Opposition Brief — Alaska Diversified Contractors, Inc. v. Lower Kuskokwim School District

Supreme Court, U.S.

gare FILED

No. 89-710 NOV 27 1983

4eSE PHF. SPAMIOL, JR.

CLERK

In The

Supreme Court of the United States

October Term, 1989

,

—

ALASKA DIVERSIFIED CONTRACTORS, INC.

AND FISCHBACH & MOORE OF ALASKA, INC.

d/b/a ALASKA DIVERSIFIED-FISCHBACH,

A JOINT VENTURE OF ALASKA CORPORATIONS,

Petitioners,

LOWER KUSKOKWIM SCHOOL DISTRICT,

Respondent.

sa

—

On Petition For Writ Of Certiorari To

The Supreme Court Of The State Of Alaska

&.

.

RESPONDENT’S BRIEF IN OPPOSITION

,

—

SAUL R. FRIEDMAN STEPHEN L. Noursé

HEDLAND, FLEISCHER, Counsel of Record

FRIEDMAN, BRENNAN & COOKE Joun P. Grirrin

1227 West Ninth Avenue CARNEY, STEPHENSON,

Anchorage, AK 99501 BADLEY, SMITH &

(907) 279-5528 SPELLMAN, PS.

701 Fifth Avenue

Seattle, Washington 98104

(206) 622-8020

Attorneys for Respondent

COCKLE LAW BRIEF PRINTING CO, (800) 225-4964

OR CALL COLLECT (402) 342-2831

PRE ot

farts

*

QUESTION PRESENTED

Were petitioners denied due process of law when a

state’s appellate court, rather than the trial court, decided

contracts between petitioners and respondent were inte-

grated, where (1) the issue of integration is a question for

the court rather than a jury, and petitioners were allowed

to argue the issue of integration before the appellate

court; (2) all of petitioners’ évidence relevant to integra-

tion was admitted at trial; (3) petitioners had numerous

opportunities to present additional evidence, if they had

any, but did not; and (4) petitioners’ decision not to

address the issue of integration at the original trial was

based upon its own misunderstanding of applicable law?

ii

TABLE OF CONTENTS

Page

CABELL PR as 60:6 o'90 on 0 ka sv okon vers i

TADLE OF BAPE TIREe Me on 5k vans c ees se¥adernne ves iii

CONSTITUTIONAL PROVISION................... 2

STATEMENT OF THE CAGE... . 2. cscccnvcssscvenes 2

L. GRARRRICT CHP PCT ie kee s cu cavencrce ss 2

II. STATEMENT OF PROCEEDINGS............ 4

SUMMARY OF ARGUMENT...................---. 11

REASONS WHY THE PETITION SHOULD BE

LIDGE nook b ec teh eniaubarbe ts bse eee a 12

I. ADF’S ARGUMENTS ARE PREMISED UPON

RULINGS OF THE ALASKA SUPREME

COURT WHICH DO NOT RAISE QUES-

TIONS OF FEDERAL LAW ................. 12

II. DUE PROCESS IS NOT DENIED WHEN AN

APPELLATE COURT, RATHER THAN A

TRIAL COURT, DECIDES A MATTER PRE-

LIMINARY TO THE INTRODUCTION OF

EVIDENCE IN A CIVIL CASE.............. 14

III. ADF WAS NOT DENIED AN OPPORTUNITY

TO PRESENT ITS EVIDENCE........ nee 15

CAINR AAR 5 60.9 sens cds ieereeuee eee 19

APPENDIX (ADF Petition for Rehearing to Alaska

Serpents COMED yaa is ckine den akany Geena eee App. 1

Ne ee

SF a AS

ili

TABLE OF AUTHORITIES

Page

FEDERAL CASES

Board of Regents of State Colleges v. Roth, 408 U.S.

564, 92 S. Ct. 2701, 33 L. Ed. 2d 548 (1972)....... 18

Brinkerhoff-Faris Trust & Savings Co. v. Hill, 281

US. 673, 50 S. Ct. 451, 74 L. Ed. 1107 €1930)...... 18

Corporation of the Presiding Bishop v. Hodel, 637 F.

CR ee err ee eee 18

Dunbar v. City of New York, 251 U.S. 516, 40 S. Ct.

ie I OE OUP oc is ect e seers cesecscees 18

Hamling v. United States, 418 U.S. 87, 94S. Ct. 2887,

41 L. Ed. 2d 590 reh’g denied, 419 U.S. 885, 95 S.

ee ee” |, ) 16

Patterson v. Colorado, 205 U.S. 454, 27 S. Ct. 556, 51

SN GS eed ab os odans enc cwesceces 17

Robinson v. Ariyoshi, 441 F. Supp. 559, (D. Hawaii

1977), affirmed in part, vacated in part, 753 F.2d

1468 (9th Cir. 1985), vacated, 477 U.S. 902, 106 S.

ee ee 18

Saunders v. Shaw, 244 U.S. 317, 37 S. Ct. 638, 61 L.

ee saben sa ave nerecvcvcccess 15, 16

Sotomura v. County of Hawaii, 402 F. Supp. 95 (D.

ee eek icing bcd ea es ayeececsccess 18

Sotomura v. County of Hawaii, 460 F. Supp. 473 (D.

eee yk y asp he bb ne ee vcesncesres 18

Time, Inc. v. Firestone, 424 U.S. 448, 47 L. Ed. 2d

Te ew ce tcc ov csccrcevvevne 14

Title Oil Co. v. Flanagan, 263 U.S. 444, 44 S. Ct. 197,

Ds ows ces chr cenenrsseevccsbaves 18

iv

TABLE OF AUTHORITIES —- Continued

STATE CASES

Alaska Diversified Contractors, Inc. v. Lower Kuskok-

wim School District, 778 P.2d 581 (Alaska 1989)

1 (icc Re OnE SS TA ha EEN ONS nea kkk SS 9, 10,

Alaska Northern Development, Inc. v. Alyeska

Pipeline Serv. Co., 666 P.2d 33 (Alaska 1983), cert.

denied, 464 U.S. 1041, 104 S. Ct. 706, 79 L. Ed. 2d

SPO SOUUEGN s av hou Chu cere rAUbess veele ps EES 9,

Johnson v. Curran, 633 P.2d 994 (Alaska 1981).....

Kupka v. Morey, 541 P.2d 740 (Alaska 1975).......

Lower Kuskokwim School District v. Alaska Diver-

sified Contractors, Inc., 734 P.2d 62 (Alaska 1987)

RPS SET tA are wert i: MHL ANE Cet Soph ath ep «IL. 8, 13, 14,

Mitford v. de Lasala, 666 P.2d 1000 (Alaska 1983)..

MIscELLANEOUS

Restatement (Second) of Contracts § 209(2) and

GE SC See kh eb ree R ashe kde nee eer ena ce

Restatement (Second) of Contracts § 212, comment

Page

i Pe Yd

15, 16

. Ae

No. 89-710

sa

bd

In The

Supreme Court of the United States

October Term, 1989

a

»

ALASKA DIVERSIFIED CONTRACTORS, INC.

AND FISCHBACH & MOORE OF ALASKA, INC.

d/b/a ALASKA DIVERSIFIED-FISCHBACH,

A JOINT VENTURE OF ALASKA CORPORATIONS,

Petitioners,

V.

LOWER KUSKOKWIM SCHOOL DISTRICT,

Respondent.

,%

_

On Petition For Writ Of Certiorari To

The Supreme Court Of The State Of Alaska

,%

4

RESPONDENT’S BRIEF IN OPPOSITION

,%

vv

The respondent Lower Kuskokwim School District

respectfully requests that this Court deny the petition for

writ of certiorari, seeking review of the Alaska Supreme

Court’s opinion in this case. That opinion is reported at

778 P.2d 581 (Alaska 1989).

oe

CONSTITUTIONAL PROVISION |

Section 1 of the Fourteenth Amendment to the United

States Constitution states:

All persons born or naturalized in the

United States, and subject to the jurisdiction

thereof, are citizens of the United States and of

the State wherein they reside. No State shall

make or enforce any law which shall abridge the

privileges or immunities of citizens of the

United States; nor shall any State deprive any

person of life, liberty or property, without due

process of law, nor deny to any person within its

jurisdiction the equal protection of the laws.

a

—

STATEMENT OF THE CASE

I. STATEMENT OF FACTS

The original action arose out of two competitively

bid construction contracts entered in 1979 between

respondent, the Lower Kuskokwim School District (the

“School District”) and petitioners, Alaska Diversified

Contractors, Inc. and Fischbach & Moore of Alaska, Inc.

(“ADF”). The contracts involved the construction of a

number of secondary schools in rural Alaska. The con-

tracts provided that “WORK SHALL BE COMPLETED

August 31, 1980.” On the second page of the contracts,

immediately above the signatures, the following

appeared:

ALTERATIONS. The following changes were

made in this contract before it was signed by the

parties hereto:

NONE.

The contracts require’? ADF to submit construction

schedules showing how it intended to complete the

schools on time. The contracts gave the School District

the right to take steps to improve ADF’s progress if

necessary. In the event ADF failed to complete on time,

the School District could terminate ADF’s contracts and

complete the schools itself, or allow ADF to continue

work and hold it liable for liquidated damages.

As part of the bidding process, the School District

held a meeting to discuss the project with interested

contractors. One topic was the liquidated damages provi-

sion as it related to the contracts’ completion date. The

School District explained that the contracts had a two-

phase liquidated damages provision. For the first 11

months after the stated completion date, the liquidated

damages were low. This was to discourage contractors

from allocating large sums for liquidated damages in

their bids to cover potential delays. The liquidated dam-

ages increased dramatically for delays greater than 11

months. At no time did the School District represent or

promise that the deadline itself would be extended, nor

were bidders told that liquidated damages were the only

penalty that would be enforced under the contracts.

Shortly after the School District awarded the projects

to ADF, the parties held a preconstruction conference.

The School District stressed the importance of submitting

and working within the construction schedules. ADF rep-

resented it planned to complete on time.

In October 1979, the School District became con-

cerned about ADF’s progress. The School District wanted

a more precise schedule from ADF showing how it

intended to complete its work by August 31, 1980. ADF

responded: “[W]e’re reorganizing and, you know, if you

just stop worrying about beating us to death about the

completion date that [sic] we’ll get things organized and

you’re going to have your schools on time.” (Tr. 2637-8.)

Throughout the winter and spring of 1979 and 1980,

the School District expressed its concern about the proj-

ects’ slow progress and insisted ADF do its utmost to

complete the schools by the date specified in the con-

tracts. ADF continued to represent that it would complete

the schools by the fall of 1980. Nevertheless, the schools

were not completed on time.

After completing construction, ADF sued the School

District seeking damages as a result of the efforts to get

ADF to finish the schools by the date specified in the

contracts. ADF claimed it had an extra year to complete

the schools by virtue of statements made at the prebid

conference regarding low liquidated damages for the first

11 months after the deadline. According to ADF, the

School District’s attempt to enforce the contracts’ comple-

tion date represented a “change in philosophy” from its

prebid statements, and amounted to a constructive accel-

eration of the contracts, requiring double shifts and win-

ter work not contemplated in ADF’s bid.

Il. STATEMENT OF PROCEEDINGS

ADF filed its complaint on January 13, 1982, claiming

damages for extra work, changed conditions and delays

allegedly caused by the School District. On October 11,

1983, the complaint was amended to allege ADF’s work

OE Ne |

was disrupted by the School District’s “change in philos-

ophy” regarding the time for completion.

Prior to trial, the School District moved for summary

judgment on ADF’s claims, as those claims were based

upon oral, prebid modifications or explanations of the

written contract documents. Since the contracts were

unambiguous with respect to the required completion

date and with respect to the School District’s remedies

upon a breach by ADF, this presented the classic, text-

book example of when the Alaska parol evidence rule

should be applied:

Thus, there is ample authority for the Court to

rule that, as a matter of law, any AD-F claim

based upon oral, prebid explanations or alter-

ation of the written terms of the contract

between the parties must be dismissed.

LKSD Reply Memorandum in Support of Motion for Par-

tial Summary Judgment at 3. (RP 228.)

In response to the summary judgment motion, ADF

argued the parol evidence rule no longer applied in

Alaska, stating “[t]he Supreme Court of Alaska has

renounced the narrow ‘parol evidence rule’ to allow con-

sideration of ‘extrinsic evidence.’ ” Memorandum Oppo-

sing Defendant’s Motion for Partial Summary Judgment

at pp. 9-10 (RP 165-166). The trial court accepted ADF’s

argument and denied the School District’s motion for

summary judgment.

As the following excerpt from the School District’s

trial brief expressly shows, the parol evidence rule was

also an issue at trial:

[T]he Alaska Supreme Court has on a number of

occasions applied a traditional formulation of

the parol evidence rule to bar evidence of all

statements to vary the terms of the written con-

tract between the parties. Pt. Valdez Co. v. City of

Valdez. 437 P.2d 768 (Ak. 1968); Kupka v. Morey.

541 P.2d 740 (Ak. 1975). In the 1981 decision of

Johnson v. Curran, 633 P.2d 994 (Ak. 1981), the

court found no ambiguity in the written contract

between a nightclub owner and a performing

band regarding the length of the band’s engage-

ment. It therefore held testimony of an alleged

oral agreement for early termination was prop-

erly ruled inadmissible... .

In the recent decision of Alaskan Northern Devel-

opment, Inc. v. Alyeska Pipeline Serv. Co., 666 P.2d

33 (Ak. 1983), the court .. . again discussed the

parol evidence rule with approval and affirmed

its earlier decision in Johnson v. Curran ... {T]he

above authority is a sufficient basis for the court

to apply the parol evidence rule and prohibit the

introduction of any evidence of oral statements

to vary the written terms of the agreement... .

LKSD Pretrial Memorandum at 19 (RP 427).

In response to the School District’s brief, ADF again

asserted the parol evidence rule no longer applied in_

Alaska. ADF argued the School District’s objections

“relied almost entirely on decisions which pre-date the

departure from old parol evidence principles” by the

Alaska Supreme Court.! Plaintiff’s Trial Brief at 15 (RP

402).

' In its petition, AD argues that at the trial level the School

District assumed, along with ADF and the trial court, that the

parol evidence rule was a “dead letter” in Alaska. The

(Continued on following page)

The case was tried before a jury between March 12

and April 19, 1984. The parol evidence was admitted. The

School District’s motion for a directed verdict was

denied. The School District’s requests for proper parol

evidence instructions were denied. The trial court entered

judgment against the School District upon the jury’s ver-

dict that the written contracts had been modified by

ADF’s parol evidence. The School District’s post-trial

motions were denied.

The School District appealed and designated the fol-

lowing points for review:

* a a

3. The trial court erred by refusing to grant

LKSD’s motion for summary judgment on the

ground that, as a matter of law, prebid oral

explanations of contract terms may not change

the terms of a written contract subsequently

entered between the parties.

od * *

8. The trial court erred by admitting

extrinsic evidence for the purpose of varying on

the terms of the written agreement entered

between the parties.

School District’s Statement of Points on_Appeal, July 27,

1984 (RP 687, 688). In a unanimous decision, the Alaska

Supreme Court reversed the judgment and reaffirmed the

(Continuea from previous page)

authority cited for this assertion is a parenthetical comment

inserted into the trial court’s oral ruling on remand. As the

excerpts from the briefs at the trial level indicate, ADF’s asser-

tion misrepresents the record.

numerous Alaskan cases applying the parol evidence

rule:

[S]ince ADF’s evidence contradicts the writ-

ten agreements, the parol evidence rule bars the

court or the jury from using this evidence.

Given our conclusion that the written agree-

ments were the complete and final agreements

and that these agreements required completion

by August 31, it follows that the School District

did not modify or breach the agreements by

requesting compliance with the deadline.

Hence, we do not need to reach the remaining

issues raised by the School District. The judg-

ment below is REVERSED and the case

REMANDED for disposition consistent with this

opinion.

Lower Kuskokwim School District v. Alaska Diversified Con-

tractors. Inc., 734 P.2d 62, 64 (Alaska 1987).

ADF petitioned for rehearing, not on the basis that it

had been denied due process, but because the Alaska

Supreme Court had (1) misconceived material facts as to

whether the School District preserved its right to raise the

parol evidence rule on appeal; (2) misconceived the prop-

osition of law that the parol evidence rule can be waived

despite its substantive character; (3) misapplied the con-

trolling legal principle that contract integration is a fact to

be found by the trial judge; (4) overlooked controlling

legal principles permitting the jury to consider extrinsic

evidence of the parties’ mutual intent; and (5) miscon-

ceived the material question of contract ambiguity. ADF

Petition for Rehearing, March 20, 1989, at pp. 1-4 (App.

1-8, infra). The petition for rehearing was denied.

On remand, ADF argued that the Alaska Supreme

Court’s opinion did not decide all of the issues in the

case, and that there were alternative theories which

would support judgment in its favor. ADF did not raise a

due process issue. The trial court rejected ADF’s argu-

ments and entered judgment for the School District. ADF

appealed.

On the second appeal, ADF argued the contract inte-

gration issue was a matter to be decided at the trial level

and, for the first time, argued it was denied due process

when the issue was decided on appeal. The Alaska

Supreme Court rejected ADF’s arguments and affirmed

the judgment on remand. Alaska Diversified Contractors,

Inc. v. Lower Kuskokwim School District, 778 P.2d 581

(Alaska 1989). The Alaska Supreme Court held ADF had

not been precluded from introducing evidence on the

integration issue and, in fact, ADF introduced all the

evidence it had. Since integration was an issue for the

court,? it was in as good a position as the trial court to

decide the issue:

[Integration] is a que:tion which this court

is as well situated to decide as the trial court.

ADF’s contention that by so ruling this court

unconstitutionally deprived it of the oppor-

tunity to be heard as to the issue of integration

lacks merit. ADF presented its arguments to this

court. The evidence which would prove or disprove

2 Alaska Diversified Contractors, 778 P.2d at 583; see Alaska

Northern Development, Inc. v. Alyeska Pipeline Serv. Co., 666 P.2d

33, 37 (Alaska 1983), cert. denied, 464 U.S. 1041, 104 S. Ct. 706,

79 L. Ed. 2d 170 (1984); Mitford v. de Lasala, 666 P.2d 1000, 1004

(Alaska 1983); Restatement (Second) of Contracts § 209(2) and

comment c.

LCL eemeeeemnemamennesititi

10

integration was admitted at trial for the purpose of

proving the existence of a prior inconsistent agree-

ment. The thrust of ADF’s argument below was

that the parties intended the prior agreement to

survive the execution of the contract.

Alaska Diversified Contractors, 778 P.2d at 583-584

(emphasis added).? The Alaska ccurt also noted that the

“Instructions to Bidders” form supplied to ADF con-

tained the functional equivalent of an integration clause,‘

3 The court also referenced the Restatement (Second) of

Contracts § 212, comment d:

Likewise, since an appellate court is commonly in as

good a position to decide such questions as the trial

judge, they have been treated as questions of law for

purposes of appellate review. Such treatment has the

effect of limiting the power of the trier of fact to

exercise a dispensing power in the guise of a finding

of fact, and thus contributes to the stability and

predictability of contractual relations.

4 The form provided to ADF stated as follows:

Explanation to Bidders. Any explanation desired by

bidders regarding the meaning or interpretation of

the drawings and specifications must be requested in

writing and with sufficient time allowed for a reply

to reach them before the submission of their bids.

Oral explanations or instructions given before the award

of the contract will not be binding. Any interpretation

made will be in the form of an addendum to the

specifications or drawings and will be furnished to

all bidders and its receipt by the bidder shall be

acknowledged.

Alaska Diversified, 778 P.2d at 585 (emphasis added by the

court).

11

and this confirmed the correctness of its prior decision.

Alaska Diversified, 778 P.2d at 585. The Alaska Supreme

Court concluded that ADF’s arguments “reveal[ed] a fun-

damental misunderstanding of the parol evidence rule”

and were “particularly untenable” in light of Alaska

Northern Dev. Inc. v. Alyeska Pipeline Service Co., 666 P.2d

33, 37-40 (Alaska 1983) a case which had reaffirmed the

role of the parol evidence rule in Alaska less than a year

prior to the trial in the present case. Alaska Diversified, 778

P.2d at 584 and n.4.

ADF now petitions this Court for a writ of certiorari.

a

vw

SUMMARY OF ARGUMENT

Petitioners’ due process arguments rest entirely upon

the patently false allegation that the parol evidence rule

was not an issue at the trial court level. In fact, the parol

evidence rule was raised at summary judgment, in the

parties’ respective trial briefs, and during the objections

to jury instructions. Petitioners have raised the alleged

insufficiency of respondent’s parol evidence objections on

at least three different occasions before the Alaska

Supreme Court, and on each occasion Petitioners’ argu-

ments have been rejected. For this Court to reach Peti-

tioners’ due process claim, it would first have to overrule

the Alaska court’s repeated holding that the parol evi-

dence rule was an issue at the trial court level. This

determination by the Alaska court, however, does not

raise a federal question and is not subject to review by

this Court.

12

Petitioners’ arguments are also without merit since

due process is not denied when an appellate court, rather

than a trial court, decides a matter preliminary to the

introduction of evidence at trial. Moreover, petitioners

failed to argue the issue of integration at trial, not

because the trial court precluded them from doing so, but

because they made a strategic choice to rely on the argu-

ment that the parol evidence rule was a dead letter in

Alaska. Petitioners were allowed to introduce evidence

on every theory they chose to pursue. Their arguments on

the issue of integration were presented to and considered

by the Alaska Supreme Court. No issue under the Four-

teenth Amendment has been presented. The petition

should be denied.

,%

. 2

REASONS WHY THE PETITION

SHOULD BE DENIED

ADF bases its petition on the due process clause of

the United States Constitution, Section 1 of the Four-

teenth Amendment, which provides:

No state shall . . . deprive any person of life,

liberty or property, without due process of law.

ADF has failed to raise a genuine issue under this

clause. Since no important federal question has been pre-

sented, Rule 17.1(c), the petition for certiorari should be

denied.

I. ADF’S ARGUMENTS ARE PREMISED UPON RUL-

INGS OF THE ALASKA SUPREME COURT WHICH

DO NOT RAISE QUESTIONS OF FEDERAL LAW

The parol evidence rule states that the unambiguous

terms of an integrated contract may not be varied by

13

evidence of prior representations or agreements. See, ¢.g.,

Johnson v. Curran, 633 P.2d 994, 995 n.1 (Alaska 1981).

ADF argues that since the parol evidence rule was not an

issue at trial, it had no reason and no opportunity to

present evidence that the contracts were not integrated.

According to ADF, it was denied due process when the

contracts were determined to be integrated on appeal.

The premise of ADF’s due process claim, that the

parol evidence rule was not an issue at trial, rests upon

its argument that the School District did not make evi-

dentiary objections based upon the parol evidence rule

and did not make proper objections to the trial court’s

instructions to the jury. ADF has presented this argument

on at least three prior occasions — in ADF’s brief on the

initial appeal, in ADF’s petition for rehearing and in

ADF’s briefs on the second appeal — and each time the

argument has been rejected.

ADF forgets that the parol evidence rule is a rule of

substantive law, not of evidence, and evidentiary objec-

tions are unnecessary to raise the issue of the rule’s effect.

Lower Kuskokwim School- District v. Alaska Diversified Con-

tractors, Inc., 734 P.2d 62, 64 n.1 (Alaska 1987). ADF

ignores that the parol evidence rule was raised at sum-

mary judgment and in the parties’ respective trial briefs.

ADF also ignores the presumption that contracts are inte-

grated, and that it, not the School District, had the burden

of asserting non-integration as an affirmative defense.

With regard to the trial court’s instructions, the Alaska

Supreme Court expressly found:

The School District preserved its right to raise

the parol evidence rule as a point on appeal by

requesting instructions as to the effect of the

14

rule, and by objecting to the court’s failure to

give parol evidence rule instructions.

Lower Kuskokwim, 734 P.2d at 64, n.1.

Since the issue of whether the parol evidence rule

had been raised at trial does not present a federal ques-

tion, ADF may not request this Court to redecide it.

II. DUE PROCESS IS NOT DENIED WHEN AN

APPELLATE COURT, RATHER THAN A TRIAL

COURT, DECIDES A MATTER PRELIMINARY TO

THE INTRODUCTION OF EVIDENCE IN A CIVIL

CASE

ADF argues it was denied due process when the

Alaska Supreme Court decided, in the first instance, the

factual issue of integration. ADF apparently believes

there is some right inherent in the Fourteenth Amend-

ment to have certain issues in a civil case heard at the

trial level. This Court rejected a similar argument in Time,

Inc. v. Firestone, 424 U.S. 448, 47 L. Ed. 2d 154, 96 S. Ct.

958 (1976):

Nothing in the Constitution requires that assess-

ment of fault in a civil case tried in a state court

be made by a jury, nor is there any prohibition

against such a finding being made in the first

instance by an appellate, rather than a trial,

court. The First and Fourteenth Amendments do

not impose upon the States any limitations as to

how, within their own judicial systems, fact-

finding tasks shall be allocated.

424 U.S. at 461, 47 L. Ed. 2d at 167.

In Alaska, as with the majority of jurisdictions, inte-

gration is an issue decided by the court rather than a jury.

15

Lower Kuskokwim, 734 P.2d at 64; Restatement (Second) of

Contracts §209(2) and comment c. ADF presented its

arguments regarding integration to the Alaska Supreme

Court. All of the evidence relevant and necessary to

decide the issue was already included in the record on

appeal. Lower Kuskokwim, 734 P.2d at 64. If ADF had

additional evidence, it could have presented it on the

initial appeal, in its petition for rehearing, in its briefs on

remand or in its briefs on the second appeal. This it did

not do. The Alaska Supreme Court’s decision to address

the issue of integration in the first instance did not violate

the Fourteenth Amendment and does not raise a federal

question. ADF’s petition should be denied.

Ill. ADF WAS NOT DENIED AN OPPORTUNITY TO

PRESENT ITS EVIDENCE

ADF cites Saunders v. Shaw, 244 U.S. 317, 37 S. Ct. 638,

61 L. Ed. 1163 (1917), to support its argument that it was

unconstitutionally denied an opportunity to present evi-

dence of integration. In Saunders, the state court refused

to hear evidence that the plaintiff did not benefit from a

particular tax, ruling it was immaterial. The defendant

therefore presented no evidence showing the plaintiff had

in fact benefitted. On rehearing, the court reversed itself

and, relying on the plaintiff’s proffered evidence, entered

judgment for the plaintiff without giving the defendant

an opportunity to be heard. This Court held the defen-

dant was denied due process. 244 U.S. at 319.

Unlike the situation in Saunders, the trial court in the

instant case did not rule that integration was immaterial,

and did not preclude ADF from introducing evidence on

16

the issue. ADF was not denied an opportunity to be

heard. ADF could have argued that the contracts were

not integrated, but instead chose to rely upon the propo-

sition that the parol evidence rule no longer existed. As

noted by the Alaska Supreme Court, Lower Kuskokwim,

734 P.2d at 64, all ADF’s evidence relevant to the issue of

integration came in to prove ADF’s assertions regarding

the existence of a prior agreement. ADF also had the

opportunity to present any additional evidence it may

have had on both appeals, on remand after the initial

appeal, and on its petition for rehearing, but ADF either

had no such evidence or simply chose not to present it.

ADF actually argued the issue of integration before the

Alaska Supreme Court. Thus, Saunders is inapposite.

A more closely analogous case is Hamling v. United

States, 418 U.S. 87, 94 S. Ct. 2887, 41 L. Ed. 2d 590, reh’g

denied, 419 U.S. 885, 95 S. Ct. 157, 42 L. Ed. 2d 129 (1974).

At trial, the jurors in a criminal obscenity case had been

instructed to apply “contemporary standards of the com-

munity as a whole.” The petitioners interpreted this lan-

guage to mean evidence of national standards of

obscenity and; as a result, did not present evidence of

local standards. On appeal, this Court held the relevant

criminal statute required a local standard of obscenity.

Since the lower court had not prohibited the presentation

of local standards, however, there was no denial of due

process. The petitioner’s failure to present evidence on

this factual issue was due to its own misunderstanding of

applicable law. 418 U.S. at 110 n. 11, 94S. Ct. 2904 n.11.

Likewise, if ADF failed to present evidence on the

issue of integration, it was not because the trial court

17

precluded it from doing so, but because it made a con-

scious decision to rely on its argument that Alaska no

longer followed the parol evidence rule. Since ADF was

not denied the opportunity to present evidence, there has

been no due process violation.

ADF also suggests that a court’s decision to alter the

existing common law may violate the Fourteenth Amend-

ment. Even if this proposition were correct, it would not

apply here. The Alaska Supreme Court’s decision simply

reaffirmed a line of Alaska cases applying the parole

evidence rule. There was no change whatsoever in settled

Alaska law. See, e.g., Alaska Northern Development, Inc. v.

Alyeska Pipeline Service Co., 666 P.2d 33, 37-40 (Alaska

1983), cert. denied, 464 U.S. 1041, 104 S. Ct. 706, 79 L. Ed.

2d 170 (1984); Johnson v. Curran, 633 P.2d 994, 995 n.1

(Alaska 1981); Kupka v. Morey, 541 P.2d 740, 747-48 n.9

(Alaska 1975). ADF’s arguments that the parol evidence

rule was a dead letter revealed a “fundamental misunder-

standing” of that rule. Alaska Diversified, 778 P.2d at

583-584 and n.5.

Nevertheless, even if a change in law occurred, a

violation of the Fourteenth Amendment may not be

- premised upon such a change. Justice Holmes, in deliver-

ing the opinion of the court in Patterson v. Colorado, 205

U.S. 454, 27 S. Ct. 556, 51 L. Ed. 879 (1907), stated:

There is no constitutional right to have all gen-

era! propositions of law once adopted remain

unchanged. Even if it be true, as the plaintiff in

error says, that the Supreme Court of Colorado

departed from earlier and well-established pre-

cedents to meet the exigencies of this case;

whatever might be thought of the justice or

wisdom of such a step, the Constitution of the

18

United States is not infringed. . . .[T]he decision

of a court upon a question of law, however

wrong and however contrary to previous deci-

sions, is not an infraction of the Fourteenth

Amendment merely because it is wrong or

because earlier decisions are reversed.

205 U.S. at 461. This rule has been adhered to repeatedly.

See, e.g., Title Oil Co. v. Flanagan, 263 U.S. 444, 450, 44 S.

Ct. 197, 198, 68 L. Ed. 382 (1924); Dunbar v. City of New

York, 251 U.S. 516, 519, 40 S. Ct. 250, 64 L. Ed. 384 (1920).

ADF’s reliance upon Brinkerhoff-Faris Trust & Savings

Co. v. Hill, 281 U.S. 673, 50 S. Ct. 451, 74 L. Ed. 1107

(1930), is misplaced. Under the peculiar facts of that case,

a change in settled law resulted in one party being denied

an opportunity to be heard in any forum. That is not the

case here, as ADF had more than adequate opportunity to

present whatever arguments or evidence it may have had

on the issue of contract integration.

Brinkerhoff-Faris, and the other cases cited by ADF®

are also inapposite as those cases involved established

property rights. It is difficult to ascertain what property

right ADF claims has been invaded here. As this court

held in Board of Regents of State Colleges v. Roth, 408 U.S.

564, 92 S. Ct. 2701, 33 L. Ed. 2d 548 (1972), the range of

——$§£ ——_

~

5 Sotomura v. County of Hawaii, 402 F. Supp. 95 (D. Hawaii

1975); Sotomura v. County of Hawaii, 460 F. Supp. 473 (D. Hawaii

1978); Robinson v. Ariyoshi, 441 F. Supp. 559 (D. Hawaii 1977),

affirmed in part, vacated in part, 753 F.2d 1468 (9th Cir. 1985),

vacated, 477 U.S. 902, 106 S. Ct. 3269, 91 L. Ed. 2d 560 (1986).

These cases have been subject to criticism. See Corporation of the

Presiding Bishop v. Hodel, 637 F. Supp. 1398, 1407 and n.5

(D.D.C. 1986).

19

interests protected by procedural due process is not

infinite:

The Fourteenth Amendment’s procedural

protection of property is a safeguard of the secu-

rity of interests that a person has already

acquired in specific benefits. .. .

To have a property interest in a benefit, a

person clearly must have more than an abstract

need or desire for it. He must have more than a

unilateral expectation of it. He must, instead,

have a legitimate claim of entitlement to it.

408 U.S. at 576-77.

There is no property interest inherent in the applica-

tion of the rules of contract interpretation. There is no

property interest in having a trial court, rather than an

appellate court, decide an issue which is a question for

the court. There is no property interest in a judgment

which is premised on inadmissible evidence and an erro-

neous legal theory. Since ADF was afforded a trial under

every theory of recovery it chose to present, it has no

viaole due process claim.

,%

-

CONCLUSION

There is no denial of due process when a jury verdict,

which has been rendered on incompetent and inadmiss-

ible evidence, is overturned. Likewise, due process is not

denied when an appellate court, rather than the trial

court, decides a matter preliminary to the introduction of

evidence, such as whether a written contract contains a

complete statement of the parties’ agreement. ADF was

not precluded from introducing evidence by the trial

20

court. Instead ADF chose to rely on an erroneous legal

theory. In fact, ADF introduced all the evidence it had.

The petition has not raised a federal question and should

be denied.

Respectfully submitted,

STEPHEN L. Nourse

Counsel of Record

JouHN P. Grirrin

CARNEY, STEPHENSON, BALDLEY,

SmitH & SrELLMAN, PS.

2300 Columbia Center

701 Fifth Avenue

Seattle, Washington 98104

(206) 622-8020

SauL R. FRIEDMAN

HEDLAND, FLEISCHER, FRIEDMAN,

BRENAN & COOKE

1227 West Ninth Avenue

Anchorage, AK 99501

(907) 279-5528

Attorneys for Respondent

App. 1

THE SUPREME COURT OF THE STATE OF ALASKA

LOWER KUSKOKWIM )

SCHOOL DISTRICT, )

Apellant, ) FILE NO. $-587

Vv.

ALASKA DIVERSIFIED

CONTRACTORS,

INC., and FISCHBACH &

MOORE OF ALASKA,

d/b/a ALASKA

DIVERSIFIED-

FISCHBACH, a joint venture

of Alaska corporations,

Ne ee ee ee eee ee ee ee”

Appellees.

PETITION FOR REHEARING

R. Everett Harris

Jensen, Harris & Roti

1629 West Third Avenue

Suite 600

Anchorage, AK 99501

277-3533

Stuart G. Oves

Ors, Morrison, RINKER,

STANISLAW & ASHBAUGH

3300 Columbia Center

701 Fifth Avenue

= Seattle, Washington 98104-7007

(206)623-3427

Alaska Diversified-Fishbach petitions for rehearing

of this matter decided by Opinion 3165, dated March 13,

1987. Under the standards enumerated in Appellate Rule

506(a), rehearing should be ordered upon the grounds set

forth below.

App. 2

THE COURT HAS MISCONCEIVED MATERIAL FACTS

AS TO WHETHER LKSD PRESERVED ITS

RIGHT TO RAISE THE PARO&t EVIDENCE

RULE OF APPEAL

The Court’s holding as to application of the parol

evidence rule is founded upon the factual predicate

stated in footnote 1 on page 3:

. . . The school district preserved its right to

raise the parol evidence rule as a point on

requesting instructions as to the effect

of the rule, and by objecting to the court's fail-

ure to give parol evidence rule instructions.

The court has apparently relied upon erroneous state-

ments in LKSD’s Brief (p. 41, n.9).

In fact, LKSD neither requested an instruction bar-

ring parol evidence, nor objected to any failure to give

such an instruction. LKSD withdrew (by substitution) its

initially proposed Instruction No. 29 (CP 342-43, attached

as Appendix-1), which would have instructed the jury to

“first look solely to the written contract.” No objection

was made to the fact that Instruction No. 29 was not

given. (The complete record of LKSD’s jury instruction

objections is attached as Appendix-2, Tr. 3938-3947.)

The instruction finally proposed by LKSD (proposed

Instruction No. 30, CP 344-45, Appendix-3), would have

invited the jury to consider evidence of “the surrounding

circumstances of the contract’s formation and perfor-

mance.” That instruction did not prohibit consideration

of extrinsic evidence, and it did not address the issue of

integration (on which this Court now relies). LKSD’s

objection (Tr. 3941, line 20, to 3943, line 2) was limited to

the failure to give its proposed Instruction No. 30. LKSD’s

App. 3

counsel did not refer to either parol evidence or integra-

tion in objecting. Consequently, LKSD did not request an

instruction as to the effect of the parol evidence rule. And

LKSD did not, in fact, “object” to the court’s failure to

give a parol evidence rule instruction.

It is also significant that LKSD offered no objection to

the giving of Instruction No. 18 (CP 598). That instruction

advised the jury that contracts “may include terms differ-

ent from or in addition to those contained in the contract

documents.”

THE COURT HAS MISCONCEIVED THE PROPOSITION

OF LAW THAT THE PAROL EVIDENCE RULE CAN BE

WAIVED DESPITE ITS SUBSTANTIVE CHARACTER

In its Opinion, the Court rules that LKSD preserved

parol evidence defenses despite failing to make eviden-

tiary objections to the parol evidence at trial (p. 3, n. 1).

The Court indicates that no objection was necessary

because “the parol evidence rule is a rule of substantive

law.”

However, “[rlecent appellate opinions have recog-

nized that the benefits of the parol evidence rule can be

waived, despite the substantive character of the rule.

[Citing cases.]” Cedic Dev. Corp. v. Sibole, 541 P.2d 1169,

1171 (Ariz. App. 1975); see also New Orleans Saints v.

Griesedieck, 790 F.2d 1249, 1252 n.2 (5th Cir. 1986); Vallarta

v. Lee Optical, 298 N.E.2d 212, 215 (Ill. App. 1973) (“defen-

dant did not object to this testimony at trial and has

accordingly waived its right to assert the parol evidence

rule on appeal”); Okuhara v. Broida, 456 P.2d 228, 231

(Hawaii 1969). This is consistent with “the general rule

App. 4

that a party may not raise for the first time on appeal an

alleged error to which he failed to object in the trial

court.” Chugach Elec. Ass'n. v. Lewis, 453 P.2d 345, 349

(Alaska 1969). Under these principles, LKSD waived any

parol evidence defense by failing to make evidentiary

objections to the parol evidence at trial, failing to propose

a parol evidence rule instruction, failing to request a

finding of contract integration, and agreeing to Instruc-

tion 18.

THE COURT HAS MISAPPLIED THE CONTROLLING

LEGAL PRINCIPLE THAT CONTRACT

INTEGRATION IS A FACT TO BE FOUND

BY THE TRIAL JUDGE

The Court’s Opinion (pp. 3-4) notes that the trial

judge made no finding on contract integration (because

LKSD requested none). The Court then makes its own

finding of integration based solely on examination of the

parties’ written contract. Those documents do not include

an integration clause reciting that they contain the par-

ties’ complete agreement. Nevertheless the Court infers

that integration must have been intended because the

written terms are lengthy and detailed. The Court states

that finding on integration is a question “for the court.”

However, under controlling precedent set forth below,

contract integration is a question of fact for the trial court.

It is respectfully submitted that the authorities cited

in this Court’s Opinion do not support the proposition

that the factual finding of integration can be made for the

first time on appeal. The Restatement (Second) of Contracts

§ 209 states that “[o]rdinarily the issue whether there is

an integrated agreement is determined by the trial judge

-

App. 5

in the first instance.” Id. at p. 116. The cited case of Alaska

Northern Dev., Inc. v. Alyeska Pipeline Service Co., 666 P.2d

33, 37 (Alaska 1983) states that “[w]hether a writing is

integrated is a question of fact to be determined by the

court in accordance with all relevant evidence.” That case

applies the “clearly erroneous ” standard to the integra-

tion question — further illustrating the factual nature of an

integration finding. In Mitford v. LaSala, 666 P.2d 1000,

1004 (Alaska 1983), which is also cited by the Opinion, it

is established that “[t]he court may resort to extrinsic

evidence in determining whether an agreement is

integrated.”

Evidence from both AD-F and LKSD’s own contract

manager (Mr. Chauvin) established that both parties

understood that their agreement to provide for nominal

liquidated damages as the sole penalty for the first 11

months of “delay” past the stated completion date (see

citations to record in AD-F’s brief, at pp. 2-7). Special

Verdict No. 1 (CP 630) confirmed that this understanding

became part of the agreement. Given the ample evidenti-

ary support for this verdict, the appellate court may not

properly substitute a contrary finding (especially where

an inference of intended integration is based solely on

inspection of the written agreements).

Corbin says flatly that such issues as contract inte-

gration cannot “be determined by mere inspection of the

written document.” Corbin on Contracts, § 574, at pp

359-60; see also Id., § 582 at p. 451. In our case, the

question of contract integration would necessarily have

to weigh live testimony that was offered to explain the

circumstances under which AD-F’s contracts were

entered. The Alaska Supreme Court has previously

App. 6

refused to make its own fact findings in such matters. See,

e.g., Penn v. Ivey, 615 P.2d 1, 3 (Alaska 1980) (credibility of

witnesses and conflicting evidence must be weighed by

trial court); Patrick v. Sedwick, 413 P.2d 169, 174 (Alaska

1966) (appellate court will not “make new independent

findings upon evidence which we did not hear”).

The finding of integration made for the first time on

appeal by this Court would be particularly inappropriate

here since neither the parties, nor the trial court, consid-

ered integration to be material at trial. As a result, the

record on appeal is not fully developed on the question of

integration. If it was error not to make a finding on

integration, AD-F submits that the proper remedy would

be a remand to the trail judge for a finding of fact.

Applicable precedents preclude such a finding by the

appellate court (at least where, as here, integration is

contested).

THE COURT HAS OVERLOOKED CONTROLLING

LEGAL PRINCIPLES PERMITTING THE

JURY TO CONSIDER EXTRINSIC

EVIDENCE OF THE PARTIES’ MUTUAL INTENT

In finding that AD-F’s contracts were integrated, the

Court effectively concludes that the jury’s deliberations

should have been limited to a review of the written

contracts. This ruling contradicts the line of recent Alaska

decisions that have admitted extrinsic evidence to ascer-

tain the contract parties’ mutual intent, regardless of

whether the contract at issue was integrated.

The Alaska Supreme Court has held that “a court

may initially turn to extrinsic evidence in <onstruing a

contract.” Dahl v. Griffin, 652 P.2d 84, 87 (Alaska 1982);

App. 7

Alyeska Pipeline Service Co. v. O’Kelley, 645 P.2d 767, 771

n.1 (Alaska 1982). “[E]xtrinsic evidence regarding the

intent of the parties may be used to interpret a contract

regardless of whether the contract appears to be ambig-

uous On its face or not.” Wright v. Vickaryous, 598 P.2d 490,

497 n.22 (Alaska 1979); see also Peterson v. Wirum, 625 P.2d

866, 871 (Alaska 1981). The Court has said that extrinsic

evidence is admitted because “the primary underlying

purpose of the law of contracts is the attempted realiza-

tion of reasonable expectations that have been induced by

the making of a promise.” Stenehjem v. Kyn Jin Cjo, 631

P.2d 482, 484-85 (Alaska 1981).

Even LKSD’s own proposed Instruction No. 30 (CP

334-345) would have advised the jury fo “give effect to

the reasonable intentions of the parties,” to be deter-

mined after considering extrinsic evidence. It would have

permitted consideration of LKSD’s contract manager’s

testimony that he induced contractors to bid subject to an

agreement (reflected in supplementary general provi-

sions) that construction could continue for up to 11

months with no penalty other than nominal liquidated

damages (see record citations in AD-F’s brief, pp. 2-7).

Several other recent cases have admitted extrinsic

evidence as a basis for ascertaining the mutual intent of

contracting parties. See, e.g., Fairbanks v. Tundra Tours, Inc.,

719 P.2d 1020, 1024 (Alaska 1986); Norton v. Herron, 677

P.2d 877, 880 (Alaska 1984); Craig Taylor Equip v. Pettibone

Corp., 659 P.2d 594, 597 (Alaska 1983); Salmine v. Knagin,

645 P.2d 148, 150 (Alaska 1982). Such evidence in this case

established that both contract parties shared a common

understanding about the consequences of completion

after August 31, 1980. And as Corbin says: “There is no

App. 8

sound reason for holding that parties are bound by any

contract, integrated or not, in accordance with a meaning

which the court now finds as a fact that neither of them

gave to it.” Corbin on Contracts, § 539 at p. 80 (emphasis

added).

THE COURT HAS MISCONCEIVED THE MATERIAL

QUESTION OF CONTRACT AMBIGUITY

The Court’s Opinion (at p. 2) rests on the premise

that “the central dispute was over when completion was

required.” The Court has apparently assumed that AD-F

was attempting to “negate” or “vary” from the contract

completion date of August 31, 1980. This misconceives

the nature of AD-F’s argument and the basis for its jury

verdict. Extrinsic evidence was necessary to resolve con-

tract ambiguity regarding penalties for late completion -

it was not offered to vary the contract completion date.

The completion date of August 31, 1980 was undis-

puted. At issue was the question of penalties if construc-

tion was delayed beyond that date. The boilerplate

“general provisions” referred to termination for untimely

completion, but a “supplementary general provision” set

forth an 11-month grace period during which AD-F’s

only penalty would be payment of nominal liquidated

damages (see citations to record in AD-F’s brief, at pp.

4-5). Consistent with industry practice, these supplemen-

tal terms were intended and understood as modifying

any inconsistent terms in the preprinted “general condi-

tions” (Tr. 369, line 13, to 370, line 11). At the pre-bid

conference, LKSD’s contract manager told contractors

that the boilerplate termination “could not have been

invoked until after the July 31st, 1981 date” (Fr. 391, line

App. 9

24, to 392, line 7). The 1980 completion date (for political

reasons) would remain unchanged, but the penalty for

delays up to 11 months would be confined to nominal

liquidated damages.

Testimony of LKSD’s statements to bidders was

admissible tc explain and resolve ambiguities in the writ-

ten documents, which were drafted by LKSD and subject

to interpretation under the rule of contra proferentem. See

AD-F’s Brief, at pp. 48-49. Even under the case cited in

the Court’s Opinion, “extrinsic evidence is admissible to

interpret ambiguous or uncertain terms in a contract”.

Johnson v. Curran, 633 P.2d 994, 995 n.1 (1981). And

“where interpretation of a written instrument turns on

the acceptance of extrinsic evidence, the process of

weighing such evidence should be for the trier of fact.”

Alyeska Pipeline Service Co., supra, 645 P.2d at 771 n.2.

Thus, the controlling precedents establish that such evi-

dence was properly admitted on the question of ambi-

guity (not to vary the contract completion date)

regardless of whether the contract was integrated.

CONCLUSION

As reflected in its brief, LKSD asked only for a new

trial, hoping to exclude factual evidence of its representa-

tions to bidders. AD-F requests that the Court vacate its

Opinion No. 3165, consider the remaining issues on

appeal, and affirm the trial court judgment. Alternatively,

AD-F requests a remand for additional findings by the

trial judge, as set forth above.

App. 10

DATED this 20th day of March, 1987.

OLES, MORRISON, JENSEN, HARRIS &

RINKER, ROTH

STANISLAW &

ASHBAUGH

By /s/ Stuart G. Oles

Stuart G. Oles

Attorneys for Appellees

By

R. Everett Harris

Attorneys for Appellees