Must Utah courts consider extrinsic evidence before construing ambiguous contracts against the drafter? Brady v. Park Explained

In Brady v. Park, the Utah Supreme Court addressed a fundamental question in contract interpretation: when courts find contractual language ambiguous, must they consider extrinsic evidence of the parties’ intent before applying the rule of construing ambiguities against the drafter?

Background and Facts

The case stemmed from a 1996 seller-financed real estate transaction where the Bradys purchased commercial property from Kang Park for $755,625, paying with two promissory notes. The larger note for $675,000 contained a default interest provision stating that if payment was not made within five days of the due date, “the entire balance shall bear interest at the rate of 20% until note is brought current.” The note also imposed a 10 percent late fee for missed payments. Over the ten-year life of the note, disputes arose over what payments were required to bring the note “current” and stop the accrual of default interest.

Key Legal Issues

The primary issue was whether the note required payment of both late installment payments and 10 percent late fees to bring the note “current.” The district court found the provision ambiguous but resolved it by construing the ambiguity against the Park Defendants as drafters, without first considering extrinsic evidence of the parties’ intent. Additional issues included the application of late fees to balloon payments, mandate rule violations, and proper interest rates for judgments.

Court’s Analysis and Holding

The Utah Supreme Court agreed the note was ambiguous regarding what constituted bringing it “current” but held the district court erred in its analytical approach. The court emphasized that under established precedent in Meadow Valley Contractors, when contractual language is ambiguous, courts must first “invite extrinsic evidence bearing on the intentions of the parties” and “assess the merits of the extrinsic evidence.” Only if extrinsic evidence fails to reveal the parties’ intent should courts construe ambiguity against the drafter. The district court improperly skipped this “critical analytical step.”

Practice Implications

This decision reinforces the hierarchical approach to contract interpretation in Utah courts. Practitioners should present comprehensive extrinsic evidence whenever arguing contractual ambiguity, as courts cannot default to construction-against-drafter rules without first examining available evidence of intent. The decision also clarifies that Utah Code sections 15-1-1 and 15-1-4 do not authorize 10 percent interest rates on judgments for contract overpayments not contemplated in the original agreement. For appellate practitioners, the case demonstrates the continued vitality of the mandate rule in preventing district courts from relitigating previously decided issues.