Court Opinion

ID: 9787326
Source: CourtListenerOpinion
Date Created: 2023-08-31 00:14:46.309993+00
Date Added: 2024-06-11T07:36:54.810133
License: Public Domain

*152ARMSTRONG, P. J.,
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.1 That is, the document is riddled with patent ambiguity.2
The text on the first page of the writing at issue refers to itself as an “agreement in principle” and that the property distribution “shall be in principle as described in the diagram attached as Exhibit A.” Furthermore, the document states that the “agreement in principle shall be finalized in *153writing,” and that “a majority of the family members shall be sufficient to authorize finalization of the proposed distribution, as long as the majority includes Opal Jahn.”
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., 230 Or 531, 540, 371 P2d 74 (1962), the Supreme Court explained that
“[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, 195 NE 323, 122 ALR 1210 (1935) (internal quotation marks omitted); ellipses in Wagner.) As I explain below in relation to the unenforceability of any agreement that was reached, the parties had not agreed on all of the material *154terms when they signed the purported settlement agreement. Hence, the “strong inference” that parties contemplating the execution of a final written agreement do not intend to be bound by earlier negotiations or agreements should prevail, and we should conclude that no binding agreement was reached.3
But even assuming that the document signed by the parties on September 12 did constitute a binding agreement, specific performance is not available to plaintiffs as a remedy. In Genest v. John Glenn Corporation, 298 Or 723, 744, 696 P2d 1058 (1985), the Supreme Court noted the seminal cases on this point: *155In Smith, marking the conservative end of the spectrum, the court stated that “[i]t is a well-established rule of law in this state that equity will not decree specific performance unless the contract is definite, certain and complete. The court cannot make a contract for the parties, nor can it make clear that which is left in doubt and uncertainty.” 194 Or at 499. The court further stated that “all the terms which the parties have adopted, as portions of their contract, must be finally and definitely settled, and none must be left to be determined by future negotiations.” Id. at 500 (internal quotation marks omitted). In contrast, in Southworth, which marks the other end of the spectrum of enforceability, the court held that the security provisions in a land sale contract were “subordinate details” and that the gap could be filled by prescribing “a printed land sale contract on installment payments, with standard form security provisions.” 284 Or at 380.
*154“[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.”
*155The 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, 298 Or at 743 (internal quotation marks omitted). The majority acknowledges that details remained to be resolved, but maintains that those details were subordinate and that the trial court could fill the gaps in the purported agreement, presumably by using “courageous common sense.” See, e.g., Miller v. Ogden, 134 Or App 589, 593, 896 P2d 596 (1995), aff'd, 325 Or 248, 935 P2d 1205 (1997) (“Oregon courts, while acknowledging the dictates of courageous common sense in permitting specific performance, have nevertheless been reluctant to engage in substantive ‘gap-filling.’ ” (Citation and internal quotation marks omitted.)). I maintain that those details were material, and not subordinate. The question is how to distinguish between the two.
In Lang v. Oregon-Idaho Annual Conference, 173 Or App 389, 397, 21 P3d 1116 (2001), we explained that the answer to that question “depends on the ‘particular circumstances of the property or the parties.’ ” (Quoting Povey v. Clow, 146 Or App 760, 764, 934 P2d 528 (1997).) And, as the *156majority correctly notes, “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, 191 Or App 26, 34, 81 P3d 92 (2003).
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.4 Although the figures $3,500 and $4,000 were tossed around after the parties signed the purported settlement agreement, the consulting fee was not agreed upon on September 12. Even the majority acknowledges that. Nonetheless, the majority reasons that it is immaterial and that the court can set it.
However, applying the principles embodied in Johnstone and Lang, it should be clear that the consulting fee was a material term, and its indefiniteness is an insurmountable obstacle to the specific enforcement of the purported settlement agreement. The substance of the purported settlement was the inter vivos distribution of Opal’s estate.5 After the proposed distribution, Opal would be left with no source of income, so the proposed settlement would have required each of her children to contribute toward paying her a consulting fee for the remainder of her life. In essence, she would surrender control over a very valuable timber estate in exchange for a fixed monthly stipend. Furthermore, the purported settlement provided that the consulting fee would increase based on Opal’s health needs and that each child’s corporation would pay for a quarter of her long-term care. However, the details of how that was to occur had not been resolved.
*157Price 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, 131 Or App 88, 96-97, 883 P2d 1308 (1994), aff'd, 328 Or 100, 968 P2d 1287 (1998). Nothing of that kind is present here. The consulting fee was intended to provide Opal with an adequate income on which to live for the balance of her life. There is no market or other objective basis on which to determine that fee.
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 *158perspective, 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.
Second, at the time the parties signed the purported settlement agreement, they had not agreed on the amount that Teresa would have to pay to buy back her interest in the Robert Jahn Corporation.6 Even assuming that the parties had agreed on a formula for calculating the buy-back price (a formula that is not noted anywhere in the document signed on September 12), the parties had not agreed on the values to assign to the variables in that equation. The buy-back amount was to include amounts representing loans to Teresa from her parents and the family corporation that had been forgiven. On September 12, the parties had not agreed on that figure, and the record establishes that there could be some dispute between Teresa and Opal as to the appropriate figure. Hence, that term was subject to further negotiations after the signing of the purported settlement on September 12.
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, 191 Or App at 34. The primary purpose of the purported settlement agreement was to resolve Teresa’s lawsuit *159that sought to force the family corporation to allow her to repurchase her shares. The purported settlement agreement would allow Teresa to do so, but only if she paid back a number of loans that had been forgiven. If Teresa were to breach the agreement by failing to pay back all of the forgiven loans, the purpose of the contract would be frustrated. In effect, the parties had not yet agreed on the consideration that Teresa would provide in exchange for her reinstatement as a stockholder. It is hard to imagine a more material term to this contract. Thus, despite the majority’s attempt to minimize its consequence, the buy-back amount was a material term of the contract and, without it being agreed on, the purported settlement agreement is unenforceable.
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, 146 Or App at 764 (holding that the “identification of the property” is always a material and essential term in a land sale contract). To the extent that the parties contemplated equalizing their estate values with cash, it is not clear that any of the parties was liquid enough to do so, because the corporate assets consisted primarily of real property, timber, and equipment. Thus, the methods by which the children’s shares were to be equalized were not definite and certain at the time the parties signed the purported settlement agreement.
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 *160have 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 renders the purported settlement unenforceable.
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.
*161Appendix
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, 325 Or 358, 363, 937 P2d 1019 (1997). However, Yogman does not prescribe the applicable analysis on a question of contract formation. Yogman involves the exception in the statute that codifies the parol evidence rule that allows extrinsic evidence to explain an ambiguity. However, no ambiguity is necessary to resort to extrinsic evidence on the question of contract formation. ORS 41.740 expressly provides that there is no prohibition against parol evidence “where the validity of the agreement is the fact in dispute.”

 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.