Unified School District No. 446 v. Sandoval

dissenting: I respectfully dissent. The uncontrov-erted facts establish the parties entered into a binding oral contract on March 10, 2008.

Binding Oral Contract

It is uncontroverted that on March 10, the Board of Education of Unified School District No. 446 was in executive session considering whether that night it would either (1) pass a resolution to nonrenew Deborah Sandoval’s teaching contract for the upcoming school year or (2) allow her to voluntarily leave its employ via a negotiated settlement. It is further uncontroverted that offers and counteroffers were exchanged until Sandoval eventually accepted the board’s “last proposal.”

It is uncontroverted that Sandoval told her negotiating agent, Kansas National Education Association (KNEA) UniServ Director, *289Tony White, “to accept the proposal,” and that White in turn told Superintendent Chuck Schmidt that Sandoval “would accept the offer.” Schmidt then told the board.

The majority opinion accurately sets forth the precise, uncon-troverted terms of the accepted offer:

“180 days of paid leave to qualify for KPERS disability benefits, which would require her to leave the classroom on March 28, 2008: paid insurance on the bottom tier for 5 years; and a lump sum payment of $20,000 in the event that she did not qualify for disability benefits.”

Under these facts, a contract typically would be formed because “the formation of a contract requires a bargain in which there is a manifestation of mutual assent to the exchange and a consideration.” Restatement (Second) of Contracts § 17 (1981). More particularly, “The manifestation of mutual assent to an exchange ordinarily takes the form of an offer or proposal by one party followed by an acceptance by the other party or parties.” Restatement (Second) of Contracts § 22(1) (1981). See Southwest £ Assocs., Inc. v. Steven Enterprises, 32 Kan. App. 2d 778, 781, 88 P.3d 1246 (2004) (Each party must accept the essential terms of the contract and outwardly communicate the acceptance in a way reasonably intended to be understood as such; law of contracts refers to that mutual acceptance as a “meeting of the minds.”). And as is required for a meeting of the minds, here the uncontroverted evidence clearly established “ ‘ “with reasonable definiteness that the minds of the parties met upon the same matter and agreed upon the terms of die contract.” ’ ” Price v. Grimes, 234 Kan. 898, 904, 677 P.2d 969 (1984).

Nevertheless, the majority adopts Sandoval’s argument that these all represent only preliminary negotiations and that no contract would be created until a formal written contract was executed. But its conclusion is contradicted by both parties’ conduct and interpretation immediately after the board learned of Sandoval’s acceptance of its offer. This warrants careful consideration because:

“The subsequent conduct and interpretation of the parties themselves may be decisive of the question of whether a contract has been made even though a *290document was contemplated and has never been executed.” (Emphasis added.) King v. Wenger, 219 Kan. 668, 672, 549 P.2d 986 (1976).

Accord 1 Corbin on Contracts § 2.9, p. 154 (rev. ed. 1993).

Here, it is uncontroverted that the board considered it had a binding oral contract and that in reliance on Sandoval’s acceptance of its last offer, it took no action on the nonrenewal resolution proposed for passage that night. Schmidt swears that “[h]aving reached a settlement, the executive session then recessed [and returned to open session]. Because Ms. Sandoval agreed to resign as part of the settlement, the board of education relied thereon and did not taire action on the nonrenewal resolution.” Board president Farthing similarly swears that “[a]s a result of the verbal agreement, the board took no action on the Resolution for Non-Renewal of Ms. Sandoval. When the meeting adjourned, the board of education felt that it had a solid, enforceable verbal agreement

Stated in the language of standard contract law, the board immediately began its performance of the oral contract when that night—March 10—it removed the barrier of its imminent nonre-newal so Sandoval could voluntarily leave her employment by March 28 per the agreement. Such partial performance of a contract can be significant evidence of contract formation. See RG. Group, Inc. v. Horn £ Hardart Co., 751 F.2d 69, 75 (2d Cir. 1983) (partial performance is of “major significance”); cf. Miles v. City of Wichita, 175 Kan. 723, 727, 267 P.2d 943 (1954) (company moved its equipment onto land and began removing sand under purported oral contract; accordingly, “the [later] preparation and execution of the written lease was but little more than a clerical act”). Even more compelling evidence of contract formation exists when one party’s partial performance “has been accepted by the party disclaiming the contract.” RG. Group, Inc., 751 F.2d at 75.

In RG. Group, Inc., the Second Circuit aptly summarized the importance of both factors: (1) acceptance of (2) partial performance. “Aside from unilateral contracts, partial performance is an unmistakable signal that one party believes there is a contract; and the party who accepts performance signals, by that act, that it also understands a contract to be in effect.” (Emphasis added.) 751 F.2d at 75-76.

*291In agreement is 1 Williston on Contracts § 4:11, pp. 513-14, (4th ed. 2007), which states in relevant part:

“Certainly, acts of performance by one party accepted by the other indicate that the parties understand that definite terms have been agreed upon. As such, even if the oral agreement prior to the act of performance did not constitute a contract, the subsequent tender of performance would amount to an offer, and the receipt of the performance without objection would operate as an acceptance of the offer.” (Emphasis added.)

To identify Sandoval’s acceptance of the board’s partial performance, I first observe that White’s affidavit repeatedly reveals he knew exactly what was at stake for his client: settle with the board that night or experience immediate nonrenewal. For example, he swears that earlier that day he and Sandoval met Schmidt “and presented a package proposal that would forestall the nonrenewal.” He further swears that at the later board meeting, Schmidt told him that “[i]f Ms. Sandoval did not accept the offer at the end of five minutes, the Board would come back into open session and nonrenew Ms. Sandoval’s employment contract.” The majority opinion correctly acknowledges that White had “many years of negotiating teacher resignations.”

Accordingly, when Sandoval accepted the board’ resignation alternative, the experienced White would have known that the alternative threatening imminent nonrenewal would be removed by the board yet that night. And his affidavit bears this out. After White told Schmidt of Sandoval’s acceptance of the board’s offer and Schmidt in turn told the board, according to White’s affidavit White tiren watched as “[t]he Board returned to open session and adjourned without taking any action,” i.e., passing the nonrenewal resolution. In other words, White chose to remain present and accept the board’s partial performance of the oral contract.

After choosing to witness and accept this partial performance, White reinforced the existence of the oral contract by taking immediate action. His affidavit provides that “[immediately after the Board meeting adjourned [without the nonrenewal], I approached Mr. Schmidt and asked him how we wanted to handle the written settlement agreement... I told him that KNEA had some standard *292language we used in due process cases and could prepare something quickly.” (Emphasis added.)

If all of the preceding had merely been preliminary negotiations—suggesting more would follow before finalization—there would seem to be no need for White’s professed urgency to prepare a written agreement. Instead, his admitted “immediate” action and chosen language (“quickly”) further demonstrates that an oral settlement agreement already had been formed. Indeed, that night White expressed absolutely nothing, by word or deed, to the board or Schmidt, even remotely suggesting a binding oral contract had not been reached.

Moreover, even when White spoke with Schmidt several days later, it was not to tell Schmidt there was no binding contract reached on March 10. Rather, it was to say Sandoval simply “changed [her] mind.” She swears that “[o]n Wednesday March 12 I told Tim Knoles [local NEA leader] that I had changed my mind and wanted to go through with a due process hearing” challenging the now-anticipated nonrenewal of her contract. Her acknowledgment of the resulting due process hearing establishes that, like White, she had known on March 10 that she would either settle that night or be immediately nonrenewed.

These actions by the parties, and the timing of their actions, compel me to consider it a binding oral contract.

The majority suggests, in another context, that the board’s failure to remove Sandoval from her classroom by March 28 indicates the board acted inconsistently with the terms of the oral contract it wants to enforce. As Justice Luckert points out, however, it is un-controverted that the board’s nonrenewal resolution “expressly reserved the right to enforce the oral agreement” and “[i]t was always tire intent of the Board to honor and enforce the agreement made on March 10, 2008.”

I now address the factors the majority cites to conclude no oral contract existed.

1. Subsequent discussions.

The majority holds that the parties’ exchange of communications after March 10 demonstrates they did not understand that they *293had reached a full meeting of the minds that day. Admittedly White and Schmidt discussed additional terms after Sandoval’s acceptance of the board’s offer. But as the majority admits, “an enforceable contract may exist despite the parties’ agreement to resolve nonessential terms at a later time.” Nungesser v. Bryant, 283 Kan. 550, 567, 153 P.3d 1277 (2007). And a contract may exist where “the parties express definite agreement on all necessary terms, and say nothing as to other relevant matters that are not essential but that other people often include in similar contracts.” Corbin § 2.9, p. 158.

Based upon the parties’ other actions, it is extremely difficult to label these later, additional terms as essential to forming any contract. First, it is uncontroverted that the present dispute was not caused because the parties failed to agree on these purportedly essential new terms but because Sandoval, after agreeing to resign, simply changed her mind. She certainly provided no reasons, e.g., refusing to agree to these new terms. Second, given White’s manifest acceptance of the board’s partial performance of the oral contract on March 10 before these additional terms were even identified, coupled with his uncontroverted alacrity that same night in wanting the oral agreement “quickly” reduced to writing, it is obvious he did not consider these later terms essential to forming a contract. One had already been made.

I readily conclude the terms were not essential and they therefore do not serve to dilute my conclusion that the contract had been formed on March 10.

2. District policy on resignations.

The majority next holds that because District policy stated resignations would be considered if submitted in writing, Sandoval may have been led to reasonably expect “that her acceptance of the board’s offer would not become binding until she signed a written settlement agreement.” But Sandoval’s affidavit is silent regarding her knowledge of this policy.

Even if she were knowledgeable, under similar reasoning the board could claim it was not bound to pay Sandoval the sums owed under the settlement until she actually left “the classroom on *294March 28th, 2008.” The board’s receipt of her eventual written resignation, like her leaving by March 28, is simply a step in the execution of the terms of the binding oral contract formed on March 10.

3. Absence of matters in open session and minutes.

The majority next holds that (1) the absence of board ratification of the purported oral contract—acceptance of Sandoval’s resignation-—-in open session on March 10, and (2) the absence in the board meeting minutes of its acceptance of her resignation “are compelling evidence that the board did not intend the agreement to be final as of March 10.”

Schmidt informed the board in executive session of Sandoval’s acceptance of its final offer. The affidavits confirm that the board and superintendent all believed an oral contract was reached in executive session. So the board recessed into open session and adjourned the meeting. And as a matter of basic contract law, the board and its superintendent were correct: nothing remained for the board to do to form a binding contract. See Restatement (Second) of Contracts, § 17(1) (1981) (the formation of a contract requires a bargain in which there is a manifestation of mutual assent to the exchange and a consideration); Southwest £ Assocs., Inc. v. Steven Enterprises, 32 Kan. App. 2d 778, 781, 88 P.3d 1246 (2004) (each party must accept the essential terms of the contract and outwardly communicate the acceptance in a way reasonably intended to be understood as such).

And under long-standing Kansas caselaw, contract action taken in executive session—although in violation of tire Kansas Open Meetings Act (KOMA), K.S.A. 75-4317 et seq.—is nevertheless binding on the parties absent prosecutorial action to void it. See Krider v. Board of Trustees of Coffeyville Community College, 277 Kan. 244, 247-49, 83 P.3d 177 (2004) (notice of nonrenewal of tenured college instructor’s contract was not voided because board’s vote taken in executive session); City of Topeka v. Watertower Place Dev. Group, 265 Kan. 148, 156-57, 959 P.2d 894 (1998); Stoldt v. City of Toronto, 234 Kan. 957, 962-63, 678 P.2d 153 (1984).

*295Because nothing more needed to be done in executive session to make the oral contract binding little, if any, weight should be given to the board’s later failure to repeat itself in open session. And actions taken in executive session—binding or not, made improperly or not-—-are not among the subjects KOMA requires to be recorded in tire meeting minutes. See K.S.A. 75-4319(a). Accordingly, little, if any, weight should be given to the resignation’s absence in the minutes.

4. Whites affidavit testimony.

The majority further points to White’s affidavit testimony “that in his many years of negotiating teacher resignations, the terms of resignation settlement agreements were always set out in writing.” It suggests Sandoval therefore did not understand “that she would be bound by her oral communication of resignation” and so there was no meeting of the minds. But as with the majority’s factor 2, Sandoval’s affidavit is silent—about her own understanding or expectation that a contract needed to be in writing in order to bind her or that it otherwise entered into the calculus of her change of mind about her acceptance of the board’s offer.

I also agree with the Court of Appeals that “[njothing in the record on appeal indicates that the agreement was conditioned upon the subsequent execution of a formal written instrument.” (Emphasis added.) U.S.D. No. 446 v. Sandoval, No. 101,145, 2009 WL 2766751, at *4 (Kan. App. 2009) (unpublished opinion). Indeed, Schmidt’s affidavit provides that he and White “were simply memorializing tire oral agreement.” And this court has held “[t]he fact that the parties [to an oral contract] contemplate the subsequent execution of a formal instrument as evidence of their agreement does not necessarily imply they have not already bound themselves to a definite and enforceable contract.” Phillips ér Easton Supply Co., Inc. v. Eleanor International, Inc., 212 Kan. 730, 735, 512 P.2d 379 (1973) (citing Willey v. Goulding, 99 Kan. 323, 161 P. 611 [1916]); Middleton v. City of Emporia, 106 Kan. 107, 186 P. 981 (1920); see Restatement (Second) of Contracts § 27 (1981) (“[M]anifestations of assent that are in themselves sufficient to conclude a contract will not be prevented from so operating by the *296fact that the parties also manifest an intention to prepare and adopt a written memorial thereof.”).

In sum, my view of the uncontroverted evidence establishes a binding oral contract was formed on March 10. I therefore would affirm the district court’s grant of summary judgment for the board.

But if contract formation is not certain, then reversal and remand for more factual development is required. Further discovery would reveal what White intended on March 10 if not to accept the board’s partial performance of an oral contract. More particularly, the parties might explore why White had not offered to draft the written agreement at the time he was also advising Schmidt of Sandoval’s acceptance of the offer—instead of offering after the board had removed the imminent nonrenewal and adjourned the meeting. Reimer v. The Waldinger Corp., 265 Kan. 212, 214, 959 P.2d 914 (1998) (“The question whether a binding contract was entered into depends on the intention of the parties and is a question of fact.”).

Second Basis Not Properly Before This Court

I also respectfully dissent from the majority’s second basis for granting judgment in favor of Sandoval. Specifically, it states that even assuming the parties formed a contract on March 10, the uncontroverted evidence establishes that they later mutually rescinded any such contract. For example, it points out the board allowed her to finish her teaching duties for the year and paid her salary.

My principal problem with this approach is that the mutual rescission issue was not raised in Sandoval’s brief or identified in her petition for review. Her only “Statement of the issue for which review is sought” is presented as follows:

“The parties did not intend to enter into an agreement without board action.”

Nor did the board file any cross-petition for review on any issue.

Considering the issue of mutual rescission violates our rules of appellate procedure and is contraiy to our case law. See State v. Sanchez-Loredo, 294 Kan. 50, 53, 272 P.3d 34 (2012) (citing rules and caselaw). The majority self-exempts from these restrictions by *297merely declaring that it “is not required to reach the wrong conclusion when the parties do not advocate for the correct application of the law to the facts.”

But this declaration misses the point. Our own rules and caselaw do not require that the wrong conclusion be reached. Rather, they require that no conclusion be reached because the issue that would require a conclusion will not be addressed by this court—absent certain narrow exceptions which are not mentioned by the majority or applicable here. See State v. Puckett, 230 Kan. 596, Syl. ¶ 1, 640 P.2d 1198 (1982) (stating the general rule and describing the exceptions).

Additionally, if under a Puckett exception we no longer require the parties to raise certain arguments at any stage of the proceedings because we will make the arguments ourselves, and if we will decide the case on the basis of our own arguments without allowing the parties input, we are on our way to eliminating any incentive for anyone to raise, much less address, any issues—because this court will do it all. Even in State v. Puckett, where an exception applied to permit this court to raise an issue on its own, we still held:

“[W]here an appellate court raises a new issue sua sponte, counsel for all parties should be afforded a fair opportunity to brief die new issue and to present their positions to the appellate court before the issue is finally determined.” 230 Kan. at 601.

For these reasons, I would affirm the district court and the Court of Appeals.