Update (April 14, 2010): Defendants got past summary judgment but not past judgment after trial.
Original Post (December 9, 2010): A lender lent money on a building project (condos), secured by personal guaranties. Borrower defaulted. Lender brought an action against the guarantors. They settled that lawsuit, with the lender to be assigned sales proceeds from yet-to-be sold units, and the guarantors promising to make up the shortfall to the extent the sales over the next year were for less than $2 million (give or take).
The sales were for far less than $ 2 million. But they were also not within a year. Lender sought summary judgment in its action to enforce the terms of the settlement agreement and to make up the shortfall. The guarantors countered that, per the settlement agreement, there was no “shortfall” because the definition of “shortfall” in the agreement incorporated the condition that the sale be within one year.
United States District Court Judge Donovan W. Frank (D. Minn.) denied the lender’s motion for summary judgment. “Viewing the evidence in the light most favorable to [the guarantors (that is, the parties against whom the motion for summary judgment was brought),] the Court finds that the settlement agreement can be read to be reasonably susceptible to more than one interpretation.” (Really? The guarantors’ obligations “go away” if the lender’s shortfall is even worse than anticipated? One of the guarantors had argued that he had surrendered counterclaims he had brought in the underlying litigation based in part on his understanding that his exposure was capped at one year…)
The Court concludes, “[R]esolution of a contractual ambiguity is a question of fact that must be determined by a jury.”