Federal Deposit Insurance Corp. v. Fisher , 292 P.3d 934 ( 2013 )

Justice RICE

delivered the Opinion of the Court.

{1 We granted certiorari to determine whether the court of appeals erred in holding that section 38-10-124(2), C.R.S. (2012) (Colorado's Credit Agreement Statute of Frauds, or "CASOF'), allows the introduction of extrinsic evidence to interpret an allegedly ambiguous contract. We reverse the court of appeals and conclude that the contract at issue is not ambiguous. Because we hold that the contract is not ambiguous, we do not reach the question of whether CASOF allows for the introduction of extrinsic evidence to resolve a facially ambiguous credit agreement.

I. Facts and Proceedings Below

1 2 In May 2000, Yale Fisher ("Fisher")-a developer and former bank executive-borrowed $3.42 million from Community Banks¹ to construct a custom home in Cherry Hills Village, Colorado (the "Stanford home"). Fisher secured the loan with the Stanford home and with his $2.44 million vacation property in Telluride, Colorado. The original term of the loan was 15 months. Fisher sought and obtained three extensions on the maturation date of the loan. Each extension was memorialized with a Change in Terms agreement. The interest rate upon default in the Second and Third Change in Terms agreements is at issue in this appeal. The First Change in Terms agreement (the "First Extension") set the default interest rate at the six percent interest rate that governed the entire credit agreement.

T3 The Second Change in Terms agreement, dated February 18, 2002, (the "Second Extension"), extended the maturation date on Fisher's loan until May 18, 2002. The Second Extension included a "description of change in terms" clause noting the revised maturation date on the loan and a change in the controlling interest rate. This provision also stated that "[all other terms and conditions remain the same." In fact, other terms and conditions had changed. For example, the number of interest only payments decreased from five to two; the cure period was reduced; and, the default interest rate was changed from the variable interest rate governing the entire document to 36 percent. Fisher signed the Second Extension confirming that he "read and understood all provisions of" the agreement. As the May 18, 2002, maturation date from the Second Extension approached, Fisher sought and obtained another extension, the Third Change in Terms agreement (the "Third Extension").

T4 The Third Extension also contained a "description of change in terms" that failed to encompass all of the changed terms. The description only identified the deferred maturation date on the loan, to May 18, 2008, and the modified controlling interest rate of six percent; it did not mention any of the other numerous substantive changes. These included: an increase in the loan amount; a modified payment schedule; a new late payment schedule whereby Fisher was deemed late 11, rather than 15 days, after payment was due and charging five percent interest on the balance; a new paragraph describing "Events Affecting Guarantor"; and, a reduction in the cure period from 60 to 80 days. The Third Extension also included the 36 percent default interest rate, originally included in the Second Extension. Fisher signed the Third Extension acknowledging that he had read and understood all of its terms and provisions.

{5 Fisher then defaulted on the loan. Community Banks demanded payment and initiated foreclosure proceedings on both the Stanford home and on Fisher's Telluride vacation property. Shortly thereafter, Community Banks sold Fisher's loan to Western Real Estate Equities, LLC ("Western").

Fisher sued Community Banks in Arapahoe County District Court alleging breach of contract, fraud, civil conspiracy, and breach of implied duty of good faith and fair dealing. Community Banks counterclaimed for fraudulent inducement, claiming that Fisher misrepresented his financial situation to obtain the loan. In an Order on Community Banks' Motion in Limine, the trial court ruled that the Third Extension unambiguously established a 386 percent default interest rate and, citing CASOF, excluded much of Fisher's evidence that purported to contradict this interest rate. Based on its CASOF ruling, the trial court dismissed Fisher's fraud and misrepresentation claims as the evidence supporting these claims was precluded by CASOF. Fisher's civil conspiracy and breach of the implied covenant of good faith and fair dealing claims, and Community Banks' fraudulent inducement counterclaim then went to the jury. The jury rendered a verdict in favor of Community Banks on its fraudulent inducement counterclaim, and against Fisher on all of his claims. The trial court entered judgment against Fisher for $136,000.

T7 Fisher appealed the verdict to the court of appeals. In a unanimous, published opinion, the court of appeals reversed and remanded for a new trial. Fisher v. Cmty. Banks of Colo., Inc., -- P.3d ---, -- (Colo.App.2010) (selected for official publication). The court of appeals held that the Second and Third Extensions are facially ambiguous because the 36 percent default interest rate in those Extensions is not de-seribed in the Second Extension's "description of change in terms" and therefore conflicts with the default interest rate in the First Extension. See id. at -- --- Based on that holding, the court of appeals remanded the case for a new trial and held that CASOF did "not limit extrinsic evidence to resolve facially ambiguous credit agreements." Id. at --. The court of appeals also reversed the judgment against Fisher, holding that Community Banks lacked standing to bring the fraudulent inducement counterclaim. Id. at ---.

18 Community Banks petitioned this Court for certiorari review. We granted cer-tiorari to determine whether the court of appeals erred in holding that section 38-10-124(2), allowed the introduction of extrinsic evidence to interpret an allegedly ambiguous contract. Now, upon de novo review, we reverse the court of appeals' holding that the Second and Third Extensions were ambiguous.

II. Standard of Review

T9 The interpretation of a contract is a question of law. Accordingly, our review is de novo. Ad Two, Inc. v. City & Cnty. of Denver, 9 P.3d 373, 376 (Colo.2000) ("[Clon-tract interpretation is a question of law that is reviewed de novo and we need not defer to a lower tribunal's interpretation of the contract." (citation omitted)).

IH. The Default Interest Rate is Not Ambiguous

110 The court of appeals held that the Second and Third Extensions are ambiguous with respect to the default interest rate because the new interest rate is not described in either Extension's "description of change in terms." Fisher, - P.3d at --. It determined that, because the "description of change in terms" does not address the new 36 percent default interest rate, the clause creates an internal contradiction and the resulting contract is ambiguous. See id. We disagree.

$11 Applying rules of contract interpretation, we hold that the contract, as memorialized in the Third Extension,² unambiguously establishes a 36 percent default interest rate. This extension contains a heading in capital letters addressing "INTEREST AFTER DEFAULT." It recites that "Upon default, including failure to pay upon final maturity, lender at its option, may, if permitted under applicable law, increase the interest rate on this agreement to 36 percent per annum. The interest rate will not exceed the maximum rate permitted by applicable law." As the three extensions demonstrate, Fisher is a sophisticated person who had bargaining power and negotiated a series of loan extensions calculated to stave off foreclosure. Our primary aim in contract interpretation is to ascertain and implement the intent of the parties Ad Two, Inc., 9 P.3d at 376. Moreover, "[the meaning of a contract is found by examination of the entire instrument and not by viewing clauses or phrases in isolation." U.S. Fid. & Guar. Co. v. Budget Rent-A-Car Sys., Inc., 842 P.2d 208, 213 (Colo.1992) (citation omitted). Considering, then, the entire Third Extension, without giving undue weight to the isolated phrase "description of change in terms," the 36 percent default interest rate controls. See id. ("Each word in an instrument is to be given meaning if at all possible." (citation omitted)).

112 Further, this Court reviews the Third Extension "in its entirety with the end in view of seeking to harmonize and to give effect to all provisions so that none will be rendered meaningless." Copper Mountain, Inc. v. Indus. Sys., Inc., 208 P.3d 692, 697 (Colo.2009) (citation and internal quotation marks omitted); See Preserve at the Fort, Ltd. v. Prudential Huntoon Paige Assocs., 129 P.3d 1015, 1017 (Colo.App.2004) ("To determine the intent of the parties, we view the contract in its entirety."). If every word in the Third Extension is to be given meaning, the description of change in terms alone cannot override the numerous, substantial changes in the instrument. See Copper Mountain, Inc., 208 P.3d at 697; see also U.S. Fid. & Guar. Co., 842 P.2d at 213. Finally, the fact that the parties differ in their understanding of the agreement does not create an ambiguity. Fibreglas Fabricators, Inc. v. Kylberg, 799 P.2d 371, 374 (Colo. 1990). Ultimately, then, Fisher's subjective understanding of the agreement does not create an ambiguity. See id.

{ 13 Applying these standard rules of contract interpretation shows that the credit agreement between Fisher and Community Banks is not ambiguous as a matter of law. Accordingly, we reverse the court of appeals' conclusion that the contract was ambiguous. Because we hold that the contract is not ambiguous, we reserve for another day the question of whether a party may introduce extrinsic evidence to interpret an ambiguous credit agreement under CASOF.³

IV. Conclusion

[ 14 We hold that the contract unambiguously establishes a 36 percent default interest rate. Therefore, we do not address whether CASOF permits the admission of extrinsic evidence to resolve a facially ambiguous contract. Accordingly, we reverse the court of appeals and remand for further proceedings consistent with this opinion.

Justice EID concurs in the judgment only. Justice COATS dissents.

1 . - Community Banks has been placed in receiver ship by the FDIC; the FDIC represents Community Banks' interest in this appeal.

2 . In signing the Third Extension, the parties manifested their mutual assent to the new loan terms and both gave valid consideration; therefore, the Third Extension is the controlling iteration of the contract for purposes of this Court's analysis. - See Indus. Prods. Int'l, Inc. v. Emo Trans, Inc., 962 P.2d 983, 988 (Colo.App.1997) ("An enforceable contract requires mutual assent to an exchange, between competent parties, with regard to a certain subject matter, for legal consideration." (citation omitted)). To the extent the court of appeals found ambiguity by considering a conflict between the First, Second, and Third Extensions, this was inconsistent with a fundamental rule of contract interpretation that the latest iteration of contractual terms controls. See, e.g., Simon v. Shelter Gen. Ins. Co., 842 P.2d 236, 241 (Colo.1992) (describing an exception to ''the general rule [] that ... the last expression of intent of the contracting parties, [usually] prevail{s] over other inconsistent provisions"); State Farm Mut. Auto. Ins. Co. v. Graham, 860 P.2d 566, 568 (Colo.App.1993) ("The endorsement was agreed to by the parties subsequent to the original policy. Its terms therefore prevail to the extent that the two conflict." (citation omitted)).

3 . We granted certiorari to determine: "[wlhether the court of appeals erred in holding that section 38-10-124(2), C.R.S. (2010), allowed the introduction of extrinsic evidence to interpret an allegedly ambiguous contract." Our de novo review of the contract reveals that it is not, in fact, ambiguous; therefore, we make no determination on whether, under CASOF, extrinsic evidence might be admitted to resolve a facially ambiguous credit agreement. See, e.g., Barnes v. Dist. Court, 199 Colo. 310, 312, 607 P.2d 1008, 1009 (1980) ("The duty of this [Clourt, as of every other judicial tribunal, is to decide actual controversies by a judgment which can be carried into effect, and not to declare principles or rules of law which cannot affect the matter in issue before it." (citation and internal quotation marks omitted)).