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Himschoot v. Dushi (2/13/98), 953 P 2d 507
Notice: This opinion is subject to 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, phone
(907) 264-0608, fax (907) 264-0878.
THE SUPREME COURT OF THE STATE OF ALASKA
ROBERT HIMSCHOOT, SR., )
) Supreme Court No. S-7861
Appellant, )
) Superior Court No.
v. ) 4BE-95-39 CI
)
TONY DUSHI, ) O P I N I O N
)
Appellee. ) [No. 4947 - February 13, 1998]
______________________________)
Petition for Hearing from the Superior Court
of the State of Alaska, Fourth Judicial District, Fairbanks,
Jane F. Kauvar, Judge pro tem.
Appearances: John Bernitz, Law Office of John
Bernitz, Anchorage, for Appellant. Cecilia M.
LaCara, Hedland, Brennan, Heideman & Cooke,
Bethel, for Appellee.
Before: Matthews, Chief Justice, Compton,
Eastaugh, Fabe, and Bryner, Justices.
FABE, Justice.
I. INTRODUCTION
Robert Himschoot, Sr. appeals the superior court's
affirmance of the district court's decision to grant Tony Dushi
summary judgment on Dushi's breach of contract claim. Because
Dushi failed to carry his initial burden in his motion for summary
judgment, we reverse.
II. FACTS AND PROCEEDINGS
Dushi contracted to sell his Bethel taxi business to
Himschoot for a purchase price of $15,000. As consideration for a
covenant not to compete, Himschoot agreed to pay Dushi an
additional $15,000 in three annual installments of $5,000. The
covenant provided:
11. SELLER's Non-competition Covenant
SELLER promises not to engage in any
competition with the taxi business in the City of Bethel for a
period of three (3) years, either by starting a new taxi business
under any name or by driving for a competitor of the taxi business,
which BUYER intends to operate under the name of HWH Enterprises,
Inc., so long as the BUYER maintains the taxi business as a going
concern. SELLER further promises not to discourage other taxi
drivers in Bethel from working for HWH Enterprises, Inc. In
consideration for SELLER's covenant not to compete, BUYER shall pay
SELLER five thousand dollars ($5000.00) per year for three years in
three equal installments payable on or before the 1st day of April
for the years 1994, 1995, and 1996.
SELLER further promises to do nothing
which will in any way impair or prejudice the name or reputation of
Taxi Cab or this taxi business under the new name of HWH
Enterprises, Inc., and promises not to prejudice the name of any
driver working for the taxi business.
Himschoot paid Dushi $15,000 and in return received
ownership of the taxi business. When Himschoot failed to pay the
first $5,000 installment for the covenant not to compete, Dushi
brought a breach of contract claim demanding payment of the
remaining $15,000. Dushi then moved for summary judgment on the
breach of contract claim. He submitted a memorandum of law with
his summary judgment motion but included no supporting documents.
Himschoot opposed the motion for summary judgment. He
argued that his obligation to pay Dushi the additional $15,000 was
excused by Dushi's "bad mouthing"the company in violation of the
covenant "to do nothing which will prejudice the reputation of the
taxi business for three years subsequent to the sale." Himschoot
reiterated the allegation of "bad mouthing"in his sworn affidavit
accompanying his opposition to summary judgment. He further stated
that "I had other customers also advise me that the prior owner was
making critical statements about the new management."
The court granted Dushi's motion for summary judgment,
stating:
The contract states the three yearly
installment payments were to be made in consideration for Dushi's
covenant not to compete. Contract, Term 3. The parties do not
dispute that Himschoot failed to pay the two installments of $5,000
due on April 1, 1994 and April 1, 1995. Thus, Dushi has put forth
a prima facie case for liability, placing the burden on Himschoot
to demonstrate a genuine issue of material fact to be litigated.
The court found that Himschoot's assertions regarding Dushi's
"critical statements about the new management"failed to raise a
genuine issue of material fact because they constituted
inadmissible hearsay upon which Himschoot could not rely.
Himschoot filed a motion to clarify and a motion to
reconsider the summary judgment order. The court clarified its
order but denied Himschoot's motion for reconsideration. In its
memorandum opinion, the court stated that "even if [Himschoot] had
offered proof that Mr. Dushi had 'bad mouthed' the company, this
court is not wholly convinced that such statements would be a per
se breach of the covenant." The court reasoned that the contract
provision in which Dushi promised not to impair or prejudice the
reputation of the taxi business was not part of the non-competition
covenant. The court interpreted the contract
as setting forth three absolute conditions
regarding the covenant not to compete: (1) starting a new taxi
business; (2) driving for the competition of the taxi business; and
(3) discouraging other taxi drivers from working for HWH
Enterprises, Inc. in Bethel. In consideration of these promises by
the seller, the "buyer shall pay seller five thousand dollars
($5,000.00) per year for three years in three equal installments
payable on or before the 1st day of April for the years 1994, 1995
and 1996."
It is in the next paragraph, that the two
other "conditions"appear: (1) that the "seller further promises to
do nothing which will in any way impair or prejudice the name or
reputation of Taxi Cab or this taxi business under the new name of
HWH Enterprises, Inc."; and (2) "promises not to prejudice the name
of any driver working for the taxi business." (See Contract at
paragraph 11).
However, the court notes that no
additional consideration is recited as payment for the seller's
compliance with these "conditions." Therefore, it is not clear in
this court's mind that these "conditions"would be fully binding as
the principles of equity would not allow one individual to hold
another to a contract secured without consideration.
Himschoot appealed to the superior court, which affirmed
the district court's decision in its entirety. Himschoot appeals.
III. DISCUSSION
A. Standard of Review
"A grant of summary judgment based upon the
interpretation of a contract is subject to de novo review." Neal
& Co. v. Association of Village Council Presidents Reg'l Hous.
Auth., 895 P.2d 497, 502 (Alaska 1995). "[T]his court must
determine whether any genuine issue of material fact exists and
whether on the established facts the moving party is entitled to
judgment as a matter of law." Nielson v. Benton, 903 P.2d 1049,
1051-52 (Alaska 1995). The moving party "has the entire burden of
proving that his opponent's case has no merit." Nizinski v. Golden
Valley Elec. Ass'n, 509 P.2d 280, 283 (Alaska 1973) (quoting
Braund, Inc. v. White, 486 P.2d 50, 54 n.5 (Alaska 1971)). "This
burden must be discharged by submission of material admissible as
evidence. Assertions of fact in pleadings and memoranda,
unauthenticated and unsworn documents, and uncertified copies of
public records are not admissible in evidence and cannot be relied
upon for purposes of summary judgment." Concerned Citizens of S.
Kenai Peninsula v. Kenai Peninsula Borough, 527 P.2d 447, 450
(Alaska 1974). On a motion for summary judgment, the non-moving
party is not obligated to demonstrate the existence of a genuine
issue for trial until the moving party makes a prima facie showing
of its entitlement to judgment on established facts. See Shade v.
Co & Anglo Alaska Serv. Corp., 901 P.2d 434, 437 (Alaska 1995).
B. Did the Trial Court Err in Granting Summary Judgment
Given Dushi's Failure to Establish a Prima Facie Showing of Breach
of Contract?
To carry his initial burden at summary judgment, Dushi
was required to submit material, admissible as evidence, that
established a prima facie claim of breach of contract. See
Concerned Citizens, 527 P.2d at 450. Such material could have
included a sworn affidavit stating that Dushi had performed his
obligations under the contract's covenant not to compete and that
Himschoot had failed to pay the $5,000 installments as they came
due. Dushi relied, however, upon assertions of fact in the
pleadings and his legal memorandum; he failed to file any
documentation with his summary judgment motion that would have been
admissible as evidence. [Fn. 1] The district court therefore erred
in granting his motion for summary judgment. Because we conclude
that Dushi did not meet his initial burden, we need not reach the
questions of whether the trial court abused its discretion by
making factual inferences in favor of the moving party, and by
failing to grant Himschoot additional time under Civil Rule 56(f)
to conduct discovery. [Fn. 2]
IV. CONCLUSION
We REVERSE the superior court's affirmance of the
district court's grant of summary judgment and REMAND with
directions to remand to the district court for proceedings
consistent with this opinion.
FOOTNOTES
Footnote 1:
We reject Dushi's assertion that certain of Himschoot's
admissions constituted admissible evidence supporting Dushi's
summary judgment motion. Once Dushi filed his motion for summary
judgment, to which an unanswered request for admissions was
appended, Himschoot responded to the request. Without ruling on
whether the request had been properly served, the district court
found Himschoot's answers timely for the purposes of summary
judgment. Dushi now contends that the district court abused its
discretion in doing so. We disagree. The withdrawal of an
admission is permitted if "the merits of the action will be
subserved thereby"and no prejudice will result. Alaska Civil Rule
36(b). We have held that "[a] party can demonstrate that
withdrawal of admissions subserves the merit by showing that the
admission concerns a key factual issue." City of Kenai v.
Ferguson, 732 P.2d 184, 190 (Alaska 1987). The disputed admissions
in the present case concerned key factual issues. Therefore, we
hold that the district court did not abuse its discretion in
finding Himschoot's answers timely filed. As a result, Dushi's
argument fails.
Footnote 2:
In order to provide guidance to the trial court on remand,
however, we address Himschoot's contention that the trial court
erred in finding that the covenants contained in the second
paragraph of Term No. 11 were unenforceable for want of
consideration. Term No. 3 of the contract states: "An additional
fifteen thousand dollars ($15,000) shall be payable in three
installments over three years pursuant to term No. 11 in
consideration for SELLER's covenant not to compete."(Emphasis
added.) This indicates that the $15,000 payment is in
consideration for Term No. 11 in its entirety. Term No. 11, all of
which is entitled "SELLER's Non-competition Covenant," includes
the seller's promise "to do nothing which will in any way impair or
prejudice the name or reputation of Taxi Cab or this taxi
business."
To interpret the contract so that there is no
consideration for this part of the covenant not to compete would be
contrary to the rule giving effect to all parts of a contract and
would render the last paragraph of the covenant useless or
inexplicable. We have repeatedly held that "[a] court should not
interpret an agreement in a manner which would give meaning to one
part of an agreement at the cost of annulling another part." Betz
v. Chena Hot Springs Group, 657 P.2d 831, 835 (Alaska 1982); see
also Earth Movers of Fairbanks, Inc. v. State, Dep't of Transp. and
Pub. Facilities, 824 P.2d 715, 717-18 (Alaska 1992) (interpreting
contract based on document as a whole). It would be unreasonable
to conclude that the parties agreed to this promise as part of the
non-competition covenant without intending it to be binding and
enforceable. Therefore, the district court erred in its
interpretation of the contract.
