Opinion ID: 2584011
Heading Depth: 1
Heading Rank: 6

Heading: The Dolson Letter

Text: Next, plaintiffs contend that Unison made arbitrary and unlawful threats against Gold. Specifically, they point to Dolson's letter which stated: Further, even if the Federal Reserve approves Gold's Application over Unison's Protest, such approval would not affect Unison's rights under the Rights Agreement or applicability of the Act. Further, Unison would have the right to take the position that no signatory to the Unison Stockholders Agreement could transfer his/her shares to Gold inasmuch as such purchase would be the first `step' in a plan as enunciated to the Federal Reserve, by which Gold and its affiliates and principals holders would own more than 35% of the outstanding stock of Unison. Plaintiffs contend that Unison's threat to refuse to transfer the shares was not authorized by the Stockholders' Agreement. Unison counters by pointing to § 4.7 which provides: Company's Right to Refuse Transfer. The Company is hereby irrevocably authorized by each Stockholder to refuse to make any transfer of shares which would not be in accordance with the terms hereof, and the Company and the officers and directors thereof are hereby released and relieved from any and all liability which might arise from the refusal to make any such transfer, absent fraud or manifest error. Relying upon this provision in conjunction with the change of control provisions, Unison contends that Dolson's letter was merely a statement of the position Unison might take if Gold was attempting to control 35% or more of Unison's stock. Unison contends the position stated in Dolson's letter was a legitimate interpretation of the contract and was not a clear and unequivocal renunciation sufficient to be considered an anticipatory breach. An explanation of the distinction between a clear renunciation and a statement of a party's interpretation or assertion of contractual rights was provided in N.Y. Life Ins. Co. v. Viglas, 297 U.S. 672, 80 L. Ed. 971, 56 S. Ct. 615 (1936). The United States Supreme Court addressed the question whether an insurance company's notification to a policyholder that it would refuse to continue paying disability benefits constituted a breach of the contract. The Court ultimately found that the company's subsequent action to stop payment constituted a breach of the agreement, noting that the insurance company's refusal was based on unfounded facts. 297 U.S. at 678. But the Court held that the notification alone did not constitute a breach by repudiation. As Justice Cardozo explained, for a unanimous Court: Repudiation there was none as the term is known to the law. Petitioner did not disclaim the intention or the duty to shape its conduct in accordance with the provisions of the contract. Far from repudiating those provisions, it appealed to their authority and endeavored to apply them. 297 U.S. at 676. The Tenth Circuit Court of Appeals noted that since Viglas the law has been settled that [a]n offer to perform in accordance with the promisor's interpretation of the contract although erroneous, if made in good faith, is not such a clear and unequivocal refusal to perform as amounts to a renunciation giving rise to an anticipatory breach. Kimel v. Missouri State Life Ins. Co., 71 F.2d 921, 923 (10th Cir. 1934). As the Tenth Circuit Court of Appeals explained: `If this were not the law, it would be a dangerous thing to stand upon a controverted construction of a contract. Every man would act at his peril in such cases, and be subjected to the alternative of acquiescing in the interpretation adopted by his opponent, or putting to hazard his entire interest in the contract. The courts have never imposed terms so harsh, or burdens of such weight. It would amount to a virtual denial of the right to insist upon an honest, but erroneous, interpretation.' 71 F.2d at 923 (quoting Armstrong v. Ross, 61 W. Va. 38, 55 S.E. 895 [1906]). See also 9 Corbin, Contracts § 973 (Where the two contracting parties differ as to the interpretation of the contract or as to its legal effects, an offer to perform in accordance with his own interpretation made by one of the parties is not in itself an anticipatory breach.). In this case, there was not a clear repudiation of the contract or a refusal to perform. Plaintiffs also argue that Unison's threat to refuse to transfer the shares was a breach of the covenant of good faith and fair dealing which Kansas courts imply in every contract. See Daniels v. Army National Bank, 249 Kan. 654, 658, 822 P.2d 39 (1991); Bonanza, Inc. v. McLean, 242 Kan. 209, 222, 747 P.2d 792 (1987). As pointed out by Unison, plaintiffs did not claim breach of this duty before the trial court. On appeal, a party cannot be permitted to change its theory or present new issues which were not raised before the trial court. Baugher v. Hartford Fire Ins. Co., 214 Kan. 891, 901, 522 P.2d 401 (1974).