Appeal
from the Superior Court No. 4FA-14-03039 CI of the State of
Alaska, Fourth Judicial District, Fairbanks, Douglas
Blankenship, Judge.
Cabot
Christianson, Law Offices of Cabot Christianson, P.C.,
Anchorage, for Appellant.
Robert
A. Sparks, Law Office of Robert A. Sparks, Fairbanks, for
Appellee.
Before: Stowers, Chief Justice, Winfree, Maassen, Bolger, and
Carney, Justices.
OPINION
WINFREE, Justice.
I.
INTRODUCTION
A
sublessee entered into an agreement containing an option to
purchase the lessee's interest in the lease and leasehold
improvements. When the sublessee attempted to exercise the
option the lessee declined to sell, claiming the option was
unenforceable. The sublessee sued, seeking, among other
things, to enforce the option provision. The superior court
held that the provision was too uncertain to enforce either
as an option or as an agreement to negotiate. The sublessee
appeals; we affirm the superior court's decision.
II.
FACTS AND PROCEEDINGS
Tok
Hwang owns a lessee interest in, and related improvements on,
a commercial lot (the leasehold) near the Denali National
Park entrance. Hwang leases the lot from a third party for
$20, 000 annually. Hwang subleased the leasehold to Alaska
Fur Gallery, Inc. in April 2012. The sublease (the lease)
provided that Alaska Fur would pay $55, 000 annual rent for a
three-summer term. The disputed provision stated, in full:
"Lease includes an option to purchase premises with
lease amount to be applied to negotiated purchase
price."
In 2014
Manuel Hernandez, one of Alaska Fur's owners, sought to
exercise the purchase option. Alaska Fur retained certified
appraiser E. Chilton Hines to appraise the leasehold as
"a basis for discussion with Hwang" about the
purchase price. Hines valued the leasehold at $150, 000 to
$155, 000. He noted that the appraisal was difficult because
he was not given building plans, locals were reluctant to
share information about property values, and information
about sales of comparable properties was non-existent.
Although Hines's appraisal did not include a fair market
rental rate, he expressed that $55, 000 per year was
"very high and above market in my judgment."
Hernandez
later stated in an affidavit that he "was aware that
$55, 000 was far higher than the fair rental rate, " but
he had agreed to that rate when negotiating the lease because
Alaska Fur "anticipated exercising the option to
purchase, " and "it was important to [Alaska Fur]
that the lease provided that rental payments were a credit to
the purchase price if the option was exercised."
Hernandez further stated that after the appraisal Hwang
"refused to negotiate the purchase price or any aspect
of the option to purchase, " and the parties failed to
reach an agreement about selling the leasehold. In a letter
to Alaska Fur, Hwang's attorney asserted that no
"price or terms were ever agreed to between the parties,
" and that Alaska Fur was not "entitled to
application of any of the rent to any of the purchase price
for the [leasehold]."
Alaska
Fur filed suit, alleging that Hwang had breached the lease by
refusing to negotiate for the sale of the leasehold and by
not applying the rental payments to the purchase price.
Alaska Fur sought an order transferring the leasehold from
Hwang to Alaska Fur "for no additional
consideration."
Hwang
moved for dismissal and for summary judgment, arguing that
the option did not comply with the statute of frauds and that
any agreement to negotiate was unenforceable. Alaska Fur also
moved for summary judgment, claiming that Hwang's refusal
to negotiate violated the implied covenant of good faith and
fair dealing and an implied agreement to negotiate in good
faith. Alaska Fur proposed that the court remedy the breach
of those duties by declaring the appraised value be the
leasehold purchase price. Alaska Fur alternatively requested
damages in the amount of the difference between its rental
rate and the fair market rental rate.
Although
the parties' arguments focused on the statute of frauds
and whether the disputed option provision created a duty to
negotiate, the superior court ruled that the option provision
was unenforceable as written. The court deemed price, or at
least a method to calculate price, "an essential term of
a contract." The court found no evidence the parties
intended that the purchase price be the appraised fair market
value; because there was no price or method for determining
price, the court determined that the option provision
therefore was unenforceable. The court further ruled that the
option provision could not be enforced as an agreement to
negotiate because the parties had provided no means of
resolving negotiation disputes. Because the court found the
option provision unenforceable, it did not reach the
leasehold value issue or whether rent should have been
applied to the purchase price.
Alaska
Fur appeals the superior court's summary judgment
decision.
III.
STANDARD OF REVIEW
"We
review questions of summary judgment de
novo."[1] "We treat the interpretation of
contract language as a question of law and interpret the
language de novo."[2] "When applying the de novo
standard of review, we apply our 'independent judgment to
questions of law, adopting the rule of law most persuasive in
light of precedent, reason, and policy.'
"[3]
IV.
DISCUSSION
The
parties' arguments on appeal are similar to those before
the superior court. We nonetheless look directly to the
substance of the superior court's order and affirm its
determination that the provision, by its own language, is too
...