properly found that a latent ambiguity was created when the language naming “Emma H. Foote (guardian)” as the beneficiary of an insurance contract was applied to the subject it described because Emma H. Foote was never the dece
The contracts in each of these cases contained genuine latent ambiguities, and the courts properly applied the relevant doctrine. However, these cases are so far afield from the case before us that it is simply impossible to apply their reasoning. Indeed, the majority does not even attempt to do so, for what could it argue — that, unbeknownst to the parties at the time they signed the releases, the Melvindale officers were actual “persons”? While the majority relies on Hall and Meyer, these cases, with their examples of true latent ambiguities, in actuality cast into relief the utter lack of serious legal underpinnings of the majority’s argument. And it becomes increasingly clear that, in its decision today, the majority misuses the latent-ambiguity doctrine, in contravention of this Court’s clear directive that
“[plarol evidence under the guise of a claimed latent ambiguity is not permissible to vary, add to or contradict the plainly expressed terms of this writing or to substitute a different contract for it to show an intention or purpose not therein expressed.” [Mich Chandelier,297 Mich at 49 (citation omitted).]
Surely, the majority is aware of this limitation on the latent-ambiguity doctrine. It cites Mich Chandelier, as does this dissent. Yet the majority has no apparent explanation for its disregard of this limitation and for its resultant misapplication of the doctrine. The majority does not explain why, “ ‘under the guise of a claimed latent ambiguity,’ ” it permits parol evidence that un
In my view, instead of pursuing its novel latent-ambiguity theory when no such ambiguity exists, the majority would have been better advised to apply what is perhaps the most well-established of all rules of contract law, and one that provides a straightforward resolution of this case: that “ ‘one who signs a contract will not be heard to say, when enforcement is sought, that he did not read it, or that he supposed it was different in its terms.’ ” Farm Bureau,
The releases at issue are not lengthy, complex, or technical. Plaintiff does not claim that he was fraudulently induced into signing them. To the contrary, he was represented by counsel when he knowingly signed the same release twice. Under these circumstances, the only logical explanation for his predicament is that plaintiff and his counsel did not read even the first sentence of their releases before assenting to their terms. And the procedural history of this case only compounds the carelessness of their error. Plaintiff executed the releases in July, but did not even provide them to the Melvindale defendants until October, at which time it appears that neither he nor his attorney had read even the first sentence of these two-page documents to which he committed himself.
Because the law so clearly does not support the result reached, I can only give the majority the benefit of the doubt and assume that it makes new law in order to accommodate what it views as the sympathetic facts of this case, thus reaffirming the adage that “bad facts make bad law.” There is no dispute that the facts of this case are “bad” in the sense that the appellant is more sympathetic than the appellant in Romska. The majority takes note of several factors that the trial court
III. MAJORITY’S NEW RULE
While there is much that is unclear about the majority’s new rulе, what is clear is that by disregarding well-settled contract principles, this Court has embarked on a new approach in which the parties’ intentions as expressed in the vehicle through which such
The first prong of the majority’s rule considers whether an “unnamed party seeks to enforce third-party-beneficiary rights based on the broad release language.” As a threshold matter, with the very first word of this inquiry, the majority leaves open the possibility that it is adopting a “specific identity rule,” which holds that a general release will only discharge those “ ‘specifically named in the release’ . . . .” Romska,
The majority opinion also cites favorably the formulation of the rule the Romska partial dissent would have adopted:
[I]n order to determine the intentions of the parties about the scope of a general release, extrinsic evidence should be allowed to determine whether a stranger may rely on the omnibus language “all other parties, firms, or corporations” that is contained within a release. [Id. at 533 (emphasis added).]
If this is the purpose behind its new rule, the problem is that the “very provision in controversy, and agreed to by the parties to the contract, explicitly relates to the interests of strangers.” Romska,
Any person for whose benefit a promise is made by way of contract, as hereinafter defined, has the same right to enforce said promise that he would have had if the said promise had been made directly to him as the promisee.
(1) A promise shall be construed to have been made for the benefit of a person whenever the promisor of said promise had undertaken to give or to do or refrain from doing something directly to or for said person.
In Schmalfeldt v North Pointe Ins Co,
In light of these first principles, I agree with the majority that the Melvindale defendants are third-party beneficiaries of the releases because the releases objectively establish that plaintiff undertook a promise “directly” to them. Specifically, by releasing “all other persons . . . from any and all claims . . . resulting from an incident occurring on September 8, 2004,” plaintiff promised to refrain from doing something directly to those defendants — that is, he promised to refrain from pursuing potential claims against them resulting from the specified incident. This determination is not nearly as difficult as the majority makes it. Contrary to the majority’s suggestion, our caselaw gоverning third-party beneficiaries cannot “be read to mean that the important inquiry is the subjective understanding of the contracting parties,” even if “taken out of context,” something no one involved in this case, save apparently the majority, has ever thought to do. Rather, our case-law unequivocally establishes an objective test to determine third-party-beneficiary status, and the Melvindale defendants are clearly third-party beneficiaries of the releases under this test.
Even more troubling than the majority’s strained determination that the Melvindale defendants are in fact third-party beneficiaries is its misunderstanding regarding the relevance of this determination to the disposition of this case. The majority deems this determination significant because “[ajlthough. .. the Melvindale Officers are entitled as third-party beneficiaries to seek enforcement of the releases, the releases are subject to the same ‘limitations’ and ‘infirmities’ as they would have been if they had been made directly for those officers.” I can only speculate about the meaning
Fortunately, the law when properly applied does not require these legal convolutions and contortions. The third-party-beneficiary statute is significant in this case because, as third-party beneficiaries of the releases, the Melvindale defendants had the right to enforce their terms. MCL 600.1405(1). And once defendants’ rights became vested, plaintiff lost the ability to reform the releases without defendants’
The second prong of the majority’s new rule considers whether “the evidence presented establishes that an ambiguity exists with respect to the intended scope of the release.” With this statement, the majority conclusively illustrates its profound misunderstanding regarding contractual ambiguity. Contrary to the majority’s assertion here, as a general rule, when a contract is clear and unambiguous on its face, extrinsic evidence is not permitted to “establish^] that an ambiguity exists with respect to the intended scope of the release.” Such evidence is only permitted in the exceptional case to prove the existence of a latent ambiguity, and a latent ambiguity is found to exist only when the “ ‘circumstances to which the words of the instrument refer [are] susceptible of explanation by a mere development of extraneous facts without altering or adding to the written language ....’” Hall,
Tragically, the impact of the majority’s new rule will be felt by the millions of citizens of this state who rely on the promises of contracts, and the good faith of thоse who enter into such contracts, to structure their personal and business affairs. There is simply no principled reason in the law why the majority’s new rule should not be extended to contact law in general. Although the majority might consider its ruling as a narrow one that is limited to “unnamed” third-party beneficiaries of a contract, there is not one rule of contract law in Michigan that applies to disputes between parties and another rule that applies to disputes involving third parties, at least before today. Indeed, MCL 600.1405 makes clear that a third party has the same right to enforce a promise that he would have had if the promise had been made directly to him. Moreover, there is no principled reason for limiting the majority’s new rule to releases only, as opposed to contracts generally. As the majority itself recognizes, this Court has always applied
IV CONCLUSION
For all these reasons, I would affirm the unanimous judgment of the Court of Apрeals, which reversed the trial court and remanded for entry of judgment in favor of the Melvindale defendants. In deciding to the contrary and overruling Romska v Opper, the majority’s decision recklessly unsettles contract law in this state on the basis of an essentially impenetrable analysis. Because the majority’s new “rule” undermines the
Justice Young has observed that
[t]he classic example of a latent ambiguity is found in the traditional first-year law school case of Raffles v Wichelhaus, 2 Hurl & C 906; 159 Eng Rep 375 (1864). In Raffles, two parties contracted for a shipment of cotton “to arrive ex Peerless” from Bombay. However, as it turned out, there were two ships sailing from Bombay under the name “Peerless.” Thus, even though the contract was unambiguous on its face, there was a latent ambiguity regarding the ship to which the contract referred. [Grosse Pointe Park,473 Mich at 217 n 21 (opinion by Young, J.).]
Thus, at the time the parties in Raffles signed the contract, they believed their words to be clear and unambiguous, although an ambiguity lay dormant in the text: unbeknownst to the parties, there happened to he two ships named Peerless. Because of that latent ambiguity, it was no longer clear from the four corners of the document what the parties meant by their use of the name Peerless, and so parol evidence was properly admitted to determine the parties’ intent.
As this Court recognized in 1858,
[t]o hold that a party may reply to an action upon a written instrument, “It is true I made the contract, but it was not my agreement, and I did not intend to be bound by it,” would set the law of contracts all afloat, render the certainty of the law a fiction,and place the obligations of parties beyond judicial control. [Adair v Adair, 5 Mich 204 , 209 (1858).]
3 As an additional reason for affirming the trial court, Romska noted that the “release contains an explicit merger clause that independently precludes resort to parol evidence” and that a contrary ruling would give “no effect at all to the merger clause by allowing resort to exactly the same extrinsic evidence as might be allowed absent the merger clause.” Romska,
4 While the partial dissent in Romska would have permitted parol evidence on its theory that the defendant was a “stranger” to the release, it should be noted that the partial dissent did not find that the release contained any ambiguity, patent or latent.
See, e.g., Meridian Mut Ins Co v Mason-Dixon Lines, Inc (On Remand),
As best as I can understand the significance of the majority’s “boilerplate” characterization, I assume that it is to communicate that such language may be safely ignored.
Carroll, Through the Looking Glass and What Mice Found There, in The Annotated Alice (New York: Bromhill House, 1960), p 269. Equally without merit is plaintiffs argument that the interplay of the language “all other persons” in the releases’ first paragraph and the indemnity provision in the third paragraph somehow creates a patent ambiguity. These paragraphs are separate and distinct promises. There is nothing even slightly inconsistent about the fact that one promise may be broader than another. Nor is there anything inconsistent about the Allen Park officers’ desire to obtain maximum security against future claims by including both provisions in the releases. Rather, these simply reflect prudent precautions.
See, e.g., Meridian,
The extrinsic evidence offered in these cases often included an affidavit stating that one party did not “intend” to release another from liability — the exact evidence which the majority here finds dispositive. None of the courts in these cases determined that such evidence created a latent ambiguity. See, e.g., Meridian,
Although the majority finds defense counsel’s opinion that there was “no actual subjective intent to release [his] clients” to be significant, it is not clear how defense counsel can conclusively know the other parties’ subjective intent.
As additional evidence of the claimed latent ambiguity, the majority relies on the fact that plaintiff and the Allen Park officers accepted case-evaluation awards and that plaintiff and the Melvindale officers rejected a larger award. I question the wisdom of the precedent the majority sets with its reliance on this information because such information is protected in nonjury trials. See MCR 2.403(N)(4). While the trial court was not acting here as fact-finder, the majority’s use of this information creates a perverse incentive for future parties to disclose award amounts precisely in order to prove the existence of a claimed ambiguity and thereby nullify a release that otherwise provides litigative finality. Using the information in this manner is inсompatible with the goal of case evaluation, which is “to expedite and simplify the final settlement of cases.” Bennett v Med Evaluation Specialists,
The majority does not even consider the entire sentence at issue in its latent-ambiguity analysis. It states that, although it “dofes] not dispute that the Melvindale Officers are ‘persons,’ ” “any person in the world could fall into this broadly defined group ....” To begin with, while the majority is apparently offended by the result of this “broad’ language, it does not identify the legal principle under which that result is impermissible, because there is no such principle. Further, the majority’s statement here is not even accurate. By their clear terms, the contracts at issue released “all. .. persons” from claims resulting from the “incident occurring on September 8, 2004.” That is, the contracts released persons from certain specific claims. The Melvindale officers certainly fall within this specifically defined group, but not all “personfs] in the world” do.
In fact, the majority’s decision arguably places in doubt the viability of Farm Bureau and the string of cases dating back well over a century that have espoused this rule. See, e.g., Komraus Plumbing & Heating, Inc v Cadillac Sands Motel, Inc,
The majority’s characterizations of some of the distinguishing aspects of this case are questionable and deserve further comment. First, the majority’s statement that plaintiff “expressly preserved [his claim for assault and battery against the Melvindale officers] by rejecting the case-evaluation awards assessed against them” is misleading. Both plaintiff and the Melvindale officers rejected the case-evaluation awards. Second, the majority’s contention that the Melvindale officers’ release from liability was not supported by consideration is simply legally incorrect. There is no requirement that the consideration for an agreement come from a third-party beneficiary of the agreement. As the Court of Appeals explained in this case, “ ‘the basic rule of contract law is that whatever consideration is paid for all of the promises is consideration for eaсh one ....’” Shay, unpub op at 5, quoting Hall v Small,
Contrary to the assertions of the majority, the well-settled and long-established body of Michigan contract law governs this case, not the Third Restatement of Torts.
The majority does not respond to any of the criticisms offered in this dissent, concluding summarily that it finds the dissent “unpersuasive, despite its 32 pages in length, because the arguments are repetitive of Justice Markman’s analysis in Romska... However, given that the majority has never before responded to the arguments in Romska, it is hard to understand the relevance of its observation that a response on its part would be “repetitive.” In short, the majority has never offered any such response. Thus, all that is truly repetitive here is the majority’s failure to explain why the arguments offered in this dissent are neither compelling nor persuasive.
The majority also incorrectly suggests that the only authorities offered in support of this dissent are “Court of Appeals decisions decided after Romska." These post -Romska decisions, of course, are not cited to justify Romska, but are cited to demonstrate the uniformity with which Romska has been applied and the resulting reliance on its rule. The actual authority cited in support of this dissent consists of the various rules of contract developed by this Court for over a century, including such long-established principles of contract law as those asserting that (a) courts do not create ambiguity and instead enforce unambiguous contracts as written, see, e.g., Smith Trust,
Additionally, I note that this focus on the stranger/non-stranger status of the person who relies on a release misconceives the legal issue, which “does not concern the rights of strangers, but rather the rights of
Moreover, this rationale also appears inconsistent with the majority’s own rule, as far as I can understand it. According to the majority, the “infirmity” in the releases is the claimed latent ambiguity that is created when the phrase “all other persons” is applied to the Melvindale officers. Thus, if the promise had been made directly to them, and if the Melvindale officers had been named in the releases, there would have been no latent ambiguity even by the majority’s erroneous standards and thus no infirmity to somehow limit their rights under the contract.
MCL 600.1405(2)(a) states:
The rights of a person for whose benefit a promise has been made, as defined in [MCL 600.1405(1)], shall be deemed to have become vested, subject always to such express or implied conditions, limitations, or infirmities of the contract to which the rights of the promisee or the promise are subject, without any act or knowledge on his part, the moment the promise becomes legally binding on the promisor, unless there is some stipulation, agreement or understanding in the contract to the contrary.
See also Anno: Comment Note — Mutual rescission or release of contract as affecting rights of third-party beneficiary, 97 ALR2d 1262,1264, which explains that “where a third-party beneficiary contract has been accepted or acted upon by the third party, it cannot be rescinded by the principal parties without the third party’s consent.”
In light of this chronology, there are additional reasons why reformation may not have been available to plaintiff, including one derived from the following equitable maxim: “ ‘Equity will not assist a man whose condition is attributable only to that want of diligence which may be fairly expected from a reasonable person.’ ” Powers v Indiana & Mich Electric Co,
See, e.g., Genesee Foods Servs, Inc v Meadowbrook, Inc,