Court Opinion

ID: 9576453
Source: CourtListenerOpinion
Date Created: 2023-08-21 21:24:29.461171+00
Date Added: 2024-06-11T13:08:28.338930
License: Public Domain

Six, J.,
dissenting: NEA-Coffeyville (NEA-C) sought a declaratory judgment. The claim was unjust enrichment, asserting that “[pjrinciples of equity and fundamental fairness dictate that the District distribute the full BCBS refund to the BCBS group contract subscribers.” The six intervenors sought similar relief.
The pretrial order reflects:
“Additionally, Plaintiff and Intervenors believe that they amended their respective Petitions by deleting any inference that they allege Defendant violated an explicit provision contained in any relevant Negotiated Agreement between NEA-Coffeyville and USD No. 445. Defendant does not believe that this action was approved during the pretrial hearing.”
At trial, the district resolved the question by permitting the amendment. We do not have a contract action here. The district court sets our stage by finding “NEA’s claim is based on equitable principles and the divisible surplus rider, neither of which is subject to the grievance procedures.” NEA-C has not sued on the negotiated agreements (contracts) for breach of contract, express or implied. On the contraiy, all agree that the District has fully performed under the three contracts.
The district judge analyzed the three contracts and the rider in crafting relief for the plaintiffs grounded in the “[p]rinciples of *403equity.” The majority disapproves of the district court’s interpretation of the rider and abandons the equity rationale. On those points, I agree with the majority. But where does such disapproval and abandonment leave our appellate court analysis? We are reviewing a declaratory judgment action that was resolved below by relying not on contract principles but on equity. The majority, in rejecting the district court’s equity rationale, sua sponte crafts a solution by calling in the Restatement (Second) of Contracts § 204, “Supplying an Omitted Essential Term” (1981). Reliance on the Restatement to resolve an equity action is puzzling. I pose two objections, the first on procedural grounds, the second on substance.
My procedural objection focuses on the propriety of supplying a rule of law sua sponte in the opinion-writing phase of appellate decision-making. I am apprehensive of an appellate procedure that invokes a theory sua sponte to end the parties’ dispute without the parties having had an opportunity for comment, particularly here, where the claims of unjust enrichment and equity carried the case from the day of filing to the day of district court resolution. I believe both counsel and the district judge will be surprised to read that § 204 of the Restatement (Second) of Contracts has decided the case. Each member of this court should have the benefit of the parties’ analysis, on the applicability of § 204 to this controversy before issuing a § 204 opinion.
My substantive objection keys on the majority’s § 204 discussion. The contracts were entered into in 1991 through 1993. The problem with basing relief on § 204’s “gap filling,” is that NEA-C has neither sued for breach of contract nor sought judicial reformation of the negotiated agreements. All of the § 204 foreign authorities cited by the majority are breach of contract cases.
The majority next turns to Arrowhead Const. Co. v. Essex Corp., 233 Kan. 241, 662 P.2d 1195 (1983), in developing its “omitted term” resolution. Arrowhead involved, among other questions, a contract for carpentry work. The carpenters, Crotts and Henley, informed Arrowhead, the subcontractor, that they required payment of $1.35 per square foot, not $1.25 as Arrowhead had stated in the written contract. Neither Crotts nor Henley signed the con*404tract; however, they continued to work until they realized they were not going to be paid.
This court looked to the Restatement (Second) of Contracts § 33. The question was the reasonableness of the price. Crotts and Henley, after stating their price of $1.35, continued working without objection from Arrowhead. According to the testimony, $1.35 was extremely reasonable. The question was whether the parties had agreed on the essential term of price, with Arrowhead claiming no agreement. We found Arrowhead’s claim “without merit.” 233 Kan. at 250. We said: “The Restatement assumes courts will, in such instances, supply a term which is ‘reasonable in the circumstances.’ (See Section 204). This term should be one which ‘comports with community standards of fairness and policy. . . .’Comment d., § 204.” 233 Kan. at 249.
The testimony in Arrowhead as to reasonableness of price led to our reference to § 204 and Comment d. Arrowhead does not support the result here. The majority has not substituted a “term.” It has created an entire provision in a contract and substituted a theory of recovery for plaintiffs that requires paragraphs to explain.
The District and NEA-C negotiated for salary plus a single health insurance policy. The District agreed to pay the respective salaries and provide a single health insurance policy. These two provisions of the contract were separate. The health insurance benefit is not included in the salary section of the agreement. The parties admit they did not contemplate a divisible surplus when they entered into the contracts. The parties also admit these 3-, 4-, and 5-year-old contracts have been fully performed by all. NEA-C itself refers to the contracts as “long since expired.” Despite this, the majority reasons that the contracts have an “essential omitted term” that must be supplied by this court. The majority’s position contradicts our time-honored rules of contract interpretation.
The function of a court is to enforce a contract as it is made by the parties, not to create a contract for them which is in accord with the court’s own notions of what the contracting parties wisely should have done. Froelich v. United Royalty Co., 179 Kan. 652, 654, 297 P.2d 1106 (1956). Courts cannot read words into a contract which import an intent wholly unexpressed when the contract *405was drawn and executed. Potter v. Northern Natural Gas Co., 201 Kan. 528, 532, 441 P.2d 802 (1968) (quoting Williams v. Safeway Stores, Inc., 198 Kan. 331, 344, 424 P.2d 541. ([1967]). Courts cannot make an agreement for the parties which they did not make themselves. Williams, 198 Kan. at 344; Smith v. Holmes, 181 Kan. 438, 441, 312 P.2d 228 (1957) (quoting Anderson v. Rexroad, 175 Kan. 676, 679, 266 P.2d 320 [1954]). Courts cannot and should not remake contracts. Hanscome v. Coppinger, 183 Kan. 623, 626, 331 P.2d 590 (1958). We should not write a new contract for the parties under the guise of interpretation in order to achieve some equitable result. Morgan v. Mobil Oil Corp., 726 F.2d 1474, 1477 (10th Cir. 1984) (applying Kansas law); Davenport v. Dickson, 211 Kan. 306, 312, 507 P.2d 301 (1973); Wood v. Hatcher, 199 Kan. 238, 243, 428 P.2d 799 (1967). We are not at liberty to revise an agreement to implement an unexpressed intention. 17A Am. Jur. 2d, Contracts § 340.
The majority acknowledges the factual distinction between U.S.D. No. 259 v. Kansas National Education Assn, 239 Kan. 76, 716 P.2d 571 (1986), and this case. The factual distinction is significant. Recall that the teachers in USD No. 259 had the option of receiving their $60 and $65 insurance premium in cash as salaiy. The teachers here did not. Importantly, the U.S.D. No. 259 negotiated agreement (contract) said:
“ ‘Paragraph 2: If a teacher enrolls in the Board provided group health insurance plan and the Board contribution exceeds the amount of die health insurance premium in the plan selected, then such excess shall be paid to that teacher as extra earnings in regular payroll checks and shall be subject to all applicable deductions.
“ ‘Paragraph 3: If a teacher does not enroll in the Board provided group healdi insurance plan, the Board shall contribute $60 per month for each teacher employed full time. Such contribution shall be paid to that teacher as extra earnings in regular payroll checks and shall be subject to all applicable deductions.’ ” 239 Kan. at 77. (Emphasis added.)
U.S.D. No. 259 did not claim entitlement to the surplus. U.S.D. No. 259 is of questionable precedential value here.
The District did not expressly agree to spend all of the $175 and $187 on health insurance in the negotiated agreements or any other *406written instrument. The District simply agreed to provide a single health policy with the understanding that it would not spend more than $175 in 1991-92 or $187 in 1992-93. In the 1993-94 negotiated agreement, there is no stated dollar figure at all. Nothing expressed in the contracts supports a recovery by the teachers.
The majority cites Peterson v. Colorado Springs, 37 Colo. App. 475, 477, 548 P.2d 1285 (1976), which is consistent with my substantive objections and contrary to the result here. Peterson held that a provision of an insurance policy did not entitle employees to a divisible surplus because it did not define the rights of the parties who made premium contributions.
The District suggests in its brief that some present and former employees who paid BCBS premiums with personal funds “may be entitled to a share of the refund because the refund is in part based upon their personal contributions.” This category of employee would have elected coverage beyond single premium coverage. Further, in oral argument, the District admitted that retired employees who paid 100% of their single premium coverage would be entitled to a portion of the surplus. I characterize the District’s suggestions as a concession. I would reverse the district court and remand for a determination of any such employee’s personal premium payment. The remainder of the disputed funds belongs to the District.