Opinion ID: 2633276
Heading Depth: 3
Heading Rank: 1

Heading: The Jeep Agreement and the Facilities Makeover

Text: The May 28 letter agreement required ACC to establish a Dodge dealership and a separate Chrysler/Plymouth/Jeep dealership on its adjoining properties on Fifth Avenue (and more specifically to put the new Dodge operation in ACC's existing Chrysler/Plymouth property, with the new Chrysler/Plymouth/Jeep operation to be located on the former Dodge property). This was made a condition of ACC's receipt of a Jeep dealership. The Chrysler, Plymouth, Jeep dealership needed to be a complete operation and the Dodge dealership needed to be separate. Shortly after signing the May 28 agreement, ACC and DCMC developed a disagreement about what changes ACC needed to make to satisfy the complete and separate requirements. The sticking point appears to have been that DCMC wanted not just separate dealer codes and different signs for each building but separate managers and separate parts and service departments in each of the two operations. ACC contends that these demands contradicted assurances DCMC made before the agreement was signed, to the effect that the changes required by this condition would be simple and easy. ACC never even attempted to separate its business along the lines contemplated by the agreement, whether under ACC's interpretation of the agreement or DCMC's. Instead it filed the complaint in this case. After amendments, the complaint alleged that DCMC breached the contract by not providing Jeeps; sought damages based on this breach; and sought a declaration that DCMC must provide Jeep vehicles to [ACC] under its standard sales and service agreement without requiring [ACC] to build and maintain additional repair and parts facilities or retain a second general manager. ACC never got the Jeep dealership. While the superior court seemed inclined to accept ACC's version of the facts, [5] it never decided whose understanding of the agreement was correct. Instead, the court relied on the undisputed fact that ACC never attempted to make whatever transformation might have been required by the May 28 agreement: [Rod] Udd [ACC's president and primary shareholder] could have made changes to ACC in short order, but he wanted more. That was an unfortunate decision. DCMC did not breach the agreement by not shipping ACC Jeeps. ACC failed to comply with the precondition. ACC did not substantially comply with the transformation requirements. Thus, DCMC was excused from shipping the Jeeps. The superior court seems to have understood ACC's obligation to establish separate facilities as a condition precedent to ACC's shipping the Jeeps. According to the Restatement of Contracts, a condition is an event, not certain to occur, which must occur, unless its non-occurrence is excused, before performance under a contract becomes due. [6] The separate facilities requirement is such a condition, because the agreement says DCMC's obligation to provide Jeeps is [s]ubject to ACC's meeting the requirement of establishing separate facilities. Since it is also undisputed that ACC did not ever comply with the condition, DCMC was not required to perform its conditional duty to supply Jeeps. As the Restatement of Contracts says: Performance of a duty subject to a condition cannot become due unless the condition occurs or its non-occurrence is excused. [7] So the court was correct in holding that DCMC did not breach the agreement to supply Jeeps. Yet notwithstanding ACC's failure to make any changes to its facilities, the superior court should have considered ACC's claim for a declaration specifying the facilities changes required by the letter agreement. Alaska Statute 22.10.020(g) says in part: In case of an actual controversy in the state, the superior court, upon the filing of an appropriate pleading, may declare the rights and legal relations of an interested party seeking the declaration, whether or not further relief is or could be sought. We have said that declarations concerning hypothetical or advisory questions or moot questions should not be rendered, [8] and that relief may be withheld when the grant of such relief would not terminate the controversy or the uncertainty which gave rise to the declaratory proceeding. [9] But declarations are appropriate where there is a substantial controversy, between parties having adverse legal interests, of sufficient immediacy and reality to warrant the issuance of a declaratory judgment. [10] As one federal court has usefully stated (quoting Professor Borchard), the two principal criteria guiding the policy in favor of rendering declaratory judgments are (1) when the judgment will serve a useful purpose in clarifying and settling the legal relations in issue, and (2) when it will terminate and afford relief from the uncertainty, insecurity, and controversy giving rise to the proceeding.[ [11] ] The superior court apparently never considered ACC's claim for declaratory relief, but ACC has a strong case that these standards are met here. ACC asserts that the facilities changes demanded by DCMC would require substantial expenditures, and it seems obviously useful [12] for the superior court to issue a declaration stating whether or not these changes are required, particularly now that the court has taken so much evidence on the question. A declaration would also presumably end this part of the controversy between the parties. And although ACC's failure to fulfill a condition precedent bars its claim that DCMC breached this part of the letter agreement, it does not bar issuance of a declaration specifying what changes the letter agreement requires ACC to undertake in order to get Jeeps. Declaratory judgments are appropriate to resolve pre-breach disputes over contractual language, giving useful guidance for the parties or others contemplating a contingent course of action. [13] Normally we review a superior court's decision to grant or refuse declaratory relief for abuse of discretion. [14] However, in light of the superior court's failure to address ACC's claim for declaratory relief, [15] and the apparent suitability of declaratory relief in this case, we vacate that part of the superior court's judgment dismissing ACC's claim for declaratory relief. [16] On remand, the superior court should determine whether the criteria for issuing a declaratory judgment are satisfied and, if so, decide whether DCMC's demands concerning creating separate dealership operations were in accordance with the May 28 agreement. [17]