STATE OF MINNESOTA

IN COURT OF APPEALS

C6-99-1487

Diane Noerenberg,
Appellant,

vs.

Robert L. Carr, et al.,
Respondents.

Filed March 7, 2000

Affirmed in part, reversed in part

Crippen, Judge

Lyon County District Court

File No. C698907

James R. Anderson, P.O. Box 1196, Marshall, MN 56258 (for appellant)

Paul E. Stoneberg, 300 O’Connell Street, Marshall, MN 56258 (for respondents)

Considered and decided by Crippen, Presiding Judge, Schumacher, Judge, and Klaphake, Judge.

U N P U B L I S H E D O P I N I O N

CRIPPEN, Judge

Appellant disputes the trial court’s construction of a bonus provision in her employment contract as the manager of respondents’ restaurant business in Marshall. We affirm the court’s decision that the bonus should be calculated without reference to profits from the sale of respondents’ business but remand to permit a final calculation of appellant’s 1998 bonus.

FACTS

In December 1996, appellant went to work for respondents as the manager of a Perkins restaurant in Marshall, Minnesota. Appellant signed an employment contract that provided that she would receive a bonus of “5% of Net Profits for full year of employment.” The contract also fixed health-insurance arrangements, vacation time, and the number of work hours per week. The following year, appellant’s salary increased and she signed a new contract. Her bonus, still based on “net profits,” was increased to 7% for profits over $25,000, 9% for sums over $50,000, 11% for amounts over $75,000, and 13% for profits over $100,000.

At the end of 1997, appellant received a bonus of $3,354.56. In August of 1998, respondents sold the restaurant for $1.65 million. The new owner fired appellant shortly thereafter. Appellant now claims she is due a 1998 bonus that includes a percentage of the net gains from the sale of the restaurant. Respondents claim the contract never anticipated that she would be entitled to anything more than a percentage of the profits from the operation of the restaurant.

The trial court determined that “[c]onsideration of the agreement as a whole favors” respondents, and that appellant was not entitled to a percentage of the net gain from the sale of the business, which it determined was $652,321.

D E C I S I O N

Absent ambiguity in the contract, the resolution of which is a fact question, the interpretation of a contract is a question of law. Turner v. Alpha Phi Sorority House, 276 N.W.2d 63, 66 (Minn. 1979). And “[w]hether or not a contract is ambiguous is a question of law.” Davis by Davis v. Outboard Marine Corp., 415 N.W.2d 719, 723 (Minn. App. 1987) (citation omitted), review denied (Minn. Jan. 28, 1988). The court must “fastidiously guard against the invitation to ‘create ambiguities’ where none exist.” Columbia Heights Motors, Inc. v. Allstate Inc. Co., 275 N.W.2d 32, 36 (Minn. 1979) (quotation omitted).

When interpreting a contract, a reviewing court attempts to put itself in the position of the parties when they entered the contract and should consider the circumstances surrounding the contract while “endeavoring to arrive at what the parties must have reasonably contemplated.” Midway Ctr. Assoc. v. Midway Ctr., Inc., 306 Minn. 352, 356, 237 N.W.2d 76, 78 (1975) (citation omitted).

Appellant contends that the concept of “net profits” is ambiguous.^[1] Viewed in isolation, the concept of profits is ambiguous. It refers to income without making it evident whether this regards revenues of the annual business operation or gains from all activities, including the transactions for the sale of the business, or both. However ambiguous the words in isolation, the contract in this case unambiguously deals with the profits from the operation of the business and not with gains realized from the sale of the business.

This construction of the contract is evident initially in light of the fact that the contract is one for a staff position and creates no equity interest in the employee. Moreover, appellant was hired as an operational manager, not an agent to accomplish the sale of a business. Also, as the trial court observed, the contract anticipates profits in increments up to $100,000, refuting the notion that it is in reference to a much larger economic experience such as is involved in the sale of a business. Finally, the contract measures the bonus in terms of yearly profits, a concept that is in patent reference to a business operation. See, e.g., Standard Oil Co. v. Stubbs-Auckland Oil Co., 265 N.W. 121, 125 (Iowa 1936) (defining “profit” as the “excess of income over expenditure, as in a business or any of its departments, during a given period of time”) (quotation omitted).^[2]

Appellant points to various extrinsic evidence that she achieved success in restoring the business operations and speculates that this enlarged the market value of the business; that she expected her employment would not be interrupted by the sale of the business; and that she believed she was dealing with entities speaking by contract for both the ownership and the operation of the restaurant.^[3] Moreover, as appellant observes, respondents drafted the instrument; therefore, if there were an ambiguity, it would be construed against the drafter. Deutz & Crow Co. v. Anderson, 354 N.W.2d 482, 486 (Minn. App. 1984). We do not reach extrinsic evidence in circumstances such as this, where the language of the contract speaks for itself in suggesting a bonus based on operational profits. See id. (only if the court determines that the contract contains an ambiguity, may it turn to extrinsic evidence to resolve that ambiguity).

The trial court entered summary judgment for respondents. In its memorandum accompanying the summary judgment order, the court observed that the respondents were to tender a $4,884 check they had previously tendered on their theory that they only owed appellant a bonus based on the restaurant’s operational profits, and respondents indicated at oral argument their continued intention to make that payment. The court made no judgment on the correct amount of the bonus. Because the subject of that payment must remain within the jurisdiction of the trial court, we reverse and remand solely to permit the court’s calculation of the amount due as a measure of the appropriate percentage of the profits from the operation of the business in 1998.

Affirmed in part, reversed and remanded in part.

^[1] The trial court evidently agreed, stating in its memorandum that “[t]he term, net profits, is ambiguous.” The trial court then considered and discussed intrinsic and extrinsic evidence in resolving the dispute of the parties. It is unclear whether the court may have erred in finding that the contract, and not just the phrase “net profits,” was ambiguous and inappropriately resolved the dispute in a summary judgment motion. See, e.g. Deutz & Crow Co. v. Anderson, 354 N.W.2d 482, 486 (Minn. App. 1984) (if the court needs to turn to extrinsic evidence to resolve an ambiguity, it may only order summary judgment for one party if the extrinsic evidence is undisputed and conclusive).

^[2] The parties do not dispute that appellant is entitled to a 1998 bonus without regard to the fact that she did not work a full year and the contract stated: “No part year bonus. Bonus from January 1 to December 31.” See, e.g., Federal Ins. Co. v. Gilmour, 92 N.E. 36 (Mass. 1910) (finding that the contract terms “predicated on the yearly profits” did not “indicate an intention that no such profits should be ascertained in the event of a termination of the agency” before the end of the year).

^[3] The restaurant was owned by Hospitality Dining of Marshall, a partnership, and operated by Hospitality Dining of Marshall, Inc. Appellant was paid on checks of Perkins DBA Hospitality Dining of Marshall, Inc. Her contracts were with Hospitality Dining of Marshall, DBA Perkins.