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You can search the entire site. or go to the recent opinions, or the chronological or subject indices. Anchorage Chrysler Center, Inc. v. DaimlerChrysler Corporation (02/24/2006) sp-5993
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,
e-mail corrections@appellate.courts.state.ak.us.
THE SUPREME COURT OF THE STATE OF ALASKA
| ANCHORAGE CHRYSLER | ) |
| CENTER, INC., | ) Supreme Court No. S- 11421 |
| ) | |
| Appellant, | ) |
| ) Superior Court No. | |
| v. | ) 3AN-99-9780 CI |
| ) | |
| DAIMLERCHRYSLER | ) O P I N I O N |
| CORPORATION, | ) |
| ) | |
| Appellee. | ) [No. 5993 - February 24, 2006] |
| ) | |
Appeal from the Superior Court of the State
of Alaska, Third Judicial District,
Anchorage, William F. Morse, Judge.
Appearances: Randall Simpson, Blair M.
Christensen, Jermain, Dunnagan & Owens, P.C.,
Anchorage, for Appellant. Jeffrey M.
Feldman, Ruth Botstein, Feldman & Orlansky,
Anchorage, and Mark F. Kennedy, Mark T.
Clouatre, Wheeler Trigg Kennedy LLP, Denver,
Colorado, for Appellee.
Before: Bryner, Chief Justice, Matthews,
Eastaugh, and Carpeneti, Justices. [Fabe,
Justice, not participating.]
MATTHEWS, Justice.
I. INTRODUCTION
This appeal arises out of a dispute between an
automobile manufacturer and one of its dealers in Anchorage. The
dealer and the manufacturer entered into a short letter agreement
that required (among other things) the dealer to make certain
changes to its facilities in return for the right to open a new
dealership in Wasilla. The parties relationship deteriorated:
the dealer refused to remodel its dealership as the manufacturer
wanted, and the manufacturer ended up opening a competing
dealership in Anchorage. The car dealership sued the
manufacturer, alleging breach of contract, misrepresentation, and
breach of the covenant of good faith and fair dealing. After a
bench trial, the superior court made findings of facts and
conclusions of law, and entered judgment in favor of the
manufacturer on all claims. We believe the superior court erred
in failing to consider (1) the dealers entitlement to declaratory
relief on what facility changes the agreement required,
notwithstanding the dealers failure to attempt such changes; (2)
whether alleged half-truths about the manufacturers plans to open
a new dealership amounted to a misrepresentation by the
manufacturer; (3) whether the manufacturer failed to supply a
letter of intent authorizing the dealer to open a store in
Wasilla, as the agreement required; and (4) whether the
manufacturer breached the covenant of good faith and fair
dealing. We vacate the superior courts judgment and remand the
case for further consideration.
II. BACKGROUND
The account below is drawn primarily from the superior
court opinion, which has not been overtly challenged as wrong on
the facts.
During the period relevant to this dispute, plaintiff
Anchorage Chrysler Center (ACC) operated a dealership selling
Chrysler, Plymouth, and Dodge vehicles, all of which were
distributed to ACC by defendant DaimlerChrysler Motors Company,
LLC (DCMC) (formerly known as DaimlerChrysler Motors
Corporation). ACC sold the vehicles out of two adjacent
buildings on Fifth Avenue: Plymouths and Chryslers were sold out
of one building, and Dodges out of the other. ACC operated the
dealership pursuant to Sales and Service Agreements between ACC
and DCMC.
These sales and service agreements gave DCMC the right
to authorize other dealers to sell the same cars in the same
locality as DCMC determines to be appropriate. The other DCMC
dealer in Anchorage was Johnson Jeep. The only DCMC models
Johnson Jeep carried were Jeep and Eagle.
In the mid-1990s, DCMC developed a merchandise strategy
it called Project 2000. Dealers were encouraged to sell Dodge
vehicles in facilities that were separate from the facilities
used to sell Chrysler, Plymouth, Jeep, and Eagle vehicles. DCMC,
ACC, and Johnson Jeep entered into discussions about how to
achieve Project 2000s goal of the same dealer selling the
Chrysler, Plymouth, Jeep, and Eagle lines. DCMC and ACC began to
negotiate what would eventually become a letter agreement between
ACC and DCMC under which ACC would not object to Johnson Jeeps
selling Chryslers and Plymouths. As part of this letter
agreement, DCMC required ACC to rearrange its showrooms so that
Dodges would be sold in what had been the Chrysler/Plymouth
showroom, with the other lines (including a new Jeep line) moving
to the former Dodge showroom. As part of the deal DCMC would
also agree to authorize ACC to open a Dodge dealership in
Wasilla.
Getting this letter agreement signed involved a long
period of negotiation, extending over several years and involving
some false starts. One source of contention was the Wasilla part
of the deal, which ultimately took the form of a letter of intent
that DCMC was required to provide as one of its obligations under
the letter agreement. Another concern ACC had (though the degree
to which this concern was reflected in the parties deal is
disputed on this appeal) was whether DCMC would establish another
Dodge dealership in Anchorage to compete against ACCs lucrative
Dodge franchise. In March 1999, as the negotiations began to
enter the home stretch, DCMCs in-house lawyer David King sent an
email to ACCs lawyer, attaching a rough draft of a Wasilla letter
of intent. Under this draft of the letter of intent, ACC could
get a dealership in Wasilla if it began constructing the
dealership over time periods to be determined (i.e., the draft
had blanks for all the milestones). This letter of intent draft
also addressed the issue of other Dodge stores in Alaska, by
obligating ACC not to protest if DCMC established another dealer
selling the same lines as ACC. The cover memo by DCMCs lawyer
explained to ACCs lawyer that any disagreement over this language
should be resolved as a result of the understandings already
reached. My clients have not informed me of any plans for
additional dealerships in Alaska. Later, after DCMC had
announced that it would open another Dodge dealership in south
Anchorage, this statement became one basis of ACCs claim that
DCMC had promised or represented not to open another Dodge store.
ACC responded by proposing revised language for the
letter agreement. The letter agreement proposed by ACC deleted
all references to DCMCs providing a letter of intent and required
ACC to commit to a new Wasilla dealership within five years.1
ACC also proposed new language that would commit the parties to
the proposition that the Project 2000 agreements between ACC,
DCMC, and Johnson Jeep does not include the Dodge franchise
language apparently intended to insure that Johnson would not get
Dodge. On May 21, 1999, DCMC responded with a letter from Carl
Fleck, DCMCs regional manager. DCMC said it was unnecessary to
add language to the agreement precluding DCMC from giving Johnson
Jeep a Dodge dealership: As to awarding a Dodge Sales and
Service agreement to Johnson Jeep, I can confirm that
DaimlerChrysler has no plan to add Dodge to this dealership.
This would become another statement used to support ACCs claim
that DCMC had at least implicitly promised or represented not to
start a new Dodge dealership in Anchorage.
The May 21 DCMC letter also seemed to reject ACCs
Wasilla proposal. Fleck enclosed another draft of the letter of
intent, which was not signed by DCMC but looked ready to be
signed by both parties. Under this version of the letter of
intent, DCMC promised to award ACC a Wasilla dealership for Dodge
and all other DCMC vehicles, provided ACC met certain milestones.
Under this draft of the letter of intent, the first milestone
proposal of a suitable site for the dealership needed to be met
by June 2002 (a little more than three years) and ACC had to
finish the dealership by July 2004 (a little more than five
years).2 One of the issues in this appeal is whether this May 21
letter of intent was in form and substance the letter of intent
contemplated by the letter agreement that was concluded a few
days later.
On May 28, 1999, ACC and DCMC had a conference call,
attended by Fleck on DCMCs side and by several managers on ACCs
side. What happened on the call was disputed at trial. First,
ACC asked about the letter agreements requirement that ACC
establish separate and complete showrooms for Dodge on the one
hand and for Chrysler/Plymouth/Jeep on the other. According to
the superior courts findings, Fleck told ACC that because ACC
already had two showrooms and combined service and parts
facilities and staff, the changes needed would be minor. ACC
also asked Fleck about Dodge. What was said on this point was
hotly disputed at trial. ACC witnesses testified that Fleck
responded by promising not to put a new Dodge dealership of any
kind in Anchorage. But the superior court found (based on Flecks
testimony) that Fleck made only a brief reference to Dodge and
only in the context of what [Johnson Jeep] was to get (or rather
to confirm what [Johnson Jeep] would not get).
The letter agreement giving rise to this litigation is
dated May 26, 1999. ACC signed the agreement on May 28, 1999,
after the parties conference call; DCMC signed it on June 1,
1999.3 The letter contains three bullet points. The first
bullet bestows a Jeep dealership on ACC, contingent on ACCs
establishment of separate and complete facilities. The second
bullet says that ACC will not object to DCMCs giving Johnson Jeep
the Chrysler and Plymouth franchises (no mention is made of
Dodge). The third bullet says DCMC will provide ACC with its
standard five year Letter of Intent. Altogether, the three
bullets read as follows:
Subject to [ACCs] meeting [DCMCs]
qualification requirements, DCMC will enter
into its standard Jeep Sales and Service
Agreements with ACC. As a part of meeting
DCMCs qualification requirements ACC will
establish a complete Chrysler, Plymouth,
Jeep (CPJ) operation in ACCs current Dodge
dealership facilities. As a result, ACC
will establish a separate Dodge dealership
operation with a separate dealer code in
ACCs current Chrysler Plymouth dealership
facility. ACC may choose to set up a
separate legal entity under which the Dodge
dealership will operate or ACC may operate
each of the two dealerships under ACCs
existing corporate entity with separate
d/b/a names for the CPJ and Dodge
operations.
ACC understands and agrees that subject to
Johnson Jeep meeting DCMCs qualification
requirements, DCMC will enter into its
standard Chrysler and Plymouth Sales and
Service Agreements with Johnson Jeep at
Johnson Jeeps current Jeep location. ACC
agrees to not protest or oppose this
establishment in any administrative, court
or other proceeding.
DCMC will provide You and ACC with its
standard five year Letter of Intent giving
You and ACC the right to qualify and be
approved as a Dodge, Chrysler, Plymouth and
Jeep dealership in the Wasilla, Alaska
Sales Locality. Such a Letter of Intent
will be conditioned upon You and ACC
meeting DCMCs standard dealership
qualifications applicable to the Wasilla,
Alaska Sales Locality, including the
requirement of adequate facilities. The
Letter of Intent will be drafted to become
effective as of the date of the standard
Jeep Sales and Service Agreement referenced
above.
Soon after signing, the parties disagreed about what
changes ACC had to make to its showrooms to make each complete
and separate under the agreement. DCMC wanted separate managers,
separate service areas, separate parts counters, separate sales
staff, separate financial statements, and separate dealer codes.
ACC understood the changeover merely to involve using separate
dealer codes, swapping signs, and making other minor
modifications.
In September 1999, without making any attempt to create
separate and complete facilities, ACC filed its complaint in this
action. DCMC had never sent any Jeeps to ACC, and never (after
May 21) sent ACC another letter of intent for a Wasilla
dealership. The complaint alleged, among other things: (1)
that, by insisting on a significant transformation of ACC as a
precondition to receiving Jeeps, DCMC breached the May 28
agreement and violated the duty of good faith and fair dealing;
(2) that DCMC misrepresented its intention not to establish a
dealer in south Anchorage; (3) that DCMC breached its promise to
give ACC five years to establish a dealership in Wasilla; and (4)
that a new dealership would violate the agreement and the
covenant of good faith and fair dealing. The complaint sought
declaratory relief, injunctive relief, and compensatory and
punitive damages.
Less than two months after the complaint was filed,
DCMC formally approved a plan to open a new Dodge store in south
Anchorage, although not at Johnson Jeep.
The matter eventually came to a bench trial before
Superior Court Judge William F. Morse. He issued findings of
facts and conclusions of law rejecting ACCs claims (though one
issue on this appeal is whether the opinion actually addresses
certain claims), and on this basis entered a judgment dismissing
all claims against DCMC. The superior courts rulings will be
discussed in detail below, but can be summarized briefly.
Rejecting ACCs claim that DCMC breached the contract by failing
to provide Jeeps, the court held that the contract required ACC
to make at least some changes to its facilities, and that without
attempting to make such changes ACC could not complain of any
breach by DCMC. On the issue of the new Dodge dealership in
south Anchorage, the court rejected ACCs contractual claims after
finding that DCMC never promised to refrain from establishing an
entirely new dealership. The court also rejected ACCs claim that
DCMC misrepresented its intentions to open a new Dodge
dealership, finding that ACC was not justified in relying on the
hedged statements made by DCMC, that ACC did not actually rely on
these statements, and that the statements were technically true.
As to the Wasilla letter of intent, the court found that DCMC,
having sent a letter of intent on May 21 (a few days before the
letter agreement was signed), was not required to send another
letter of intent under the letter agreement, at least when ACC
had never requested that DCMC send such a new letter of intent.
III. DISCUSSION
ACC has four claims on appeal. First, it argues that
the superior court should have determined what facilities changes
the letter agreement required ACC to make as a precondition to
getting Jeeps. Second, it argues that the superior court erred
in finding that the letter agreement did not include a promise by
DCMC to refrain from opening a new Dodge store in Anchorage.
Relatedly (and we will consider these points together), ACC
argues that it was entitled to rely on DCMCs statements about a
new Dodge dealership in Anchorage, and that these statements were
half-truths actionable as misrepresentations under Alaska law.
Third, ACC argues that the superior court erred in finding that
the May 21 letter of intent was the letter of intent contemplated
under the letter agreement, and further erred in requiring ACC to
demand a new letter of intent when the letter agreement imposed
no such requirement. Fourth, ACC argues that the superior court
erred by failing to discuss altogether ACCs claim for breach of
the covenant of good faith and fair dealing. As discussed below,
these allegations of error raise mostly (but not entirely) legal
issues, and to this extent our review will be de novo.4
A. The Jeep Agreement and the Facilities Makeover
The May 28 letter agreement required ACC to establish a
Dodge dealership and a separate Chrysler/Plymouth/Jeep dealership
on its adjoining properties on Fifth Avenue (and more
specifically to put the new Dodge operation in ACCs existing
Chrysler/Plymouth property, with the new Chrysler/Plymouth/Jeep
operation to be located on the former Dodge property). This was
made a condition of ACCs receipt of a Jeep dealership. The
Chrysler, Plymouth, Jeep dealership needed to be a complete
operation and the Dodge dealership needed to be separate.
Shortly after signing the May 28 agreement, ACC and DCMC
developed a disagreement about what changes ACC needed to make to
satisfy the complete and separate requirements. The sticking
point appears to have been that DCMC wanted not just separate
dealer codes and different signs for each building but separate
managers and separate parts and service departments in each of
the two operations. ACC contends that these demands contradicted
assurances DCMC made before the agreement was signed, to the
effect that the changes required by this condition would be
simple and easy. ACC never even attempted to separate its
business along the lines contemplated by the agreement, whether
under ACCs interpretation of the agreement or DCMCs. Instead it
filed the complaint in this case. After amendments, the
complaint alleged that DCMC breached the contract by not
providing Jeeps; sought damages based on this breach; and sought
a declaration that DCMC must provide Jeep vehicles to [ACC] under
its standard sales and service agreement without requiring [ACC]
to build and maintain additional repair and parts facilities or
retain a second general manager. ACC never got the Jeep
dealership.
While the superior court seemed inclined to accept ACCs
version of the facts,5 it never decided whose understanding of
the agreement was correct. Instead, the court relied on the
undisputed fact that ACC never attempted to make whatever
transformation might have been required by the May 28 agreement:
[Rod] Udd [ACCs president and primary
shareholder] could have made changes to ACC
in short order, but he wanted more. That was
an unfortunate decision.
DCMC did not breach the agreement by not
shipping ACC Jeeps. ACC failed to comply
with the precondition. ACC did not
substantially comply with the transformation
requirements. Thus, DCMC was excused from
shipping the Jeeps.
The superior court seems to have understood ACCs
obligation to establish separate facilities as a condition
precedent to ACCs shipping the Jeeps. According to the
Restatement of Contracts, a condition is an event, not certain to
occur, which must occur, unless its non-occurrence is excused,
before performance under a contract becomes due.6 The separate
facilities requirement is such a condition, because the agreement
says DCMCs obligation to provide Jeeps is [s]ubject to ACCs
meeting the requirement of establishing separate facilities.
Since it is also undisputed that ACC did not ever comply with the
condition, DCMC was not required to perform its conditional duty
to supply Jeeps. As the Restatement of Contracts says:
Performance of a duty subject to a condition cannot become due
unless the condition occurs or its non-occurrence is excused.7
So the court was correct in holding that DCMC did not breach the
agreement to supply Jeeps.
Yet notwithstanding ACCs failure to make any changes to
its facilities, the superior court should have considered ACCs
claim for a declaration specifying the facilities changes
required by the letter agreement. Alaska Statute 22.10.020(g)
says in part: In case of an actual controversy in the state, the
superior court, upon the filing of an appropriate pleading, may
declare the rights and legal relations of an interested party
seeking the declaration, whether or not further relief is or
could be sought. We have said that declarations concerning
hypothetical or advisory questions or moot questions should not
be rendered,8 and that relief may be withheld when the grant of
such relief would not terminate the controversy or the
uncertainty which gave rise to the declaratory proceeding.9 But
declarations are appropriate where there is a substantial
controversy, between parties having adverse legal interests, of
sufficient immediacy and reality to warrant the issuance of a
declaratory judgment.10 As one federal court has usefully stated
(quoting Professor Borchard), the
two principal criteria guiding the policy in
favor of rendering declaratory judgments are
(1) when the judgment will serve a useful
purpose in clarifying and settling the legal
relations in issue, and (2) when it will
terminate and afford relief from the
uncertainty, insecurity, and controversy
giving rise to the proceeding.[11]
The superior court apparently never considered ACCs
claim for declaratory relief, but ACC has a strong case that
these standards are met here. ACC asserts that the facilities
changes demanded by DCMC would require substantial expenditures,
and it seems obviously useful12 for the superior court to issue a
declaration stating whether or not these changes are required,
particularly now that the court has taken so much evidence on the
question. A declaration would also presumably end this part of
the controversy between the parties. And although ACCs failure
to fulfill a condition precedent bars its claim that DCMC
breached this part of the letter agreement, it does not bar
issuance of a declaration specifying what changes the letter
agreement requires ACC to undertake in order to get Jeeps.
Declaratory judgments are appropriate to resolve pre-breach
disputes over contractual language, giving useful guidance for
the parties or others contemplating a contingent course of
action.13
Normally we review a superior courts decision to grant
or refuse declaratory relief for abuse of discretion.14 However,
in light of the superior courts failure to address ACCs claim for
declaratory relief,15 and the apparent suitability of declaratory
relief in this case, we vacate that part of the superior courts
judgment dismissing ACCs claim for declaratory relief.16 On
remand, the superior court should determine whether the criteria
for issuing a declaratory judgment are satisfied and, if so,
decide whether DCMCs demands concerning creating separate
dealership operations were in accordance with the May 28
agreement.17
B. The New Dodge Dealership
At trial ACC claimed that in the negotiations leading
up to the May 28 agreement, DCMC employees made three promises to
ACC not to establish another Dodge dealership in Anchorage. ACC
argues both that the superior court erred in failing to read the
agreement to include these three alleged promises and also that
the same statements constituted tortious misrepresentations. The
three alleged statements and the courts rulings were as follows:
(i) A March 1999 email by David King, DCMCs in-house
counsel, to ACCs attorney: My clients have not informed me of any
plans for additional dealerships in Alaska. The superior court
found that this statement was true, because DCMC did not have a
concrete plan to add a dealership when it made this statement. It
also found that the statement was so hedged that ACC was not
justified in relying on it, and that ACC did not in fact rely on
it, in that it kept seeking more formal assurances from DCMC.
(ii) A statement in the May 21, 1999 letter to ACC by
DCMC manager Carl Fleck: As to awarding a Dodge Sales and Service
agreement to Johnson Jeep, I can confirm that DaimlerChrysler has
no plan to add Dodge to the [Johnson Jeep] dealership. This was
in response to a request by ACC to add language clarifying that
the agreements between ACC, DCMC, and Johnson Jeep would not
include the Dodge franchise.18 The superior court characterized
Flecks statement as merely address[ing] [ACC President] Udds oft-
stated concern and understanding of the scope of the discussions
that had been ongoing for over a year. Udd wanted to protect his
Dodge franchise from [Johnson Jeep].
(iii) A statement to ACC on a conference call by the
same DCMC manager, the day ACC signed the agreement, allegedly to
the effect that DCMC would not establish a Dodge dealership in
south Anchorage. Fleck, the manager, testified that his
statement was simply a confirmation that Johnson Jeep would not
be getting a Dodge franchise, rather than a promise not to open
an entirely new dealership. The court found Flecks evidence more
credible than ACCs. The Court finds that it is not credible that
Fleck, at this stage of the lengthy discussions regarding the
realignment of vehicle lines between [Johnson Jeep] and ACC, and
especially at the end of a brief, unexpected phone call, would
agree to forego the placement of a Dodge dealership in south
Anchorage.
These three statements are the basis of several issues
on appeal. First, there is ACCs claim that the statements amount
to additional promises that ought to be incorporated in the May
28 letter agreement. The only statement of the three that could
possibly be construed as a promise (as opposed to a statement of
present intention) is Flecks statement on the May 28 phone call,
which is number (iii) in the list above. But the superior court
found, based on Flecks testimony at trial, that Fleck made no
such promise on the phone call. This is a factual finding
reviewed for clear error.19 Since the finding is supported by at
least some evidence, we will not disturb it here.
The more difficult issue raised by ACC is whether the
superior court properly considered whether the three statements
might amount to a misrepresentation. Alaska cases follow the
Restatement (Second) of Torts on what constitutes a fraudulent
misrepresentation.20 The Restatement identifies several elements
of intentional misrepresentation: (1) a misrepresentation of
fact or intention, (2) made fraudulently (i.e., with scienter),
(3) for the purpose of inducing another to act in reliance, (4)
with justifiable reliance by the recipient, (5) causing loss.21
The superior court rejected the misrepresentation claim
related to the King email (paragraph (i), above) because it found
the statement was technically true, because the statement was so
hedged that ACC was not justified in relying on it, and because
the court found that ACC did not in fact rely on the statement,
in that ACC kept seeking more formal assurances from DCMC.
Whether the statement was misleading in spite of its being
technically true is open to question; the problem of half-truths
is discussed more below. But the finding that ACC did not
justifiably rely on any misleading statement by King was an
adequate basis to reject any misrepresentation claims based on
the King email. ACC does not challenge the finding that it
continued to seek assurances that there would be no new
dealerships, and from this fact the superior court plausibly
inferred that ACC did not actually rely on the King email.
Moreover, the court did not err in finding that, even if there
had been actual reliance by ACC on Kings hedged statements, such
reliance would have been unreasonable. Although some courts
appear to hold that determinations as to whether reliance was
justified can be a question of law reviewed de novo,22 our own
precedents suggest that it is a question of fact,23 and it seems
that most jurisdictions that have addressed the issue say it is
either a purely factual issue or a mixed question of law and
fact, to be reviewed for clear error in either event.24 We will
therefore extend deference to the superior courts determination
and reverse only if reasonable minds could not disagree that
reliance was justified.25 Under this standard, we think it was
reasonable for the superior court to conclude that someone in
ACCs shoes would have acted unreasonably in relying on Kings
statements as precluding new DCMC dealerships in south Anchorage.
Since actual reliance and justifiable reliance are both
prerequisites to claims of negligent and intentional
misrepresentation,26 the court did not err in rejecting ACCs
claims that the King email was a misrepresentation.27
The superior courts treatment of the other two
statements (the Fleck letter and the May 28 conference call with
Fleck) is more problematic. The court did not directly address
whether these statements were intentional or negligent
misrepresentations, although it did find that Flecks statements
were merely true statements that DCMC did not intend to give
Johnson Jeep the Dodge line. What is problematic is that the
superior court did not appear to appreciate that a statement can
be literally true and yet still be an actionable
misrepresentation. Section 529 of the Restatement (Second) of
Torts says: A representation stating the truth so far as it goes
but which the maker knows or believes to be materially misleading
because of his failure to state additional or qualifying matter
is a fraudulent misrepresentation.28 Under this standard, a
partial disclosure is fraudulent if the person making the
statement knows or believes that the undisclosed facts might
affect the recipients conduct in the transaction in hand.29 The
Restatement gives some examples, including a prospectus that
fails to list all the companys debts; a statement that a title to
land has been upheld by a particular court without mentioning
that the courts decision has been appealed; and a statement that
tenants in a building all pay a certain rent, without mentioning
that the rent is still subject to approval by a rent control
agency.30 In addition, this court has held that a defendants
offer to pay property taxes on the plaintiffs behalf might have
implied that the plaintiffs owned the land, such as to give rise
to at least a question of fact as to whether the defendant misled
the plaintiffs about the status of their ownership interest.31
Here it appears that ACC was concerned that Johnson
Jeep would get a Dodge dealership, apparently without adequately
considering whether DCMC might withhold Dodge from Johnson Jeep
and yet still open an entirely new Dodge dealership in Anchorage
soon thereafter. DCMC may have known that a new Dodge dealership
was a distinct possibility (even though it had not yet developed
concrete plans), and that ACC would never sign the May 28
agreement if it appreciated the possibility of a new dealership.
DCMC might therefore have decided to exploit ACCs tunnel vision
by crafting its reassurances to ACC to cover Johnson Jeep and no
more. These anyway are ACCs allegations, supported by at least
some evidence, and there is little or nothing in the superior
court opinion that rejects this version of the facts.32 Under
this scenario, would DCMCs statements about withholding Dodge
from Johnson Jeep, combined with Kings earlier denial of knowing
about any expansion, be misleading because of [DCMCs] failure to
state additional or qualifying matter namely, the likely
possibility of a new Dodge dealership in Anchorage in the near
future? Did DCMC know or believe that the undisclosed facts
might [have] affect[ed] the recipients conduct in the transaction
in hand? The superior court seemed to focus on the literal truth
of DCMCs statements, and does not appear to have considered these
questions, even though ACCs pre-trial papers presented them in a
straight forward fashion.33
Although the question of whether a misrepresentation
exists is normally a question of fact, we think the superior
courts failure to make factual findings appropriate to the
relevant legal test (here, Section 529 of the Restatement
(Second) of Torts) was an error of law, just as erroneous jury
instructions are an error of law.34 We appreciate that, even in
ACCs version of events, these two statements were probably less
radically incomplete than the illustrations provided in the
Restatement (e.g., a company that fails to list all its debts),
particularly since at least one of them, the May 21 letter,
appears to have been made in response to a specific question by
ACC about Johnson Jeep. Still, the question of whether the
statements were fraudulent under the relevant standard is a
question for the trier of fact, which in this case was the
superior court.
Finally, DCMC argues that any oral misrepresentations
about new dealerships are irrelevant, because ACCs basic sales
and service agreements give DCMC the right to place new Dodge
dealerships in Anchorage, and these same agreements cannot be
amended except in writing. Yet the question is not whether DCMC
retained a right, notwithstanding any oral misstatements, to
establish another dealership in Anchorage under the sales and
service agreements if it were, DCMC might well be right to argue
that any such statements would be irrelevant. Instead, the
question is whether DCMCs alleged oral statements (which DCMC
appears to have been reluctant to commit to writing) were a fraud
inducing ACC to enter into the May 28 letter agreement. Put
differently, an oral statement that would be unenforceable as a
promise under the terms of Contract A may yet be a tortious
misstatement if it induces the recipient of the statement to
enter into Contract B.
For these reasons, we vacate the superior courts
decision as to the claims that the two Fleck statements were
negligent and/or intentional misrepresentations, and remand this
part of the case for further consideration.
C. The Wasilla Letter of Intent
In the days leading up to the May 28, 1999 agreement,
the parties negotiated over the terms of a letter of intent by
which ACC would obtain the right to open a dealership in Wasilla.
DCMC sent a draft to ACC in March 1999 and then another draft on
May 21, 1999. The parties did not sign either draft, although
the May 21 draft appears to be a document in final form, without
blanks or brackets. On May 28, 1999, ACC signed the short letter
agreement that gave rise to this litigation. The letter
agreement said that DCMC will provide ACC with its standard five
year Letter of Intent to give ACC a dealership in Wasilla. The
agreement further stated that [t]he Letter of Intent will be
drafted to become effective as of the date of the standard Jeep
Sales and Service Agreement referenced above. But DCMC did not
send a letter of intent at any point after May 26, the day the
letter agreement was dated, either in the May 21 version or in
any other version. Similarly, ACC never signed the May 21 draft
it had already received and it never asked DCMC to send a new
one. In its complaint, ACC claimed by implication that DCMCs
failure to send a new letter of intent was a breach of contract.
The court rejected this claim, on the ground that ACC had a duty
to sign the May 21 draft or ask for a new one:
ACC might have read the May 1999
agreement to require that DCMC send a
proposed LOI [letter of intent] after Udd
signed on 28 May (whether different from the
21 May LOI or not). But ACC never made that
demand to DCMC.
ACC never demanded that the draft LOI be
modified. Instead ACC did nothing to
implement the May 1999 agreement concerning
Wasilla. After ACC filed its lawsuit . . .
objecting to DCMCs demands concerning the
transformation of the ACC sales complex, ACC
and DCMC met without counsel to resolve their
disagreements. They appeared to have made
progress toward understanding and/or
compromise. Nonetheless, ACC never signed
the LOI. That was a breach of the 28 May
1999 agreement.
(Citations omitted.)
ACC argues that the superior courts ruling was
erroneous for several reasons. First, ACC points out that the May
28 letter agreement says DCMC will provide a letter of intent,
and DCMC never did so; there is no requirement that ACC make a
demand. ACC also argues the May 21 letter of intent cannot be
the agreement contemplated by the May 28 letter agreement,
because it requires ACC to take certain actions as soon as June
2002 and was therefore not the five year Letter of Intent
referred to in the contract.
We do not agree with ACC that, merely because the May
21 letter of intent requires that some deadlines be met in less
than five years, it cannot possibly be the five year Letter of
Intent contemplated by the agreement. But we do think ACC is
entitled to a remand on this issue. ACC is correct that there is
nothing in the May 28 letter agreement that required ACC to
demand that DCMC provide the letter of intent; DCMCs obligation
to provide the letter of intent was unconditional. It is
possible that ACCs failure to insist on this right could be an
implied waiver of its right to be offered a letter of intent.
But the standard for an implied waiver is high and factual
findings are required.35 The superior court in its opinion did
not make findings on this subject.
But what about the May 21 letter of intent? If the May
21 letter of intent was in form and substance the standard five
year Letter of Intent described in the May 28 agreement, the case
would be simpler. Then DCMCs breach, if any, would merely be its
failure to re-send this letter of intent to ACC. And the damages
flowing from such a picayune breach would probably be nominal,
inasmuch as ACC essentially concedes that it ultimately refused
to sign the agreement in this form. Yet the superior court did
not make a finding as to whether the words standard five year
Letter of Intent referred to the May 21 letter of intent or to
an agreement having different terms. It explicitly refrained
from deciding this question.36 And there is at least some
evidence suggesting that ACC was not satisfied with the May 21
letter of intent because it required ACC to meet some deadlines
in less than five years, and that DCMC knew the May 21 letter of
intent would have to be changed when the parties signed the May
28 letter agreement.37 If it were the case that ACC understood
the letter agreement to refer to a letter of intent with terms
different from those in the May 21 letter of intent, and if DCMC
knew this, ACCs understanding of standard five year Letter of
Intent should prevail over DCMCs.38 Alternatively, it may be that
both parties understood standard five year Letter of Intent to
mean different things, in which case the result may be there was
no contract at all.39 Or it may be that both parties understood
the May 21 letter of intent was the one being referred to in the
May 28 agreement, in which case the courts dismissal would prove
to be the proper course after all.
We therefore remand the case to the superior court for
additional findings, with directions to the court as follows. If
it determines that both parties understood that the May 28
agreement referred to the May 21 letter of intent, then it should
reject ACCs breach claim because it seems clear ACC never would
have signed that letter of intent. If it believes that ACC had
in mind a different letter of intent, and that DCMC was aware of
this, then it should consider whether ACC implicitly waived its
right to receive this letter of intent by failing to complain
when DCMC did not send a revised letter of intent. This would
require a consideration of the circumstances surrounding the
contentious period that followed the signing of the letter
agreement under the standards for an implied waiver described
above. If there was no waiver by ACC, then DCMCs failure to send
a revised letter of intent would amount to a breach of its
obligation under the letter agreement to supply a letter of
intent. Finally, if the court concludes that the parties did not
have a meeting of the minds on what constituted the letter of
intent so vaguely identified in the May 28 letter agreement, then
the court may choose to take briefing on what remedy should
issue.40
D. The Covenant of Good Faith and Fair Dealing
ACC claimed several breaches of the covenant of good
faith and fair dealing: (1) DCMCs failure to notify ACC that it
intended to establish a new south Anchorage dealership, (2) its
alleged revocation of the Wasilla letter of intent, and (3) its
allegedly unreasonable demands for changes in ACCs facilities.
ACC argued that these breaches were manifested by, among other
things, the timing of DCMCs decision to open a new dealership
(allegedly in retaliation for ACCs filing its complaint), and by
DCMCs treating Johnson Jeep more favorably than ACC. ACC also
suggests that we should evaluate DCMCs conduct in light of
Relevant Market Area legislation enacted in Alaska in 2002, by
which car manufacturers are required (among other things) to give
dealers notice and to have good cause before setting up another
local dealership.41
As ACC points out, the superior court did not make any
findings on these claims. The closest it came was when the court
rejected the notion that Relevant Market Area legislation enacted
after the dispute arose had any bearing on the case. With this
much we agree; a court should not anticipate legislation imposing
tort duties inconsistent with existing common law principles.
But the court never decided or even mentioned whether DCMCs
conduct might have otherwise violated the covenant of good faith
and fair dealing, nor did it make the factual findings incident
to such a ruling. We therefore vacate the superior courts
judgment to the extent it fails to address these claims, and
remand the case for consideration of this issue as well.
IV. CONCLUSION
We VACATE the superior courts judgment insofar as it
fails to consider (1) the claim for a declaration as to what ACC
must do to receive Jeeps under the letter agreement; (2) the
claim alleging misrepresentations by Fleck; (3) the breach of
contract claim related to the Wasilla letter of intent; and (4)
the claim for a breach of covenant of good faith and fair
dealing. We also VACATE the superior courts attorneys fee award,
inasmuch as it was based on DCMCs having prevailed on all claims.42
The case is REMANDED to the superior court for further
proceedings.
_______________________________
1 This commitment by ACC was initially made subject to
viable economic circumstances, although a few weeks later ACC
agreed to drop this particular condition.
2 Unlike DCMCs prior draft, this letter of intent did not
contain any language that purported to preclude ACC from opposing
DCMCs establishment of competing dealers.
3 According to the terms of the letter agreement, it
became effective on June 1, 1999, the date that it was signed by
an authorized representative of DCMC. The superior court chose
to refer to the letter agreement as the May 28 letter agreement,
based on the date ACC signed the agreement. For purposes of
clarity, we will continue to refer to the agreement as the May 28
letter agreement.
4 In re Schmidt, 114 P.3d 816, 820 (Alaska 2005).
5 The superior court found that the issue of which party
breached the Jeep deal [was] the most difficult of the case, that
there was evidence that supports ACCs allegations, that DCMC may
have made life difficult after the agreement was signed because
it clearly preferred to have different [dealers] in southcentral
Alaska, and that some of DCMCs actions in the period after the
agreement was signed were more than a little troubling. The
findings also state that Flecks subordinates were making demands
that ACC did not perceive to be consistent with Flecks earlier
assurances of simplicity.
6 Restatement (Second) of Contracts 224 (1981).
7 Id. 225(1); see also Kennedy Assocs., Inc. v. Fischer,
667 P.2d 174, 178 (Alaska 1983) (explaining that a plaintiffs
failure to perform condition precedent is complete defense).
8 Jefferson v. Asplund, 458 P.2d 995, 999 (Alaska 1969)
(citations omitted).
9 Id. at 998 (citations omitted).
10 Id. at 999 n.20 (quoting Maryland Cas. Co. v. Pacific
Coal & Iron Co., 312 U.S. 270, 273 (1941)).
11 Broadview Chem. Corp. v. Loctite Corp., 417 F.2d 998,
1001 (2d Cir. 1969) (quoting Edwin Borchard, Declaratory
Judgments 299 (2d ed. 1941)), cert. denied, 397 U.S. 1064 (1970).
If either prong is met, the action must be entertained.
Broadview Chem., 417 F.2d at 1001. The D.C. Circuit has made the
test still more specific. Under its rule, the court should
consider
whether [declaratory relief] would finally
settle the controversy between the parties;
whether other remedies are available or other
proceedings pending; the convenience of the
parties; the equity of the conduct of the
declaratory judgment plaintiff; prevention of
procedural fencing; the state of the record;
the degree of adverseness between the
parties; and the public importance of the
question to be decided.
Jackson v. Culinary Sch. of Washington, Ltd., 27 F.3d 573, 580
(D.C. Cir. 1994), vacated and remanded for application of the
correct standard of review by 515 U.S. 1139 (1995). Our cases on
declaratory judgments generally follow federal cases construing
the federal Declaratory Judgment Act. Lowell v. Hayes, 117 P.3d
745, 755 (Alaska 2005); Jefferson, 458 P.2d at 997 n.7.
12 Broadview Chem., 417 F.2d at 1001.
13 See, e.g., Fidelity & Deposit Co. of Maryland v. City
of Sheboygan Falls, 713 F.2d 1261, 1265 (7th Cir. 1983) (holding
that where plaintiff was indemnified for certain amounts
potentially owed by plaintiff to defendant, and where plaintiff
had interest in collecting on indemnity quickly, declaratory
action would lie to determine plaintiffs liability to defendant,
even though defendant had not yet sought to collect from
plaintiff); Salomon Bros., Inc. v. Carey, 556 F. Supp. 499, 502
(S.D.N.Y. 1983) (permitting brokerage to bring a declaratory
action to establish that it was not liable to its customer, even
though customer had merely advised brokerage that he thought he
had a claim and wanted to settle it: This courts judgment will
serve a useful purpose in alerting other Salomon Brothers
customers . . . of the legal consequences of Salomon Brothers
actions under both contract and agency law and will terminate the
uncertainty and controversy giving rise to the proceeding.); see
also 8 Catherine M.A. Mc Cauliff, Corbin on Contracts 30.9 (rev.
ed. 1999) (Certain judicial remedies may be available and an
action for them maintainable even before any breach of
contractual duty has occurred and while the duty [to perform] in
question is still future and conditional. . . . For these
purposes, declaratory judgments and equitable remedies are
available.).
14 Lowell, 117 P.3d at 750 (In light of the significant
role of judicial discretion in the administration of declaratory
judgment, we will reverse the dismissal of a declaratory judgment
action that is not based on prudential grounds only when we find
that the superior court abused its discretion.); see also Wilton
v. Seven Falls Co., 515 U.S. 277, 289-90 (1995).
15 Of course, if it turns out that the relevant condition
precedent (establishment of separate facilities and compliance
with any other requirements) can for some reason no longer occur,
the case for declaratory relief would be much weaker. See
Restatement (Second) of Contracts 225(2) (Unless it has been
excused, the non-occurrence of a condition discharges the duty
when the condition can no longer occur.).
16 See Jackson v. Culinary Sch. of Washington, Ltd., 59
F.3d 254, 256 (D.C. Cir. 1995) ([W]e believe it essential for the
district court to give explicit consideration to whether the case
is appropriate for declaratory judgment. . . . [W]e find that a
remand of the case is necessary so that the district court has an
opportunity to exercise its discretion . . . .).
17 A final issue is whether ACC has waived its entitlement
to declaratory relief, here or in the superior court. We think
there has not been a waiver. First, we believe ACC adequately
raised the issue on appeal. Although ACC did not explicitly
mention declaratory relief until its reply brief, its opening
brief makes the argument in substance if not in form by
contending that the superior court failed to determine what the
Agreement required ACC to do to transform its sales complex. In
our view, this is good enough to avoid waiver. Second, we
believe the issue was adequately raised in the superior court.
ACCs complaint quite plainly seeks declaratory relief.
Declaratory relief is not explicitly mentioned in ACCs trial
brief or in its proposed findings of fact and conclusions of law
(both of which seek damages and delivery of Jeeps), but the
latter seeks legal rulings that are effectively a declaratory
judgment, including a proposed conclusion that ACC may comply
with the May 28 agreement by implementing a simple location swap
and a signage change. We think this is enough to avoid any
waiver in the superior court.
18 Rod Udd, the primary shareholder and president of ACC,
had written DCMC: I will add the Jeep line as part of the
Project 2000, if the third paragraph of our agreement letter
read[s] as follows: . . . The Project 2000 agreement between
[ACC], Johnson Jeep[,] and [DCMC] does not include the Dodge
franchise.
19 Hall v. TWS, Inc., 113 P.3d 1207, 1210 (Alaska 2005).
20 Carter v. Hoblit, 755 P.2d 1084, 1086-87 (Alaska 1988)
(relying on Restatement).
21 Restatement (Second) of Torts 525 (1977). The
scienter requirement in the case of a claim of intentional
misrepresentation is met where the speaker knows or believes that
the matter is not as he represents it to be, does not have the
confidence in the accuracy of his representation that he states
or implies, or knows that he does not have the basis for his
representation that he states or implies. Id. 526.
22 Gardner v. Gardner, 527 N.W.2d 701, 710 (Wis. App.
1994) (holding that where there was no debate over the facts, the
question of whether a particular statement was fraudulent and
justifiably relied upon would be reviewed de novo), review
denied, 531 N.W.2d 327 (Wis. 1995).
23 Indus. Commercial Elec., Inc. v. McLees, 101 P.3d 593,
601 (Alaska 2004) (holding that whether the level of trust
between the parties to a settlement agreement was sufficient to
justify reliance was an issue of fact that precluded summary
judgment: Whether reliance is justified in a given case seems to
us more likely to turn on the course of dealings between the
parties before and during the dispute.); Ambassador Ins. Co. v.
Kenneth I. Tobey, Inc., 618 P.2d 572, 574 (Alaska 1980) (holding
that whether reliance was reasonable was one of many factual
disputes precluding summary judgment).
24 See, e.g., Minnesota Forest Prods., Inc. v. Ligna
Machinery, Inc., 17 F. Supp. 2d 892, 912 (D. Minn. 1998)
(explaining that under Minnesota law, [t]he question of whether a
party justifiably relied upon anothers representations is a
question of fact for the jury); Smith v. Pope, 176 A.2d 321, 325
(N.H. 1961) ([T]he conclusion that the plaintiffs reliance was
justified is implicit in the verdict. If a different view might
have been taken upon the evidence, we cannot say that the trier
of the facts who heard and saw the parties was compelled as a
matter of law to adopt it.); Bolser v. Clark, 43 P.3d 62, 66
(Wash. App. 2002) (Whether a party justifiably relied is a
question of fact unless reasonable minds could reach but one
conclusion, in which case the issue may be determined as a matter
of law.); cf. In re Rovell, 194 F.3d 867, 870-71 (7th Cir. 1999)
(holding that reasonable reliance is mixed question of law and
fact, but is still reviewed for clear error: The case law firmly
establishes the proposition that a finding of reasonable reliance
is reviewed for clear error . . . .).
25 Bolser, 43 P.3d at 66.
26 As noted above, justifiable reliance is an element of
intentional misrepresentation. Restatement (Second) of Torts
525. Section 552(1) of the Restatement makes justifiable
reliance one of the elements of negligent misrepresentation.
27 Our conclusion that the King email was not in and of
itself worthy of reasonable reliance should not preclude
consideration of whether the King email helped create a context
that made subsequent statements misleading.
28 This standard has been cited with approval by Alaska
courts. See Carter, 755 P.2d at 1086.
29 Restatement (Second) of Torts 529 cmt. b.
30 Id. 529 cmt. a and illustration 2.
31 Carter, 755 P.2d at 1086.
32 As the superior court pointed out, Fleck testified that
if, before completion of the Project 2000 realignment, DCMC had
revealed to ACC . . . DCMCs intent to open a south Anchorage
Dodge, he doubted [ACC] would have consummated the realignment of
vehicle lines.
33 ACCs Proposed Findings of Fact and Conclusions of Law
referred to all three alleged misrepresentations and emphasized
Flecks testimony that he did not want to spell . . . out DCMCs
plans to open a new dealership. ACCs trial brief noted that half-
truths and true remarks that omit material information are
actionable misrepresentations under Alaska law, relying on the
Carter case cited above.
34 See, e.g., Zaverl v. Hanley, 64 P.3d 809, 817 n.16
(Alaska 2003) (jury instructions); Freeman v. Southwire Co., 605
S.E.2d 95, 96 (Ga. App. 2004) (explaining that factual decisions
based on erroneous theories of law . . . are subject to the de
novo standard of review).
35 This court has previously explained:
An implied waiver arises where the course of
conduct pursued evidences an intention to
waive a right, or is inconsistent with any
other intention than a waiver, or where
neglect to insist upon the right results in
prejudice to another party. . . . [T]here
must be direct, unequivocal conduct
indicating a purpose to abandon or waive the
legal right, or acts amounting to an estoppel
by the party whose conduct is to be construed
as a waiver.
Milne v. Anderson, 576 P.2d 109, 112 (Alaska 1978) (citations
omitted); see also Wausau Ins. Cos. v. Van Biene, 847 P.2d 584,
589 (Alaska 1993) (holding that neglect to insist upon a right
only results in an estoppel, or an implied waiver, when the
neglect is such that it would convey a message to a reasonable
person that the neglectful party would not in the future pursue
the legal right in question and refusing as a result to uphold a
finding of implied waiver where evidence suggested mere neglect
or an internal mistake).
36 The superior court said: ACC might have read the May
1999 agreement to require that DCMC send a proposed LOI after Udd
signed on 28 May (whether different from the 21 May LOI or not).
(Emphasis added.)
37 DCMC manager Carl Fleck testified:
Q. In fact, did [ACC President Ron Udd]
provide you any comments about this
document [the May 21 letter of intent]?
A. This document?
Q. Correct.
A. The only comments that Im familiar with
is he was concerned about the time
tables, the time the numbers on here.
Q. Okay. And would that and that was some
certainly something you were willing to
work on?
A. Sure.
38 See Restatement (Second) of Contracts 201(2)(a)
(stating that where A understands contract to mean one thing, and
B knows this, As meaning prevails over Bs).
39 See id. 201(3) (Except as stated in this Section,
neither party is bound by the meaning attached by the other, even
though the result may be a failure of mutual assent.).
40 See id. 201 cmt. d (There may be a binding contract
despite failure to agree as to a term, if the term is not
essential or if it can be supplied. See 204. In some cases a
party can waive the misunderstanding and enforce the contract in
accordance with the understanding of the other party.); id. 204
(When the parties to a bargain sufficiently defined to be a
contract have not agreed with respect to a term which is
essential to a determination of their rights and duties, a term
which is reasonable in the circumstances is supplied by the
court.).
41 AS 45.25.180.
42 ACC claimed that the attorneys fees awarded by the
superior court to DCMC were too high and provided several
examples of what it said was over-lawyering on DCMCs part. It is
unnecessary to consider this challenge in light of our decision
to vacate the superior courts resolution of the merits and the
fee award that was based on the merits resolution.
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