YOUNG v. HOBBS

OPINION

RABINOWITZ, Justice.

I. INTRODUCTION

The central issue presented by this appeal is whether the superior court properly ruled that the parties agreed to a settlement contract.

II. FACTS AND PROCEEDINGS

Dale Young and Marion Hobbs were involved in Wilderness Acquisitions, Inc., a corporation which attempted to build a wilderness lodge on Baranof Island in Southeast Alaska. In the course of the corporation's dissolution, a number of issues were contested, and eventually litigated, including the issue of ownership of high density polyethylene pipe that had been transported to the Baranof Island property.

Before the corporation was dissolved, Young purchased a security interest in the corporation's property, and eventually obtained a foreclosure of this security interest. In the underlying litigation, Young filed a motion requesting determination of the ownership of the pipe which had been removed from Baranof Island by Hobbs. The superior court ordered Hobbs to return the pipeline to the island, holding "that the pipeline ... was appurtenant to the property purchased by Dale Young at the foreclosure sale[.]"1 Subsequently, in an effort to have Hobbs comply with the superior court's order requiring return of the pipe, Young filed a motion for order to show cause. The motion was stayed pending a settlement conference scheduled for March 11, 1994.

The settlement conference was not limited to the pipe issue; rather it was intended to resolve all outstanding issues relating to the corporation's dissolution. Accordingly, for several days prior to the settlement conference, Young, Hobbs, and the other corporate members met in an attempt to define and resolve all pending issues. Of significance are three preliminary meetings at which Young and Hobbs discussed the existing pipe dispute: (1) a meeting on March 9; (2) a meeting at Young's house the morning of March 10; and (3) a meeting on the evening of March 10. At issue in this appeal is whether, as a result of these meetings, Young and Hobbs agreed to settle the pipe dispute.

At the global settlement conference held on March 11, all interested parties reached a settlement that was memorialized on the record in Judge Ripley's chambers. Included in the recorded settlement was a reference to the Young-Hobbs pipe dispute:

Young and Hobbs, as well as their counsel and other interested parties, were present when the superior court's recitation was made, and no objections were raised. After the recitation, Judge Ripley concluded the settlement conference by stating:

Though the recorded settlement agreement referred to a side-agreement purporting to settle the pipe dispute between Young and Hobbs, the post-conference drafting process revealed that their dispute was far from resolved. Young contended that their agreement was fully reflected in a written draft that he had prepared and handed to Hobbs when the parties met for the third time on the night of March 10. Hobbs argued that the written draft was deficient. Hobbs additionally argued that both he and Young knew that the written draft was not a complete expression of their agreement. The parties disputed whether Young was to pay Hobbs for the cost of his labor for installing the pipeline on the Baranof Island property, a term absent from Young's written draft.

The superior court's underlying order required Hobbs to return the pipe to Baranof Island "in its same condition" — namely, unassembled. Hobbs argued that Young had agreed during their negotiations that Hobbs would be compensated for his labor cost in installing the pipe. Hobbs brought Young's written draft with him to the settlement conference, discussed with Young what he considered to be its deficiencies, and made handwritten additions to it during the recitation of the global settlement agreement. Immediately after the settlement conference ended, the parties presented their dispute to Judge Ripley, who decided to hold a hearing regarding the particulars of Young and Hobbs's pre-conference negotiations. At the hearing, Young and Hobbs, as well as others who were privy to the negotiations, testified. Neither Young nor Hobbs explicitly disputed the existence of an agreement. Rather, each asserted that his respective version of the draft represented the agreement.

At the conclusion of the hearing, the superior court entered the following findings of fact:

Based upon these findings the superior court concluded:

This appeal followed.

III. STANDARD OF REVIEW

Whether the superior court erred in finding that Young and Hobbs reached a meeting of the minds is a question of fact. As stated in Juliano v. Angelini:

708 P.2d 1289, 1291 (Alaska 1985) (citations omitted). Thus, the superior court's conclusion that Young and Hobbs "had reached a meeting of the minds on or before the settlement conference of March 11, 1994" will be reversed only if its finding is clearly erroneous. Id.

IV. DISCUSSION

The superior court ruled that Young and Hobbs had reached a meeting of the minds regarding the pipe issue on or before the day of the global settlement conference. We turn to the question of whether the superior court's findings of fact are clearly erroneous.

"The formation of an express contract requires an offer encompassing its essential terms, an unequivocal acceptance of the terms by the offeree, consideration and an intent to be bound." Childs v. Kalgin Island Lodge, 779 P.2d 310, 314 (Alaska 1989); Hall v. Add-Ventures, Ltd., 695 P.2d 1081, 1087 n. 9 (Alaska 1985) (citing 1 W. Jaeger, Williston on Contracts § 64 at 211, § 72 at 235, § 73 at 128 (3d ed. 1957)). "Mutual assent is an elementary requirement for a binding contract." Zeman v. Lufthansa German Airlines, 699 P.2d 1274, 1281 (Alaska 1985) (citing State v. Fairbanks North Star Borough School District, 621 P.2d 1329, 1331 n. 3 (Alaska 1981)).

In reviewing questions of intent, we have stated:

Juliano, 708 P.2d at 1291 (quoting 1 A. Corbin, Corbin on Contracts § 30 at 98-99 (1963)).2

Our review of the entire record in this case leads us to the conclusion that Young and Hobbs never reached a meeting of the minds regarding settlement of their dispute over the pipe. Our conclusion is based in part on the following evidence.

Young's draft "Proposal for Pipeline Issue Resolution" represents his version of the agreement with Hobbs regarding the pipe issue. Hobbs, however, asserts that Young agreed to four additional or differing terms relating to default, time for performance, Hobbs's pipe installation labor costs, and performance bond or security.3 The discrepancies between the two versions are clearly substantial.

Even more telling are certain portions of Hobbs's testimony. Hobbs testified that when Young presented him with the draft "Proposal for Pipeline Issue Resolution" and asked him to review it, Hobbs told Young that he could not say "Yes, I agree." Hobbs stated he could not agree because "I knew more had to be added, because this is all his half, on his thoughts, and it did not include my thoughts at all." When asked at the global settlement conference held in Judge Ripley's chambers whether he had any discussion with Dale Young regarding the "Proposal for Pipeline Issue Resolution", Hobbs replied in the affirmative. He stated, "I sat out here and said, `Dale, I can't accept this. I've — my thoughts are not into this yet.' ... and I told him that I have to finalize — we have to finalize it. We have to come up with the numbers."

Concerning his handwritten modifications of Young's "Proposal for Pipeline Issue Resolution," Hobbs testified that the purpose of his additions was "to put my half of the thoughts on how this... pipeline issue was to be solved.... It was the continuation ... of us trying to solve it." When asked about the additional term regarding payment for labor installation costs, Hobbs responded in part that "I do not have an exact figure, but I'm going to say you're talking probably — to do the work, to install the pipe and et cetera is probably about $70,000."4 Regarding all of his handwritten additions to the draft, Hobbs testified that he made them because "[t]his has got to be put — this has got to be part of the agreement."

Greg Young, Dale Young's brother, testified concerning what transpired between Dale and Hobbs at their first and third preliminary settlement meetings. Greg Young testified that his brother Dale and Hobbs had been working toward an agreement and that it was his understanding that "they had what I'd consider a draft agreement." Greg Young further testified that Hobbs had a copy of Dale's draft and "had written in ink at the bottom what he had discussed or what he felt were conditions under which he would do his part of it. But I don't know if he had given that to Dale." Furthermore, Greg Young testified as follows:

Based on the evidence outlined above and our review of the entire record, we hold that the superior court's conclusion that "Marion Hobbs and Dale Young had reached a meeting of the minds on or before the settlement conference of March 11, 1994, regarding the resolution of the pipeline dispute" must be set aside since it is clearly erroneous. Although the evidence does indicate that Dale Young and Marion Hobbs reached preliminary agreements on several issues relating to their pipe dispute, review of the entire record demonstrates that the parties failed to agree on the final material terms of a settlement of their pipe dispute.

V. CONCLUSION

The settlement of the pipe dispute was an integral and major part of the global settlement. Since the parties never reached agreement on this material issue, they could not have reached a meeting of the minds regarding the global settlement. Therefore, we VACATE the settlement and REMAND for further proceedings.

MOORE, C.J., not participating.