Ambiguity

Charles Wunderlick and Martha Wilson ended their marriage in 1990 with a written agreement that required Wunderlick to pay Wilson alimony of $1000 per month indefinitely.  The payments were to end on the occurrence of certain contingencies, one of which was Wunderlick’s compensation being substantially reduced without “good cause” at the lumber company he owned and operated. In late 2008, the company responded to the recession by laying off employees and cutting the officers’ salaries to $1 annually. Wunderlick eventually stopped paying the monthly alimony payments, and Wilson sued for breach of contract. The trial court granted summary judgment for Wilson, and Wunderlick appealed.

The issue on appeal was whether Wunderlick had submitted summary judgment evidence showing that the company had reduced his compensation without “good cause,” a term which was not defined in the contract. For his part, Wunderlick argued that “good cause” should be interpreted in the employment context, which would require the employee to have done something wrong to justify termination or demotion. Wilson argued that the divorce agreement was not an employment contract, and “good cause” should therefore be given its ordinary meaning of “good reason” — and Wunderlick had admitted that the recession gave the company “good reason” to cut his salary. The court of appeals concluded that both constructions were reasonable, that the contract was therefore ambiguous, and a genuine issue of material fact existed as to the parties’ intent. The court of appeals therefore reversed the summary judgment and remanded to the district court for further proceedings.

Wunderlick v. Wilson, No. 05-11-01597-CV