| Alaska Supreme Court Opinions made Available byTouch N' Go Systems and Bright Solutions |
|
|
|
This site is possible because of the following site sponsors. Please support them with your business.
|
| Alaska Supreme Court Opinions made Available byTouch N' Go Systems and Bright Solutions |
|
|
|
|
|
This site is possible because of the following site sponsors. Please support them with your business.
|
You can search the entire site. or go to the recent opinions, or the chronological or subject indices. Jarvis v. Ensminger (05/05/2006) sp-6010
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
| TROY JARVIS, | ) |
| ) Supreme Court No. S- 11581 | |
| Appellant, | ) |
| ) Superior Court No. | |
| v. | ) 3AN-02-9287 CI |
| ) | |
| GARY ENSMINGER, JAMES | ) |
| JOHNSON, MOTORS, INC., and | ) |
| FAIRBANKS NISSAN, INC., | ) O P I N I O N |
| ) | |
| Appellees. | ) No. 6010 - May 5, 2006 |
| ) | |
Appeal from the Superior Court of the State
of Alaska, Third Judicial District,
Anchorage, Morgan Christen, Judge.
Appearances: Kevin T. Fitzgerald, Ingaldson,
Maassen & Fitzgerald, P.C., Anchorage, for
Appellant. Mark E. Wilkerson and Wallace H.
Tetlow, Wilkerson, Hozubin & Burke,
Anchorage, for Appellees.
Before: Bryner, Chief Justice, Matthews,
Eastaugh, Fabe, and Carpeneti, Justices.
CARPENETI, Justice.
I. INTRODUCTION
Troy Jarvis was hired as the sales manager at Fairbanks
Nissan. His employment contract included a performance
incentive: by meeting certain sales benchmarks he could earn an
option to purchase as much as thirty percent of the shares in
Fairbanks Nissans parent corporation, Motors, Inc. Jarvis met
those benchmarks but Motors refused to honor his option. Jarvis
sued, claiming breach of contract, misrepresentation, and
promissory estoppel. The superior court granted summary judgment
to Motors, holding that the contract contained an unsatisfied
condition precedent and that defendants were entitled to judgment
regarding Jarviss misrepresentation and promissory estoppel
claims. Jarvis appeals. We affirm the superior court in regard
to Jarviss contract claim but reverse and remand in regard to his
misrepresentation and promissory estoppel claims.
II. FACTS AND PROCEEDINGS
A. Facts
Fairbanks Nissan, Inc. is a subsidiary of Motors, Inc.
Prior to July 10, 1997 all 7,500 outstanding Motors shares were
held by the James E. Johnson Revocable Trust (Johnson Trust), of
which James E. Johnson was, and is, the trustee and beneficiary.
On July 10, 1997 the Johnson Trust and Gary Ensminger, the
general manager of Fairbanks Nissan, executed a shareholder
agreement issuing 7,500 new Motors shares to Ensminger. The
shares were issued to Ensminger on August 26, 1997.
The shareholder agreement specified that Johnson and
Ensminger would compose the board of directors of Motors, with
Johnson serving as president and Ensminger as
secretary/treasurer.1 Even though the shareholder agreement
rendered Ensminger and the Johnson Trust co-owners, each holding
fifty percent of the outstanding shares in Motors, the
shareholder agreement specified that Johnson, both as the trustee
of the Johnson Trust and as president of Motors, would retain
corporate control until September 1, 2000.2
The agreement established three ways in which the
shares held by the Johnson Trust might be obtained by Motors.
When Johnson reached the age of seventy, the corporation would
receive a call option and the Johnson Trust would receive a put
option. The call option entitled Motors to purchase the shares
held by the Johnson Trust and the put option entitled the Johnson
Trust to sell those same shares to the corporation. The price
for the shares under either option was to be determined by an
agreed-upon formula contained in the shareholder agreement.
Additionally, the agreement specified that upon Johnsons death,
the corporation was obligated to purchase the shares held by the
Johnson Trust.
Ensminger recruited Jarvis to work as the general sales
manager of Fairbanks Nissan in November 1997. Jarvis and
Ensminger initially agreed that Jarvis would receive six and one-
half percent of the gross sales profit for new and used cars as
commission. This compensation package was amended by a written
agreement on February 1, 1998.3 The February 1 agreement
specified that Jarvis would receive only six percent of the gross
sales profit, but would also receive an option to buy up to
thirty percent of the shares in Motors, or 4,500 shares, if he
met certain sales benchmarks. The agreement further stated that
[t]he percentage that is being made available are Jim Johnson
Trust shares which must first be bought from Jim Johnson by Gary
Ensminger/Fairbanks Nissan. Additionally, the agreement
established a time frame within which Jarvis could exercise his
option. If Jarvis met his benchmarks, the agreement stated that
[t]he performance option stock transfer will be exercised after
the purchase from Jim Johnson Trust account by Gary
Ensminger/Fairbanks Nissan or December 31, 2000, whichever is
[later].
On November 27, 1998 Ensminger and the Johnson Trust
amended the shareholder agreement to provide Ensminger with the
option of buying the Johnson Trust shares between September 1,
2000 and October 15, 2000.
Shortly after executing this amendment, Ensminger and
Johnson had a falling out and Ensminger was terminated on
February 26, 1999.4 Ensminger never exercised any option to
purchase shares from the Johnson Trust. At the time of
Ensmingers termination, Motors had not exercised its call option
and the Johnson Trust had not exercised its put option.
Jarvis left his job with Fairbanks Nissan in February
2001. On February 9, 2001 he sought to exercise his option to
purchase 4,500 shares of Motors.5 Johnson refused and Jarvis
sued.
B. Proceedings
Jarvis filed suit against Ensminger, Johnson, Motors,
and Fairbanks Nissan in July 2002, seeking $100,000 in
compensatory damages plus undetermined punitive damages. Jarvis
alleged that the failure to honor his option breached the
explicit terms of his contract as well as the implied covenant of
good faith and fair dealing. He also claimed misrepresentation
and promissory estoppel. Jarvis argued that because the
defendants acted with intentional bad faith he is entitled to
punitive damages. On September 19, 2002 the defendants answered
the complaint and asserted several affirmative defenses
including an assertion that no relief could be granted based on
Jarviss claim because the February 1, 1998 employment agreement
contained an unfulfilled condition precedent. Defendants
contended that Jarviss purchase option was conditioned on Motors
obtaining shares from the Johnson Trust, and that since neither
Motors nor Ensminger ever obtained any shares from the Johnson
Trust, Jarviss purchase option never ripened.
Defendants moved for summary judgment in July 2003
based on this last affirmative defense. The motion for summary
judgment did not address Jarviss claims for misrepresentation or
promissory estoppel. Jarvis replied that the contract specified
that he could exercise his option either upon the purchase by
Motors of Johnson Trust shares or on December 31, 2000, whichever
occurred later. Jarvis maintained that the issuance of 7,500
shares to Ensminger pursuant to the July 10, 1997 shareholder
agreement6 counted as a relevant purchase of Johnson Trust
shares. Consequently, Jarvis contended that his option ripened
on December 31, 2000.
In an October 29, 2003 order, Superior Court Judge
Morgan Christen denied the defendants summary judgment motion
without prejudice. The court observed that it could rule on the
condition precedent as a matter of law. This was the superior
courts only reference to the condition precedent in this case.
The court held, however, that there existed a factual dispute as
to whether the parties had intended for the 7,500 shares held by
Ensminger at the time of agreement to be subject to Jarviss
purchase option.
Defendants moved for reconsideration, claiming that the
parties could not have intended for Ensmingers 7,500 shares to be
subject to Jarviss option because the contract contemplate[d] an
option to purchase Johnson shares that at some point in time
after the signing of the Jarvis Agreement, might be bought by
Ensminger from Johnson. (Emphasis in original.) The superior
court appeared to accept this argument7 but rejected the motion
without prejudice since it remained unclear whether the 7,500
shares were transferred to Ensminger before the signing of the
February 1, 1998 employment agreement.
In response to this order defendants produced the stock
certificate reflecting that the 7,500 shares had been transferred
to Ensminger on August 26, 1997 and renewed their motion for
summary judgment. The court granted this renewed motion for
summary judgment in March 2004. Jarvis appeals this ruling.
III. STANDARD OF REVIEW
We review a superior courts decision to grant summary
judgment de novo, drawing all reasonable factual inferences in
favor of the non-movant and affirming if the record reveals no
genuine issues of material fact and the movant is entitled to
judgment as a matter of law.8
The meaning of a contract is ordinarily a question of
law that we review de novo.9 If the superior court weighed
conflicting extrinsic evidence in interpreting the contract, we
apply the more deferential clearly erroneous standard to the
conclusions drawn by the superior court from the extrinsic
evidence.10
IV. DISCUSSION
A. The Superior Court Did Not Err in Granting Summary
Judgment on the Contract Claims.
The superior court granted summary judgment based on
its conclusion that Jarviss option was conditioned on a future
purchase of Johnson Trust shares by Ensminger or Motors11 and its
finding that the parties did not intend for the 7,500 shares
acquired by Ensminger pursuant to the shareholder agreement to be
subject to the option. We agree with both and therefore affirm.
1. Jarviss option was conditioned on the acquisition
of Johnson Trust shares by Motors.
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.12 We have embraced the
well-settled rule of contract interpretation that conditions are
disfavored and will not be found in the absence of unambiguous
language indicating the intention to create a conditional
obligation.13 To be enforceable, a condition must be expressed in
plain, unambiguous language or arise by clear implication.14 This
interpretive rule protects both parties to the transaction and
also does not involve the consequences that a slight failure to
perform wholly destroys all rights under the contract.15
We conclude that Jarviss employment contract
conditioned his purchase option on the future sale of Johnson
Trust shares to Motors, for the language of the contract clearly
indicates that the parties intended to create a condition.
Two provisions of the employment contract suggest that
Jarviss option was conditioned on a future purchase of Johnson
Trust shares by Motors. The first addresses when Jarviss option
could be exercised:
The performance option stock transfer will be
exercised after the purchase from Jim Johnson
Trust Account by Gary Ensminger/Fairbanks
Nissan or December 31, 2000, whichever is
later.
(Emphasis added.) The second discusses an event that must occur
before Jarvis might exercise his option:
The percentage that is being made available
are Jim Johnson Trust Shares which must first
be bought from Jim Johnson by Gary
Ensminger/Fairbanks Nissan.
Under these provisions, Jarvis could not exercise his option
until after Motors acquired the Johnson Trust shares. Thus,
whether this language creates a condition depends on the
certainty of that sale.16 If the parties reasonably expected that
the sale was a certainty, this language would not create a
condition; instead, it would specify the mechanics of Jarviss
option. Based on the interaction of Jarviss employment contract
with the July 15, 1997 shareholder agreement, we conclude that
the parties could not have reasonably believed that the future
sale was certain to occur.17
As discussed above, the shareholder agreement specified
three ways that Motors might acquire the Johnson Trust shares:
(1) Motors could exercise a call option on the Johnson Trust
shares at any time following Johnsons seventieth birthday, (2)
Johnson could exercise a put option at any time following his
seventieth birthday, and (3) Motors could fulfil its obligation
to purchase the Johnson Trust shares in the event of Johnsons
death.18
Whether the call or put option would be exercised was
uncertain; neither Motors nor Johnson was obliged to exercise
them. Moreover, the employment contract specified that Jarviss
option would ripen after the purchase of Johnson Trust shares or
December 31, 2000, whichever is later. This alternate timing
would be superfluous if the parties had expected that Motors
would purchase the Johnson shares as soon as the call or put
option ripened, or at some other relevant time (such as when
Motors had sufficient cash or received financing to purchase the
shares). And while Johnsons death itself is a certainty, the
timing of his death is sufficiently unknown as to preclude the
parties from reasonably considering it a certain event for
purposes of this contract.
But while the contract does not use magic words like
conditioned or contingent, the most natural reading of the
contract includes a condition. Considering the evidence as a
whole, a clear implication arises that a condition was intended
by the parties.19 Indeed, the disputed language makes little
sense as anything but a condition.
Based on the foregoing, we conclude that the parties
intended for Jarviss option to be conditioned on the future
purchase of the Johnson Trust shares by Motors.
2. The parties did not intend for Ensmingers shares
to be subject to the option.
The superior court also concluded that the parties did
not intend for the issuance of 7,500 shares to Ensminger to
trigger Jarviss option.20 The basis for the courts second
conclusion is two-fold: (1) the words of the contract
unambiguously indicate that the parties intended only for shares
owned by the Johnson Trust as of February 1, 1998 to be subject
to the option; and (2) it is undisputed that Ensminger obtained
his shares on August 26, 1997.
In his brief, Jarvis disputes the finding that the
parties intended only for shares that had not yet been purchased
from the Johnson Trust to be subject to his option. He contends
that the parties understood that Ensmingers shares were subject
to the Jarvis purchase option. As evidence for this claim,
Jarvis points to his November 26, 2003 affidavit. The affidavit
expresses Jarviss belief that, as of February 1, 1998, the
parties understood that Ensmingers shares were subject to my
option to purchase agreement.
Motors replies that this interpretation ignores the
plain meaning of the contract and gives too much weight to
Jarviss subjective understanding of the contract. The defendants
also point to the words of the February 1, 1998 employment
contract which indicate that the shares subject to Jarviss option
were to be purchased from the Johnson Trust at a future time. We
agree with the defendants for three reasons.
First, Jarviss interpretation of the contract conflicts
with language in the contract indicating that the shares which
would be made available to him had not yet been purchased from
the Johnson Trust. The contract states, in relevant part:
The performance stock option transfer will be
exercised after the purchase from Jim Johnson
Trust Account . . . or December 31, 2000,
whichever is [later].
. . . .
The percentage that is being made available
are Jim Johnson Trust shares which must first
be bought from Jim Johnson by Gary
Ensminger/Fairbanks Nissan.
(Emphasis added.) This language clearly indicates that the
parties intended that Jarviss option would allow him to purchase
shares that had not yet been purchased from the Johnson Trust.
Jarvis does not dispute that he was aware that Ensminger had
received his shares prior to the negotiation of the employment
contract.21 Moreover, [i]n reaching a reasonable interpretation
of a contract, we attempt to give effect to all of its terms.22
Jarviss interpretation would render the timing provision
superfluous since a timing provision would be pointless if the
option had already ripened.
Second, the parties could not have reasonably
considered Ensmingers shares to have been Johnson Trust shares.23
According to the employment contract, [t]he percentage that is
being made available are Jim Johnson trust shares which must
first be bought from Jim Johnson by Gary Ensminger/Fairbanks
Nissan. (Emphasis added.) The contract further states that
[a]ll parties have read and understand the shareholder agreement
dated July [10], 1997. A review of the July 10, 1997 shareholder
agreement indicates that Ensmingers shares were new shares issued
by Motors and were not purchased from the Johnson Trust.
The shareholder agreement described Ensminger as a
prospective shareholder of Motors, Inc. pending issuance of 7500
shares of Motors, Inc. stock to him by Motors, Inc. (Emphasis
added.) The shareholder agreement also described the Johnson
Trust as a present shareholder of Motors, Inc. . . . holding
7,500 shares of its common stock. Taken together, these recitals
indicate: (1) that Ensminger received his 7,500 shares from
Motors, rather than the Johnson Trust; and (2) that the Johnson
Trust could not have sold Ensminger 7,500 shares because such a
sale would have exhausted its holdings. In light of these facts,
the parties could not have reasonably considered Ensmingers
shares to have been shares that had been purchased from the
Johnson Trust.
Lastly, Jarviss evidence that the parties understood
that Ensmingers shares would be subject to the option was not
sufficient to avoid summary judgment. A party moving for summary
judgment bears the initial burden of showing the absence of an
issue of material fact and that it is entitled to judgment as a
matter of law.24 Once the movant has met this dual burden, the
burden shifts to the non-movant to produce facts showing that he
will be able to present admissible evidence tending to dispute or
contradict the movants evidence.25 After Motors supported its
motion for summary judgment with the text of the employment
agreement, the shareholder agreement, and a copy of the August
26, 1997 stock certificate, the burden shifted to Jarvis to
present contradictory evidence. Jarviss evidence consisted only
of his own conclusory affidavit. He stated:
At the time I entered into the employment
agreement with the defendants, I believed,
based upon representations made to me by Gary
Ensminger, that he was a 50% owner of Motors,
Inc. I understood that he received the
shares that made him a 50% owner from Jim
Johnson. These shares were subject to my
option to purchase agreement.
(Emphasis added.) This statement is not sufficient to
demonstrate a factual dispute over the meaning of the contract.
[P]arties testimony as to their subjective intentions or
understandings will normally accomplish no more than a
restatement of their conflicting positions.26 We generally ignore
such statements in favor of express manifestations of each partys
understanding of the contract in attempting to give effect to the
intent behind the agreement.27 In this case, Jarvis has not put
forward any other evidence to support his interpretation.
We thus affirm the superior courts conclusion that the
parties did not consider Ensmingers 7,500 shares to be subject to
the option.
B. It Was Error To Dismiss Jarviss Claims for
Misrepresentation and Promissory Estoppel.
The superior court dismissed Jarviss claims for
misrepresentation and promissory estoppel even though Motors did
not move for summary judgment regarding these claims.28 The
superior court did not explain this decision. Jarvis contends
that this was erroneous, arguing that it was improper to grant
summary judgment because Motors did not present evidence showing
that there were no issues of material fact and because he had no
opportunity to present contradictory evidence. Motors asserts
that summary judgment would have been appropriate in regard to
the misrepresentation claim because the alleged
misrepresentations were, in fact, true. Motors also maintains
that Jarviss misrepresentation and promissory estoppel claims
merely restated his contract claims and were, therefore, properly
dismissed.
We agree with Jarvis that it was error to grant summary
judgment in regard to his misrepresentation and promissory
estoppel claims. On summary judgment, it is the moving party
that bears the initial burden of proving, through admissible
evidence, the absence of genuine factual disputes and its
entitlement to judgment.29 The non-movant is not obligated to
make any factual showing until the moving party makes a prima
facie showing of its entitlement to judgment on established
facts.30 Motors never moved for summary judgment regarding
Jarviss claims for misrepresentation or promissory estoppel or
presented evidence showing the absence of any genuine issues of
material fact. The burden of showing any genuine issues of
material fact, therefore, never shifted to Jarvis and his claims
should not have been dismissed for failure to carry this burden.31
We consider in turn whether the erroneous grant of
summary judgment regarding Jarviss misrepresentation and
promissory estoppel claims was harmless.
1. Summary judgment regarding the misrepresentation
claim was not harmless.
Motors contends that any procedural error in dismissing
Jarviss misrepresentation claim was harmless because Motors was
entitled to summary judgment. Motors claims that the relevant
representations that form the basis of Jarviss tort claim were
shown to be true and that Jarviss tort claims merely restate his
breach of contract claim. We disagree.
a. Ensmingers alleged misrepresentations were
not shown to be true.
Jarviss complaint maintains that Ensminger
misrepresented basic terms of the contract to induce Jarvis to
sign the agreement. Jarvis has claimed that Ensminger made three
misrepresentations: (1) that Ensminger had a right to acquire the
remaining 7,500 shares in the Johnson Trust, (2) that Ensminger
was involved in the process of acquiring them, and (3) that
Ensmingers shares were subject to Jarviss option. Based on the
record, we cannot conclude that Ensmingers alleged false
statements were proven true.
Jarvis swore:
I also believed, based upon Ensmingers
representations, that by virtue of his own
employment agreement he was entitled to, or
in the process of, receiving additional
shares which would make him a 100% owner.
We are unable to conclude that these alleged representations were
shown to be true, because we cannot review their truth. The
record does not contain Ensmingers employment contract. We are
confident that such a document exists because of multiple
references to it in the shareholder agreement and the November
27, 1998 amendment to the shareholder agreement. Its absence
from the record, however, precludes us from agreeing that any
representation regarding its contents was, as Ensminger argues,
proven undisputably true.
Jarvis also swore that:
At the time I entered into the employment
agreement with Motors, I believed, based
upon representations to me by Gary Ensminger,
that he was a 50% owner of Motors, Inc. I
understood that he received the shares that
made him a 50% owner from Jim Johnson. These
shares were subject to my option to purchase
agreement.
(Emphasis added.) Motors is correct that Ensmingers alleged
representation that he was a fifty percent owner is true, but
Jarvis never asserted the falsity of this statement.32 Jarvis
does assert, however, that Ensminger represented that his shares
were subject to Jarviss option. The grant of summary judgment
was inconsistent with that claim. Moreover, it cannot be said
that Ensmingers alleged misrepresentations were shown to be true.
b. Jarvis asserted a breach of an independent
duty.
Motors also maintains that Jarviss misrepresentation
claim was properly dismissed because it merely repeat[ed] his
claim that the contract means something other than what is
written. We disagree.
We have recognized that [p]romises set forth in a
contract must be enforced by an action on that contract. Only
where the duty breached is one imposed by law, such as a
traditional tort law duty furthering social policy, may an action
between contracting parties sound in tort.33 As the New York
Court of Appeals recognized in NYU v. Continental Insurance Co.,
Inc.:34
A tort obligation is a duty imposed by law to
avoid causing injury to others. It is apart
from and independent of promises made and
therefore apart from the manifested intention
of the parties. Thus, [a] defendant may be
liable in tort when it has breached a duty of
reasonable care distinct from its contractual
obligations, or when it has engaged in
tortious conduct separate and apart from its
failure to fulfill its contractual
obligations.[35]
Thus a violation of a duty arising from contract such as the
duty to pay wages under an employment contract or tender payment
for goods does not give rise to a tort claim. However, when a
partys actions violate a general duty of care, its actions may
give rise to an action in tort, even if the violation also
breaches a contract.36
Alaska law imposes an independent duty to refrain from
the tort of intentional misrepresentation. The essential
elements of that tort are: (1) a false representation of fact,
(2) knowledge of the falsity of the representation, (3) intention
to induce reliance, (4) justifiable reliance, and (5) damages.37
Jarvis has asserted that Ensminger violated his duty to avoid
such conduct.38 We therefore conclude that Jarviss claim for
misrepresentation alleges a breach of a duty independent of the
contract.
2. Dismissal of Jarviss promissory estoppel claim is
not conclusively harmless.
The superior court also dismissed Jarviss promissory
estoppel claim without a motion for dismissal or summary
judgment. Motors again contends that any procedural error was
harmless, here because the alleged . . . promissory estoppel
representations are subsumed by the written contract.
Promissory estoppel is an equitable doctrine that
allows the enforcement of a promise made unenforceable by
technical defects or defenses.39 The Restatement (Second) of
Contracts sets out the doctrine:
A promise which the promisor should
reasonably expect to induce action or
forbearance on the part of the promisee or a
third person and which does induce such
action or forbearance is binding if injustice
can be avoided only by enforcement of the
promise.[40]
A claim for promissory estoppel requires that an actual promise
was made and itself induced the action or forbearance in reliance
thereon.41 But such a claim is a theory, independent of contract,
for awarding reliance damages.42 And when a defect in contract
formation or validation for example, failure of a condition
prevents action on the contract, courts recognizing promissory
estoppel perceive the correlative rights and duties as distinct
from contract.43
We have concluded that the superior court properly
granted summary judgment to Motors because of the failure of a
condition of the contract.44 But this determination does not
require the conclusion that Jarvis could not establish the
existence of promissory estoppel. That a requirement for
enforcement of a contract is lacking, denying a legal remedy,
does not mandate denial of the equitable remedy here. Especially
in light of the complete failure on the part of Motors to even
request summary judgment (or dismissal) of the promissory
estoppel claim, we cannot say that the grant of summary judgment
as to this claim was conclusively harmless.
V. CONCLUSION
Because a future sale of the Johnson Trust shares to
Motors was a condition precedent to Jarviss stock purchase
option, and this sale never occurred, Jarviss option never
ripened. We therefore AFFIRM the superior courts grant of
summary judgment in regard to Jarviss contract claims. Because
there was no motion for summary judgment regarding Jarviss claims
for misrepresentation and promissory estoppel, we conclude that
it was error to grant summary judgment on these issues. This
error was not harmless in regard to Jarviss misrepresentation
claims and we cannot say that it was harmless as to his
promissory estoppel claim. We therefore REVERSE the grant of
summary judgment on Jarviss misrepresentation and promissory
estoppel claims and REMAND those claims to the superior court for
further proceedings consistent with this opinion.
_______________________________
1 The agreement also stated that on September 1, 2000 the
respective positions would be switched.
2 The trust accomplished this in two ways. First, it
stipulated that until September 1, 2000 the Johnson Trust must
approve of any corporate act. Second, it also stipulated that if
the board of directors disagreed (the board was composed only of
Johnson and Ensminger), the presidents decision would control.
Until September 1, 2000 Johnson was to serve as president.
3 There is some dispute over whether Johnson personally
consented to Jarviss contract, but Ensmingers authority to bind
Motors is not at issue in this appeal.
4 Jarvis replaced Ensminger as general manager of
Fairbanks Nissan. Ensminger contended in an affidavit attached
to defendants January 7, 2004 renewed motion for summary judgment
that Jarvis subsequently renegotiated his employment terms with
Johnson after taking Ensmingers job. This affidavit is the only
evidence in the record that Jarvis renegotiated the February 1,
1998 contract. However, on appeal, neither party has placed any
significance on the alleged renegotiation.
5 Defendants do not argue that Jarvis failed to meet the
performance benchmarks that entitled him to the option.
6 In his opposition to the motion for summary judgment,
Jarvis stated that the shareholder agreement was dated July 10,
1998 though he admitted in a footnote that there was some
confusion as to whether the correct year was 1997 or 1998.
7 The courts Order on Motion for Reconsideration, dated
December 31, 2003, rejected summary judgment because assertions
of uncontested facts in the pleading were disputed at oral
argument. This includes the date the initial shares of stock
were transferred to Ensminger.
8 Matanuska Electric Assn, Inc. v. Chugach Electric Assn,
Inc., 99 P.3d 553, 558 (Alaska 2004).
9 Harris v. Ahtna, 107 P.3d 271, 274 (Alaska 2005).
10 Id.
11 The superior court addressed the existence of the
condition only in its October 29, 2003 order. However, the
courts conclusion that the parties intended to include a
condition precedent to the option in the contract is essential to
the courts determination that the parties did not intend for
Ensmingers shares to be subject to the option.
12 Restatement (Second) of Contracts 224 (1981).
13 Logghe v. Jasmer, 686 P.2d 694, 698 (Alaska 1984); see
also Peterson v. Wirum, 625 P.2d 866, 873 n.14 (Alaska 1981)
(holding that contract language purporting to condition repayment
of partner loans on receipt of financing from specific bank was
not sufficiently unambiguous to constitute condition precedent);
Catherine M.A. McCauliff, Corbin on Contracts 30.14, pp. 29-30
(Rev. Ed. 1999) (If the non-occurrence of a condition causes a
forfeiture, the law will try to reduce the risk of forfeiture
within the limits allowed by the competing policy of freedom of
contract.); Restatement (Second) of Contracts 227 (1981) (In
resolving doubts as to whether an event is made a condition of an
obligors duty, and as to the nature of such an event, an
interpretation is preferred that will reduce the obligees risk of
forfeiture, unless the event is within the obligees control or
the circumstances indicate that he has assumed the risk.).
14 Prichard v. Clay, 780 P.2d 359, 362 (Alaska 1989)
(quoting Wirum, 625 P.2d at 873); see also Norton v. Herron, 677
P.2d 877, 882 (Alaska 1984) (clause in agreement to purchase real
property in Fairbanks calling for purchaser to use funds from
sale of own property in Montana for monthly payments on Fairbanks
property not condition precedent permitting vendor to void
purchase agreement simply because purchaser used other source for
payments where vendor completely failed to inquire as to equity
in purchasers Montana property).
15 Norton, 677 P.2d at 882 (quoting Wirum, 625 P.2d at 873
n.14). The Restatement of Contracts articulates a similar
justification for this rule, observing that since the
non-occurrence of a condition of an obligors duty may cause the
obligee to lose his right to the agreed exchange after he has
relied substantially on the expectation of that exchange . . .
[,] [w]hen . . . it is doubtful whether or not the agreement
makes an event a condition of an obligors duty, an interpretation
is preferred that will reduce the risk of forfeiture. Restatement
(Second) of Contracts, 227 cmt. b.
16 See Restatement (Second) of Contracts 224 & cmt. b
(1981) (there is inherent in the concept of condition some degree
of uncertainty as to the occurrence of the event. . . . [T]he
mere passage of time, as to which there is no uncertainty, is not
a condition and a duty is unconditional if nothing but the
passage of time is necessary to give rise to a duty of
performance.).
17 Jarviss employment contract states that [a]ll parties
have read and understand the shareholder agreement dated July 15,
1997. Thus the provisions of the shareholder agreement are
relevant to understanding the parties expectations. Additionally,
Jarvis presented evidence to the superior court regarding his
reasonable expectations; he swore in an affidavit that Ensminger
led him to believe that by virtue of his own employment agreement
he was entitled to, or in the process of, receiving additional
shares which could make him a 100% owner. No such employment
agreement appears in the record. Jarvis does not contend here,
nor did he below, that the superior court did not allow him to
discover such a document.
18 Indeed, given the absence of any reference to
Johnsons age in the record, it may well be that Johnson would
have reached his seventieth birthday while still exercising
corporate control under the shareholder agreement; thus, Johnson
would have the authority to decide whether either option would be
exercised.
19 Prichard v. Clay, 780 P.2d 359, 362 (Alaska 1989).
20 The court noted in its October 29, 2003 ruling that it
could rule on the condition precedent as a matter of law. The
court then observed that a possible factual dispute existed as to
whether the parties intended that Ensmingers shares be subject to
the option. The courts December 31, 2003 ruling similarly held
that summary judgment would be premature without evidence of when
Ensminger acquired his shares. After Motors presented evidence
that Ensminger had obtained his shares on August 26, 1997, the
court granted summary judgment. Presumably, the court concluded
that the parties intended for only shares purchased from the
Johnson Trust by Gary Ensminger/Fairbanks Nissan after the
execution of the employment agreement to be available to Jarvis,
and that Ensmingers shares had been purchased from the Johnson
Trust at some point. Under this theory, the only question left
was whether Ensminger bought his shares during the relevant time
frame. Once the court was convinced that Ensminger had acquired
his shares prior to February 1, 1998, the court concluded that
the condition had not been satisfied and Jarvis could not
prevail.
21 See Complaint 2.
22 Matanuska Electric Assn, Inc. v. Chugach Electric Assn,
Inc., 99 P.3d 553, 562 (Alaska 2004) (citations omitted).
23 Although this issue was not discussed by the superior
court or raised by the parties, we may affirm a lower courts
decision on any grounds supported by the record. Marshall v.
First Natl Bank of Alaska, 97 P.3d 830, 835 (Alaska 2004).
24 Shade v. CO & Anglo Alaska Service Corp., 901 P.2d 434,
437 (Alaska 1995).
25 Id.
26 Sprucewood Invest. Corp. v. Alaska Housing Corp., 33
P.3d 1156, 1162 (Alaska 2001).
27 Id. (quoting Peterson v. Wirum, 625 P.2d 866, 870
(Alaska 1981)).
28 Defendants did not address these claims in any of their
summary judgment motions. See Memorandum in Support of Motion
for Summary Judgment; Reply to Opposition to Motion for Summary
Judgment; Memorandum in Support of Reconsideration; Reply to
Supplemental Opposition to Motion for Summary Judgment; Renewed
Motion for Summary Judgment; Reply to Opposition to Renewed
Motion for Summary Judgment. The superior court stated that
these issues were not briefed.
29 Shade, 901 P.2d at 437 (citations omitted).
30 Id. (citations omitted).
31 We do not consider whether a genuine issue of material
fact exists regarding Ensmingers alleged misrepresentations.
32 See Complaint 2.
33 Alaska Pacific Assur. Co. v. Collins, 794 P.2d 936, 946
(Alaska 1990) (citing Tameny v. Atlantic Richfield Co., 610 P.2d
1330, 1334 (Cal. 1980)); see also ARCO Alaska, Inc. v. Akers, 753
P.2d 1150, 1154 (Alaska 1988) (Alaska law does not allow tort
recovery for breach of covenant of good faith and fair dealing
implied in all employment contracts unless breach rises to level
of traditionally recognized tort, such as infliction of emotional
distress).
34 87 N.Y.2d 308 (1995).
35 Id. at 316 (citation omitted).
36 See Restatement (Second) of Torts 549(2) (1977).
37 City of Fairbanks v. Amoco Chem. Co., 952 P.2d 1173,
1176 n.4 (Alaska 1998) (citations omitted).
38 He claims that Ensminger knowingly misrepresented his
rights and his plans to purchase the Johnson Trust shares and
thereby induced Jarvis to rewrite his employment contract and
accept deferred compensation in the form of the purchase option.
We do not reach any conclusion on the merits of Jarviss
misrepresentation claim. We only hold that it alleges a breach
of a tort duty.
39 Brady v. State, 965 P.2d 1, 10 (Alaska 1998); see also
Eric Mills Holmes, Restatement of Promissory Estoppel, 32
Willamette L. Rev. 263, 271-86 (1996).
40 Restatement (Second) of Contracts 90(1) (1981).
41 Valdez Fisheries Dev. Assn v. Alyeska Pipeline Serv.
Co., 45 P.3d 657, 668 (Alaska 2002). We have adopted a four-part
test for claims of promissory estoppel. See id. ((1) The action
induced amounts to a substantial change of position; (2) it was
either actually foreseen or reasonably foreseeable by the
promisor; (3) an actual promise was made and itself induced the
action or forbearance in reliance thereon; and (4) enforcement is
necessary in the interest of justice.) (citing Zeman v. Lufthansa
German Airlines, 699 P.2d 1274, 1284 (Alaska 1985)).
42 Holmes, supra n.39 at 289.
43 Id.
44 See supra Part IV.A.
 |
| Case Law Statutes, Regs & Rules Constitutions Miscellaneous |
|
