Dalton v. Robert Jahn Corp.Dalton v. Robert Jahn Corp.
Lead Opinion
pro tempore
This case arises from a dispute between members of the Jahn family, primarily over control of the Robert Jahn Corporation. Defendant Opal Jahn appeals a decree of specific performance granted by the circuit court, arguing that a settlement agreement signed by the parties is too indefinite to be enforced by that decree. Opal Jahn’s daughter, Pamela Dalton, a plaintiff in this case, disagrees, claiming that the settlement agreement is sufficiently definite. We affirm.
Because this is an action in equity, our review is de novo, ORS 19.415(3); Hughes v. Misar,
Subsequently, a dispute began over the future of RJC’s assets and business. Particularly contentious was a proposed business deal known as the “Ten Mile” transaction, in
The trial court suggested that the parties attempt to reach a settlement and, when they agreed to do so, appointed William Richardson, a former Chief Judge and current Senior Judge of this court, to preside over the parties’ settlement negotiations.
All of the Jahn family members were present at that conference with their attorneys except Linda, who had no attorney, and Teresa, who participated via telephone but whose attorney was present. Richardson made it clear that anyone could enter a side room for private discussions at any time, that anyone could ask any question at any time, and that anyone could propose any settlement terms at any time. All of those options were utilized by the Jahns and their attorneys during the conference.
Jennings gave a detailed presentation of a plan to use a device known as a divisive reorganization to effectively split RJC into four separate corporations: RJC and three newly formed corporations. Each corporation would be headed by one of the Jahn children and each child would control a bare majority of the stock in his or her corporation. The remainder of the stock of each of the four corporations would be in Opal’s control through the two trusts, each of which would own nearly equal shares in each child’s corporation. The property owned by RJC would effectively be split among the four corporations in roughly equal parts. To the degree that those parts were not equal, the four corporations would grant each other timber deeds, lot line adjustments, or cash payments to equalize the value of each corporation. Moreover, each corporation would pay Opal an equal lifetime consulting fee to cover her living expenses consistent with her then-current standard of living. Each corporation would also share equally the costs of Opal’s health and long-term care needs. At Opal’s death, the shares in each corporation held by the Jahn Family Credit Shelter Trust would go to the child who controlled that corporation.
The goal of Jennings’s proposal was to divide RJC’s assets equally among the four corporations controlled by the Jahn children while minimizing adverse tax consequences and to ensure that Opal would be secure in her remaining years and have sole control over the disposition of some assets (sale proceeds from the redemption of shares held by the marital trust). Except for Chester, who had indicated an unwillingness to agree to any of the plans discussed by the other parties, the Jahns shared those goals. Each of the Jahns, except Chester, reacted positively to Jennings’s proposal. The plan did not require Chester’s agreement because the other family members constituted a majority of RJC’s shareholders, Opal controlled a majority of its shares, and Chester would control RJC after the transfer of assets to the three newly formed corporations.
Following Jennings’s presentation, the parties began to discuss other terms that were important to them. Despite Chester’s reservations, he and his sisters proceeded to divide RJC’s properties among the four corporations, with Pamela’s corporation taking “the Orchard” and “the Flats,” Teresa’s corporation taking “Grandma’s Place,” Linda’s corporation taking the “Boys’ Place,” and RJC (Chester’s corporation) retaining “the Home Place.”
After those details of the settlement proposal had been discussed, Richardson met privately with Opal and her attorney, Brink, to ensure that Opal understood the proposal and to gauge her interest in signing an agreement. Richardson and Brink thoroughly explained the terms of the proposal to Opal. Although Opal was not entirely happy with the proposal, she appeared inclined to agree to it. Richardson then asked the entire group whether they were willing to settle the lawsuits on the terms they had discussed. Although the Jahn daughters were ready to do so, Chester was not, and Opal was reticent to make a final decision. Richardson told Opal that this was the time for her to make a decision, and asked her if she would settle even if Chester would not agree to the proposal. Opal said that she would and that Chester would “just have to live with it.”
To memorialize that oral agreement, Richardson went to the side room and drafted a document for the parties to sign. That document stated:
“Jahns Family
“It is agreed between the undersigned Jahns family members that the division of property rights, corporate shareholder rights and asset distribution shall be in principle as described in the diagram attached as Exhibit A which shall be part of this agreement. A majority of the family members shall be sufficient to authorize finalization of the proposed distribution, as long as the majority includes Opal Jahn.
“The agreement in principle shall be finalized in writing and shall include dismissal of pending law suits [sic] and mutual releases of liability for all claims.”
Exhibit A consisted of a drawing and text that Feibleman had copied by hand onto paper from what Jennings had written on a whiteboard during his presentation, as well as additional notes taken by Feibleman. In sum, Exhibit A included most of the terms on which the settling parties had agreed and it looks substantially like the Appendix to this opinion.
Everyone had an opportunity to review the agreement drafted by Richardson and to propose any changes they wished or add any additional terms they felt were important, but no one did. In the end, Chester did not sign the agreement, although Opal, Linda, Pamela, and Teresa, through her attorney, Lodine, did.
When everyone returned from lunch, Jennings played the tape, and the settling parties agreed that it accurately represented the terms by which they had bound themselves. Jennings, Brink, and Feibleman reassured everyone that the agreement could be effectuated even without Chester’s approval. The settling parties agreed that Jennings and Brink would hire the appraisers and draft the necessary documents and that they would be paid for those services by RJC, and not by the parties individually. That term was agreed upon because the settling parties felt that Jennings and Brink would be working for the “common good” and not for any one party in particular. In addition, it was agreed that Brink and Lodine would work together to determine the terms of Teresa’s buy-back of her shares. Finally, with regard to the redemption of the shares of the four corporations held by the Opal Jahn Marital Trust, the settling parties agreed that the purchase price of the stock would have to be paid within 15 years of Opal’s death.
The settling parties also discussed, but did not agree on, a total amount for Opal’s consulting fee, mentioning both $3,500 per month (an amount Opal had stipulated to earlier in the litigation as her living expenses) and $4,000 per month, which they felt was fair and easily divisible by four. Although the settling parties discussed how to pay for each party’s attorney fees up to that day, they did not reach an agreement on that subject. Richardson scheduled another meeting for October 3, 2000, so that the Jahns could review drafts of the documents that would effectuate the agreement and so that everyone could be updated on the progress of matters. Afterwards, the conference ended.
The next day, Feibleman e-mailed a number of attorneys, stating that “[w]e have just settled a very difficult and complex [case,] and to complete the settlement” the parties would need to hire “experts” to appraise timber and property, a task as to which he solicited suggestions for appraisers. Later that day, Feibleman and Brink met to congratulate each other on reaching a settlement. In the days that followed, Feibleman forwarded to Brink the names of several appraisers, which Brink forwarded to Jennings. As Brink wrote to Jennings on September 18, “We have quite a list now, and you and I were delegated to put our heads together on the actual selection. I am happy
Despite that progress, potential obstacles to effectu-ation of the agreement remained. As early as September 13, Feibleman had expressed to Brink a concern that “Chester would try to get everything undone.” According to Feibleman, Chester had great influence over Opal and was pressuring her to frustrate the agreement. As Feibleman testified, Brink’s response was, “Don’t worry, it’s a done deal,” and that if Opal “tried to reverse herself [Brink] might not continue as her lawyer.” Similarly, in a September 14 e-mail to Brink, Feibleman again expressed his fear that “Chester is putting a full court press on Opal.” Feibleman concluded, “As far as I am concerned, this case is settled and witnessed by a Senior Judge and we are just drafting the documents. That is the legal part. We owe it to our clients to keep up the efforts to support the emotional reconciliation as well.” Along those lines, William Mehlhaf, who represented Pamela along with Feibleman, wrote Brink that he was “being kept apprised of the progress of settlement discussion[s]” and that Pamela was “hopeful that a resolution consistent with last week’s agreement can be obtained in the near future.”
As things turned out, Feibleman’s fears were well-founded. On September 16, Opal called Brink to express concern about the agreement reached just days before. Brink met Opal and attempted to explain the settlement but could not do so to her satisfaction. Although Brink knew Opal was not happy, he left the meeting feeling that the settlement could still go through and proceeded with the work he had previously begun. On September 20, Brink wrote Jennings requesting a status update and asking Jennings to remind him “how some of this fits together.” Brink also responded to Mehlhaf, emphasizing his understanding that “it is a process and, while concerns remain, no doubt on both sides, we are hopeful.” (Emphasis in original.)
On September 21, Brink wrote Opal a letter explaining that, despite the work being done on the settlement, “[t]here are a number of ways this might not come together yet.” Brink mentioned the ongoing discussions regarding Teresa’s buy-back, noting that he had given Teresa’s attorney, Lodine, “several of the components of the price, but he has not responded to me yet with a figure and the rest of the pieces of the outline will need to actually fit, which we will only learn after reading drafts of the documents. But we ought to see how far apart my documents are from the one you signed.”
On October 2, Jennings finally e-mailed his draft documents to the other attorneys working on the case. Jennings wrote that he had drafted the documents “with the assumption that Chester Jahn will sign them,” which was consistent with the other parties’ intentions and hopes that Chester would eventually sign on to the agreement. Jennings’s e-mail continued that, if Chester “refuses to sign them, we will have to make some changes, including which he will not be included in the release agreement.” The draft documents that Jennings attached to his e-mail were a Settlement Agreement and Mutual Release, an Agreement for Corporate Separation, a Buy-Sell Agreement, a Consulting/ Long Term Care Agreement, and a Memorandum proposing to have RJC pay the costs of each party’s attorney fees through the September 12 settlement conference (a point on which the parties still had not agreed). The terms of the September 12 settlement agreement were reflected in the documents drafted by Jennings, as were additional terms designed to effectuate the agreement. The draft Settlement Agreement and Mutual Release also contained a clause stating that it and the other agreements “set forth the entire agreement among the parties and are intended to be final and binding upon them.”
Pamela and Teresa then brought an action for specific performance of the settlement agreement. The trial court found that the agreement was enforceable and entered a decree of specific performance, charging Senior Judge Richardson with the task of ensuring that the settlement was fully effectuated. Opal now appeals that judgment and decree.
Opal makes several arguments as to why the September 12 settlement agreement is not enforceable. Opal’s first argument entails several factors, each of which can be subsumed under the contention that no contract was formed because there was no meeting of the minds on September 12. Opal contends that she did not understand what she was signing when she signed the agreement and, more specifically, that she did not understand that the agreement would leave her without control over the RJC properties. Opal also argues that the agreement was incomprehensible to the average person, full of “laconic symbols and abbreviations.”
“Whether a contract existed is a question of law.” Ken Hood Construction v. Pacific Coast Construction,
The trial court made extensive findings regarding the process by which the September 12 agreement was reached and subsequent negotiations were handled. We find the trial court’s findings well supported by the evidence in the record and adopt them as fact on de novo review. Opal’s argument that she did not understand what she was signing is -undermined by Richardson’s and Brink’s testimony that they carefully described to her the terms of Jennings’s proposal, as well as her own statement that Chester would have to live with the consequences of the agreement. Like the plaintiff in Newton/Boldt, Opal cannot argue that her statements and actions at the September 12 settlement conference, “viewed objectively, could be anything other than clear and unequivocal assent to the terms” agreed on by the rest of the settling parties.
In particular, we reject Opal’s argument that the settling parties never intended to be bound by the terms of the September 12 agreement. Opal bases that argument on words in the settlement agreement describing it as a mere “agreement in principle” that must be “finalized in writing.” See Engineered Data Prods., Inc. v. Art Style Printing, Inc.,
“a framework to prepare final written documents similar to a letter of intent. It left a number of issues open which needed to be resolved through future negotiations * * *.
Some of these issues would be susceptible to easy resolution once the appraisals and other calculations were completed.
% * * *
“[Other issues, however,] required decisions to be made on the terms and conditions that would apply.”
Opal’s view, however, is contradicted by significant other evidence. For instance, in addition to those statements cited by Opal, Jennings acknowledged that the parties had anticipated “negotiat[ing] in good faith to implement the terms of [the September 12 agreement]” and that “if the parties [had] proceeded in good faith, the terms of the settlement agreement were capable of implementation.” In this regard it is important to note that the writing says “it is agreed” that a division shall be “in principle” as described in the diagram and that the “agreement in principle” shall be finalized. That language reflects a binding agreement to be effectuated according to agreed principles. Indeed, Richardson, who wrote the agreement and whose credibility the trial judge particularly commented upon, explained that it was his impression that everyone understood that, in signing the September 12 settlement agreement, the settling parties agreed to be bound by its terms. Feibleman and Lodine testified that the term “agreement in principle” was meant to indicate a hard deal, and not a mere proposal, tentative agreement, or letter of intent. As Feibleman explained, the term was meant to convey that, upon the parties’ agreement, the details would be left to the experts (i.e., Jennings, Brink, the other attorneys, and the required appraisers, surveyors, etc.). See Miller v. C. C. Meisel Co., Inc.,
Similarly, Richardson, Feibleman, and Lodine all explained that the phrase “shall be finalized in writing” was not meant to signify that the signed agreement was not binding; it was meant to signify that, by itself, the agreement was not sufficient to effectuate its terms: additional documents would need to be drafted and signed. That those additional documents needed to be finalized was not a bar to the existence of a binding contract but, rather, a term of the contract in the sense that the parties had agreed to create the documents. See Kaiser Foundation Health Plan v. Doe,
In interpreting contract provisions, we attempt to discern the intent of the parties in light of the circumstances that existed when the agreement was reached. Yogman v. Parrott,
Here it is obvious, given the competing yet reasonable meanings that the parties attach to the phrases “agreement in principle” and “finalized in writing,” that neither text nor context leads to a single unambiguous meaning for those phrases. Yet the extrinsic evidence reveals that the phrases had one unambiguous meaning to the settling parties. Nixon v. Cascade Health Services, Inc.,
Even if we were to conclude that the phrases “agreement in principle” and “finalized
No one said or did anything at the September 12 conference to indicate an intention not to be bound to the agreement then; no one indicated on September 12 that the terms “agreement in principle” and “finalized in writing” were added to stall formation of a binding contract — indeed Richardson, who drafted the agreement, testified to the contrary. See Hughes,
We next turn to Opal’s final argument as to why we should not require specific performance of the settlement agreement. Opal contends that the agreement is too indefinite for specific performance. In determining whether to require specific performance of a contract when its definiteness is disputed, we follow the rule of Booras v. Uyeda,
There are two crucial distinctions to bear in mind. The first is that between material terms and subordinate details of performance. “A term is ‘material’ to an enforceable agreement when it goes to the substance of the contract and, if breached, defeats the object of the parties in entering into the agreement.” Johnstone v. Zimmer,
The second crucial distinction is that between definite terms and indefinite terms.
1176, rev withdrawn,
Here, Opal argues that several terms were indefinite. We take each term in turn. First, Opal claims that the September 12 agreement was too indefinite for specific performance because it was unclear whether the agreement was binding and whether Chester was a necessary party to it. Although the binding nature of a contract is clearly material, we have already held that the parties did, indeed, agree to bind themselves to the terms of the settlement agreement. As we stated in Hughes,
Opal also argues that the agreement is not enforceable through specific performance because the parties failed to agree on terms material to the use of timber deeds to equalize the value of each Jahn child’s corporation. Specifically, Brink testified that the parties had not decided the amount of timber that would be cut, which specific tracts would be cut, whether they would be clear-cut, or what specific lot line adjustments or cash payments, if any, would be made instead of or in addition to timber deeds. The dissent finds that argument persuasive, noting that agreement on the identification of property is necessary in the context of a land sale contract.
The mistake in that argument is fundamental. Terms that are material to one kind of contract are not necessarily material to another kind of contract. Lang,
Additionally, the terms of the equalization mentioned by Opal were sufficiently definite for specific performance. Here, the parties agreed to work together to “finalize” the settlement agreement by equalizing the values of the four new corporations through the use of appraisers, timber deeds, and other commonly used devices such as lot line adjustments and cash payments. See Yeon Street Partners,
Opal also argues that certain details of the redemption agreement, by which the four corporations would purchase the shares held in them by the Opal Jahn Marital Trust on Opal’s death, were material or indefinite. Although the parties had agreed that the redemption price for those shares was to be their “fair market value discounted for applicable discounts for minority interests, lack of marketability, and any other discount available,” no specific price or discount value had been set. Neither had the parties established an interest rate or payment schedule, although they had agreed on a maximum 15-year payment period. Further, Jennings’s draft Buy-Sell Agreement included a term the parties had not discussed: mandatory mediation and binding arbitration should the parties fail to agree on a price. Lastly, there were no protections for Opal’s position as a minority shareholder, such as rules regarding the preservation of assets or limits on corporate debt and officer compensation.
As with the details of the timber deeds, we consider the terms identified by Opal to be either immaterial or sufficiently definite to allow specific performance. Regarding the redemption price, we note that “where a contract specifies that the price is to be measured by the ‘fair market value’ or ‘reasonable value’ of the services or property involved, courts have generally held that the price is sufficiently certain in order to have an enforceable obligation.” Portnoy v. Brown, 430 Pa 401,
Opal next contends, and the dissent agrees, that the details of Teresa’s buy-back of her shares were material and indefinite. To understand the nature of the buy-back in full, it is important to state a few facts not mentioned earlier. When Teresa sold her stock back to RJC in 1995, RJC paid her $91,000, of which it paid $20,000 down and the balance of which it was to pay over the next seven years. Subsequently, additional shares were received by Pamela, Linda, and Chester, apparently from their parents. RJC also apparently made loans to Teresa, some of which it later forgave. At the September 12 settlement conference, the parties agreed that Teresa would buy back from RJC the shares she had sold it in 1995 at a price of $91,000, adjusted for any payments RJC had already made and for any of her debts to RJC that it had forgiven; the parties did not agree, however, on an ultimate purchase price, interest rate, or payment period. Teresa was not to be given additional RJC stock to make up for the additional shares her siblings had received, but the discrepancy that that would create between the value of her corporation and the value of the other three corporations was to be eliminated through the general process of equalization to which the settling parties had committed themselves.
As to the materiality of the price terms of Teresa’s buy-back, Opal points to an e-mail that Brink wrote to the other attorneys involved in the case, stating that Teresa’s attorney, Lodine, was “still working on his proposal about Teresa’s buy-in, a major pre-condition here.” That statement, however, is contradicted by Lodine’s response that he “never thought of this part as a ‘major precondition’ to an overall settlement * * * [but had] always viewed it as more of a fine-tuning of something that was agreed to by all parties.” According to Lodine, once Teresa obtained “documentation regarding the loans and advances made to her over the years,” she could “more accurately assess what a reasonable purchase price should be,” thus expediting “a resolution of this piece of the puzzle.” Moreover, none of the other settling parties considered the exact amount or the payment terms of Teresa’s buy-back material;
As to the definiteness of the terms of Teresa’s buyback, we find that, although the exact amount of forgiven debt might have been subject to some dispute, a reasonable figure could be reached through objective calculations based on accurate information. Cf. Adair Homes, Inc. v. Jarrell,
Opal next turns to the details regarding her lifetime consulting fee. She argues that the amount was unsettled and that there was no guarantee that it would actually be paid in a timely manner. That argument fails for the same reasons that the above arguments do. The amount of the monthly consulting fee was not settled, but the parties had discussed and agreed upon the standard that payments were to be sufficient to maintain her lifestyle and cover her healthcare costs. In addition, the parties had discussed an initial level of payment at one of two amounts. The first amount, $3,500, was an amount Opal had earlier stipulated to as sufficient to support her standard of living, which was the settling parties’ stated goal in providing for a consulting fee. As Feibleman testified, that amount was based on Opal’s “normal monthly income from the corporation” and “a historical record of what she had been spending and what her expenses had been” — indeed, it was “more than actually what she even spends.” The second amount discussed was $4,000, which the parties felt was fair and easily divisible among the four children’s corporations. The gap between the two numbers is not so large as to preclude reasonable agreement, and the failure to decide between them was certainly not seen by the parties as material on September 12. Indeed, Jennings’s draft Consulting Fee/Long Term Care Agreement set the amount at
$4,000, which comports with what the settling parties indicated was the more likely figure.
Opal also contends that the settlement agreement is unenforceable because the details of the divisive reorganization, including the means by which tax liability would be minimized, were unsettled. It is clear from the record, however, that the parties intended to leave those matters to Brink, Jennings, and others expert in the fields of tax and business law.
In sum, we find that the settling parties committed themselves to a binding agreement on September 12, that their minds met,
We finally note the fact that when the parties were working on finalizing the agreement after September 12, no one proposed any modifications to the basic structure of the agreement or the fundamental economic terms or methods to which they had bound themselves. Instead, pursuant to an agreement to share legal costs by way of payment by KJC, they began working to effectuate the agreement, and continued to do so, until Opal unilaterally withdrew. See Hughes,
Affirmed.
Notes
For clarity, in the remainder of this opinion we refer to all members of the Jahn family by their first names.
Teresa did not appear in this appeal.
Richardson was to be a settlement judge, not a mere mediator. The letter from the court proposing that the parties meet with Richardson specifically states that Richardson was to preside over a “settlement conference,” which would lead to a “universal settlement.” No mention is made of mediation in the letter, and the testimony at trial reflects that the parties contemplated settlement, not mediation.
Under the terms of the Jahn Family Credit Shelter Trust, Opal possessed a limited power of appointment. Under Jennings’s proposal, if all children did not agree to the settlement, Opal would irrevocably exercise that power to guarantee that, upon Opal’s death, each child would receive the shares of his or her corporation held by the trust. If all children did agree to the settlement, all parties would act to amend the trust to add Teresa as a beneficiary because she had been removed following the sale of her RJC shares in 1995.
Under the terms of the Opal Jahn Marital Trust, Opal possessed a general power of appointment. Under Jennings’s proposal, she would retain that power. The trial court properly ordered revocation of that power so that its exercise could not be inconsistent with the agreement reached by the parties.
Each of those properties was known to the Jahns and capable of exact legal description.
Although the parties might not have formally agreed to operate in good faith, the law implies in every agreement “a promise of good faith to effectuate the reasonable expectations contemplated by the agreement.” Barrett and Barrett, 126 Or App 62, 67,
Chester refused to sign the agreement both on his own behalf and on behalf of his company, Superior Tree Stewards, Inc. Opal signed the agreement both on her own behalf and on behalf of RJC.
On September 18, Mehlhaf wrote to Yandell, then counsel for Chester, that it was his and Pamela’s “understanding that, as of last week’s conference, all parties other than [Chester] had committed in writing to an arrangement.” Accordingly, Mehlhaf made clear that he would pursue Pamela’s claims against Chester and requested compliance with prior discovery requests.
The dissent characterizes Exhibit A as practically “written in Klingon.”
Opal testified at trial that she did not let anyone know about her doubts regarding the settlement agreement until after she had signed it. According to Opal, although Brink, her own attorney, thought she was “buoyant and relieved” after she signed the agreement, “deep down in her heart” she was not.
The dissent suggests that the statement in the agreement regarding action by a majority, including Opal, indicates no agreement was formed.
On the problem of determining whether contracting parties intend to bind themselves either in the presence or absence of terms such as “letter of intent” and “memorandum of understanding,” it has been said, “It would be difficult to find a less predictable area of contract law.” E. Allen Farnsworth, Farnsworth on Contracts § 3.8c (1990).
That the agreement does not contain one of those clauses merely underscores the parties’ lack of legal sophistication, despite their adequate legal representation. The Jahns are not in the business of engaging in extensive settlement negotiations. When unsophisticated parties engage in a complex legal transaction and rely on experts to fill in the details, it is more likely that they intend to be bound by the agreements that they reach than that they intend to engage in protracted rounds of negotiation. See Skycom Corp., 813 F2d at 816 (discussing the difference in parties’ intent between large- and small-scale transactions). That is certainly the case here. Indeed, as Feibleman testified, his regular practice is in divorce and family law. He was unversed in business and tax law, and he himself felt the need to rely on experts such as Jennings to implement the agreement.
The dissent seizes on the word “proposed” found in the settlement agreement as evidence that “the parties did not reach a binding settlement agreement on September 12.”
The dissent opines that certain terms, such as those regarding Teresa’s buyback of her shares, were “not even mentioned in Exhibit A.”
Even if we were to conclude that the parties had not intended to bind themselves as of September 12, we would conclude from their subsequent actions that they acted “as if they had a contract,” thus manifesting mutual assent to the entire agreement afterwards. See Ken Hood Construction,
We recently described the various categories into which preliminary agreements have been divided. See Logan,
As noted above, the agreement did not require Chester’s approval so long as the other parties agreed, which they did.
In Ogden, we recognized that “the parties’ ultimate inability to agree about [certain provisions] suggests the materiality of these terms to the parties. See Tollman [v. Floran], 53 Or App [65, 70,
No party questions that there is an active timber market in Oregon or that it would be relatively easy to find independent, objective appraisers who can determine the fair market value or cash equivalents of different timber deeds and lot line adjustments with different provisions. The existence of that market and those appraisers is shown by the ease with which Feibleman and Brink gathered so many names in such a short time following the September 12 conference. After all, the devices agreed upon by the parties — timber deeds, lot line adjustments, and cash payments — are just that: devices. The fundamental economic “trade” of equalization of values had already been made on September 12; the determination of exactly how to implement that trade was left to an agreed upon, objective method. Objective valuation experts could evaluate which devices best suited the parties’ fundamental goal of equalization. If, as the dissent suggests, cash payments would be difficult to make due to liquidity problems, then cash payments would not be reasonable, and the independent expert would rely on the other devices mentioned. Any breach could be remedied by a court order to sell the timber or make the lot line adjustments or cash payments necessary for equalization.
The parties contemplated that each corporation might choose to pay cash, in which case payment terms would be unnecessary. To the degree that any corporation chose not to pay in cash, a statutory interest rate of 9 percent per annum could be supplied, ORS 82.010, and the parties had already agreed on a maximum payment period of 15 years.
Indeed, they would not have offered Opal much additional protection. As is, if the four corporations fail to pay the full redemption price as required by the agreement, Opal’s remedy (which would be sought by the successor trustee of the Opal Jahn Marital Trust) will be an action for damages based on breach of contract. That is the same remedy Opal would have if she separately negotiated for specific minority interest protections. The same is true for the trust’s rights as a creditor of the four corporations.
Additionally, even without specific contractual protections for Opal’s position as minority shareholder in each child’s corporation, she retains those protections provided by state law. See, e.g., Zidell v. Zidell, Inc. (24128),
In short, it is not a bar to specific enforcement of an agreement that parties have not contracted for perfect or even standard remedies. Parties often leave themselves with nothing but the protections provided by statute and case law. Indeed, doing so might be an integral part of a contracting party’s strategy to obtain ultimate agreement in a situation where requesting additional clauses, such as for remedies, might cause negotiations to lose momentum, focus, or trust, such that the overall agreement is jeopardized.
As Lodine testified, “it was a small fractional difference in ownership, so that did not appear to be of concern to anybody.”
Interest rates ranging from 7 percent to 12 percent were proposed by various parties. However, it appears that Chester and his attorney, Yandell, were the cause of much of the delay and difficulty regarding Teresa’s buy-back in that they withheld the necessary documentation and apparently sought the 12 percent rate. Nonetheless, as Yandell admitted, absent agreement on an interest rate, the statutory rate of 9 percent would have applied. ORS 82.010.
The dissent characterizes our holding as lacking concern for Opal’s “health and comfort.”
Thus, Jennings’s draft Settlement Agreement and Mutual Release included clauses binding the parties, in the interest of minimizing adverse tax consequences, to operate their corporations as timber enterprises and not to sell substantial corporate interests for two years. Similarly, Jennings repeatedly stressed that he felt that the only way to be certain of the tax implications of a divisive reorganization was to first obtain a favorable private letter ruling from the Internal Revenue Service. Those are the exact kinds of complicated tax matters regarding which the Jahns turned to Jennings for expertise.
We also consider unconvincing the argument that the settlement agreement is unenforceable because the parties never agreed on who was to pay the attorney fees generated by each of the parties prior to September 12. It is true that, although the parties had discussed those fees and Jennings had proposed having RJC pay those fees (RJC was already paying the fees generated after September 12, per the agreement), no consensus had been reached. Yet none of the settling parties felt that those details were material to the overall agreement when they signed it on September 12. Cf. Povey,
Dissenting Opinion
dissenting.
The trial court judgment and order that the majority affirms is not so much one for specific performance as it is one for specific drafting. As I explain below, the writing that emerged from the September 12 settlement conference did not constitute a binding agreement and, even if it did, it was not specifically enforceable.
The writing that Opal Jahn signed consisted of two pages. The first consisted of this text:
“It is agreed between the undersigned Jahns family members that the division of property rights, corporate shareholder rights and asset distribution shall be in principle as described in the diagram attached as Exhibit A which shall be part of this agreement. A majority of the family members shall be sufficient to authorize finalization of the proposed distribution, as long as the majority includes Opal Jahn.
“The agreement in principle shall be finalized in writing and shall include dismissal of pending law suits [sic] and mutual releases of liability for all claims.”
The second page, styled as “Exhibit A,” consisted of a pie chart of sorts with figures and abbreviations galore and, from the standpoint of someone not familiar with this controversy, may as well have been written in Klingon.
Without considering Opal’s other arguments as to why no binding agreement resulted from the September 12 settlement conference, on the basis of the excerpted text alone I would conclude that the parties did not reach a binding settlement agreement on September 12. Most convincing is the statement that “a majority of family members shall be sufficient to authorize finalization of the proposed distribution, as long as the majority includes Opal Jahn.” (Emphasis added.) That statement acknowledges that the distribution encrypted in Exhibit A is a “proposed” distribution that will require “finalization.” Furthermore, it would have taken a majority of family members that included Opal Jahn to vote in favor of the finalization. Consequently, the writing contemplated future opportunities for the parties to express their approval or disapproval of the terms of the settlement, a contemplation wholly inconsistent with the notion that the writing was a binding agreement.
Furthermore, the September 12 writing left open too many details to permit an inference that it was a final, binding settlement. In Wagner v. Rainier Mfg. Co.,
“[n]ormally the fact that parties contemplate the execution of a final written agreement justifies a strong inference that the parties do not intend to be bound by earlier negotiations or agreements until the final terms are settled. * * * Said fact does not conclusively establish such intention. * * * If all the material terms which are to be incorporated into a future writing have been agreed upon, it may be inferred that the writing to be drafted and delivered is a mere memorial of the contract, which is already final by the earlier mutual assent of the parties to those terms.”
(Quoting Rosenfield v. United States Trust Co., 290 Mass 210, 216,
But even assuming that the document signed by the parties on September 12 did
“[W]ith respect to specific performance in equity, Smith v. Vehrs, [194 Or 492 ,242 P2d 586 (1952)], may be said to mark the conservative end of the spectrum of our cases while Southworth v. Oliver, [284 Or 361 ,587 P2d 994 (1978)], marks the other end. We believe it is fair to say that our decision in Booras v. Uyeda, [295 Or 181 ,666 P2d 791 (1983)], lies between those extremities [sic] and that our statement there should govern courts of equity in the future in determining whether judgment of specific performance should be given.”
The principle embodied in Booras, which the Supreme Court embraced in Genest as a happy medium, is this: To be subject to specific performance, a contract must be definite and certain in all material respects, with nothing left for future negotiation “except subordinate details of performance.” Genest,
In Lang v. Oregon-Idaho Annual Conference,
Under that test, at least three of the terms missing from the contract were material and, hence, not subject to gap-filling by the court. First, and most critically, the purported settlement is unenforceable because the parties had not agreed on the amount of Opal’s consulting fee and the details of how her long-term care needs would be met.
Price is unquestionably a material term, and the agreement does not specify the price that Opal will receive in consulting fees and long-term care for the property that she will convey. Under limited circumstances, a court can enforce an agreement that does not specify the price for a conveyance if the agreement specifies a mechanism by which the price can be determined or there is an objective means by which to determine it, such as a market. See, e.g., Building Structures, Inc. v. Young,
The trial court concluded that the amount that Opal would receive for her consulting fee would “be an amount that will support her reasonable and necessary monthly needs, to enable her to continue to live in a manner to which she has become accustomed.” According to the trial court, that standard “provides a reasonable and objective basis upon which to calculate the monthly consulting fee.” The majority agrees with that conclusion, but I cannot. The amount that would meet that standard necessarily will fall within a range. The choice of a fee that the court ultimately will make within that range is just that, a choice. There is no objective standard on which to make that choice.
Similarly, there is no market or other basis on which to determine the amount to be paid for Opal’s long-term care if her health were to deteriorate. The cost of that care can vary widely depending on the nature and quality of the facility providing the care. The terms that the court must supply to determine the amount that the children will pay for Opal’s long-term care will determine the quality of life that Opal enjoys at the end of her life. A court cannot make that decision for the parties, yet that is precisely what the majority says that the trial court can do here.
It is a remarkable proposition to me that the quality of life and long-term care that Opal enjoys can be treated, as the majority treats it, as a gap that can be filled by the court. It is a chasm in my view, the content of which, from Opal’s perspective, was central to the agreement. The judgment that the trial court entered, and that the majority affirms, appoints Senior Judge Richardson as a referee under ORCP 65 and directs him to prepare “an appropriate * * * long-term care agreement for Opal Jahn.” I cannot conceive how that agreement can be anything other than one in which the court will determine for the parties how much the children will pay for Opal’s long-term care and, hence, the quality of long-term care that Opal will receive. There simply is no objective standard by which the court can determine that. The agreement that Judge Richardson ultimately fashions for the parties might set a reasonable standard for Opal’s care, but it is beyond the power of a court to supply a material term for the parties’ agreement, and the amount paid to Opal for her long-term care is such a term.
The buy-back amount was a material term because it goes to the subject of the contract and its breach would defeat the parties’ purpose in entering the agreement. See Johnstone,
Similarly, the failure of the parties to more definitely articulate the manner in which the value of their respective portions of the estate would be equalized is fatal to the enforcement of the purported settlement agreement. It is apparent from the record, and from Exhibit A to the purported settlement agreement, that the parties contemplated that equalization could be achieved using timber deeds, lot line adjustments, and cash in a “reasonable” manner. On careful scrutiny it becomes clear that those equalization methods are not particularly “definite.” Timber deeds and lot line adjustments both involve real property, and the failure to identify the specific tracts of timber or lot lines to be adjusted renders the equalization terms indefinite. Cf. Povey,
The equalization terms were material because they went to the heart of the purpose of the contract. The children sought an equal distribution of the family’s assets. Each child received a particular parcel of real property, but the various properties were not of equal value. Hence, the children would have to equalize their allotments through the timber deeds, lot line adjustments, and cash in order to achieve their goal of an equal distribution. Furthermore, if one of the children were to breach her agreement to adjust her lot lines for equalization purposes (or to grant a timber deed or pay cash for that matter), then the children would not have equal shares and the purpose of the purported settlement would be defeated. Thus, the equalization methods were material terms of the contract, and their indefiniteness
As Opal notes, to effectuate the purported settlement agreement, the court will have to order the parties to draft multiple legal documents. The gaps that the court is filling here are too large, even for courageous common sense. If ordering the parties to use form contracts for the sale of real property marks the outer limits of the court’s gap-filling abilities, as the Supreme Court suggested that it did in Genest, then the order issued in this case is far beyond those abilities. For the foregoing reasons, I respectfully dissent.
Appendix
EXHIBIT Ato Jahn Family Settlement
[[Image here]]
Opal through Credit ShelterTrust owns [about] 24.448% of each unit/corporation. Then each CST Section to that child at death (i.e. CST) Amend CST to add Teresa and disclaim Power of Appointment.
Opal, through marital (living)Trust owns 24.096% of each unit/corporation subject to redemption agreement.
1. Adjust values of 4 shares to equalize w/timber deeds.
2. Lifetime consulting fee to Opal from each corp increase if health needs each corp pays V* of long term care.
3. At death, Redemption Agreement to buy back OMT shares.
Exhibit A looks substantially like the graphic appended to this opinion, except that the original exhibit was handwritten.
As an aside, the majority uses the ambiguity in the text of the document to justify its resort to extrinsic evidence to address whether the parties had reached a binding agreement, citing Yogman v. Parrott,
I also think that it is significant that the two people assigned the task to develop the documents by which the settlement was to be achieved, Jennings and Brink, did not believe that the parties had reached a binding agreement that left only drafting details to work out. Jennings’s view on that issue is particularly noteworthy because he is the expert who was hired to develop the ideas that formed the basis for agreement embodied in the September 12 documents.
The majority finds it significant that the parties had agreed that the costs incurred by Jennings and Brink to develop the final documents would be borne by the Robert Jahn Corporation (RJC). That is an unremarkable fact. It is not uncommon for one party in a transaction to pay the cost of preparing the documents by which a transaction will close or a dispute be settled even when the parties still must negotiate to reach a final, binding agreement. That arrangement is particularly unremarkable, here, where Opal effectively controlled the family assets, including RJC, that would be divided to settle the family disputes.
Finally, the majority considers it significant that all family members except Chester were greatly relieved by reaching the agreement that they had reached on September 12.1 have no doubt that the parties considered the agreement that they reached on September 12 to be a significant achievement in the effort to resolve an emotional and difficult intrafamily dispute. It was a significant achievement, one that finally identified a path by which the parties could resolve their dispute. The desire by some family members to hold on to that achievement is understandable. Nevertheless, the majority errs in turning the achievement into something that it was not: a binding settlement agreement.
It seems to me that a court should use extra caution when the gap that it is filling determines the comfort of a human being in the twilight of her life. This is not just a situation where real property or a unique good is being exchanged for money; this contract will have a real effect on the health and comfort of Opal Jahn.
As Opal’s attorney described Opal’s perception of the purpose of the agreement, her daughters “had written her will for her.”
In fact, Teresa’s buy-back is not even mentioned in Exhibit A. Although the exhibit states that Opal is to amend the Credit Shelter Trust to add Teresa as a beneficiary, it does not provide that Teresa is to buy back her interest in the family corporation, or say how the buy-back amount is to be calculated.