Neiss v. Ehlers

• Decision Date: 28 June 1995
• Docket Number: E-3
• Citation: 899 P.2d 700,135 Or.App. 218
• Parties: , 10 IER Cases 1365 Violet E. NEISS, Appellant, v. Kenneth E. EHLERS and Jill A. Ehlers, husband and wife, Respondents. 92-1832-; CA A83026.
• Court: Oregon Court of Appeals

Page 700

899 P.2d 700

135 Or.App. 218, 10 IER Cases 1365

Violet E. NEISS, Appellant, v. Kenneth E. EHLERS and Jill A. Ehlers, husband and wife, Respondents.

92-1832-E-3; CA A83026.

Court of Appeals of Oregon.

Argued and Submitted Nov. 14, 1994.

Decided June 28, 1995.

[135 Or.App. 219-A] Carl F. Jepsen, Portland, argued the cause, for appellant. With him on the briefs was Warren, Allen, King & O'Hara.

G. Philip Arnold, Ashland, argued the cause, for respondents. With him on the brief was Drescher & Arnold.

Before DEITS, P.J., and RIGGS and HASELTON, JJ.

DEITS, Presiding Judge.

Plaintiff appeals from a summary judgment for defendants in this action for breach of contract. ¹ We reverse.

In May 1989, plaintiff was an optician, working for a large optical concern in Portland. Defendant Kenneth Ehlers is a licensed doctor of optometry. He and his wife, defendant Jill Ehlers, had recently opened an optical business in Ashland, operating under the name Ashland's Optical Expressions. On May 12, the parties entered into the following agreement:

"LETTER OF AGREEMENT AND INTENT

"The following letter outlines the initial agreement between Kenneth E. and Jill A. Ehlers dba Ashland's Optical Expressions and Violet E. Neiss, Dispensing Optician.

"Salary: $24,000 per year

"Benefits: Medical/Dental Insurance (Company Paid Deductible)

Long Term Disability Insurance

Three Weeks Paid Vacation

Sick Leave as Necessary.

"Additional salary increases, bonuses and benefits shall be given to all parties in accordance with good business practices, subsequent to appropriate legal and accounting advice, and agreed upon by all above named parties.

"Furthermore, in consideration of the particular skills and contributions of Violet E. Neiss to Ashland's Optical Expressions, she shall be granted a one-third interest in Ashland's Optical Expressions as soon as it can be practically arranged [but in no case later than May 1, 1990] through the establishment of an S corporation and/or in a manner agreed upon by all above named parties and subsequent to appropriate legal and other necessary advice." ²

Plaintiff moved to Ashland and worked for defendants' business for more than two years. During that time, the parties attempted unsuccessfully to negotiate a new agreement, spelling out both the terms of plaintiff's employment and of her acquisition of an ownership interest. After those attempts failed, plaintiff left the business and returned to Portland. She then brought this action, alleging that defendants breached the agreement by not conveying the promised ownership interest. She sought damages, inter alia, for wages and benefits that she would have received from defendants had they not breached the agreement; for the expenses and losses that she incurred and other consequences of her move to Ashland; for lost wages and benefits she would have received had she remained employed in Portland; and for the value of the share of the Ashland business that defendants promised, but did not provide her.

In granting the motion for summary judgment, the trial court concluded that there was no enforceable contract between the parties. The court first noted that the agreement of May 12, 1989, and the related oral promise, "did not include an immediate promise" for the transfer of the ownership interest. The court then reasoned:

"The alleged Agreement encompassed both the ownership and employment and * * * they are not divisible; and since the parties were not able to agree on the employment portions, the parties' agreement is too indefinite for enforcement."

The focal point of the trial court's reasoning, and of defendants', is that the 1989 agreement's provisions relating to employment terms and its provisions relating to ownership are indivisible; therefore, if either is unenforceable, neither is enforceable. The trial court and, to a lesser degree, defendants take the view that the employment terms are too indefinite for enforcement, because the efforts to replace them with a new agreement ultimately failed in 1992. However, we agree with plaintiff that the "fact that the parties * * * were unable to agree on a new substitute Agreement does not abrogate the original Agreement of 1989." The failure to agree on a modification simply left the existing terms intact. Consequently, we do not agree that the 1989 ownership terms are rendered unenforceable because of the parties' failure to modify the employment terms in the 1989 agreement.

Defendants' primary argument, however, is that the agreement is unenforceable because the ownership provisions themselves constitute a mere "agreement to agree" and, as such, cannot be enforced. Because defendants regard the provisions in the agreement as indivisible, they therefore conclude that it is unenforceable in its entirety.

Plaintiff contends that she is entitled, under the doctrine of promissory estoppel, to some relief in connection with the ownership provisions. We agree with defendants that those provisions comprise only an agreement to agree. Slayter v. Pasley, 199 Or. 616, 264 P.2d 444 (1953). Consequently, plaintiff can prevail in this action, if at all, only on her promissory estoppel theory. Although defendants offer a number of reasons why that theory does not avail plaintiff, they do not raise the basic question of whether the doctrine of promissory estoppel is applicable when the promise involved is an agreement to agree or, for other reasons, is too indefinite or incomplete for enforcement as a contract.

Generally, this court does not address or decide issues that the parties do not raise. In this instance, however, the resolution of the unraised issue is so critical to the economy of the process that we will depart from our usual practice: If the only theory on which plaintiff can prevail is inapplicable to the facts as a matter of law and our disposition of the issues that the parties do raise would otherwise lead to a remand, the practical effect would be to reverse the trial court's judgment and to remand for further proceedings on a nonissue. Moreover, the question of whether promissory estoppel can apply to indefinite agreements is "close." There is no controlling Oregon authority, and the courts of other jurisdictions which have addressed the question are divided.

In Bixler v. First National Bank, 49 Or.App. 195, 199-200, 619 P.2d 895 (1980), we described the elements of promissory estoppel as

"(1) a promise

"(2) which the promisor, as a reasonable person, could foresee would induce conduct of the kind which occurred,

"(3) actual reliance on the promise "(4) resulting in a substantial change in position."

We noted in Bixler that the promissory estoppel doctrine, as embodied in Restatement of Contracts § 90, (1956), had been "adopted" by the Supreme Court in Schafer et al. v. Fraser et ux, 206 Or. 446, 290 P.2d 190, 294 P.2d 609 (1956). Bixler, 49 Or.App. at 199, 619 P.2d 895. Finally, in a footnote, we touched on the question that is presented here, noting:

"If the promise were not sufficiently definite to be enforceable, there is a growing body of law which would, nevertheless, apply the doctrine of 'promissory estoppel' to permit the party relying reasonably on that promise to recover his reliance damages--that is, to make him whole for out of pocket expenses. See Henderson, Promissory Estoppel and Traditional Contract Doctrine, 78 Yale L.J. 343 (1969). The promise, as such, is not enforced as a contract because it is too indefinite, and the remedy is not co-extensive with that for breach of contract. The remedy may be limited as justice requires. See Restatement (Second) of Contracts, § 90 (Tent. Draft, 1973)." Id. at 199 n 4, 619 P.2d 895.

In Stanley D. Henderson, Promissory Estoppel and Traditional Contract Doctrine, 78 Yale L.J. 343 (1969), the author describes the process, referred to in Bixler, by which traditional concepts of promissory estoppel were gradually broadened as section 90 was extended and applied more liberally in the commercial and bargaining contexts. Of particular relevance, Henderson notes that the emerging trend of the case law "sounds a retreat from the common law view that breach of an agreement to agree is not actionable." Id. at 359. (Footnote omitted.) More generally, Henderson states that "Section 90 is also being used as a basis for enforcement of promises which under traditional theory would be held indefinite and hence unenforceable." Id. at 361.

The case which Henderson identifies as exemplifying the trend, Hoffman v. Red Owl Stores, Inc., 26 Wis.2d 683, 133 N.W.2d 267 (1965), has since become the factual and legal prototype for Illustration 10 to Restatement (Second) of Contracts § 90 (1981):

"10. A, who owns and operates a bakery, desires to go into the grocery business. He approaches B, a franchisor of supermarkets. B states to A that for $18,000 B will establish A in a store. B also advises A to move to another town and buy a small grocery to gain experience. A does so. Later B advises A to sell the grocery, which A does, taking a capital loss and the grocery, which A does, taking a capital loss and foregoing expected profits from the summer tourist trade. B also advises A to sell his bakery to raise capital for the supermarket franchise, saying 'Everything is ready to go. Get your money together and we are set.' A sells the bakery taking a capital loss on this sale as well. Still later, B tells A that considerably more than an $18,000 investment will be needed, and the negotiations between the parties collapse. At the point of collapse many details of the proposed agreement between the parties are unresolved. The assurances from B to A are promises on which B reasonably should have expected A to rely, and A is entitled to his actual losses on the sales of the bakery and grocery and for his moving and temporary living expenses. Since the proposed agreement was never made, however, A is not entitled to lost profits from...