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Frontier Co.'s of AK et al v. Jack White Co. et al (10/4/91), 818 P 2d 645
<![CDATA[
Notice: This is subject to formal correction before
publication in the Pacific Reporter. Readers are
requested to bring typographical or other formal errors
to the attention of the Clerk of the Appellate Courts,
303 K Street, Anchorage, Alaska 99501, in order that
corrections may be made prior to permanent publication.
THE SUPREME COURT OF THE STATE OF ALASKA
FRONTIER COMPANIES OF )
ALASKA, INC., )
) Supreme Court No. S-3800
Appellant, )
) Trial Court No.
) 3AN-88-285 Civil
v. )
) O P I N I O N
JACK WHITE COMPANY, )
)
Appellee. )
______________________________)
)
ARCTIC SLOPE REGIONAL ) Supreme Court No. S-3801
CORPORATION, )
)
Appellant, )
)
v. ) [No. 3759 - October 4, 1991]
)
JACK WHITE COMPANY, )
)
Appellee. )
______________________________)
Appeal from the Superior Court of the
State of Alaska, Third Judicial District,
Anchorage,
Karen L. Hunt,
Judge.
Appearances: Patrick H. Owen, Galbraith
& Owen, P.C., Anchorage, for Appellant
Frontier Companies of Alaska. Allan J.
Olson, Staley, DeLisio, Cook & Sherry, Inc.,
for Appellant Arctic Slope Regional
Corporation. Duncan A. Stuart, William M.
Bankston, Bankston & McCollum, P.C.,
Anchorage, for Appellee Jack White Company.
Before: Rabinowitz, Chief Justice,
Burke, Matthews, Compton, and Moore,
Justices.
MATTHEWS, Justice.
INTRODUCTION
At issue is the effect to be given a real estate
broker's exclusive listing agreement when the sale was not
formally completed until after the agreement had expired. We
have been asked to review the denial of directed verdicts
regarding when the sale occurred, whether the seller acted in bad
faith, and whether the buyer induced a breach of the listing
agreement. The buyer and seller also claim error in the trial
proceedings. Specifically, we must determine whether a
settlement agreement was improperly discussed before the jury,
and whether the trial court erred by answering a question from
the jury without consulting counsel. Finally, the propriety of
the award of attorney's fees and costs must be assessed.
FACTUAL AND PROCEDURAL BACKGROUND
Frontier Company of Alaska ("Frontier") and Jack White
Company ("Jack White") entered into an exclusive listing
agreement for the sale of Frontier's "Arctic Spur" commercial
property./1 The agreement provides in part:
This agency shall continue
irrevocably for the full period beginning
August 11, 1986, to midnight August 11, 1987.
Owner agrees to pay Agent . . . six % of the
selling price as compensation if the property
is sold or transferred by anyone, including
Owner, during the contract period or if sold
or transferred within 180 days after
expiration of that period to anyone who
negotiated during the period of this
agreement with Agent . . . .
* * *
Agent agrees to use diligence in
procuring a purchaser and to SUBMIT THIS
LISTING TO THE MULTIPLE LISTING SERVICE
WITHIN SEVENTY-TWO HOURS.
(Emphasis in original.) The initial listing price was
$2,995,000.00./2
Arctic Slope Regional Corporation ("ASRC") was
interested in acquiring property in Anchorage for an office and
met with broker John Morrison of the Brayton Company in December
1986 to discuss several properties. Morrison suggested the
Frontier property to ASRC. ASRC indicated it was aware of the
property but that it was too expensive. Although Morrison
maintained contact with ASRC, it appears that the Frontier
property was not again discussed.
In early 1987, Frontier independently initiated
discussions with ASRC relating to the possible sale of the Arctic
Spur property. Frontier was in the process of selling a number
of its business operations and assets to ASRC. Frontier
repeatedly tried to interest ASRC in the property, but ASRC
remained indifferent. On August 4, 1987, Frontier's Robert
Helsell contacted ASRC's Conrad Bagne and told him that Frontier
was "getting to the point where we were going to make somebody a
very good deal on that building." Bagne responded that Frontier
should approach ASRC next winter since ASRC was still not
interested in buying the building.
Frontier and ASRC again discussed the Arctic Spur
property in an August 5, 1987 meeting which had been scheduled to
discuss a number of items of unfinished business between the two
companies. Helsell said that Frontier was willing to reduce the
price of the building from $2.5 million to $1.8 million if ASRC
would make certain concessions, including permitting Frontier to
remain in a portion of the building rent-free for a period of
time. Bagne responded that he would recommend that ASRC purchase
the property for $1.7 million. The price appears to have been
settled on August 5, but Frontier and ASRC contend that a deal
was not struck until later, specifically after the listing
agreement had expired. The parties were aware that the listing
agreement would soon expire, and chose to wait until after August
11 to complete the transaction.
ASRC and Frontier met again on August 18, 1987 to
finalize the sale of the building. Some changes were made to the
draft agreement which had been prepared for this meeting,
including the addition of a clause requiring approval by the ASRC
board of directors. The agreement was signed on August 18
subject to ASRC board approval which was obtained on August 19.
The sale closed on October 9, 1987.
Jack White filed suit against Frontier claiming that it
was entitled to a six percent commission. In Count I, it alleged
that ASRC's contacts with Morrison were negotiations entitling
Jack White to the commission. In Count II, it asserted that
Frontier had breached its implied obligation of good faith and
fair dealing by postponing the sale until the listing agreement
had expired. Frontier brought a third-party claim against ASRC
because Jack White had alleged ASRC had negotiated with a broker
(Morrison), which conflicted with ASRC's representation to
Frontier that no brokers were involved in the transaction.
Frontier and ASRC settled the claim out of court agreeing to
share any liability to Jack White. Jack White amended its
complaint to add ASRC as a defendant claiming that ASRC was
liable for intentional interference with contractual relations
between Frontier and Jack White. The amended complaint also
plead an additional theory against Frontier, namely that the sale
had taken place within the listing period.
The case was tried to a jury. At the conclusion of the
evidence Frontier and ASRC moved for a directed verdict against
Jack White. Frontier alleged that there was no evidence from
which the jury could conclude that the property was sold while
the listing agreement was in effect, or that it had acted
unfairly or in bad faith. ASRC reiterated that there was not a
breach of the listing agreement, but added that even if a breach
was found, there was no evidence from which the jury could
conclude that ASRC had induced the breach. The motions were
denied and the case submitted to the jury.
During deliberations the jury sent a question through
the bailiff to the trial judge. The judge returned an answer to
the jury without notifying counsel.
By a 10-2 vote the jury found against Jack White on the
negotiation claim, and for Jack White on the claims that Frontier
breached the contract, both by selling the property within the
contract period and by violating the implied covenant of good
faith and fair dealing. The jury also found that ASRC interfered
with the contract. A judgment was entered for Jack White of
$102,000, six percent of the sale price.
Frontier and ASRC moved for a new trial claiming that
the trial judge's ex parte contact with the jury was prejudicial
error. The motion was denied.
Jack White sought attorney's fees and paralegal
expenses. The trial court specifically found that there was no
reason to vary from the Civil Rule 82 schedule and awarded
attorney's fees of $15,324.75. On January 3, 1988, the court
reconsidered and held that Jack White was entitled to scheduled
attorney's fees separately from both Frontier and ASRC. On
reconsideration the court also granted 100 percent of Jack
White's paralegal expenses.
Frontier and ASRC appeal.
DISCUSSION
A. Denial of the Motions for Directed Verdict
The standard of review of denials of directed verdicts
is deferential. "Our standard of review for a directed verdict
is to determine whether the evidence, and all reasonable
inferences which may be drawn from the evidence, viewed in the
light most favorable to the non-moving party, permits room for
diversity of opinion among reasonable jurors." City of Delta
Junction v. Mack Trucks, Inc., 670 P.2d 1128, 1130 (Alaska 1983).
1. Sold or Transferred
Frontier contends that the property was not "sold or
transferred" until after August 11, 1987, the last day of the
exclusive listing agreement. Frontier notes that a written
agreement for the sale was not signed until August 18; that the
agreement was subject to approval by the ASRC board of directors,
which did not approve it until August 19; and the transaction was
not consummated until October 9, when the purchase price was paid
and the deed was executed and delivered. Implicit in Frontier's
argument is the contention that no sale took place within the
meaning of the exclusive listing agreement unless Frontier made a
legally enforceable agreement of sale within the contract period.
Jack White argues that all the important terms of the
sale were agreed to on August 5, 1987. There is ample evidence
supporting that conclusion. Thus the question presented is
whether the term "sold or transferred" used in the listing
agreement is broad enough to cover an oral agreement which may
not be legally enforceable because of the statute of frauds, but
which is consummated after the expiration of the listing period.
We answer that question in the affirmative.
In Hazell v. Richards, 659 P.2d 575, 577 (Alaska 1983),
we recognized as a general proposition the validity of the
argument that "a property is `sold' within the meaning of a
listing agreement when an earnest money contract is signed,
regardless of whether the sale closes prior to the expiration of
the listing agreement, so long as it at some time results in a
completed transaction." Earnest money agreements come in various
forms. Sometimes they are legally binding on both the seller and
the buyer; in other forms they are only an option to buy, that
is, they are not legally enforceable against a buyer. We did not
in Hazell address the question of whether an earnest money
contract which was legally unenforceable against a prospective
buyer would suffice as a "sale"under a listing agreement,
assuming that the option was eventually exercised.
That question was, however, addressed by the Supreme
Court of Oregon in Dean Vincent, Inc. v. Chef Joe's, Inc., 541
P.2d 469 (Or. 1975). The Oregon court recognized that the
earnest money agreement may not have been legally enforceable
against the buyer. It nonetheless held that the sale took place
when the earnest money agreement was made, if it was eventually
consummated:
The construction of the clause
which would most fulfill the purpose for
which it was intended is that the plaintiff
is entitled to a commission if the defendant
enters into an earnest money agreement within
the exclusive period and that agreement at
some time results in a completed transaction.
We hold that is the correct interpretation.
A construction to the contrary would
encourage chicanery to circumscribe the
exclusive feature of the listing agreement.
Id. at 471.
Other courts have applied the same rule to agreements
for the purchase of real estate which were not enforceable
against the prospective purchaser because they were oral. Covino
v. Pfeffer, 276 A.2d 895, 897 (Conn. 1970) ("During the life of
an exclusive sale contract, an agreement between the owner and
the ultimate purchaser to sell and buy, whether or not
specifically enforceable, gives rise to a cause of action on the
part of an exclusive broker . . . . To place any other
interpretation on the meaning of `sale' in an exclusive sale
contract would encourage connivance."); Bolger v. Danley Lumber
Co., 395 N.E.2d 1066, 1069 (Ill. App. 1979); Great Falls
Properties, Inc. v. Professional Group, Ltd., 649 P.2d 1082, 1085
(Colo. 1982) ("Sells"used in listing agreement "refers to any
agreement of purchase and sale entered into during the listing
period even though actual transfer of title does not take place
until the listing has expired,"including verbal agreement which
might be void for noncompliance with the statute of frauds).
We agree with the above authorities. It follows that
the trial court did not err in refusing to direct a verdict on
the issue of whether the property was sold while the listing
agreement was in effect.
2. Good Faith and Fair Dealing
Frontier also argues that the trial court erred in
refusing to direct a verdict on the issue of whether Frontier was
guilty of a breach of the implied covenant of good faith and fair
dealing. It is, however, unnecessary to decide this issue
because the jury's conclusion in the special verdict that
Frontier sold the property within the contract period is
independently sufficient to support the jury award.
3. Intentional Inducement of Contract Breach
ASRC moved for a directed verdict on the issue of
whether it tortiously interfered with the exclusive listing
contract between Frontier and Jack White. This motion was denied
and the jury concluded in the special verdict that ASRC
intentionally interfered with Jack White's contractual
relationship with Frontier.
We have listed the elements of an intentional inter
ference claim as follows:
[P]roof that (1) a contract existed, (2)
the defendant [ASRC] . . . knew of the
contract and intended to induce a breach, (3)
the contract was breached, (4) defendant's
wrongful conduct engendered the breach, (5)
the breach caused the plaintiff's damages,
and (6) the defendant's conduct was not
privileged or justified.
Knight v. American Guard & Alert, Inc., 714 P.2d 788, 793 (Alaska
1986).
We conclude, for the reasons that follow, that the
inducement and wrongful conduct elements of an intentional inter
ference tort were not proven. It appears that Frontier suggested
that the transaction not be finalized until after the listing
period expired. ASRC did no more than assent to that suggestion,
knowing that Frontier's purpose was to avoid paying Jack White a
commission. In Knight v. American Guard we held that a directed
verdict on an intentional interference claim was properly granted
in favor of a defendant who acquiesced in a breach of contract by
one of the contracting parties, but did not instigate it. Id. at
793-94./3
In essence, ASRC's conduct was nothing more than
acquiescence in Frontier's breach of contract. This does not
provide a sufficient basis for a finding of intentional
interference with contract. See, e.g., Corinthian Corp. v. White
& Bollard, Inc., 442 P.2d 950, 957 (Wash. 1968) ("[Defendant's]
action did not have the requisite quality of inducement. Its
participation was merely an acceptance of an offer.
[Defendant's] participation was not the `moving force' in the
breach, and therefore did not amount to a tortious interference."
(citations omitted)); Middleton v. Wallichs Music & Entertainment
Co., 536 P.2d 1072, 1075 (Ariz. App. 1975) ("The mere fact that
[defendant] contracted with the lessor with knowledge of the
existence of the restrictive [competition] covenant and its
possible breach by lessor in entering into the subsequent lease
with [defendant], is not . . . the equivalent of improper
inducement."); Baker v. Carpenter, 516 P.2d 459, 461 (Colo. App.
1973) ("[O]ne does not induce a seller to breach a contract with
a third person when he merely enters into an agreement with the
seller with knowledge that the seller cannot perform both it and
his contract with the third person. In order to establish the
alleged tort, a plaintiff must prove, inter alia, that the
actions of the defendant actually induced a breach of the
contract.").
Jack White cites three cases which it contends indicate
that denial of a directed verdict was proper. We disagree and
believe that each of the cases is distinguishable in an important
way. The first case, Boyles v. Thompson, 585 S.W.2d 821 (Tex.
App. 1979), involved a relatively unusual situation in which the
buyer disliked the broker personally and for that reason
suggested to the seller a transaction which would eliminate the
broker's commission. Id. at 826 & 837. There is no such
motivating animus in this case. Furthermore, ASRC's knowing
acceptance of Frontier's breach is a far cry from Boyles' active
encouragement of the breach. The second case, Community
Cablecasting Corp. v. Daniels & Assocs. Inc., 215 So.2d 17 (Fla.
App. 1968), cert. denied, 225 So.2d 553 (Fla. 1969), is better
authority for Jack White. However, although the facts are not
stated in detail, it appears that the purchaser affirmatively
arranged an attempted deception of the broker by postdating the
sale contract. Id. at 18. In the present case, ASRC engaged in
no similar conduct which might be characterized as wrongful. The
third case which Jack White cites is Bolger v. Danley Lumber Co.,
395 N.E.2d 1066 (Ill. App. 1979), where summary judgment had been
rendered in favor of the buyer on the basis that there was no
factual issue as to whether the buyer had knowledge of the
brokerage contract. The court reversed summary judgment, holding
that there was a question of fact as to the buyer's knowledge.
Id. at 1069. The court did not state that knowledge alone was
sufficient for entry of judgment against the buyer, nor did the
court purport to analyze what additional elements would have to
be proved in order to establish a case of intentional
interference against the buyer. The case, therefore, does not
support Jack White's position.
B. In-Court Discussion of the Frontier/ASRC
Settlement Agreement
In settling their third-party claims, Frontier and ASRC
agreed to share all liability to Jack White. Jack White
attempted to introduce the settlement agreement and evidence of
the related negotiations at trial, but the court refused to allow
it. Jack White was, however, permitted to cross-examine Frontier
and ASRC about the settlement, and discuss it in front of the
jury./4 The trial court allowed the settlement agreement to be
discussed at trial on the grounds that it was useful in showing
bias or prejudice of ASRC and Frontier representatives.
Frontier, however, contends that because the parties to the
settlement agreement were also parties to the action, the jury
was aware that the witnesses were biased.
Evidence Rule 408 specifically allows the use of
settlement agreements to show witness bias./5 While it is true
that ASRC's and Frontier's status as parties would suggest to the
jury that their representatives might be biased in favor of the
party employing them, that bias does not necessarily carry over
to the co-defendant. Because of the agreement, ASRC
representatives might be motivated to slant their testimony in
Frontier's favor and vice-versa. The trial court did not err in
allowing the testimony.
C. Ex Parte Contact by Trial Judge with the Jury
Frontier asserts that the trial court's ex parte
contact with the jury was error and a new trial is required.
During its deliberations, the jury sent the following question to
the court:
There is a question in regard to the
validity of the contract: Exhibit 10
* * *
Contract says:
Agent agrees to use
diligence in procuring a purchaser
and submit this listing to the
multiple listing service within
seventy-two hours.
Since it was not sent within seventy
hours do we have the option of considering
the contract null and void[?]
The court responded "No." Counsel was not notified of the
question or the answer. The court later explained: "Given that
the case had no claim that the contract should be rescinded or
otherwise considered `null and void', . . . the answer was given
to the jury without counsel being called."
We have not previously addressed the proper remedy for
ex parte contact between the judge and jury in a civil case,
although the rule in criminal cases is clear. We have expressly
rejected a per se reversibility standard; instead, we apply a
"harmless beyond a reasonable doubt"standard with the state
bearing the burden of proving harmlessness. Dixon v. State, 605
P.2d 882, 884 (Alaska 1980); see also Wamser v. State, 652 P.2d
98 (Alaska 1982); Noffke v. State, 422 P.2d 102 (Alaska 1967).
The United States Supreme Court has also indicated that ex parte
communication between a judge and jury may sometimes be harmless
error in a criminal trial. Rogers v. United States, 422 U.S. 35,
40 (1975). The standards of evaluating ex parte contact need not
be as high in civil as in criminal cases since the right of the
accused to be present at every stage of a criminal trial has
constitutional status,/6 and there is no similar protection on
the civil side.
While it has not been universally rejected, most courts
do not apply a per se reversibility standard when there have been
ex parte contacts between judge and jury in a civil trial. For
example, in Petrycki v. Youngstown & Northern R.R., 531 F.2d 1363
(6th Cir.), cert. denied, 429 U.S. 860 (1976), the court held
"[C]ommunications between a judge and a jury, without notice to
counsel, constitute reversible error[, however,] a court's ex
parte communication with the jury will not require reversal where
substantive rights of parties have not been adversely affected."
Id. at 1366-67 (citations omitted). The court applied a harmless
error standard, found that the error in question was not
harmless, and ordered a new trial./7
The Ninth Circuit has also applied a harmless error
test. Dixon v. Southern Pacific Transp. Co., 579 F.2d 511 (9th
Cir. 1978). In deciding that the error was harmless it was
important to the court that the judge's answer was "indisputably
correct." Id. at 514; see also Acree v. Minolta Corp, 748 F.2d
1382, 1386 (10th Cir. 1984) (although the court's ex parte
response to a jury's question regarding the losses for which they
could properly award damages is error, reversal is only necessary
if the error affected substantial rights).
We agree with these authorities and will apply a
harmless error standard to this case. Frontier, as the party
alleging error, bears the burden of proving both error and harm.
See Poulin v. Zartman, 542 P.2d 251, 261 (Alaska 1975); Zerbinos
v. Lewis, 394 P.2d 886, 889-90 (Alaska 1964).
The trial court's response to the jury was error.
Clearly, the court should have consulted counsel and given them
an opportunity to be heard before answering the jury. However,
Frontier has not proven that this error was prejudicial.
Prejudicial error can frequently be proven by showing that the
judge's ex parte response was legally or factually incorrect.
See, e.g., Petrycki, 531 F.2d at 1367. The court's response in
this case was neither. Therefore, we conclude that a new trial
is not required.
D. Attorney's Fees
In response to Jack White's request for attorney's
fees, the court initially found that there was no reason to
deviate from the schedule contained in Civil Rule 82(a)(1) and
awarded fees according to the schedule. The court subsequently
reconsidered and held that Jack White was entitled to scheduled
attorney's fees separately from both Frontier and ASRC, in effect
doubling Jack White's fee recovery.
Even though the decision of the trial court regarding
attorney's fees is given great deference, City of Valdez v.
Valdez Development Co., 523 P.2d 177, 184 (Alaska 1974), we have
routinely held that "the trial court should state its reasons
when it makes an award of attorney's fees which varies from the
schedule in Rule 82(a)(1)." Miller v. McManus, 558 P.2d 891, 893
(Alaska 1977); Farnsworth v. Steiner, 601 P.2d 266, 272 (Alaska
1979).
The trial court erred in ordering both defendants to
pay Jack White's scheduled attorney's fees. To reach the fee
figure of $15,324.75 that was subsequently doubled the trial
court used Jack White's total judgment. Frontier and ASRC were
jointly liable for this amount; Jack White basically recovered
one amount, the commission, using two theories against two
defendants. By doubling the schedule figure because there were
two defendants, the court in essence used a much higher judgment
than the jury found appropriate. The court abused its discretion
by deviating from the Rule 82 schedule without explaining its
reasons.
Because the judgment against ASRC must be reversed, the
court's error regarding attorney's fees should be remedied by
vacating the fee award against ASRC. On remand the court may
make an attorney's fee award in favor of ASRC.
E. Costs
The court awarded Jack White its full paralegal
expenses as costs citing CTA Architects v. Active Erectors &
Installers, Inc., 781 P.2d 1364 (Alaska 1989). Cost awards will
be affirmed unless there has been a clear abuse of discretion.
Kaps Transport, Inc. v. Henry, 572 P.2d 72, 77 (Alaska 1977).
This award was not an abuse of discretion and so it is affirmed
as to Frontier. As to ASRC, it is reversed, along with the
judgment on the merits.
The judgment of the superior court is AFFIRMED as to
Frontier, REVERSED as to ASRC, and REMANDED for further
proceedings.
_______________________________
1/ This was an "exclusive sale"contract as opposed to an
"exclusive agency"contract. As such, Jack White was entitled to
a commission if the property sold within the specified time
regardless of whether the broker played a role in locating the
purchaser.
2/ The listing price was reduced by Frontier to $2.5 million
on December 10, 1986. The listing price was not further reduced.
3/ See also Prosser and Keeton on The Law of Torts 129 at
989-90 (P. Keeton 5th ed. 1984) (footnotes omitted):
In order to be held liable for
interference with a contract, the defendant
must be shown to have caused the interference
and the loss. Sometimes it is said that the
defendant must have played an active and
substantial part in the loss. It is not
enough that he merely has reaped the
advantages of the broken contract after the
contracting party has withdrawn from it of
his own motion. Thus acceptance of an
offered bargain is not in itself inducement
of the breach of a prior inconsistent
contract, and it is not enough that the
defendant has done no more than enter into
one with knowledge of the other . . . .
4/ In closing argument Jack White's counsel said:
[Frontier and ASRC] have incentives to
make sure that they're working together . . .
. [T]hey have to, in a sense, make sure
their testimony lines up. Why? Because if
Frontier -- if you decide that Frontier is in
the wrong, then Arctic Slope has to pay half.
If you decide Arctic Slope -- (indiscernible)
-- responsibility to what Arctic Slope's done
in this case, Frontier has to pay half.
5/ Rule 408 provides:
Evidence of (1) furnishing or
offering or promising to furnish or (2)
accepting or offering or promising to accept,
a valuable consideration in compromising or
attempting to compromise a claim which was
disputed as to either validity or amount, is
not admissible to prove liability for or
invalidity of the claim or its amount. . . .
This rule . . . does not require exclusion
when the evidence is offered for another
purpose, such as proving bias or prejudice of
a witness . . . .
6/ This right is derived from the confrontation and due
process clauses of the Alaska and United States Constitutions.
Dixon, 605 P.2d at 884 & n.3.
7/ The judge's response to the jury's question regarding the
maximum amount of damages the jury could award was factually
incorrect.
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