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Weinglass v. Reitman

A-1670-99T2 (N.J. Super. App. Div. 2001) (Unpublished)

CONTRACTS; INTERPRETATION—Where a contract provision is ambiguous, the parties should have an opportunity to present all of the evidence surrounding its formation and a court should consider the relationship of the parties, the attendant circumstances, and the object the parties were seeking to attain.

One shareholder sold his half interest in the corporation to another shareholder. A provision of their agreement read as follows: “[The corporation] shall continue the health and dental coverage of Seller and his wife for so long as [the corporation] can maintain Seller as a member of its group plan. Any addition to one hundred and twenty-five (125%) percent of the premium paid for Seller’s coverage (including the coverage of his wife) as of the date of the execution of this agreement shall be deducted by Purchaser from payments which would otherwise be made to Seller. In the event that [the corporation’s] insurance carrier will no longer include Seller in the group, or continue the insurance coverage of his wife, then and in that event, [the corporation] will continue to pay seller annually for the rest of his natural life an amount equal to the premium, as of the closing date, paid for Seller’s coverage.” Two years after the sale, the buyer wrote to the seller to inform him that the assets of the corporation were going to be sold. The letter indicated that the buyer intended to fulfill all of the requirements of the agreement. Specifically, he wrote: “With respect to the health and dental coverage (par. 8a), I agree to either continue the coverage which you now have or to provide you with the annual amount required to be paid to you pursuant to paragraph 8a.” A time came when the insurance coverage could no longer be maintained and the buyer then maintained that the agreement did not require him to make payment for the wife’s insurance since the insurance would no longer include the seller and his wife in the group. The lower court, before either side was afforded an opportunity to present any evidence in support of its position, held that the agreement only provided the cost of the individual “Seller’s” coverage as of the closing date,” interpreting the agreement to contain no obligation to pay for the cost of the wife’s coverage. The Appellate Division disagreed. It pointed out that an appellate court is not obliged to give deference to a lower court’s legal conclusion and that “[i]nterpretation and construction of a contract is a matter of law for the court subject to de novo review.” The Appellate Division found that the phrase “Seller’s coverage” appearing at the end of the paragraph was “indeed susceptible to two different interpretations.” It could be narrowly construed to mean only the husband or, the phrase could denote coverage for both the husband and his wife. This second interpretation was based on the fact that earlier in the paragraph the phrase “Seller’s coverage” was directly followed by the parenthetical phrase “including the coverage of his wife.” The Court found that the disputed provision was ambiguous and the parties should have been given the opportunity to “present all their evidence and to offer testimony as to the circumstances surrounding the formation of this provision of the agreement and their expectations… .”

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