*1 treating physician erly Kaiser’s influence conduct violated the carrier’s
whether fair deal- good faith and covenant of
implied
ing. court. the direction of the
Entered at
MATTHEWS, J., participating. ADAMS, Appellant, A. ADAMS, individually and behalf
Don Inc., Supply, Rubber &
of Alaska Investments, Appellees.
ADA
No. S-10271. of Alaska.
Supreme Court
April *2 Shea,
Wevley Anchorage, Ap- William for pellees. FABE, Justice,
Before: Chief MATTHEWS, EASTAUGH, BRYNER, and CARPENETI, Justices.
OPINION MATTHEWS, Justice. power to avoid a contract due to
misrepresentation can be lost knowing having reason to know of the misrepresentation affirms the contract. But only applies this rule in cases of non-fraudu misrepresentations. lent Where there is power fraud the of avoidance is lost if party actually misrepresen knows of the tation and affirms the contract. The main whether, question pro in this case is in the lease, negotiating changing cess of of first refusal to an with out notice should be considered construc purposes applying tive fraud for this rule. We conclude should because of the strong tendency deceptive of such conduct. I. AND FACTS PROCEEDINGS contiguous Michael Adams owns four lots Highway on the in Anchorage. Old Seward Adjacent to this owned Supply, and used Alaska & Rubber Inc. 1, 1996, Effective October leased to Alaska Rubber and (col- principal, Alaska Rubber’s Don Adams lectively opinion referred to in this as Alaska Rubber). three-year The lease had a term. The focus of this case is a clause the lease Refusal,” “Right that is titled of First but is textually option running an unconditional favor of Alaska Rubber to during leased time $300,000.1 excepts term for The lease also coverage L-shaped portion from its 3,750 square straddling about feet two lots on Caudle, Larry L. Anchorage, Appel- which Michael Adams lives in a trailer and quonset lant. storage has a hut and containers.2 1. See note 6 1. Premises: Lessor shall let to Lessee and infra. Lessee shall rent from the Lessor that certain property together improvements with all there- premises 2. The are described as follows in 1,800 including square building foot lease: property together located on the with the real general manager, in- Alaska Rubber’s Janeece secondary issue is whether A Higgins, for transmission to Don Adams who excepted cludes the Washington. in the state of resides leading up to the execu- negotiations July began in earnest tion of the Subsequent delivery August 2, 1996, August 1996. On August of *3 draft, 2, 1996 letter and the first Adams, president of Alas- Don Adams wrote prospective transac- met and discussed Rubber, leasing asking for a decision on ka they tion. Michael Adams testified of the month. property before the end reached an and he instructed purchase option. It mentions a The letter attorney prepare to a second draft of a suggests- that language that also contains agreement. their lease accordance with objective was to sell Michael Adams’s Caudle, Larry attorney, Michael Adams’s for property found suitable property after he prepared right In it the of the second draft. Adams enclosed a a tax-free trade.3 Michael changed by specifying the first refusal was containing right-of-first-re- a proposed lease $300,000. price, option But the sale lessee’s lessee was under which the fusal clause when “Lessor at his was still exercisable buy conditioned on the granted an to property discretion elects to sell the sole property and attempting to sell the lessor during pre- lease term.” After Caudle buyer. In that event the lessee finding a draft, pared Michael Adams took the second buy terms right on the would have Hig- it to Alaska Rubber and delivered it to buyer.4 agreed the lessor and to between gins. brought the that he Michael Adams testified by Hig- 2,1996, draft was transmitted first draft of second August of and the letter gave gins to Don who sent it to Alaska Alaska Rubber and them the lease to you purchase a be the property "A” which is with with would as described in Exhibit 20, year way Perhaps comprised approximately and benefit me. a two of Lots that will T 13N be Subdivision and Parcel lease with an would suitable. 21 Meredith por- payments per SW less a R3W Sec 32 would be 3000.00 month lease 1/4 S1/2NW1/4: by welding shop a dashline shown in unique tion land indicated of ... Ken with or machine by my A to be used the Lessor for his willing pay Exhibit be half of that and would comprised portion a use which is of building prop- exclusive occupies tenant who currently by utilized Lessor as his of lot 19 per erty willing also to rent. Of the 3000 is comprises approximately 50 residence which brings pay will the land taxes which month I portion by of Lot 50 feet located at the Eastern you your per to 2500 2600 month. If outlet portion a the Northeast comer of 19 and in that event I will exercise an then 14, approximately 75 feet Parcel feet phase you two furnish with an environmental currently storing quonset Lessor where is you look asked for. I had some one which hut, It is comer containers and well. premises and he commented that the over the that Lessor reserves access to the relatively clean. para- by Lessor as set forth in this reserved copy of a lease I used for one Enclosed is graph and that Lessee shall not interfere with my you properties. As know leases are ingress ingress to Lessor’s re- Lessor’s you complicated you would feel so if have one portion property. The 1800 served prepare and I more comfortable with then square building foot and land described above try year a three lease will read it. Lets (excluding portion for Lessor’s reserved opportunity per 3000.00 month and use) throughout referred to this lease as during period. chase the “Premises.” a trade soon and Chances are that I will find you release from the lease. part August relevant 1996 letter stat- ed: right-of-first-refusal draft clause in the first 4. The like to make a decision before the would read follows: appears I will have to end of the month and it Right the Lessor-owner First you speak only you. be In the event will Refusal may place Premises on the Real the entire property you with the will have it for involved Market for sale and if the Lessor-seller Estate any arrangement your with oth- use and make buyer, then have the the Lessee shall finds according your wishes. I have been ill ers buy right In the of refusal to at those terms. trying put my and lost a lot of time and I am purchaser Phase two envi- get away event the demands prospective from real future the cost shall be shared greatly ronmental assessment benefit me would estate. What would charge pro- equally way on a non-refundable the sale into a be some I can reinvest from buyer. spective appears a term tax free trade. It short attorney, Viergutz. Rubber’s Herbert Vier- that Alaska Rubber would have an gutz right- a third draft. prepared then that was contin- gent in the of-first-refusal clause third draft on Michael Adams’s decision to sell. draft, Viergutz to that in the second He almost identical instructed to revise the clause except that two additional sentences are add- so that Alaska Rubber’s concerning Viergutz ed at the end of the clause shar- would be unconditional. made this ing phase change change caption of the cost of environmental but did not required result, report might paragraph. paragraph two be in the As a “Right event lessee exercises its still titled of First Refusal.”6 Don this, draft, refusal.5 The third draft was delivered the final on behalf Alaska Rubber to Michael Adams. Michael of himself and Alaska Rubber transmit- it, brought Higgins. Adams reviewed it to Alaska Rub- ted it to When the draft arrived at *4 office, office, acceptable that it was ber’s and stated the Alaska Michael Rubber Adams draft, signing to him. signed Without then Mi- came to the office and it without gave Higgins, reading chael Adams to who sent it it. No one advised Michael Adams Washington to for Don Adams’s review changed and the third draft had been and signature. that the final draft contained an uncondition- option buy. al to
Don Adams read the third draft and did
agree
right-of-first-refusal
years
with the
Almost
passed.
three
A month be-
parties
agreed
expire
clause.
his view the
fore the lease was to
it was extended.
right
subject
5.
property during
of first refusal in the third draft reads
the term of this lease.
Lessee,
as
discretion,
follows:
at his sole
shall have
Right
agrees
purchase
First
property
Lessor
to
to elect to
at
of
Refusal:
give
right
purchase
event,
Lessee
of first refusal to
any
during
time
the lease term.
In such
subject
during
the term of this
$300,000.00
agreed
price
it is
the sale
shall be
right
lease. This
of
refusal shall
first
not be
any
closing
net of
commissions and
costs.
enforceable unless Lessor
his sole discretion
sign
money agreement
Lessee shall
an earnest
property during
elects to sell the
days
exercising
within 30
of
his
to
price
term.
In such event it is
the sale
by providing
chase
written notice of Lessee's
$300,000.00
any
shall be
of
net
commissions
$300,000.00
purchase
desire to
for
as set forth
closing
agree
costs. If Lessee does not
to
herein.
In the event Lessee fails to exercise
sign
money agreement
an earnest
within 30
term,
purchase
to
within the Lease
days
receiving
of
written notice of Lessor's
money agree-
or fails to execute the earnest
$300,000.00
desire to sell for
as set forth here-
herein,
provided
ment as
Lessor should be
in,
Lessor
be
shall
allowed to sell the
anyone
allowed to sell the
to
at mar-
anyone
price.
at market
In the event Lessor
price.
ket
In the event Lessee fails to execute
party,
give
sells to a third
Lessor shall
Lessee
money agreement
days
the earnest
within 30
of
days prior
written notice of the date Lessor
providing
purchase,
written notice of intent to
complete
property.
intends to
the sale of sale,
may
party,
Lessor
Upon closing
completion
sell to third
in which
event
give
rights
days prior
lease and Lessee's
hereunder
Lessor shall
Lessee 30
shall be-
written
come null and void and this lease shall be
complete
notice of the date Lessor intends to
any
except
liability
terminated
for
Lessee
of
property. Upon closing
the sale of the
arising
any
any provi-
Lessor
from
breach of
sale,
completion of the
this lease and Lessee's
money agreement
sion herein. The earnest
rights hereunder shall become null and void
$30,000.00
require
shall
as non-refundable
except
and this lease shall be terminated
for
money
purchase price
earnest
and balance of
any liability
arising
of Lessee or Lessor
from
$270,000.00
paid
days
of
to be
within 90
after
any provision
breach of
herein. The ear-
money agree-
the date set forth in the earnest
money
agreement
require
nest
shall
phase
ment.
In the event an environmental
$30,000.00
money
as non-refundable earnest
sale,
required
two is
at the time of
the cost is to
$270,000.00
purchase price
and balance of
of
equally by
parties,
be shared
both
paid
days
to be
within 90
after the date set
being buyer
prop-
and seller. In the event the
money agreement.
forth in the earnest
In the
erty
purchased
is not
due to an unfavorable
phase
required
event an environmental
two is
report,
party
equally
each
shall also share
in
sale,
at the time of
the cost is to be shared
report.
the cost of the
equally by
parties,
parties being buyer
both
6. Clause 39
of
draft that became the lease
and seller.
In the event the
is not
reads as follows:
purchased
report,
due to an unfavorable
each
Right
equally
hereby
shall also
First
Lessor
share
in the cost of the
Refusal:
grants
report.
to Lessee an
court found that as of October
when
years. This
accom-
two
was
an additional
lease,
signed by
signed
Mi-
prepared and
Michael Adams
by a letter
plished
justified
believing
to Alaska
in
that he delivered
chael Adams was
30, 1999,
and that Don
August
was identical to the
Rubber on
September
1999.7
third draft that he reviewed and that Alaska
Adams assented
leading up to the lease
The circumstances
did not advise him that the
Rubber
dispute.
in
extension are
refusal in the third draft had
con-
been
But the
verted to an
prepared
testified that he
Michael Adams
that the failure of Alaska
court found
Rubber
extending the
because the
lease
the letter
change
Adams of the
to advise Michael
expire
and he wanted
was about
attempt to
Michael Adams in
not “an
deceive
in advance
Rubber’s intentions
know Alaska
any way.”
Higgins,
As to
the court found
Higgins
date. But
testified
expiration
negotiations
not involved in the
she “was
a conversa-
was renewed after
that the lease
intermediary
act as an
other than to
between
that she had with
tion
principals.” As to Don
the court
want-
him that Alaska Rubber
which she told
justified
believing
he “was
found that
According
purchase the
ed to
consistent with the
that he would
Higgins, Michael Adams said
prior negotiations
parties”
between
her,
did not hear
and when she
get back
part
August
reflected
the letter
him,
telephoned
again
him and
told
from
she
*5
1996,
Higgins
“were
and that both he
to exercise
him that Alaska Rubber wanted
justified
assuming
that Michael Adams
that
option
purchase. She- testified
the
to
would read the final version of the lease
told her that he did
Michael Adams
signing it.”
before
property, that
had to sell the
believe that he
disagreed, and that he told her that he
she
respect
original
With
lease the
get
it and
back to her.
would look into
material misunder-
found that
there was a
according Hig-
significance
next event of
standing
option agreement and that
as to the
receipt of the lease extension
gins was her
formed. The court wrote:
no contract was
above. The
from Michael Adams described
148,
Knagin,
Salmine
645 P.2d
description
accepted Higgins’s
of
trial court
150-151,
Supreme
recog-
the Alaska
Court
extension.
leading up to the lease
the events
misunderstanding
nized that
material
29, 1999, Alaska Rubber
On November
may prevent
forma-
among
parties
exer-
a certified letter to Michael Adams
sent
may occur if the
tion of
contract. This
purchase
cising its
materially
things
parties
different
meant
refused to sell. Alaska Rub-
Michael Adams
to know of
neither knew or had reason
present
seeking spe-
brought the
action
ber
meaning, of if each knew and
the other’s
damages for breach of
performance
cific
meaning.
know of the other’s
had reason to
agreement.
Adams filed a
the lease
Michael
(Second)
Id.;
See Restatement
of Con-
counterclaim, seeking
that the
a declaration
§
I
that this is what
tracts
conclude
null and void because of Alaska
lease is
agreement dated
occurred when
deceptive act
Rubber’s “fraudulent
At that
1996 was executed.
October
changing a material condition of the lease
reasonably
that
Don Adams
believed
time
or knowl-
consent
[Michael Adams’s]
without
pur-
an
agreement
contained
edge.”
reasonably be-
while Michael Adams
chase
trial,
the contract contained
lieved that
Following a bench
issued
party knew or
of first refusal. Neither
findings
fact and conclusions of law. The
original
provides
2001. All conditions
follows:
October
7. The lease extension
changes
apply
and shall
without
lease shall
to that certain
This letter is in reference
parties
force and effect.
dated 1
remain in full
with the above
lease
being
premises
parties
Lease
5773 Old
have
October
The concerned
Highway
respective signa-
and further described in the
Seward
and affixed their
extension
original
parties.
between the
lease
tures.
your lease has been
Please be advised that
years ending 1
extended for an additional two
meaning
meaning
to know the
attached
to know the
attached
had reason
originally
party.
[the lease]
the other. When
there was material misun-
was executed
Salmine,
Id.; see also
fact made interpre- port to the This a factual basis for its credit husband.16 “provide contract,”10 deferen- are reviewed been the settlement.17 The tation of a A clearly erroneous standard. tially under a draft order forwarded wife’s coun- clearly erroneous when the finding calling of fact is sel for review without attention to the left with a definite and reviewing court is new term.18 wife’s counsel reviewed and document, the trial court has made firm conviction that approved overlooking the new- ly a mistake.11 added term. The court the order prepared approved.19 Subsequently Changing Final B. Version the wife discovered the new term and moved Fraud. Lease Was Constructive for relief from the order.20 The trial court granted this motion and issued an amended argues that Alaska Michael deleting provision order husband’s specific performance cannot obtain Rubber appeal af- counsel had added.21 On we conduct, changing the terms of its because Although firmed.22 this was not the basis for notifying final lease without action, court’s we ruled that the change, was fraudulent as Adams of order should have been set aside under Civil Alaska Rubber counters matter of law. 60(b)(3) provides Rule which relief from findings that Alaska Rubber did the court’s “fraud, judgment misrepresentation, ... Adams effec attempt to deceive Michael party.”23 or other misconduct of an adverse tively argument that fraud was negate his held that the action of husband’s counsel We follow, reasons that we involved. For the notifying adding the term without conduct with conclude that Alaska Rubber’s opposing party was misconduct within the original lease was a construc respect to the 60(b)(3): meaning of Rule tive fraud. Pierce, informing of a new term without Pierce v. Insertion Michael Adams relies on attempt or the court amounts to an strongly disapproved [wife] case in which we unagreed-to provi- gain a concession that was not bar- adding an party’s act of ... was gained for. Insertion of the credit without notice to sion to document legitimate mistake nor a a divorce case in neither an honest party.12 other Pierce was negotiations, as the settlement participated in a settlement extension which the agree- already complete when add- during they [husband] reached conference which If custody, ed new term. wished [husband] of child child ment on all issues *7 agreement a new term that had add to the support, property division.13 sub- and negotiated, his counsel previously been ject party would receive a child of which bring requested obligation to the during had the support tax credit was not discussed attorney. change [wife’s] to the attention conference.14 After the set- the settlement conference, failed to do. Rule counsel [husband’s] the husband’s counsel This tlement 60(b)(3) authority to the custody gives the court a child and designated was to draft by party or an remedy misconduct a memorializing such support the settlement order fact, duty to the court has a attorney. in provision He inserted a agreement.15 Id.; 52(a). 17. Id. R. Civ. P. 10. Alaska (Alas- Dingeman, Dingeman 865 P.2d 96
11. 18. Id. 1993). ka 19. Id. (Alaska 1997).
12. 949 P.2d 20. Id. Id. at 499.
13. 21. Id. at 499-500. Id. at 500.
14. 22. Id. at 501.
15. Id. at 499. at 500. Id. Id. teaches, in- wrong protect integri changes, as Pierce rectify a announced such herently deceptive wrongful. ty judicial process.[24] and condemning expressed in Pierce policy may Fraud be actual or construc expression of new terms in surreptitious fraud in in tive. “Constructive exists cases negotiations applies here. process conduct, actually although not fraudu which is, anything, in this case more The conduct treated,' is, lent, ought to be so —that blameworthy than that Pierce because ... which such conduct is a constructive miscaptioned language new Pierce was fraud, having consequences all actual and in an it not contradict a clause earlier and did legal all the effects of actual fraud.”26 Stat Here, option was inserted in a draft. otherwise, constructive fraud is a breach ed addressed, according to its paragraph that duty, intentionally which while not de Further, right refusal. caption, a of first dishonest, ceptive actually “the law de option conflicted with earlier drafts tendency clares fraudulent because of its including exchanged, had the third others.”27 deceive prepared draft that was Alaska Rubber’s Alaska a con- Rubber’s conduct here was counsel. Higgins, structive neither nor fraud. While concluding The trial court’s reasons for Adams, Viergutz, may Don nor have intend- justified in not call- that Alaska Rubber was Adams, ed to deceive Michael the failure of change ing attention to the to Michael Adams notify Alaska Rubber to Michael Adams of As noted there are three insufficient. change an the same effect as inten- First, Higgins merely an reasons. was inter- deception. corporately, tional Viewed Alaska second, mediary; Don Adams believed that obligation bring “had the the ... Rubber consistent with the change to the attention of’ Michael Adams.28 parties; prior negotiations between the and duty Its breach of this awas constructive third, Higgins thought Don Adams and Mi- tendency powerful fraud because of the Adams would read the final version chael deceive such conduct carries with it. may Don signing before it.25 While thought that an have Right C. The To Avoid Contract prior negotiations consistent with between Is Voidable Because of Fraud Is parties, that does not account for the fact Only by Knowing Lost Affir- parties’ negotiations that the recent had fo- mance. containing cused on drafts of first refusal, option, including not an To use the most terms of the Restatement (Second) Contracts, prepared recent draft that was Alaska Alaska act of Rubber’s Further, possi- changing right-of-first-refusal Rubber’s counsel. while clause to changing caption Alaska ble each of the actors for Rub- without Adams, Higgins, Viergutz— notifying ber—Don without Michael Adams was mis might representation express implied call have believed that others would as —an change right-of-first-refusal attention to the to Michael that the sertion clause *8 unchanged.29 the fact remains that no one did so. More- the third draft was The mis over, representation it not is a sufficient excuse for one was material30 and for the party say that it preceding believed the other reasons discussed the section of opinion, would review a final document and it all we consider to have the change. Making an notice unannounced un- effects of actual fraud. But since Michael Pierce, 24. Id. 28. at 949 P.2d 500. Supra page 25. 747. § 29. Restatement Contracts 159 (Second) Estate, 562, (1981). Cal.App.2d
26. In re Arbuckle's 98 950, (1950). 220 P.2d 954-55 § 30. Id. at 162. 402, 300, Knight Day, 27. 343 Ark. 36 S.W.3d Ctr., Inc., (2001); 303 see also Patel v. OMH Med. (Okla.1999). 987 P.2d present tion in the case. The lease was opportunity to read a reasonable Adams had it, by Michael but not void. voidable signed apparent he the lease before effective, to the lease assent question in this The main case is whether void.31 rather than was voidable power Michael Adams lost his of avoidance by extending the lease. The exercise of the 163 of the Re- to section Two illustrations subject power of avoidance is to the limita- the facts of this ease. come close to statement chapter 16 of expressed tions the Restate- 2 states: Illustration 380(2) deals with the loss of ment.32 Section understanding that an A and B reach It power of avoidance affirmance. a contract con- they will execute written provides party’s power that a of avoidance they agreed. have taining terms on which not “until he misrepresentation for is lost B, properly prepared and is read It is misrepresentation if it is fraud- knows writing containing es- A a but substitutes ulent, ought to of a non- or knows or know from those that are different sential terms misrepresentation....”33 fraudulent sign thereby induces B to agreed upon and Adams’s extension of the lease it the one he has in the is it belief willingness go “a was a manifestation of of assent apparent B’s manifestation read. contract” and was thus an “affir- with the is not effective. But the court did mance.”34 Illustration 3 states: actually knew that find that Michael Adams understanding that an A and B reach an rather lease contained contract con- they refusal, execute a written will right of that he “had than a they agreed. have taining terms on which Rubber] reason to know that be- [Alaska writing containing essential prepares A they lieved that agreed from those that are different terms A review of the by telling sign B to upon signed and induces in 1996 would have con- that he had agreed upon the terms him that it contains firmed this.” necessary him to read and that it is power of For Michael Adams to lose his is apparent manifestation assent it. B’s avoidance, knowledge of finding of actual opportunity B effective if had reasonable misrepresentation, rather than reason However, writing. the con- to read it, Thus, necessary. remand is know of by B under the rule stated tract is voidable remand, court should make required. On alternative, at §in 164.... In the Adams had findings as to whether Michael B, decree that the request of the court will knowledge that the lease contained actual conform to their writing reformed to be it. he to extend when understanding under the rule stated Description § Changing Property 166. D. Requires Reformation. the two illustra- The main difference between recipient misrepresen- description in the lease only property is that the tions straddling parcel opportunity excepted to read from the lease is tation had a reasonable Adams lives As Michael four lots. Michael writing in Illustration 3. two of the parcel. personal property on this opportunity to read and stores had a reasonable it, initially concluded that Although the the lease in the final form before included excepted property was not analogous to the situa- Illustration 3 is more of the mistake or or has reason to know at§§ knows 164. Id. misrepresentation if it is non-fraudulent § if the contract is Id. at cmt. a: "Even misrepresentation if it is or knows of the voidable, power of avoidance exercise of fraudulent, party his *9 to the other he manifests Chapter subject 16 on to the limitations stated respect to or acts with to affirm it intention remedies.” anything in a manner in- that he has received with disaffirmance. consistent § b. The black letter statement 33. Id. at cmt. 380(2) § as follows: of at§ cmt. a. 34.Id. power party a contract for to avoid misrepresentation is lost if after he mistake or (1) option, the on reconsideration the court con- mutual mistake of fact in which the portion property cluded “that the of the deed, written, does conform to the was excluded from the lease was not intend- gave a number of reasons for this conclusion: eventual sale of the ed from the lease was to allow Michael Adams pose finally parties tended to move off the temporarily First, by opportunity the of the evidence indicates that the establishes occurred. The excluding portion parties until a to remain on the to be excluded from property.” sale property testimony of of the The court when the property property property of the any in- inequitable the other’s mistake and mistake especially (5)mistake of law.... party to be under a mistaken belief as to the by prior agreement any contents of the one true freedom of which party by where the latter conduct one which causes the other deprives deed; party of the by choice; [38] the other (3) and fraudulent or parties; the other kept duress (4) silent; unilateral (2) party knew of by party, party fraud one of property was sold and that Michael Adams party seeking A required reformation is seeking dispose prop-
was of the entire prove of elements reformation clear erty. leasing property of the convincing evidence.39 temporary intended to abe measure until present only In the case the circumstance property the sale of the occurred. The appraisals parties might justify that were done reformation in favor of trial all parcel valued the entire without Alaska Rubber would be a mutual mistake of portion. reference to excluded Fur- property description fact set out in the ther, theory even under defendant’s of the parties’ agree- lease does not conform to the agreement only case that gave Don ment as to what was to be sold. The court’s refusal, right Adams a of right of findings on quoted reconsideration as above first refusal would have to be exercised suggest a mutual mistake rationale. But piece Otherwise, property. entire they are not based on a convincing clear and theory problem even under defendant’s proof. remand, standard On if the court illegality Municipali- and violation of the decides that Michael Adams has lost his ty’s zoning ordinances would arise. thus to avoid the specific perform- lease and that conclude that while the intended to appropriate, ance is explicit- court should portion exclude a of the from the ly grounds address whether for reformation lease, this oper- exclusion was intended to description as to the only ate while the was leased and present, so, and if whether the clear and was not intended to affect the sale of the convincing evidence standard has been satis- The sale of the fied. intended to be for parcel the entire property without exclusion.
By including
excepted proper
III. CONCLUSION
ty
option,
in the
the court reformed the
A
necessary
remand is
for additional find-
property description in the overall docum
ings as described above. The court should
ent.35 Reformation of a contract
avail
supplemental
hold a
evidentiary proceeding if
able when “the
writing
words of the
do not
it believes that such a proceeding would be
correctly express
meaning
par
that the
necessary
useful or
to its decision. For the
agreed upon.”36
ties
In Voss v. Brooks37we
judgment
listed the
reasons stated the
circumstances under which refor
may
mation
appropriate:
be
is VACATED and the
is RE-
case
(Alaska
explicitly
1995).
35. judg-
court did so
in the final
37.
36. Arthur L. 7 Corbin on Contracts Id. 28.45, (2002). § at 281 *10 you purchasing in accor- would be interested proceedings for further MANDED July building I would like to have until or opinion.40 this with dance property.” to move off the He re- sooner CARPENETI, Justice, whom with to an earlier conversation between the ferred Justice, EASTAUGH, joins, dissenting. two, that Don Adams had offered mentioned $300,000 property but that his for the stated CARPENETI, Justice, with whom $320,000, and with these price was closed EASTAUGH, Justice, dissenting. joins, offering admonitions as to his seriousness Introduction ready dispose “I am to for sale: his offered to sell Michael Adams property is for property.... The sale directly through or either to Don Adams seriously an and I will consider offer.” par- purchase. The option an to lease with parties By August 1996 the unrelated, ties, subsequently who agreement. That month Michael reached an although option purchase, to an a lease with letter to Don Adams. Adams sent another Adams, read the final who did not Michael trade, Noting sought that he a tax free Mi- document, right it contained believed wrote, appears a Adams short “[i]t chael end of the lease Near the first refusal. you purchase option lease with with a term gave notice of his intent Adams period, Don way me. Per- would be the that will benefit purchase. option to the lease’s to exercise year option an would haps a two lease with that the lease con- Adams insisted Michael In the same letter Michael be suitable.” refusal, to not an right of first tained a stated, try year Adams “Let’s for a three it to purchase. Told that contained $3,000 opportunity per month and an would read the he said that he purchase, purchase property during subsequently extended the He document. Adams then sent a lease period.” Michael purchase by drafting lease with Adams, it did not contain an form to Don but sending it to signing an extension and Instead, purchase. it contained a option to Don Adams. provi- right the latter refusal. Under Michael Adams Adams later notified Don sion, would be Don Adams able his again he intended to exercise only if Michael decided Adams again When to sell. sell, con- insisting that the lease refused to proposed Don Adams sent refusal, Don right of first tained attorney, changed only one section who to his per- complaint specific brought a Adams by adding provision apportioning the costs granted spe- superior formance. (which investigation of an environmental performance. cific only in necessary the event would be correctly decided the Adams, sale). The draft was sent Michael findings. court’s factual case based on the Don returned it approved who clearly findings are not erro- Because those point, Don signature. At this Adams for his neous, respectfully I dissent. contain that the draft did not Adams noticed he believed —which Facts agreed upon had earlier —and Adams, attorney his to delete who instructed 1995 Michael October and to insert a lot owned first refusal next to owned but, Adams, attorney supe- as the Rubber, did so Don chase. wrote to Aaska found, were not Rubber, “for reasons that proper- rior court to offer owner of Aaska wrote, attorney] failed to at trial [the established ty for lease or sale. Michael heading.” Neither Don Adams change the you you are interested writing “I am to ask brought anyone his behalf nor else on leasing premises purchasing it. stated, change “If to the attention of way.” He ready go either am We have re- a number of other option. 40. Michael Adams has made excepted property to be and find them these contentions with the viewed contentions in connection remedy merit. without and the inclusion specific performance *11 it, agreement reading gins “fully addition, who without to be In credible.” believing superior testimony to be the same as the document court found the of Mi- credible, previously he had sent to Don chael pointing Adams. The to be to a court, factors, superior hearing including after all of number of the evi- that Michael dence, Adams’s uniformly that was not a letters to a concluded “this deliber- referred sale negotiation and that attempt purchase price ate mislead Michael Adams.-’ the letters is The court consistent with an based this conclusion on the testi- and mony inconsistent with a specifi- of Don who the court first refusal. strong contrast cally these found be credible. findings, Opinion merely *12 (which misrepresentation Mi- option to ... knows of the if it is contained an denied)1 (2) fraudulent, respect any- that Michael chael he ... acts with Adams testimony he did thing that not read in manner Adams’s he has received a inconsis- signing the lease lease extension Accordingly, before tent with disaffirmance.”2 not knowing credible. extended the lease purchase, that it he contained upheld only if Mi- Today’s can be result power lost the avoid the lease. obligation no to read the chael Adams had signing,1 before first lease on two occasions Generally party “knowingly” a acts not under the signed when lease he possessed when or she actual knowl- he it contained of mistaken that a belief fact, any edge of a also when but failure refusal, when and second possess knowledge was due actual being told lease twice that it extension after party’s ignorance or deliberate blind- willful Because contained presented ness in the face of information supe- conclude there is no reason to that the to him or her.3 In Louis Vuitton v. S.A. clearly erroneous in of its rior court was Lee,4, requiring a trademark case that go findings indeed, I would so far as to — violation be defendant’s trademark “know- correct, they clearly al- suggest that ing,” the held that “willful Seventh Circuit though standard that is not the of review enough.”5 knowledge blindness is uphold findings I can- factual because —and found that defendant did not that know may agree indefinitely re- party that a designer selling goods he was counterfeit and be from fuse to a document saved read inquire because “failed to fur- the defendant today’s folly, Opinion. I dissent from inqui- ther was afraid of what because he Thus, yield.”6 ry would the court found Law proved Louis that the Vuitton defendant quarrel proposition with the have no knowingly.7 had acted may constructive fraud to constitute equation of willful blindness with actu- change final version of lease without frequently found most knowledge al has been change of informing the other criminal an area prosecutions, where misleading place. leaving heading while historically extremely law has been solicitous accept propositions But it impossible rights Interpreting the defendant. “knowing affirmance” of that there was not a statutory “knowingly,” Alas- definition Michael Adams or who ka courts held that “one remains have court did find a know- illegal activity” deliberately ignorant of an legal ing A careful review of the affirmance. probabili- necessarily of a substantial “aware by the court the find- adopted standard so, existence,” ty “knowing- acts of its ings Judge there Rindner show that made ly.”8 Judge knowing was a affirmance and that found. Rindner so Federal to the same effect. In U.S. law is jury that a the court held today adopts the Restatement Picciandra9 provides: properly to consider the willful The Restatement “The instructed standard. 5. Id. at 1. See n. 590. 16. infra 380(2). § Contracts 2. (Second) Restatement 6. Id. al., Proving et See Tal S. Benschar
3.
Willfulness
Cases,
Counterfeiting
27
Id.
Colum.-VLA
in Trademark
(2003);
Robbins,
J.L. &
123-25
Ira P.
Arts
Ignorance
Deliberate
as
The Ostrich instruction:
State,
(Alaska
894 P.2d
678
8. Dawson v.
Rea,
Criminology
Mens
81
J.Crim.
&L.
Criminal
App.1995).
(1990).
Cir.1986).
(1st
rior court found Aaron point. this (cid:127) Higgins that she called testified Janeece COUNCIL, Appellee. TANANA VILLAGE the lease contained reiterated that superior No. S-10881. testimony to be credible. found this Supreme Court of Alaska. (cid:127) Adams did testified telephone call. recall the April testimony not found to be credible.
(cid:127) signed, and prepared, to Don an extension
sent provided “[a]ll conditions apply -without lease shall
changes.” facts, by the found
These Opinion rejected today’s as clear- they firmly es-
ly could erroneous —nor be— kept at the that Michael Adams least tablish deliberately ignorant contents
himself willfully to the fact lease and was blind it contained
Conclusion prop- to sell proposed
erty under a with to that He twice documents
chase. today for a Yet the court remands
effect. effect,
determination, in of whether he ever signed, he even after
read the documents dispute
promised to check the lease when (Indeed, this as to what it contained.
arose Michael Adams has not the first time that arguing that he was
been before previously required to do what he had sell that he had
agreed to do: Judge purchase.17) with an
leased properly that Michael Adams
Rindner found Judge contract.
knowingly affirmed the correct, and I would affirm his
Rindner was escape Michael Adams should not
decision. originally suggest- obligation that he had reasons, I twice to. For these
ed and
respectfully dissent. 1975). Waddell, (Alaska Adams v. P.2d 215 notes later, years Almost three as the lease was superior court found that Don Adams “was expire, manager about to the office for Alas- justified in believing that an pur- Rubber, ka Higgins, spoke Janeece with Mi- chase was prior negotia- consistent with the company picnic. chael Adams at the She parties,” tions between the the trial notified him that Don Adams was interested “accepted court Higgins’s description of the exercising and leading up extension,” events to the lease and therefore needed to initiate the environmen- that both Don Adams and Higgins Janeece investigation tal before winter set in. Mi- “justified were in assuming that Michael chael Adams indicated get that he would Adams would read the final version of the so, back to her. When he did not do she lease signing before it.” again called him and stated that Don Adams Next, superior unambiguously had decided to exercise the longer found that “there was no point, superior chase. At this misunder- as the standing between the found: when the lease extension was today’s executed.” While Michael Adams indicated to her that he did Opinion finding mentions this long quo- not think he had to sell the and decision, tation superior of the court’s Higgins disagreed. Mrs. told him she She Opinion ignores finding in its discussion told Michael Adams that while she did not of whether Michael Adams affirmed the lease have the front of her she was when he sent the lease extension to Don pretty wording sure there was in the lease Adams. gave Alaska Supply Rubber & purchase. According to Mrs. But the findings most critical superi- Higgins, Michael Adams indicated that he court, effectively ignored by today’s Opin- would look into it get and would back to ion in reaching remand, its conclusion to her. following: Thereafter, [Alaska Rubber] received a Michael Adams does not recall [the fol- faxed lease extension from Michael Adams. low-up telephone conversation in which he agreement lease extension was draft- Higgins and differing “discussed their signed by ed and Michael Adams and sub- concerning views whether or not the con- sequently executed Don Adams.... tract purchase”] contained lease extension further in- indicates that he sent the lease extension dicated that “all conditions to Alaska Supply merely Rubber & be- apply lease shall changes without and shall cause the contract expire was to in another remain in full force and effect.” month. He reading denies agree- sending ment the lease extension to court made findings several before Higgins. Mrs. Higgins[’s] Mrs. today’s Opinion effectively ignores. The find testimony leading on the events court found that Don testimony Adams’s execution fully the lease extension to be “entirely credible.”' The court found that Conversely, credible. I do not Mi- testimony Don Adams’s was consistent with find testimony chael Adams[’s] on this issue to correspondence the initial par- between the be credible. regarding ties property, sale of the added.) that it was testimony consistent with (Emphasis words, In other the su- Higgins. (1) Janeece The court Hig- perior also found court found that two conversations power of a a contract ... Higgins to avoid place between took misrepresentation if after Higgins party] [the stated that the lease is lost Adams in which