Herson v. Gibraltar Building & Loan Association, Inc.

864 F.2d 848 (D.C. Cir. 1989)

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Nature of the Case

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Facts

Three units of a condominium complex were purchased with promissory notes secured by a deed of trust by the Hersons (P) et al. (Vierlings). The notes were payable to Gibraltar (D). A falling out occurred with P and its partners, and a Mutual Release and Discharge Agreement was signed by all parties on August 24, 1984, in order to settle the lawsuits. P and its parties then refused to tender the payments due on the promissory notes and sought a declaratory judgment that would require D to release the deeds and to treat the debts as satisfied. The case was removed to federal court and D counterclaimed for the balance due on the notes and attorney’s fees. Based on the evidence of the agreement allowed to be admitted at trial, the trial court concluded that the parties only intended to resolve only the matters specifically mentioned in the Release. The court reached this conclusion by applying Maryland law; a trial judge may not consider extrinsic evidence both to determine whether a contract ambiguity existed (unless the evidence varied, altered, or contradicted the writing's clear meaning) and to resolve any ambiguity by ascertaining the parties' intent. The court ruled the Release unclear and relied upon extrinsic evidence to conclude that the parties did not intend to cancel the notes in question. P appealed.