Court Opinion

ID: 9608385
Source: CourtListenerOpinion
Date Created: 2023-08-22 03:11:23.232658+00
Date Added: 2024-06-11T11:28:33.422068
License: Public Domain

JACOBSON, Presiding Judge,
dissenting.
I find myself in the minority and therefore dissent. The majority seems to find the case of Schade v. Diethrich, 158 Ariz. 1, 760 P.2d 1050 (1988), to be of such earthshaking departure from previous contract law as to reverse, sub silentio, settled supreme court case law in the area of construction contracts.
Before discussing this “new” revelation, I find it necessary to supply some facts not discussed by the majority. The majority opinion correctly sets forth the chronology of events between ICS and AROK, up to the point that AROK submitted its written bid confirmation. What the majority fails to mention is that this bid confirmation contained terms that were different from those contained in ICS’s standard contract. Moreover, although the parties had engaged in dealings four years prior to the negotiations involved here, AROK was not aware of what the terms of the ICS subcontract would be, having not seen the contract ICS ultimately used for the drywall subcontractors until after this litigation was commenced.
AROK was also aware that at the time ICS made its alleged promise12 as to employment, any oral agreements would have to be reduced to writing. Also, ICS’s standard contract contained a no-damages-for-delay provision that was not acceptable to AROK; AROK would not have entered into a contract containing such a clause. In addition, AROK’s president testified that there would be a “real war” over a “pay-when-paid” clause in ICS’s standard contract. In short, AROK’s president expected post-bid discussions with ICS concerning the “conflicts” between ICS’s standard subcontract and AROK’s standard proposal. He testified that “where [ICS’s] boiler plate form conflicted with [AROK’s] boiler plate form, that would have to be worked out and he expected “discussions over some of those items” and would have “expected possible changes.” A written contract embracing these “possible changes” was never entered into between the parties. These additional facts are basically undisputed and are neither favorably or unfavorably presented.
I now turn to what the majority contends are diametrically opposed concepts of contract law embraced by Savoca Masonry v. Homes & Sons Construction Co., 112 Ariz. 392, 542 P.2d 817 (1975) and Schade v. Diethrich. I note that the majority agrees that if Schade does not “more accurately reflect Arizona’s common law of contracts,” then Savoca Masonry is controlling and this case must be affirmed.
Any analysis as to whether Schade has such an effect must begin with a true understanding of both the factual predicate for the Schade decision and its legal conclusions, for reversals of prior settled law are not to be lightly implied, particularly where the case allegedly overruled is not *301even mentioned in the overruling decision. Litigants should be entitled to rely upon previous decisions of the supreme court until they are clearly overruled. Sligh v. Watson, 67 Ariz. 95, 191 P.2d 724 (1948).
Schade involved the termination of an employment contract with a long time valued employee. The trial court, after a trial, made extensive findings of fact. The facts deemed dispositive by the supreme court in its decision were:
[T]here were a number of oral conversations among Schade, Diethrich and Dieth-rich’s attorney and agent Paul Meyer culminating in an offer made to Schade by Diethrich that if Schade would resign his employment with both Defendants and the International Heart Foundation effective immediately, Schade would receive fair and equitable severance benefits based on his tireless service of IOV2 years and his unique contributions, that an unbiased committee would be appointed to make recommendations as to the amount of fair and equitable severance benefits and Schade would continue to work toward presenting the International Cardiovascular Congress IV.
158 Ariz. at 7-8, 760 P.2d at 1056-57.
Moreover, as noted by the supreme court:
In this case, both Schade and Diethrich began performing within days of making the contract. Having accepted Dieth-rich’s offer by resigning his former position on November 17, 1982, Schade undertook his newly defined duties for the Congress the next day. According to the terms of his agreement with Diethrich, he continued to perform these duties in support of the Congress through March 6, 1983. Diethrich, for his part, attended the Foundation’s board meeting on December 22, 1982 to personally request the appointment of the committee that would formulate Schade’s severance package. By these acts the parties clearly manifested their joint understanding that they were bound by their promises.
158 Ariz. at 10, 760 P.2d at 1059 (emphasis added).
The only thing missing from the agreement was the “fair and equitable severance agreement” to be decided by an impartial committee. The supreme court noted, “Assuming they [the committee] acted in good faith, Diethrich and Schade impliedly agreed to accept the Committee’s recommendation if they found it fair and equitable.” Schade, 158 Ariz. at 11, 760 P.2d at 1060 (emphasis in original).
The supreme court found that the implied agreement to be bound by what was “fair and equitable” did not render the agreement incapable of either being formed or enforced. In doing so, the court relied upon the one hundred year old decision in Joy v. City of St. Louis, 138 U.S. 1, 11 S.Ct. 243, 34 L.Ed. 843 (1891).
In Joy, the United States Supreme Court held:
Although the statement is that the compensation is to be such “as may be agreed upon by such companies,” yet the statement that it is to be “fair and equitable” plainly brings in the element of its determination by a court of equity____ If the parties agree upon it, very well; but if they do not, still the right was is to be enjoyed upon making compensation, and the only way to ascertain what is “fair and equitable” compensation therefore is to determine it by a court of equity. In this view, it cannot be said that the court is making an agreement for the parties which they did not make themselves.
138 U.S. at 43, 11 S.Ct. at 255. In adopting this reasoning, the court in Schade held:
Here, as in Joy, if the parties could agree upon what was “fair and equitable,” then “very well; but if they [did] not,” then the Committee’s recommendation might be agreed upon, but if not, what was to be “fair and equitable compensation ... [would be] determine[d] ... by a court of equity.” ... The trial court found ... that the recommendation [of the Committee] was “fair and equitable” and adopted it____ The trial court’s finding was supported by credible evidence, and we, in turn, are bound by the trial court’s finding.
*302158 Ariz. at 11, 760 P.2d at 1060 (citations omitted).
In essence, what Schade holds, completely in keeping with long-established principles of contract law, is that if the parties agree to abide by what is “fair and equitable,” assuming contractual intent, the parties impliedly agree that the fact that the future determination of what is “fair and equitable” may be settled by a court does not make the contract indefinite. See Henderson Bridge Co. v. McGrath, 134 U.S. 260, 10 S.Ct. 730, 33 L.Ed. 934 (1890) (holding a promise to do “what is right” enforceable so long as it was made with contractual intent); Brennan v. Employers’ Liability Assurance Corp., 213 Mass. 365, 100 N.E. 633 (1913) (holding that a promise to “make it right” did not fail for indefiniteness); Noble v. Joseph Burnett Co., 208 Mass. 75, 82, 94 N.E. 289 (1911) (upholding the enforceability of a promise to pay “a fair and equitable share of the net profits” as neither so indefinite nor so impracticable that it cannot be applied with reasonable certainty).
Again, Schade relies upon well settled principles of contract law when it quotes from Restatement (Second) of Contracts § 33(3) and the comment to that section:
The fact that one or more terms of a proposed bargain are left open or uncertain may show that a manifestation of intention is not intended to be understood as an offer or as an acceptance.
But the actions of the parties may show conclusively that they have intended to conclude a binding agreement, even though one or more terms are missing or are left to be agreed upon.
158 Ariz. at 9, 760 P.2d at 1058.
In Schade, the trial court found that by reason of the parties’ action in proceeding to perform the agreement, they manifested an intent to conclude a binding agreement. The supreme court concurred in this conclusion. Thus, Schade is not a bump in the universal fabric of contract law; nor does it reflect a “realist approach” to contract law; it merely restates settled principles.
Unlike Schade, in this case there were no actions by the parties that would indicate they intended to enter into a binding agreement; everyone agreed that the oral promises needed to be reduced to writing. In this case, the parties did not agree to be bound by what was “fair and equitable.” Rather, the entire contract, including disputed provisions dealing with “no-damage-for-delay” and “pay-when-paid,” was unresolved. The majority contends that these “missing terms” can be supplied by looking to the custom utilized by the parties in the past. Aside from the fact that certain provisions of this “standard contract” required further negotiations, the law is clear that custom and usage cannot be used to provide missing essential elements of a contract, but only to clarify or explain terms in a contract already formed. Savoca, 112 Ariz. at 395, 542 P.2d at 820.
Moreover, what parties may have been willing to agree to years before, does not mean these same terms would be agreeable today. Time and circumstances change the economic feasibility of construction contracts. Business relationships should not be cast forever in the same contractual mold.
Thus, the majority, unlike the court in Schade, is not merely supplying “a missing term,” it is creating a contract for the parties, which they themselves refused to create.13 I would affirm on the clear au*303thority of Savoca, not having the omnipotence to forecast that the present supreme court would decide that case differently today.

. For purposes of summary judgment only, ICS does not dispute AROK’s factual assertion that its agent said, "if we get the job, [AROK] gets a job.”

. I also believe the majority goes too far in "holding” that "AROK’s offer — its bid — was accepted by ICS,” at 296, 848 P.2d at 875, when that question was not at issue on appeal "because ICS has conceded that, for purposes of the appeal, the offer was accepted,” at 296 n. 4, 848 P.2d at 875 n. 4.
Furthermore, although the majority observes that "[t]he words and actions of the parties create at least a question of fact as to whether they intended to conclude a binding agreement," at 297 n. 9, 848 P.2d at 876 n. 9, it then concludes that ICS’s refusal to allow AROK to perform the work “was a total breach of the contract,” at 298, 848 P.2d at 877, apparently as a matter of law. Thus, on remand, it appears there is nothing left for the trier of fact to do but to determine damages if it is to act “consistent with this opinion,” at 298-99, 848 P.2d at 877-78.
I believe these holdings are beyond the scope of our review on appeal from summary judg*303ment, where the only issue before us is whether the trial court erred in finding no issue of material fact regarding the formation of a contract.