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Diagnostic Imaging Center Associates & H. Cable v. H & P (8/16/91), 815 P 2d 865
Notice: This is subject to formal correction before
publication in the Pacific Reporter. Readers are
requested to bring typographical or other formal errors
to the attention of the Clerk of the Appellate Courts,
303 K Street, Anchorage, Alaska 99501, in order that
corrections may be made prior to permanent publication.
THE SUPREME COURT OF THE STATE OF ALASKA
DIAGNOSTIC IMAGING CENTER )
ASSOCIATES, a Limited ) Supreme Court No. S-3817
Partnership, and HAROLD )
CABLE, an individual, ) Trial Court No.
) 3AN-88-10406 Civil
) O P I N I O N
H & P, a General Partnership, ) [No. 3739 - August 16, 1991]
Appeal from the Superior Court of the
State of Alaska, Third Judicial District,
J. Justin Ripley,
Appearances: William Grant Stewart,
McCarrey & McCarrey, Inc., Anchorage, for
Appellants. Richard H. Foley, Jr., Foley &
Foley, Anchorage, for Appellee.
Before: Rabinowitz, Chief Justice,
Burke, Matthews, Compton, and Moore,
Appellants, defendants below, are Diagnostic Imaging
Center Associates ("DICA"), a limited partnership, and Dr. Harold
Cable, a general partner in DICA. Appellee, plaintiff below, is
H & P, a general partnership formed by Dr. James Pister and Dr.
Randolph Hall in 1982. Pister formed DICA with two other doctors
in 1984, and remained a partner until 1988. Cable became a
general partner in DICA in 1987.
Prior to the formation of DICA, H & P entered into a
lease/purchase agreement with Equitable Life Leasing Company (the
"Equitable lease") for two ultrasound machines. On or about
September 1, 1984, H & P orally agreed to sublease the two
ultrasound machines to DICA. Under the terms of the sublease,
DICA paid $3,878.48 monthly to H & P for the machines, an amount
identical to H & P's monthly lease obligation to Equitable.
In 1987 and 1988, various disputes arose between DICA
and H & P. Pister was repeatedly questioned by the other DICA
partners about the oral sublease. Pister told Cable and the
other DICA partners that the sublease "corresponded exactly with
[H & P's] lease/purchase agreement with Equitable Life and that
both leases expired in September 1989, and that at that time,
title to both pieces of equipment would vest in DICA at no
additional cost."1 In fact, the Equitable lease ended in May and
June of 1988.
On February 18, 1988, H & P and DICA, each aided by
counsel, entered into a written settlement agreement to resolve
their disputes. Among other things, the agreement outlined the
terms of the oral sublease.2 Although there is no mention of the
length of the Equitable lease in the agreement, during the
negotiations H & P's attorney represented to DICA that the
Equitable lease expired in the summer of 1989.3
Under the terms of the settlement agreement, payments
were to continue through September 1, 1989. According to DICA,
this was to give H & P a few months of payments beyond that
required to pay off Equitable. At the time of the settlement
agreement, DICA was unaware that the Equitable lease was to
expire in 1988, not 1989, and that the agreement provided H & P
with fifteen months of payments after the Equitable lease ended.
Cable states that he would not have agreed to the sublease
provision in the settlement agreement if he had known the truth
about the Equitable lease.
Paragraph 22 of the settlement agreement contains an
integration clause providing:
This agreement contains the entire
understanding between the parties and
supersedes all prior and contemporaneous
understandings and agreements between them
respecting the within subject matter.
The parties also agreed to execute "mutual releases releasing
each other from all claims which they may have against one
another arising out of the DICA Limited Partnership . . . ."
In April 1988, Equitable threatened to repossess the
machines because H & P was not making the lease payments. DICA
contacted Equitable directly and learned that the Equitable lease
actually expired in 1988.4 DICA then made the lease payments
directly to Equitable, bypassing H & P. Title to the machines
was transferred from Equitable to DICA at the end of the
H & P sued DICA, seeking the additional sublease
payments required under the terms of the settlement agreement.
The superior court granted H & P's motion for summary judgment
without opinion and awarded H & P $60,410.43 plus costs,
interest, and attorney's fees. DICA appeals.
DICA argues that the settlement agreement was induced
by a misrepresentation concerning the length of the Equitable
lease. Alternatively, DICA argues that the agreement was the
product either of a mutual mistake as to the length of the
Equitable lease, or a unilateral mistake by DICA which was or
should have been appreciated by H & P. On these grounds DICA
seeks rescission or reformation of the agreement.
H & P counters with a lengthy discussion of the parole
evidence rule. The rule, however, does not apply where a
contract has been formed as a result of misrepresentation or
mutual mistake. Gablick v. Wolfe, 469 P.2d 391, 394-95 (Alaska
H & P's argument that the misrepresentations or
mistakes were not material is also unconvincing. H & P argues
that DICA agreed in the settlement agreement to pay a reasonable
price for the ultrasound machines and therefore Pister's profit
on the transaction is immaterial. This argument fails to
consider the full circumstances of the settlement transaction.
We defined materiality in Cousineau v. Walker, 613 P.2d 608, 613
Materiality is a mixed question of law
and fact. A material fact is one "to which a
reasonable man might be expected to attach
importance in making his choice of action."
It is a fact which could reasonably be
expected to influence someone's judgment or
conduct concerning a transaction.
(quoting W. Prosser, Law of Torts 108, at 719 (4th ed. 1971))
(other citations omitted).
H & P and DICA were negotiating a settlement to a
number of disputes, and we assume that each party made a number
of concessions. That H & P was to receive a profit of more than
$45,000 beyond that disclosed to DICA is a fact to which a
reasonable negotiator would be expected to attach importance and
cannot be immaterial. This is particularly true in light of the
fact that Pister was a partner in both H & P and DICA at the time
the settlement agreement was negotiated. Cable, the other DICA
partner,6 might well have resented any profit Pister was making
at his expense.
There is evidence in the record which tends to confirm
the materiality of H & P's misrepresentations. Dr. Cable states
that he agreed to the settlement "with the understanding that the
Equitable leases expired in the summer of 1989, and I would not,
and did not, agree that H & P would receive a year of payments
beyond what was needed to pay the Equitable lease/purchase."
Gidcumb, DICA's attorney during the settlement negotiations,
states that he relied on the representations of H & P's attorney
and that if he had been aware of the true expiration dates of the
Equitable leases he would not have been authorized to agree to a
1989 expiration of the sublease.
Because there are genuine issues of material fact
concerning whether material misrepresentations or mistakes were
made, the judgment in this case must be reversed and the case
remanded for further proceedings.7
REVERSED and REMANDED.
1 Pister denies making any representations about the length
of the Equitable leases. However, because we must view the facts
in the light most favorable to DICA, the non-moving party, we
assume that the disputed representations were made. Duty Free
Shoppers Group, Ltd. v. State, 777 P.2d 649, 652 (Alaska 1989).
2 The Preamble to the settlement agreement provides in part:
WHEREAS, H & P is the lessor of one
(1) ATL 600 Ultrasound Machine and one (1)
ADR 4000 Ultrasound Machine from Equitable
Life Leasing Corporation. These machines are
currently being subleased to DICA for the sum
of THREE THOUSAND EIGHT HUNDRED SEVENTY-EIGHT
DOLLARS AND FORTY-EIGHT CENTS ($3,878.48) per
month for a period of five years beginning on
September 1, 1984 with final payment due on
or before September 1, 1989.
Paragraph 6 of the agreement provides:
H & P will execute a Bill of Sale
conveying all right, title and interest which
it may have in the ATL 600 Ultrasound Machine
and ADR 4000 Ultrasound Machine to DICA.
Consideration for said transfer shall be
payments of THREE THOUSAND EIGHT HUNDRED
SEVENTY-EIGHT DOLLARS AND FORTY-EIGHT CENTS
($3,878.48) on the first day of each month
through and including September 1, 1989.
3 Notes taken by DICA's attorney Lance E. Gidcumb, of his
conversation with H & P's attorney Stanley Lewis, suggest that
DICA was told the lease expired in 1989. Although Lewis denies
making such representations, we are required to accept DICA's
version of the facts, see supra note 1, and therefore assume
Lewis told Gidcumb that the Equitable lease expired in 1989.
4 According to Gidcumb, he and Lewis called Cindy Allopena
of Equitable on April 19, 1988, "and both of us were shocked to
be told by her that the leases expired in May and June of 1988
and not 1989, and I remember seeing that Mr. Lewis was visibly
disturbed when he heard this."
5 H & P acknowledges this rule at one point in its brief.
6 By the time the settlement agreement was entered into,
only Pister and Cable remained as general partners in DICA.
7 Because we reverse and remand on the merits, the award of
attorney's fees is vacated. For the same reason, the defendants'
motion to amend clearly is no longer futile, as argued by H & P.
Thus, on remand, the superior court should consider anew the
defendants' motion to amend.