Copper River School District v. Traw

9 P.3d 280, 2000 Alas. LEXIS 91, 2000 WL 1448797

• Court: Alaska Supreme Court
• Decided: September 29, 2000
• Docket: S-8743
• Status: Published

Opinions

OPINION

EASTAUGH, Justice.

I.. INTRODUCTION

Soon after the Copper River School Board passed a motion to offer retirement incentives to teachers with seniority, school district administrators realized that they had erroneously calculated the financial effect of the incentives. But before the school board met again and rescinded its motion, six teachers communicated their "acceptance" of the retirement program. The school district refused to pay the six teachers the amounts the motion had specified. The teachers sued for breach of contract and won on summary judgment in the superior court. The school district appeals. Because there are disputed issues of material fact about whether the school board's motion was an offer and whether the district's acts terminated the teachers' power of acceptance, we reverse and remand.

II. FACTS AND PROCEEDINGS

In early 1996 the Alaska legislature was considering a teachers' retirement incentive package (RIP) to ease the salary burdens on school districts in Alaska. The Copper River School District sought to take advantage of this proposed legislation. In March 1996 Copper River School District Superintendent George Maykowskyj directed the school district's business manager, Loreen Kramer, to determine how the district could or should augment the state's proposed retirement incentives.

Kramer presented her financial analysis to the Copper River School Board at its April 2 meeting. She told the school board that the district could save money by offering the teachers a payment "equal to what I understood would be the indebtedness to [the retirement fund] incurred by retiring teachers under the bill being considered by the Legislature." The school board, accordingly, voted at its April 2 meeting in favor of the following motion:

MOTION ... to offer a retirement incentive equal to the employee's indebtedness for three years (8.65% of gross wages for certified [employees] ... ) to all certified and classified employees who are eligible to retire at the end of the school year and/or meet the requirements as established by the state for RIP. The employee must notify the District by April 30, 1996 if they plan to participate.

Within a few days Kramer decided that she had erred. The retirement program the school board had approved would cost the district more than it would save. On April 8 Kramer e-mailed the district's school principals, urging them to

[pliease inform your employees that may be eligible for retirement that I am waiting for a response from our attorneys concerning the "Longevity Bonus" offered by the school board and possibly entering into an agreement with the Retirement System for a "Retirement Incentive Program". It appears that there are some additional costs to the district that I was not aware of so we may have to "re-think" the process. I'll have an answer by the end of the week.

In early April Teacher Beverly Goad called Kramer to "get the specifics of the RIP offer." Kramer told her that the district's lawyer had advised the school board to rescind the incentive motion, and that the school board would be meeting to do just that. Goad asked what would happen if the teachers accepted the incentive prior to the rescission meeting. Kramer responded, "You can't do that." Asked by Goad whether teachers needed to accept the incentive before the meeting, Board President Linda Marchini told Goad, "Please don't." Goad then apparently reported these comments to the other teachers involved in this case.

Some teachers decided to accept the "offer" before the meeting. On April 18 six teachers delivered letters communicating their "acceptance" of the terms of the April 2 program.¹

On April 19 the school board met and rescinded the April 2 motion. It then passed a motion approving a modified retirement incentive package.

The six teachers requested payment of retirement benefits under the April 2 plan, but the district refused to pay more than the April 19 plan envisioned. The six teachers then sued for breach of contract, among other things. The teachers and the district cross-moved for summary judgment, and the superior court granted summary judgment to the teachers on the breach-of-contract question.² The district appeals. It argues that (1) the board's April 2 motion was not an offer the teachers could accept, and (2) even if it was an offer, communications from the district's administrators prevented the teachers from accepting it.

III. DISCUSSION

A. -Standard of Review

On questions of contract formation, we review grants of summary judgment de novo³ We "will affirm a grant of summary judgment if the evidence in the record presents no genuine issue of material fact and the moving party is entitled to judgment as a matter of law."⁴ We will accordingly not affirm a summary judgment if the record presents issues of material fact or if the moving party is not entitled to judgment as a matter of law. On questions of law, we are not bound by the lower court's decision⁵ Our duty is "to adopt the rule of law that is most persuasive in light of precedent, reason, and policy." ⁶

B. Was the Motion an Offer?

The district contends that the school board did not make an offer when it passed the April 2 motion. Rather, it argues, the school board was instructing the superintendent and the superintendent's staff to make an offer. Thus, there could have been no offer subject to acceptance until the administrative staff communicated one to the teachers. The teachers contend, and the superior court held, that the April 2 motion was an offer, made in accordance with the power and practice of the school board.

Was the motion an offer, or did it merely authorize district administrators to make an offer?

1. Contract formation in the government context, generally

Restatement (Second) of Contracts sections 24 and 26 (1981) delimit what can be considered an offer. offer as "the manifestation of willingness to enter into a bargain, so made as to justify another person in understanding that his assent to that bargain is invited and will con-Section 24 defines an clude it."⁷ Section 26 informs us that "[a] manifestation of willingness to enter into a bargain is not an offer if the person to whom it is addressed knows or has reason to know that the person making it does not intend to conclude a bargain until he has made a further manifestation of assent." ⁸

Two factors are relevant: the language of the motion, and the teachers' understanding of the board-administration relationship.

According to one leading municipal corporations treatise, the language of a motion has the following contractual significance: "[An ordinance granting a right, accepted and acted upon by the grantee, becomes an irrevocable contract. But an ordinance or resolution authorizing the mayor, or other officers([,] to enter into a contract does not of itself create a contract, if not acted upon."⁹

The Oregon Supreme Court quoted this language in Winklebleck v. City of Portland.¹⁰ That case illuminates the issues presented here. The city condemned Winklebleck's property in order to extend a road; Winklebleck learned from city officials that the city needed only some of his property.¹¹ He lobbied for return of the rest of his property, and the city council passed a motion directing the city auditor to return the disputed land if Winklebleck filed a release.¹² The motion stated that "upon the execution and filing of such document with the City Auditor [the property] shall be released."¹³ The city then realized that it had erred, and a city attorney told Winklebleck's attorney that Winklebleck could not reclaim the land.¹⁴ The council repealed its earlier ordinance, but before it did so, Winklebleck accepted the offer and delivered a declaration of compliance with the requirements of the ordinance; he apparently also delivered a release.¹⁵

The court reasoned that the ordinance "did not contemplate that the auditor and the plaintiff should execute some contract before the language could be closed ... but that the lot owner 'should demonstrate his right to secure [the land] by waiving the privilege of an appeal," and taking other actions commensurate with ownership.¹⁶ The court held that the ordinance was a valid offer, and that because Winklebleck had accepted the offer, he was entitled to his land.¹⁷

The Winklebleck court held a motion "fairly capable of construction as an offer" to be an offer.¹⁸ But even if a motion is fairly capable of being construed as an offer, the issue is not conclusively resolved. For example, if a person had a history of dealings with a municipality, and had reason to know that the municipality did not intend to make an offer (whatever the language of its ordinance), a court should apply Restatement section 26, and should not treat the ordinance as an offer.¹⁹ Accordingly, when a board motion is expressed in terms of a delegation, it should be considered a delegation and not an offer; but when it is couched in terms of an offer, further inquiry may be required.

When there is a continuing relationship like the employment relationship here, the language of the motion must be considered in context of the contracting parties' relations.²⁰ The commentary to Restatement section 26 includes language to this effect:

If the addressee of a proposal has reason to know that no offer is intended, there is no offer even though he understands it to be an offer. "Reason to know" depends not only on the words or other conduct, but also on the circumstances, including previous communications of the parties and the usages of their community or line of[²¹]

One writer notes:

That the alleged offeree has reason to know that no offer has been made depends not solely on the words used but also on the cireumstances surrounding the communication. Thus, if the parties have dealt with one another before ... or if the custom in a particular location or trade suggests that an offer is intended ... an offer will be found.[²²]

This leaves us with the following process. First, courts must look to the language of the motion. If the motion is not expressed in terms of an offer, there is no offer. If the motion is expressed in terms of an offer, courts must look to the underlying context. If the context suggests that the legislative body normally acts as an offeror, there is a valid offer. But if the context suggests that the legislative body normally delegates the role of making the offer, a presumption arises that the motion is not an offer, but a delegation of power to make an offer. For a motion to be an offer, then, its language must be clear enough to overcome this presumption.

This approach answers the district's public policy argument that it "should not automatically be bound every time its board passes a motion." The school board can prevent itself from being bound merely by incorporating into its motions appropriate delegation language, such as "the board delegates the authority to" carry out specific tasks. We deal below with the other part of the district's public policy question-what happens when a school board makes a mistake and the district's administrators realize it.

2. Contract formation in this case

The language of the motion suggests that the motion was itself an offer. The motion's relevant language reads: "MOTION by Turner and seconded by Kimball to offer a retirement incentive.... The employee must notify the District by April 30, 1996 if they plan to participate." The district nearly concedes this point, noting that whether the motion was an offer "turns on whether under the circumstances the Plaintiffs were justified in viewing it as one."

Assessing the underlying context of the offer implicates three circumstances: (1) whether and how the offer was conveyed to the teachers; (2) the official structure of the school district; and (8) the history of past dealings.

Restatement section 26 is concerned with the state of mind of the recipient of the offer. It asks whether "the person to whom it is addressed knows or has reason to know that the person making it" does not intend for it to be considered an offer.²³ The district asserts that "it was not reasonable to view the motion as an offer."

The district contends that the offer was not conveyed to the teachers, although it concedes that "those persons attending the meeting, hearing of the meeting, or in possession of the minutes could be said to have received the 'offer'" The teachers do not argue that the district conveyed the "offer" more clearly after the board passed the motion. They contend that at least one of them attended the April 2 school board meeting and heard the board pass the motion, but it is not clear from the record how many of the six teachers were present.

The conveyance circumstance slightly favors the district. By publicizing the meeting's agenda in advance, the district might be said to have taken extra steps to convey the offer. But there are other valid reasons the district might have publicized the agenda (e.g., to promote public comment) without intending to convey an offer by passing a motion. And while an offer was not directly conveyed to the teachers merely because the school board passed the motion at a public meeting, it was indisputably made public knowledge.

The second cireumstance here is the structure of authority in the school system. For purposes of this case, that structure is determined by Alaska statute and board bylaws and manuals.

Alaska Statute 14.14.090 contains an incomplete list of school board duties. It empowers school boards, among other things, to set total compensation levels: "In addition to other duties, a school board shall ..: determine and disburse the total amount to be made available for compensation of all school employees and administrative officers...."²⁴

The statute governing district bylaws provides that "school board policies relating to management and control of the district shall be expressed in written bylaws" adopted at board meetings.²⁵

Alaska Statute 14.14.1380 creates the position of the chief school administrator.²⁶ It empowers the administrator to "administer" the district, and to control school personnel decisions:

(b) [The [chief school] administrator shall administer the district in accordance with the policies that the school board pre-seribes by bylaw. '

(c) [TJhe [chief school] administrator shall select, appoint, and otherwise control all school district employees that serve under the chief school administrator subject to the approval of the school board.[²⁷]

The Copper River School District policy manual states that "the Board has exclusive responsibility for all school policy. The Superintendent shall have the responsibility for executing the policy of the Board...." The manual also states that

the Superintendent is the chief executive officer of the school system and has, under the direction of the Board, general supervision of all of the public schools and of all the personnel ... of the school system. The Superintendent is responsible for management of the schools under the Board's policies, and is accountable to the Board.

These provisions support the general conclusion that the superintendent is charged with carrying out the district's executive functions, while the school board acts as a legislative policymaker. Under this scheme, board actions are more likely delegations than offers. This cireumstance strongly supports the district.

The third cireumstance concerns past dealings. There is some dispute about whether teachers had previously negotiated personnel issues with the superintendent and administrators, or with the school board itself. The teachers offered inconclusive affidavits, in which they affied that they had dealt "directly with the school district." But these assertions do not explain whether the negotiations were with the school board or with the district's administrators. While there is some evidence that the teachers negotiated with the administrators, the evidence cited by both sides on this point is meager, particularly considering the importance of this issue.

In sum, it is unclear to what extent the school board normally delegates executive and negotiating authority to district administrators. If it has been standard practice to require the administrators to take executive action in order for the district to enter into contracts, a statement by the board should be considered a direct offer only if it clearly and specifically rejects or suspends that pattern of action. In this case, the motion "to offer" the retirement incentive was not accompanied by any such extraordinary language. Ultimately, the relationship between the board, the administrators, and the teachers here is a fact question for the fact finder.

Each side cross-moved for complete summary judgment. Each side thus certified that no genuine, material fact disputes precluded favorable summary judgment. Although neither side asserted that genuine fact disputes required denial of the other side's motion, each side advanced an account of the parties' past dealings that was irreconcilable with the other side's account. Under these circumstances, summary judgment was inappropriate because material questions of fact exist as to whether the context of the April 2 motion made it unreasonable for the teachers to consider it an offer. We remand to determine whether there was an offer within the meaning of Restatement sections 24 and 26.

C. Did the District Terminate or Suspend the Teachers' Power to Accept Any Offer?

An offeror, by manifesting an intention not to enter into a proposed contract, can terminate the offeree's power of acceptance.²⁸ Invoking that principle, the district argues that even if there was an offer, the district's communications with the teachers revoked the offer or terminated their power to accept it. The teachers assert that only the board had the power to revoke the offer.

Recognizing the calculation error, administrators and an individual school board member tried to prevent teachers from accepting the incentive. Their communications, discussed above, did not use words that expressly revoked the offer. We think the issue of the effect of the district's communications raises questions that should not be resolved in this appeal as a matter of law.

First, because the meaning of the words in the district's communications was not adequately litigated in the superior court, we decline to hold that those words are fairly susceptible to only one interpretation. The district gave the issue of their meaning only cursory attention in the superior court. The teachers did not address the issue there, nor have they on appeal. In holding that the district's statements did not revoke the April 2 offer, the superior court did not discuss or rely on the meaning of the statements. It relied instead on the proposition that only the board had authority to revoke a board offer. -

The absence of express words of revocation is not necessarily controlling.²⁹ The history of past dealings-also relevant to whether the board's motion was an offer-is relevant to interpreting the words of the administrators and individual board members. It therefore appears that there may be genuine, material fact disputes about the meaning and effect of these communications. We consequently cannot decide as a matter of law whether these communications revoked any offer or otherwise terminated the teachers' power to accept a board-made offer.

Second, we cannot hold as a matter of law that only board action could terminate or suspend offerees' ability to accept a board-made offer.

The teachers point out that the school board could only act as a collective body. Board bylaws state that "[bloard members have authority only when acting as a body in regular or special sessions." The bylaws also state that "[the Board shall not be bound in any way by any statement or action on the part of any individual Board member or employee of the District except when such statement or action is in pursuance of special instructions by the Board or under specified delegation of responsibility."

Corporate and municipal organizations, by their nature, require executive actors to make just this sort of decision. The district has such executive actors, consisting of the superintendent and his staff; the school board endows them with the authority and powers necessary for carrying out board decisions, as noted above.

This case does not turn exclusively on whether only the school board could revoke a board-made offer. Instead, the question is whether the administrators could permissibly do things short of revocation that nonetheless had the legal effect of suspending the offer until the board could act or could otherwise terminate the teachers' power to accept the offer,. The bylaws did not explicitly grant the superintendent the power to revoke a board offer upon learning it was based on erroneous information. Rather, the superintendent had the "responsibility of executing the policy of the Board." It could be argued that powers of "general supervision" and "policy interpretation to school staff" encompass the authority to revoke a school board offer or hold it in abeyance. While the superintendent does not have the authority to bind the board, he may have the authority to "unbind" it pending further consideration. This is an issue to be resolved on remand.

The dissent would reverse and remand with directions to enter judgment for the school district. The dissent reasons that communications received by the teachers suspended their power to accept any offer here. Absent a valid acceptance, of course, no contract was formed.

Although we agree with the dissent's legal analysis, we decline to rule on this question as a matter of law. The dissent relies heavily on the principles discussed in the Restatement (Second) of Agency (1958).³⁰ The parties did not discuss these propositions in their appellate briefs except in the most cursory fashion and did not cite the provisions the dissent finds persuasive. We prefer not to reverse for entry of judgment for the appellant in this cireumstance. Moreover, we decline to hold as a matter of law that the language used or the representatives' ostensible or inferred authority was necessarily sufficient to deprive the teachers (and each teacher individually) of any power to accept the alleged offer. We leave it to the parties on remand to assert any argument, not made to date, that the representatives' words were susceptible to more than one meaning or that one or more of the teachers should have realized that no offer could be accepted pending further school board action.

Finally, the district contends that, in accordance with comment d to Restatement section 43, "[the basic standard to which the offeree is held is that of a reasonable person acting in good faith" We agree with that principle. On remand the conduct of the teachers in accepting the offer should be considered in light of that standard.

IV. CONCLUSION

For these reasons, we REVERSE the teachers' summary judgment and REMAND for further proceedings.

1 . The six teachers are Doyle Traw, Barbara Goozen, Beverly Goad, Gary Stenberg, Karen Stenberg, and Stanley Wallace.

2 . In a related, pending case, the district is suing the Teachers' Retirement System (TRS). The district and TRS have agreed to defer further activity on the third-party claims until the present case is resolved.

3 . See Davis v. Dykman, 938 P.2d 1002, 1006 (Alaska 1997).

4 . Id.

5 . See Guin v. Ha, 591 P.2d 1281, 1284 n. 6 (Alaska 1979).

⁶

7 . Restatement (Second) of Contracts § 24 (1981). See also Young v. Hobbs, 916 P.2d 485, 488 (Alaska 1996) (setting out requirements for formation of express contract).

8 . Restatement (Second) of Contracts § 26 (1981). See also Thrift Shop, Inc. v. Alaska Mut. Sav. Bank, 398 P.2d 657, 658-59 (Alaska 1965) (citing Restatement).

9 . 10 Eugene McQuillin, The Law of Municipal Corporations § 29.03, at 247 (3d ed.1999).

10 . 147 Or. 226, 31 P.2d 637, 641 (1934) (the words "or other officers" do not appear in Winklebleck ).

11 . See id. at 638.

12 . See id. at 638-39.

13 . Id. at 639.

14 . See id. at 639-40.

15 . See id. at 640.

16 . Id. at 641-42.

17 . See id. at 641-43.

18 . Id. at 641.

19 . See Restatement (Second) of Contracts § 26 (1981).

20 . See id.

21 . Id. at § 26 crat. a.

22 . 1 Richard A. Lord, Williston on Contracts § 4:7 (4th ed.1990).

23 . Restatement (Second) of Contracts § 26 (1981).

24 . AS 14.14.090.

25 . AS 14.14.100.

26 . The superintendent is the chief school administrator in the Copper River School District.

27 . AS 14.14.130.

28 . See Restatement (Second) of Contracts § 42 (1981) ("An offeree's power of acceptance is terminated when the offeree receives from the offer- or a manifestation of an intention not to enter into the proposed contract."); id. at § 43 ("An offeree's power of acceptance is terminated when the offeror takes definite action inconsistent with an intention to enter into the proposed contract and the offeree acquires reliable information to that effect.").

29 . See Restatement (Second) of Contracts § 42 illus. 5 (1981) ("A makes an offer to B, and later says to B, 'Well, I don't know if we are ready. We have not decided, we might not want to go through with it.' The offer is revoked.").

30 . Dissent at 290-291.