Panhandle Eastern Pipe Line Co. v. Smith

• Decision Date: 16 December 1981
• Docket Number: No. 5506,5506
• Parties: 112 L.R.R.M. (BNA) 3075 PANHANDLE EASTERN PIPE LINE COMPANY, a Delaware Corporation authorized to do business in the State of Wyoming, Appellant (Defendant), v. Nowlin SMITH, Jr., Appellee (Plaintiff).
• Court: Wyoming Supreme Court

Page 1020

637 P.2d 1020

112 L.R.R.M. (BNA) 3075

PANHANDLE EASTERN PIPE LINE COMPANY, a Delaware Corporation authorized to do business in the State of Wyoming, Appellant (Defendant), v. Nowlin SMITH, Jr., Appellee (Plaintiff).

No. 5506.

Supreme Court of Wyoming.

Dec. 16, 1981.

Richard L. Williams of Williams, Porter, Day & Neville, P. C., Casper, for appellant.

Bernard Q. Phelan of Graves, Hacker & Phelan, P. C., Cheyenne, for appellee.

Before ROSE, C. J., and RAPER, THOMAS, ROONEY and BROWN, JJ.

BROWN, Justice.

Panhandle Eastern Pipe Line Company (Panhandle) appeals a district court judgment granting damages to its former employee Nowlin Smith, Jr., for breach of contract. Panhandle asserts that no contract ever existed. It maintains that the dispute which is here on appeal should have been submitted to arbitration under the terms of a collective bargaining agreement. It also maintains that if this court decides a contract did exist, we should nevertheless reverse the damage award because it was not supported by sufficient evidence.

We affirm.

Panhandle fired Mr. Smith in October, 1979. Mr. Smith followed the grievance procedure provided by a collective bargaining agreement to the third and final level of intracompany proceedings, which was a meeting with company officials at the division office. After that meeting, Panhandle initially decided to uphold the decision to fire Mr. Smith, but changed its mind after Mr. Smith's union representative requested that it reconsider. By letter dated December 13, 1979, the company offered to withdraw the discharge if Mr. Smith would agree to comply with certain terms and conditions. Mr. Smith signed the letter under the typewritten words, "Understood, Agreed To and Accepted," added some handwritten notations, and again signed his name. The union representative also signed the letter and returned it to the company.

Because Mr. Smith wrote on the letter, Panhandle argues that no contract existed, claiming that Mr. Smith failed to use the mode of acceptance which it prescribed. As Panhandle conceded at oral argument, it would have contested any words being added to the letter, even ones as innocuous as, "Have a nice day." Panhandle also argues that Mr. Smith made a counteroffer by adding terms and conditions which showed he was trying to modify the offer.

We think appellant's "mode of acceptance" argument was not directly raised in the district court. Panhandle's pleadings spoke to a counteroffer being made because Mr. Smith added terms and conditions to the proposed offer. The exhibits introduced at trial spoke to "modifications," and "added terms and conditions," implying that the content of the words mattered. No mention was made anywhere below of "mode of acceptance" or "method of acceptance." Appellant cautioned this court not to confuse the two theories of "mode of acceptance" and "counteroffer," although appellant tried to interweave them in its brief. Because we want to avoid any confusion, we have decided to address both the "mode of acceptance" argument and the "counteroffer" argument.

I

An offeror has the right to demand an exclusive mode of acceptance from an offeree. The mode of acceptance can be unreasonable or difficult if the offeror clearly expresses his intention to exclude all other modes of acceptance. This intention must be expressed in the communicated offer itself. Crockett v. Lowther, Wyo., 549 P.2d 303, 309 (1976), citing 1 Corbin, Contracts, § 88, at 373 (1963). The letter of December 13, 1979, contained the offer to withdraw Mr. Smith's discharge. The letter directed that both Mr. Smith and the union had to agree in writing to the terms of the offer, and that the signatures were a condition precedent to the withdrawal of the discharge. ¹ It went on to reiterate that the withdrawal of the discharge was contingent upon receipt of written acceptance by Mr. Smith and the union.

Panhandle insists that it modified this offer by orally demanding of Mr. Smith during a telephone conversation that he just sign the letter and not add anything. Mr. Smith, however, does not remember the conversation that way, and we must view the evidence on appeal most favorably to him. Madrid v. Norton, Wyo., 596 P.2d 1108 (1979). Here, Mr. Smith testified he did not understand that any addition to the letter would be considered a rejection of the offer. Panhandle, therefore, did not orally modify the written offer of December 13, 1979; it failed to "clearly express, in the terms of the communicated offer itself," its intention to exclude all other modes of acceptance. Crockett v. Lowther, supra. Panhandle was explicit only in stating that the terms and conditions had to be agreed to in writing.

The offeror is master of the offer, but we think fairness demands that when there is a dispute concerning mode of acceptance, the offer itself must clearly and definitely express an exclusive mode of acceptance. There must be no question that the offeror would accept the prescribed mode and only the prescribed mode. Corbin comments, "The more unreasonable the method appears, the less likely it will be that a court will interpret his offer as requiring it (a specific mode of performance) and the more clear and definite must be the expression of his intention in words." 1 Corbin on Contracts, § 88, at 373 (1963). The only motivation we could surmise for the requirement that no handwriting be added to the paper, regardless of content, would be that the offeror had an inordinate fondness for tidy sheets of paper. The requirement strikes us as unreasonable, and strikes out as a prescribed mode of acceptance unless the offeror's intention is explicitly set out. We agree that the mode of acceptance rule " * * * has been enforced with a rigor worthy of a better cause." Calamari & Perillo, Contracts, § 2-22 (2d ed., 1977). We are not eager to enforce it if there is any question about the mode of acceptance or about the clarity with which the demand was made. Had Panhandle seriously been proposing an exclusive mode of acceptance calling for the absence of any writing on the paper other than signatures, the letter should have explicitly demanded that exact and exclusive mode of performance.

II

The requirement that no terms or conditions be added to change the contract is a different matter. The law of contract formation dictates that one who modifies an offer has usually rejected the offer and made a counteroffer, and that no contract exists unless the original offeror accepts the counteroffer. Trautwein v. Leavey, Wyo., 472 P.2d 776 (1970). Panhandle contends that Mr. Smith made a counteroffer by adding a request on the letter to see his personnel file and to contest any mistakes he found there. An offer must be accepted unconditionally; but there is, as always, an exception to the rule. An acceptance is still effective if the addition only asks for something that would be implied from the offer and is therefore immaterial. 1 Corbin on Contracts, § 86, p. 368 (1963). Kodiak Island Borough v. Large, Alaska, 622 P.2d 440 (1981); Pickett v. Miller, N.M., 412 P.2d 400 (1966). A Panhandle supervisor, Mr. Smith, and a company machinist, who was also a union representative, all testified that all Panhandle employees had the right to see their personnel files. Panhandle's offer to withdraw its discharge and eventually reinstate Mr. Smith carried with it the implication that he would be able to see his personnel record when he was once again an active employee.

Besides reserving the right to see his personnel file, Mr. Smith wrote that his personnel file contained mistakes, and that he was having financial problems, apparently as a result of the company's actions. Williston has described the kind of acceptance Mr. Smith made as one showing "an abundance of caution," and Corbin has called it a "grumbling acceptance," which in this case it certainly appeared to be. ² The acceptance was unenthusiastic to be sure, but it was an acceptance nevertheless. Mr. Smith signed his name under the words "Understood, Agreed To and Accepted." He wrote that he agreed to the terms and conditions. He began performance by seeking medical help and by sending in a check to keep his insurance current. Mr. Smith wanted to be sure that he would be able to see his personnel file when he returned to work. His effort to insure that right should not block him from benefits that Panhandle had already offered to him. His "grumbling acceptance" should stand.

Mr. Smith found himself in his own "Catch-22" ³ when he tried to accept Panhandle's offer contained in the letter of December 13, 1979. The letter said that Mr. Smith could contact Panhandle's supervisors about the terms and conditions of the offer. ⁴ When Mr. Smith telephoned the company to ask about his personnel files, Panhandle viewed his request as an indication that Mr. Smith did not want to eliminate the problems that had led to his discharge. In the same letter, Panhandle wrote that Mr. Smith would have at least six months to improve his emotional state, and indeed demanded that Mr. Smith receive counseling for that purpose. ⁵ When Mr. Smith made a request which Panhandle thought showed an improper attitude, he was apparently fired because he had failed to spontaneously rehabilitate. We do not dispute that Panhandle's offer to Mr. Smith was generous. We do say that Panhandle could not withdraw its offer just because Mr. Smith did not and could not fulfill Panhandle's unrealistic and contradictory expectations.

III

Panhandle contends that Mr. Smith should not be allowed to assert his claim for breach of contract because the collective bargaining agreement under which he was employed required him to take his grievance to arbitration. The agreement did provide a three-step grievance procedure culminating in the fourth step of binding arbitration. The arbitration clause of the collective bargaining agreement said "All grievances and disputes arising...