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Froines v. Valdez Fisheries Development Assoc. (7/25/2003) sp-5714
Froines v. Valdez Fisheries Development Assoc. (7/25/2003) sp-5714
Notice: This opinion is subject to correction before
publication in the Pacific Reporter. Readers are
requested to bring errors to the attention of the Clerk
of the Appellate Courts, 303 K Street, Anchorage,
Alaska 99501, phone (907) 264-0608, fax (907) 264-0878,
e-mail corrections@appellate.courts.state.ak.us.
THE SUPREME COURT OF THE STATE OF ALASKA
CHRIS FROINES, )
) Supreme Court No. S-10340
Appellant, )
) Superior Court No.
v. ) 3VA-00-80 CI
)
VALDEZ FISHERIES )
DEVELOPMENT ASSOCIATION, ) O P I N I O N
INC., )
) [No. 5714 - July 25, 2003]
Appellee. )
)
Appeal from the Superior Court of the State
of Alaska, Third Judicial District at Valdez,
Joel H. Bolger, Judge pro tem.
Appearances: Michael T. Stehle, Law Office
of Michael Stehle, Anchorage, for Appellant.
Stephen McAlpine, Law Office of Stephen
McAlpine, Anchorage, for Appellee.
Before: Fabe, Chief Justice, Matthews,
Bryner, and Carpeneti, Justices. [Eastaugh,
Justice, not participating.]
BRYNER, Justice.
I. INTRODUCTION
Chris Froines sued the Valdez Fisheries Development
Association for breaching an agreement to renew an annually
issued vessel charter contract making him a member of the
association's fishing fleet. The superior court entered summary
judgment against Froines, ruling that the parol evidence rule
barred him from using extrinsic evidence to prove that the
association had promised to renew his charter contract, which, by
its own terms, expired at the end of the fishing season in which
it was issued. Froines appeals, contending that evidence of the
association's renewal policy was admissible under the parol
evidence rule because it neither modified nor contradicted the
annual charter contract's terms. Because the superior court
overlooked extrinsic evidence raising triable issues of fact as
to the scope and meaning of the annual charter agreement, we
reverse its summary judgment order.
II. FACTS AND PROCEEDINGS
The Valdez Fisheries Development Association is a
private, non-profit corporation organized by a group of Valdez
fishermen in 1978 to run a salmon hatchery in the Eastern
District of the Prince William Sound. The association recovers
its hatchery costs through a program that allows it to harvest
and sell some of its returning salmon each year. The association
determines its operation costs, negotiates a price-per-pound with
local fish processors, and figures the amount of salmon it needs
to catch to recover its costs. It then arranges for the fish to
be harvested during a one-month limited entry season between mid-
June and mid-July. The remaining salmon are "common property"
and are harvested by commercial and sport fishermen.
Since beginning its cost-recovery program, the
association has used several arrangements for harvesting its
returning salmon. For the first few years of the program, it
contracted with a single individual to catch all the fish; for
the next few years, it conducted its cost-recovery fishing
through volunteer participation, allowing anyone with a permit to
join in the fishing. But in 1994 the association converted to a
"fleet" system of fishing. Under this system, it recruited ten
local fishing vessels and entered into vessel charter agreements
with their owners. The individual vessel charter contracts
covered the one-month cost-recovery season and set out detailed
terms addressing the fishing duties and compensation rates that
would apply during this period. Under the terms of the charter
agreements, fleet members would fish individually during the
first ten days of the cost-recovery season, and each would be
paid on the basis of its own production, receiving ten percent of
the value of its catch or a minimum of $500 per day. During the
balance of the cost-recovery season, if the association began
harvesting more fish than it could sell, the charter contracts
required the fleet members to fish together as a "combine
fishery" under the direction of the association's cost-recovery
fleet manager. For this combined fishing effort, the charter
agreements provided that each vessel would be paid an equal share
of the entire fleet's production.
The association evidently planned to retain the same
fleet in 1995 that it used in 1994. But in response to inquiries
from persons interested in joining the cost-recovery fishery, the
association's board of directors and cost-recovery fleet manager,
Mike Wells, began discussing ways to introduce new boats into the
fleet. In a memo to the board during the 1994-95 off-season,
Wells proposed a system to replace "the boat with the lowest
landing each season." Wells favored the idea because it "would
at least ensure that a spot becomes available each season" and
"because it would help to put some additional incentive on the
fishermen to not be the last in line."
The board discussed Wells's suggestion at its February
14, 1995, meeting, and the suggestion was apparently well
received; the minutes of the board's meetings noted that
Mike wrote a letter proposing that each year
we drop the bottom boat. This would allow
the group to change over time. The
replacement list would be from past
experience and a local or greater interest.
We will notify the fleet this year and see
what they have to say.
A short time later, Wells described the new renewal
arrangement in a cover letter sent to fleet members with their
1995 charter contracts:
In talks with the VFDA's Board of
Directors, I was asked to come up with a fair
and equitable way to add new boats into our
cost recovery program. After much
consideration, we have decided to replace the
boat with the lowest total pounds caught each
year. A new vessel will be selected out of a
pool of names to replace the number 10 boat.
Of course someone will always be last and in
the event that one of the remaining nine does
not return, the tenth vessel will be offered
a position.
After the 1995 cost-recovery season - the second season
of fleet fishing and the first under the newly announced renewal
arrangement - one of the fleet's ten original vessels decided to
drop out of the fleet. This made it unnecessary to eliminate the
lowest producing boat, and the association ultimately opted to
keep the fleet at nine boats for the 1996 season. Wells
explained the situation to fleet members in his cover letter to
their 1996 vessel charter contracts: "Because VFDA will not fill
the tenth vessel position for 1996, VFDA will not seek to drop
the boat with the lowest pounds landed at the end of the [1995]
season."
The situation remained unchanged after the 1996 season:
the fleet retained its nine remaining original members, and the
association elected not to add a new vessel. In his cover letter
distributed with the 1997 vessel charter contracts to members of
the fleet, Wells indicated that a price reduction was "the only
change from our previous programs" and noted that "all other
aspects of the harvest will remain the same."
Froines fished with the fleet from its opening season
in 1994 through 1997. His boat, the Nikki Ann, was the fourth
highest producing boat during the 1997 cost- recovery season.
After that season ended, most fishermen in the Valdez area went
on strike to protest the low prices being offered by area
processors. But Froines declined to join the strike. His
decision to continue fishing during the strike upset many of the
association's board members and officers. As the 1998 season
approached, Wells recommended that Froines's boat be terminated
from the fleet for unspecified "past performance" reasons. The
board voted to follow Wells's recommendation in May 1998, and the
association declined to renew Froines's contract as a member of
the cost-recovery fleet.1
Froines sued the association. He claimed that, by
declining to renew his fishing contract in 1998, it breached its
promise to retain all but the least productive vessel in its
fleet from year to year. During pretrial discovery, Wells and
various association board members gave deposition testimony in
which they arguably acknowledged that the association had
implemented the alleged renewal policy in 1994 and that the
policy remained in effect when the association refused to renew
Froines's fishing contract in 1998. For example, in responding
to questions about the May 1998 meeting at which the board voted
to replace Froines's vessel, Jason Wells, a former association
board member, admitted that the main concern "was that the board
follow its policy and base that decision on production." Wells
then confirmed that the policy at issue was the one "put into
place at the end of the `94 season, beginning of [the] `95
season, that the lowest producing boat would, in fact, be dropped
or replaced with a new boat."
There was also deposition testimony acknowledging that
some board members were angry with Froines for his refusal to
join the fishing strike during the 1997 fishing season and that
they wanted to eliminate him from the fleet for that reason.
Furthermore, Mike Wells conceded that the Nikki Ann had been one
of the fleet's most productive boats in 1997. Wells nonetheless
claimed that the Nikki Ann's production levels were lower in 1995
and 1996 and that Froines had generally put forth little effort
during the fleet's periods of "combine" fishing. Froines denied
these claims, pointing out that they were based on statistics
compiled after the board voted not to renew his contract.
Shortly before trial, Froines moved for partial summary
judgment on liability; relying on the deposition testimony and
other documentary evidence, he claimed that the association had
effectively admitted that it violated its renewal policy.2 The
association opposed Froines's motion. In addition, it moved to
exclude any evidence offered by Froines to suggest that an
enforceable renewal contract existed. According to the
association, the parol evidence rule barred this evidence because
proof of a promise to renew fleet membership would contradict the
terms of the annual vessel charter contracts, which expressly
limited the duration of the fishing contracts to the one-month
cost-recovery season each year, contained no renewal provisions,
and included an integration clause declaring that "there are no
other agreements or understandings, oral or written, between the
Owner and the Corporation."
After reviewing all evidence submitted in connection
with the pending motions, hearing oral argument, and offering to
hold a hearing to allow further evidence, the superior court
entered a decision denying Froines's summary judgment motion and
granting the association's parol evidence motion. In so ruling,
the court concluded that extrinsic evidence of the renewal
agreement would violate the parol evidence rule by modifying the
express terms of the annual charter contracts. Because the
parties agreed that this ruling effectively granted summary
judgment to the association, the superior court entered a final
judgment against Froines. Froines appeals.
III. DISCUSSION
A. Standard of Review
We independently review orders granting summary
judgment, drawing all reasonable inferences in favor of the
non_moving party to determine whether the record raises a genuine
dispute as to any facts material to a viable legal theory and
whether the moving party is entitled to judgment as a matter of
law.3
B. Parol Evidence Ruling
When a written statement sets out the terms of an
agreement between contracting parties, the parol evidence rule
generally precludes the parties from using evidence of prior
agreements to contradict the written terms.4 If the writing
expresses part of the parties' agreement, the agreement is
considered to be partially integrated; a writing that sets out
the parties' complete agreement is deemed fully integrated.5 The
parol evidence rule forbids contradiction of partially integrated
terms but allows them to be "explained or supplemented . . . by
evidence of consistent additional terms."6 In contrast, the rule
does not allow the terms of a fully integrated contract to be
varied by evidence of additional terms, even if those terms are
consistent.7
Our case law describes a three-step process for
resolving parol evidence issues, requiring trial courts to
consider: (1) whether the contract is integrated, (2) what the
contract means, and (3) whether the prior agreement conflicts
with the integrated agreement.8 We have summarized the requisite
inquiry as follows:
The parol evidence rule is implicated
when one party seeks to introduce extrinsic
evidence which varies or contradicts an
integrated contract. Once the rule is
triggered, the parties' reasonable
expectations are determined by applying a
three_step test. The first step is to
determine whether the contract is integrated.
The second step is to determine what the
contract means. Determining the meaning of a
contract is treated as a question of law for
the court except where there is conflicting
extrinsic evidence on which resolution of the
contract's meaning depends. . . . If the
language is susceptible to [two] asserted
meanings, then interpreting the contract is a
question of fact for the jury. Extrinsic
evidence may always be received in resolving
these first two inquiries. The third step is
to determine whether the prior agreement
conflicts with the integrated writing.
Whether there is conflicting extrinsic
evidence depends on whether the prior
agreement is inconsistent with the
integration. Inconsistency is defined as
"the absence of reasonable harmony in terms
of the language and respective obligations of
the parties." . . . While extrinsic evidence
is important, nonetheless after the
transaction has been shown in all its length
and breadth, the words of an integrated
agreement remain the most important evidence
of intention.[9]
In the present case, the superior court acknowledged
the need to conduct this three-step inquiry and briefly addressed
each step. But the court did not clearly recognize that it was
required to consider the totality of the evidence, including
extrinsic evidence of the renewal agreement, in addressing the
first two issues - integration and contractual meaning. The
point is significant, since our cases have consistently
emphasized that "[e]xtrinsic evidence may always be received in
resolving [the] first two inquiries."10
Addressing the first issue, integration, the superior
court simply quoted the charter agreement's integration clause
and cited Kupka v. Morey for the proposition that "contracts
containing such clauses are partially integrated so that parol
evidence may not be used to prove a provision that contradicts or
is inconsistent with a specific term of the contract."11 The
court then turned to the issue of contractual meaning. Noting
that time charter agreements are inherently fixed-period
contracts and that the agreements at issue here expressly fixed
the duration of the charters to "the period of June 20 . . . to
July 20" each year, the court summarily ruled that "[t]he meaning
of this term is fairly clear from the language of the time
charter, and Froines does not identify any ambiguity in this
language." Turning to the third-step issue of conflict, the
court, again appearing to rely exclusively on the plain meaning
of the written charter agreements, concluded that Froines's
allegation of a renewal agreement "was inconsistent with the
unambiguous terms of the time charter in that it contradicted the
provision for the anticipated duration of the charter."12
Since Froines has not challenged the validity of the
charter agreements' integration clauses or alleged that those
agreements do not accurately memorialize part of the parties'
overall agreement, we agree with the trial court's reliance on
Kupka v. Morey to establish that the integration clauses alone
allowed the charter agreements to be treated as partially
integrated contracts.13 But the court's conclusion on this point
did not eliminate the need to consider and weigh the totality of
the evidence for purposes of determining the intended scope and
meaning of the charter agreements in relation to the alleged
renewal agreement. To the contrary, recognizing the charter
agreements to be partial expressions of the parties' agreement
made it crucial to determine the scope and meaning of the full
agreement in light of all available evidence - including
Froines's proposed evidence of a renewal agreement.
As we indicated earlier, however, the superior court's
second-step determination of contractual meaning focused narrowly
and exclusively on the literal terms of the charter contracts'
one-month duration provisions. The superior court saw no need to
look further, noting that "Froines does not identify any
ambiguity in this language." This finding suggests a belief by
the court that Froines's extrinsic evidence of a renewal
agreement could not be considered without an initial showing of
ambiguity in the written provisions. Yet we have expressly
recognized that a trial court's duty to consider the totality of
the evidence in resolving issues of integration and contractual
meaning extends to all cases and requires no preliminary
indication of ambiguity in the written agreement:
In the past, this court has stated or
implied that resort to extrinsic evidence can
take place only after a preliminary finding
of ambiguity. Thus, a court would review
extrinsic evidence to make a preliminary
finding of ambiguity and only then consider
extrinsic evidence in construing the
contract. A minority of this court has
repeatedly criticized this two_tiered test as
artificial and unduly cumbersome, noting that
it offers no advantage over one which
initially turns to extrinsic evidence for
such light as it may shed on the reasonable
expectations of the parties. We think this
criticism is sound and hold, as we have
intimated before, that a court in this
jurisdiction may initially turn to extrinsic
evidence in construing a contract.[14]
Here, under the evidence before the superior court at
the time of its ruling, the scope and meaning of the charter
agreements were hotly disputed issues. The association denied
formally adopting the alleged renewal policy and maintained that
the charter agreements were fully integrated contracts that
expressed the parties' complete agreement, ruling out any
possibility of an enforceable renewal agreement. Froines, on the
other hand, asserted that the association had all but admitted
the renewal policy's existence. Portraying the charter
agreements as contracts that were limited in subject and scope to
governing the fleet's fishing activities during the cost-recovery
season proper, Froines characterized the renewal policy as a
supplemental contractual term that was consistent with the
charter agreements because the renewal policy merely enabled the
parties to determine how the fleet would be selected between each
season of fishing.
"Generally, the interpretation of a writing is a task
for the court. However, where `interpretation of a written
instrument turns on the acceptance of extrinsic evidence, the
process of weighing such evidence should be for the trier of
fact.' "15 More specifically, we have explained that
[w]hether there is conflicting extrinsic
evidence is a question resolved by the court.
Even where there is conflicting extrinsic
evidence the court decides the question of
meaning except where the written language,
when read in context with its subject matter,
is reasonably susceptible to both asserted
meanings. If the language is susceptible to
both asserted meanings, then interpreting the
contract is a question of fact for the jury.
Extrinsic evidence may always be received in
resolving [this issue].[16]
Viewing the totality of the evidence in the present
case in the light most favorable to Froines, we find extrinsic
evidence that, if accepted, is reasonably susceptible to being
viewed as proof of a renewal policy that would supplement, rather
than contradict, the terms of the annual vessel charter
agreements. In context, the alleged renewal policy could
reasonably be seen as merely determining how the association
would select candidates for its fleet from season to season - a
subject beyond the narrower scope of the fixed-period charter
agreements. So construed, the renewal policy would neither
extend nor alter the terms of the annual charter agreements; it
would simply promise those vessel owners who were invited to join
the current year's fleet that, in return for a productive season
of fishing under the current charter agreement, they would be
invited back to fish with the fleet the following year under
whatever terms the association might offer them - assuming that
the association elected to retain its fleet method of cost-
recovery fishing.17 Accordingly, the alleged renewal policy would
not contradict the terms of the vessel charter agreements.18
Because the alleged renewal policy is not inconsistent
with the charter agreements, the parol evidence rule does not bar
extrinsic evidence tending to prove the policy's adoption and
continued existence. And because reasonable jurors viewing the
evidence in the light most favorable to Froines could find that
the association adopted and breached a policy of this kind, we
conclude that entry of summary judgment for the association
amounted to error.19
IV. CONCLUSION
For these reasons, we REVERSE the superior court's
judgment and REMAND the case for further proceedings.
_______________________________
1The board also voted to terminate a second vessel from the fleet
in 1998, the Kerri Lynn, a vessel that had consistently been the
fleet's lowest producer and whose owner had experienced ongoing
problems maintaining a regular fishing schedule. Because the
projected cost-recovery harvest for 1998 had increased
significantly over prior years, the board decided to add three
new boats to the fleet: two to replace the Nikki Ann and the
Kerri Lynn, and a new boat to restore the fleet to its original
size of ten vessels.
2Froines also moved to exclude the testimony of other fishermen
expressing their subjective impressions concerning whether the
board's actions amounted to the adoption of a contractually
binding renewal policy, and to preclude the association from
relying on its annual vessel charter contracts as a legal basis
for denying the existence of a renewal policy as a matter of law.
3E.g., Philbin v. Matanuska_Susitna Borough, 991 P.2d 1263, 1265
(Alaska 1999).
4E.g., id. at 1270; Alaska Diversified Contractors, Inc. v. Lower
Kuskokwim Sch. Dist., 778 P.2d 581, 583 (Alaska 1989). Alaska's
version of the parol evidence rule is stated in AS 45.02.202:
Final written expression; parol or extrinsic
evidence. Terms with respect to which the
confirmatory memoranda of the parties agree,
or which are otherwise set out in a writing
intended by the parties as a final expression
of their agreement with respect to the terms
included in the writing, may not be
contradicted by evidence of a prior agreement
or of a contemporaneous oral agreement, but
may be explained or supplemented
(1) by course of dealing or usage of
trade (AS 45.01.205) or by course of
performance (AS 45.02.208); and
(2) by evidence of consistent
additional terms unless the court finds the
writing was intended also as a complete and
exclusive statement of the terms of the
agreement.
This provision codifies the parol evidence rule in section 2-202
of the Uniform Commercial Code and parallels section 215 of the
Restatement (Second) of Contracts. See Alaska N. Dev., Inc. v.
Alyeska Pipeline Serv. Co., 666 P.2d 33, 36, 39 n.5 (Alaska
1983).
5 Restatement (Second) of Contracts 210 (1981).
6AS 45.02.202(2); see also Restatement (Second) of Contracts
215, 216(1) (1981).
7AS 45.02.202(2); Restatement (Second) of Contracts 216(1)
(1981).
8E.g., Alaska Diversified Contractors, Inc., 778 P.2d at 583.
9Western Pioneer, Inc. v. Harbor Enters., Inc., 818 P.2d 654, 657
n.4 (Alaska 1991) (citations omitted).
10Western Pioneer, Inc., 818 P.2d at 657 n.4; see also Northern
Timber Corp. v. State, Dep't of Trans. & Pub. Facilities, 927
P.2d 1281, 1287 (Alaska 1996) (quoting Western Pioneer, Inc. and
applying the three-part test); Neal & Co., Inc. v. Ass'n of
Village Council Presidents Reg'l Hous. Auth., 895 P.2d 497, 504
(Alaska 1995) (same).
11541 P.2d 740, 748 (Alaska 1975).
12The court went on to determine that evidence of the renewal
agreement also could not be admitted as proof of a separate
contract, concluding that it would have been natural for the
parties to have included the renewal agreement in the charter
contracts if they had meant to adopt it. But as the superior
court itself seems to have recognized, this analysis would have
applied only if the court had found the charter agreements to be
fully integrated contracts - an issue that the court never
addressed. In any event, our conclusion that reversal is
necessary because the alleged renewal agreement would not
necessarily have contradicted the charter agreements makes it
unnecessary to address this alternative analysis.
13Under Kupka v. Morey, however, an integration clause is not
completely self-validating, since parol evidence must be
considered to determine whether the clause is valid:
[C]ontracts containing such clauses are
partially integrated so that parol evidence
may not be used to prove a provision that
contradicts or is inconsistent with a
specific term of the contract (other than the
integration clause itself)."
541 P.2d at 748. Here, of course, the superior court had no need
to consider parol evidence in determining the validity of the
integration clause under Kupka, since Froines essentially
acknowledged that the charter contracts were partially integrated
agreements.
14Alyeska Pipeline Serv. Co. v. O'Kelley, 645 P.2d 767, 771 n.1
(Alaska 1982) (citations omitted).
15Id. at 771 n.2 (citation omitted) (quoting Hausam v. Wodrich,
574 P.2d 805, 809 (Alaska 1978)).
16Western Pioneer, Inc. v. Harbor Enters., Inc., 818 P.2d 654, 657
n.4 (Alaska 1991) (citations omitted).
17In our view, the evidence in the record fails to suggest any
implied promise or commitment by the association to retain its
fleet method of fishing from one year to the next, thus
necessarily making any right of renewal accruing to successful
fleet members at the end of a season contingent on the
association's election to pursue the same method of cost-recovery
fishing the following year.
18In analyzing the viability of the alleged renewal policy as a
separate contract, the superior court expressed the view that
this kind of arrangement would fail for want of sufficiently
specific terms and for lack of consideration. We disagree. As
described, the terms of the bargain are fairly specific: in
return for a productive season of fishing (defined as not being
the least productive boat in the fleet), the alleged renewal
policy promises that if the fleet method is continued, current
fleet members will be invited back to fish again the following
season. Nor would this arrangement lack mutual consideration.
From the association's point of view, as Mike Wells observed when
he recommended the renewal policy to the board in 1995, the
policy offered an equitable way of rotating new boats into the
fleet, while simultaneously encouraging more efficient production
by helping "to put some additional incentive on the fishermen to
not be the last in line." And from the cost-recovery fleet's
perspective, the policy offered a way of earning the right to be
invited to fish again if the association retained its fleet
system the following year.
19Froines additionally maintains that the superior court erred in
denying his motion for partial summary judgment on the issue of
liability. We find no merit to this point since, in our view,
substantial evidence supports both parties' positions and raises
genuine issues of material fact that preclude summary judgment.
Froines separately argues that the court erred in denying his
motion to exclude testimony concerning subjective impressions as
to the scope and meaning of the disputed renewal policy. But
this argument raises evidentiary issues that are ordinarily
committed to the sound discretion of the trial court in the first
instance. Because the court's denial of Froines's motion to
exclude this evidence appears to have been dictated by its ruling
on the parol evidence issue, which we have now reversed, we see
no need to address this evidentiary point at present.
