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Young v. Hobbs (5/10/96), 916 P 2d 485
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NOTICE: This opinion is subject to formal correction before
publication in the Pacific Reporter. Readers are requested to bring
errors to the attention of the Clerk of the Appellate Courts, 303 K
Street, Anchorage, Alaska 99501; (907) 264-0607.
THE SUPREME COURT OF THE STATE OF ALASKA
DALE E. YOUNG II, )
) Supreme Court No. S-6416
Appellant, )
) Superior Court No.
v. ) 1JU-92-674 CI
)
MARION HOBBS, MICHAEL W. ) O P I N I O N
MILLAR, WILDERNESS ACQUISI- )
TIONS, INC., BARANOF WARM ) [No. 4347 - May 10, 1996]
SPRINGS LODGE, INC., )
)
Appellees. )
______________________________)
Appeal from the Superior Court of the State of
Alaska, First Judicial District, Juneau,
J. Justin Ripley, Judge.
Appearances: Dennis C. Bailey, Dillon and
Findley, P.C., Juneau, for Appellant. Daniel
G. Bruce and Linda T. McKinney, Baxter, Bruce
& Brand, Juneau, for Appellees.
Before: Rabinowitz, Matthews, Compton, and
Eastaugh, Justices. [Moore, Chief Justice,
not participating.]
RABINOWITZ, Justice.
I. INTRODUCTION
The central issue presented by this appeal is whether the
superior court properly ruled that the parties agreed to a
settlement contract.
II. FACTS AND PROCEEDINGS
Dale Young and Marion Hobbs were involved in Wilderness
Acquisitions, Inc., a corporation which attempted to build a
wilderness lodge on Baranof Island in Southeast Alaska. In the
course of the corporation's dissolution, a number of issues were
contested, and eventually litigated, including the issue of
ownership of high density polyethylene pipe that had been
transported to the Baranof Island property.
Before the corporation was dissolved, Young purchased a
security interest in the corporation's property, and eventually
obtained a foreclosure of this security interest. In the
underlying litigation, Young filed a motion requesting
determination of the ownership of the pipe which had been removed
from Baranof Island by Hobbs. The superior court ordered Hobbs to
return the pipeline to the island, holding "that the pipeline . . .
was appurtenant to the property purchased by Dale Young at the
foreclosure sale[.]"(EN1) Subsequently, in an effort to have
Hobbs comply with the superior court's order requiring return of
the pipe, Young filed a motion for order to show cause. The motion
was stayed pending a settlement conference scheduled for March 11,
1994.
The settlement conference was not limited to the pipe
issue; rather it was intended to resolve all outstanding issues
relating to the corporation's dissolution. Accordingly, for
several days prior to the settlement conference, Young, Hobbs, and
the other corporate members met in an attempt to define and resolve
all pending issues. Of significance are three preliminary meetings
at which Young and Hobbs discussed the existing pipe dispute: (1)
a meeting on March 9; (2) a meeting at Young's house the morning of
March 10; and (3) a meeting on the evening of March 10. At issue
in this appeal is whether, as a result of these meetings, Young and
Hobbs agreed to settle the pipe dispute.
At the global settlement conference held on March 11, all
interested parties reached a settlement that was memorialized on
the record in Judge Ripley's chambers. Included in the recorded
settlement was a reference to the Young-Hobbs pipe dispute:
Included in this settlement is an agreement
between Dale Young and Marion Hobbs for return
of the pipe removed from Baranof Warm Springs.
That agreement is attached to this settlement
and incorporated by reference.
Young and Hobbs, as well as their counsel and other
interested parties, were present when the superior court's
recitation was made, and no objections were raised. After the
recitation, Judge Ripley concluded the settlement conference by
stating:
We recognize that there are going to be
documents prepared for dismissal for
confession of judgment without action and all
the corporate business, but the -- this deal
is binding as of now, and if there is any
dispute over the language, we all agree it's
to be submitted to me informally. We can go
on the record, argue it one time, I'll give a
ruling as to what we meant if there's a
dispute over the language, and it will be
binding.
Any problems with that?
Okay. I recognize that this has been an
incredible amount of give and take. It's now
7:21 in the evening, but in a legal sense
we've assumed since everybody's here and
everybody has heard this put on record, that
it is legally binding, it's voluntarily done
by each with the full knowledge of your -- the
consequences, and I congratulate you for your
ability to do this.
If there's nothing else, we're off record at
7:21.
Though the recorded settlement agreement referred to a
side-agreement purporting to settle the pipe dispute between Young
and Hobbs, the post-conference drafting process revealed that their
dispute was far from resolved. Young contended that their
agreement was fully reflected in a written draft that he had
prepared and handed to Hobbs when the parties met for the third
time on the night of March 10. Hobbs argued that the written draft
was deficient. Hobbs additionally argued that both he and Young
knew that the written draft was not a complete expression of their
agreement. The parties disputed whether Young was to pay Hobbs for
the cost of his labor for installing the pipeline on the Baranof
Island property, a term absent from Young's written draft.
The superior court's underlying order required Hobbs to
return the pipe to Baranof Island "in its same condition"--
namely, unassembled. Hobbs argued that Young had agreed during
their negotiations that Hobbs would be compensated for his labor
cost in installing the pipe. Hobbs brought Young's written draft
with him to the settlement conference, discussed with Young what he
considered to be its deficiencies, and made handwritten additions
to it during the recitation of the global settlement agreement.
Immediately after the settlement conference ended, the parties
presented their dispute to Judge Ripley, who decided to hold a
hearing regarding the particulars of Young and Hobbs's pre-
conference negotiations. At the hearing, Young and Hobbs, as well
as others who were privy to the negotiations, testified. Neither
Young nor Hobbs explicitly disputed the existence of an agreement.
Rather, each asserted that his respective version of the draft
represented the agreement.
At the conclusion of the hearing, the superior court
entered the following findings of fact:
2. . . . Marion Hobbs presented evidence
that a material term of the settlement
agreement was that he was to be paid by Dale
Young for the labor costs for Marion Hobbs and
his company to obtain certain permits and to
install a water pipeline on Dale Young's
property in Baranof Warm Springs. . . .
Marion Hobbs' version of the agreement is set
forth in Plaintiff's Exhibit 1.
3. Dale Young denied that the settlement
contained any requirement that he pay Marion
Hobbs for his labor. Dale Young presented
testimony that Defendant's Exhibit A contained
all the material terms of their agreement.
Dale Young testified that the payment of
Marion Hobbs for his labor costs was never
discussed as part of this settlement
agreement.
4. Since the dispute centers over the
parties' respective versions of the agreement,
credibility is a major issue. After
consideration of the testimony, the court
resolves questions of credibility in favor of
Marion Hobbs. The preponderance of the
evidence favors Hobbs' version of the
settlement agreement. All of the witnesses,
except Dale Young, recall that the settlement
offer conveyed by Marion Hobbs to Dale Young
contained a provision for the payment of
Marion Hobbs' labor to install the pipeline on
Dale Young's property. A number of the
witnesses were present when discussions
occurred, either between the parties or in the
parties' presence, over the disputed term.
5. The court finds that Dale Young must
have known that a material term of the
settlement agreement for Marion Hobbs was the
payment of his labor costs to obtain the
permits and install the pipeline. The court
finds that Dale Young agreed to this term and
the use of the Industrial Plastics Pipeline
Replacement bid as the basis for calculating
the labor costs to be paid to Marion Hobbs for
his work.
6. Furthermore, the preponderance of the
evidence establishes that the agreement as
construed by Dale Young in Defendant's Exhibit
A is so unfair and one-sided that it is
unreasonable to conclude that Marion Hobbs
would have agreed to settle on those terms.
The overall consistency of the evidence
presented to this court establishes the
credibility of Marion Hobbs' version of the
settlement agreement.
Based upon these findings the superior court concluded:
1. Marion Hobbs and Dale Young had
reached a meeting of the minds on or before
the settlement conference of March 11, 1994
regarding the resolution of the pipeline
dispute.
2. The agreement reached by Marion
Hobbs and Dale Young was sufficiently definite
and certain as to be an enforceable agreement.
3. The Pipeline Settlement Agreement as
set forth in Plaintiff's Exhibit No. 1 shall
be incorporated by reference in the settlement
agreement entered in open court on March 11,
1994 and the terms of both agreements shall be
binding on all parties to Case No. 1JU-92-674
CIV and shall be entered as a final judgment
of the court.
This appeal followed.
III. STANDARD OF REVIEW
Whether the superior court erred in finding that Young
and Hobbs reached a meeting of the minds is a question of fact. As
stated in Juliano v. Angelini:
Whether the parties to an informal agreement
become bound prior to the drafting and
execution of contemplated formal writings is a
question of intent. The intent of the parties
is to be determined by the surrounding facts
and circumstances of each case, and is
reviewed under the clearly erroneous standard
of Civil Rule 52(a).
708 P.2d 1289, 1291 (Alaska 1985) (citations omitted). Thus, the
superior court's conclusion that Young and Hobbs "had reached a
meeting of the minds on or before the settlement conference of
March 11, 1994"will be reversed only if its finding is clearly
erroneous. Id.
IV. DISCUSSION
The superior court ruled that Young and Hobbs had reached
a meeting of the minds regarding the pipe issue on or before the
day of the global settlement conference. We turn to the question
of whether the superior court's findings of fact are clearly
erroneous.
"The formation of an express contract requires an offer
encompassing its essential terms, an unequivocal acceptance of the
terms by the offeree, consideration and an intent to be bound."
Childs v. Kalgin Island Lodge, 779 P.2d 310, 314 (Alaska 1989);
Hall v. Add-Ventures, Ltd., 695 P.2d 1081, 1087 n.9 (Alaska 1985)
(citing 1 W. Jaeger, Williston on Contracts  64 at 211,  72 at
235,  73 at 128 (3d ed. 1957)). "Mutual assent is an elementary
requirement for a binding contract." Zeman v. Lufthansa German
Airlines, 699 P.2d 1274, 1281 (Alaska 1985) (citing State v.
Fairbanks North Star Borough School District, 621 P.2d 1329, 1331
n.3 (Alaska 1981)).
In reviewing questions of intent, we have stated:
In determining the parties' intent, the courts
look first to the parties' expressed
intentions. "If their expressions convince
the court that they intended to be bound
without a formal document, their contract is
consummated, and the expected formal document
will be nothing more than a memorial of that
contract."
Juliano, 708 P.2d at 1291 (quoting 1 A. Corbin, Corbin on Contracts
 30 at 98-99 (1963)). (EN2)
Our review of the entire record in this case leads us to
the conclusion that Young and Hobbs never reached a meeting of the
minds regarding settlement of their dispute over the pipe. Our
conclusion is based in part on the following evidence.
Young's draft "Proposal for Pipeline Issue Resolution"
represents his version of the agreement with Hobbs regarding the
pipe issue. Hobbs, however, asserts that Young agreed to four
additional or differing terms relating to default, time for
performance, Hobbs's pipe installation labor costs, and performance
bond or security. (EN3) The discrepancies between the two versions
are clearly substantial.
Even more telling are certain portions of Hobbs's
testimony. Hobbs testified that when Young presented him with the
draft "Proposal for Pipeline Issue Resolution"and asked him to
review it, Hobbs told Young that he could not say "Yes, I agree."
Hobbs stated he could not agree because "I knew more had to be
added, because this is all his half, on his thoughts, and it did
not include my thoughts at all." When asked at the global
settlement conference held in Judge Ripley's chambers whether he
had any discussion with Dale Young regarding the "Proposal for
Pipeline Issue Resolution", Hobbs replied in the affirmative. He
stated, "I sat out here and said, 'Dale, I can't accept this. I've
-- my thoughts are not into this yet.' . . . and I told him that I
have to finalize -- we have to finalize it. We have to come up
with the numbers."
Concerning his handwritten modifications of Young's
"Proposal for Pipeline Issue Resolution,"Hobbs testified that the
purpose of his additions was "to put my half of the thoughts on how
this . . . pipeline issue was to be solved. . . . It was the
continuation . . . of us trying to solve it." When asked about the
additional term regarding payment for labor installation costs,
Hobbs responded in part that "I do not have an exact figure, but
I'm going to say you're talking probably -- to do the work, to
install the pipe and et cetera is probably about $70,000."(EN4)
Regarding all of his handwritten additions to the draft, Hobbs
testified that he made them because "[t]his has got to be put --
this has got to be part of the agreement."
Greg Young, Dale Young's brother, testified concerning
what transpired between Dale and Hobbs at their first and third
preliminary settlement meetings. Greg Young testified that his
brother Dale and Hobbs had been working toward an agreement and
that it was his understanding that "they had what I'd consider a
draft agreement." Greg Young further testified that Hobbs had a
copy of Dale's draft and "had written in ink at the bottom what he
had discussed or what he felt were conditions under which he would
do his part of it. But I don't know if he had given that to Dale."
Furthermore, Greg Young testified as follows:
Q. At the settlement conference, was it your
understanding that Dale and Marion had
reached an agreement so that it was no
longer an issue on the table?
A. No. It was my understanding that they
were going to finalize the agreement
after the settlement hearing.
Based on the evidence outlined above and our review of
the entire record, we hold that the superior court's conclusion
that "Marion Hobbs and Dale Young had reached a meeting of the
minds on or before the settlement conference of March 11, 1994,
regarding the resolution of the pipeline dispute"must be set aside
since it is clearly erroneous. Although the evidence does indicate
that Dale Young and Marion Hobbs reached preliminary agreements on
several issues relating to their pipe dispute, review of the entire
record demonstrates that the parties failed to agree on the final
material terms of a settlement of their pipe dispute.
IV. CONCLUSION
The settlement of the pipe dispute was an integral and
major part of the global settlement. Since the parties never
reached agreement on this material issue, they could not have
reached a meeting of the minds regarding the global settlement.
Therefore, we VACATE the settlement and REMAND for further
proceedings.
ENDNOTES:
1. Hobbs filed a petition for review of Judge Carpeneti's
decision, which was denied on October 12, 1993.
2. Similarly, the Restatement (Second) of Contracts provides, in
pertinent part:
Manifestations of assent that are in
themselves sufficient to conclude a contract
will not be prevented from so operating by the
fact that the parties also manifest an
intention to prepare and adopt a written
memorial thereof; but the circumstances may
show that the agreements are preliminary
negotiations.
Restatement (Second) Contracts  27 (1981).
3. Hobbs's handwritten edits to the typed agreement were as
follows:
9. In the event of a default by Marion in
this agreement, Marion will pay Dale the
amount of money that was claimed for
replacement costs and submitted to the court.
will replace all the original 12 & 10"pipe on
the property.
10. A time certain agreeable to both parties
will be set for performance. 2 years
(Underlined text added by Hobbs.) Hobbs also added the following
two paragraphs to the agreement:
13. Dales [sic] agreed to pay Marion Hobbs the
the [sic] lump sum that he submitted to the
court of his cost to replace the pipe of
$149,233.23 112,057.08 less the cost of
materials & freight. . . . A copy of the cost
of materials will be given to Dale.
14. Dales [sic] agrees to put the money into
escrow until the project is completed. Then
dispurse [sic] to Marion Hobbs upon an
engineer's approval.
4.Hobbs additionally testified that "there was no
$70,000 -- number ever came up . . . because
the agreement is that we're using Dale's
numbers that he turned in to the court
. . . ."
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