PER CURIAM.
A landowner contracted with a manufacturer to purchase a pre-fabricated steel hangar. In a separate agreement, the landowner contracted with a construction company to erect the steel hangar on his land. After completing its work, the construction company sued the landowner for unanticipated costs it incurred as a result of manufacturing defects in the pre-fabricated hangar. The landowner made an $18,000 offer of judgment, which the construction company accepted. But when the construction company received a separate payment from the manufacturer, the landowner refused to pay the full $18,000, arguing that an offset was warranted. The superior court rejected the landowner's argument, ordering him to pay the full amount of the offer. Because the basis for the superior court's decision is unclear, we reverse and remand for additional factual findings.
Gary Miller is the lessee of a tract of land at Lake Hood. Planning to develop his land into a hangar facility, Miller purchased a pre-fabricated steel hangar building from VP Buildings (VP).
In assembling the building, two costly defects in the pre-fabricated hangar became apparent. First, a paint-related defect caused rust damage. Second, an entirely separate defect relating to the steel caused Handle to incur more costs than it had anticipated in erecting the building. Handle claimed that the additional costs arising out of the steel defect amounted to $13,000. The hangar manufacturer, VP, acknowledged the steel defect, but claimed that the damages were only around $6,000. Miller also believed that the damages were less than Handle alleged.
Because both VP and Handle had contracted with Miller, but not with each other, Miller found himself in the position of a middleman with respect to the additional costs Handle had incurred as a result of the steel defect. Handle could not directly recover from the manufacturer VP; rather, Handle would have to assert a claim against Miller, who would in turn have to seek recovery from VP. Because Miller was reluctant to advocate for the higher amount of damages Handle alleged, and because he believed that Handle was in a better position to explain its claim, Miller authorized Handle to negotiate directly with the manufacturer as to the amount owed.
It appears that both Miller and Handle understood the scope of this granted authority to be quite narrow, consisting exclusively of the power to negotiate, and not the power to collect payment on Miller's behalf. Miller stated in an affidavit that he never assigned
Thus, it appears that both parties understood that Handle's negotiating authority did not encompass the power to independently recover from VP.
In March 2008, Handle recorded a lien against Miller's leasehold in the amount of $39,600.11, plus interest, costs, and attorney's fees. This amount included the alleged $13,000 "backcharges" caused by the steel defect, which was in addition to other unrelated damages that Handle argued Miller owed. In June, Handle filed a complaint against Miller seeking recovery of the entire amount of the lien. The following month VP—which was not a party to the pending litigation—offered to pay Handle $5,900 as compensation for the additional costs it incurred related to the steel defect. On the same day, VP also offered to pay Miller $9,502. While Handle took no immediate action on its offer, Miller accepted his offer almost immediately. Although both Handle and VP later asserted that the $9,502 settled all of Miller's claims against VP, the superior court found that it was solely for the "paint/ rust claim" and Handle does not appeal this finding.
In September, Miller made a Civil Rule 68 offer of judgment to Handle in hopes of settling Handle's lawsuit. Miller's offer stated that it was
Several days after Miller made this offer, Handle's attorney asked Miller's attorney if the offer included an amount for the claim that Handle had concerning the steel defect. Miller's attorney said that it did and that Miller intended to collect the $5,900 VP had offered,
At no point did Miller revoke the authority he had granted Handle to negotiate directly with VP. On October 2, Handle informed VP that it would accept the offer of $5,900. The following day, Handle accepted Miller's $18,000 offer of judgment.
A week later, Miller's attorney wrote to Handle's attorney regarding Handle's acceptance of both offers. Miller's attorney stated that the $5,900 from VP was rightfully Miller's, and reiterated that Miller had intended the offer of judgment to settle the steel defect claim. Therefore, he explained, the amount that Handle had collected from VP would be credited against Miller's $18,000 offer of judgment. Handle's attorney responded by insisting that Miller had not conditioned the offer of judgment on an offset and that, as a result, Handle expected full payment from Miller. When Miller declined to pay the full amount, Handle filed a motion for entry of judgment upon confession, based upon Miller's Rule 68 offer and Handle's acceptance of the offer.
Miller opposed the motion. The superior court held oral argument, but did not hold an evidentiary hearing. In its order on Handle's motion, the superior court rejected all of Miller's arguments, finding that the offer of judgment did not entail an offset under these circumstances and that Handle's acceptance
Miller appeals.
We interpret an accepted offer of judgment according to our independent judgment.
Miller argues that the superior court erred in finding that the circumstances did not warrant an offset of the judgment. First, he argues that Handle's acceptance of both offers amounts to a double recovery and, therefore, the offer of judgment should be reduced by the $5,900 that Handle collected from VP. Second, he asserts that the words of the offer itself—which he argues unmistakably implied that Handle could not accept both offers— necessitate such an offset, especially when interpreted in light of the cross-counsel communications that occurred after Miller made his Rule 68 offer. Finally, he argues that if the agreement does not entail an offset, it is unenforceable.
Because the superior court made no findings as to whether the $5,900 Handle accepted from VP was rightfully Miller's, we are unable to evaluate the bulk of Miller's arguments on appeal, and remand to the superior court for an evidentiary hearing.
Miller argues that allowing Handle to keep both the $18,000 judgment and the $5,900 from VP gave Handle a double recovery for the steel defect claim, and that we must reduce the $18,000 judgment by the amount that Handle collected from VP to prevent this double recovery. Miller cites no law in support of his argument.
Handle correctly asserts that we specifically held in Rules v. Sturn
On appeal, Rules argued that allowing Sturn to keep both the full amount of the judgment and the advanced medical payments would result in a double recovery.
The same reasoning applies here. As we held in Rules, because the purpose of the prohibition against multiple recovery is to prevent over-compensation, it does not apply in a Rule 68 context, where there is no guarantee that the offer of judgment reflects the actual amount of compensation warranted.
Miller's remaining arguments assume that the $5,900 Handle collected from VP was rightfully Miller's. The parties disputed this issue in the proceedings below. Handle argued that the $9,502 VP paid Miller settled all of Miller's claims against VP, and therefore, Miller had no right to the $5,900 that VP eventually paid Handle. Handle pointed to the explicit terms of the settlement agreement and submitted a VP representative's affidavit stating that following Miller's acceptance of the $9,502, he was entitled to no further compensation from VP. Miller submitted his own affidavit to the court asserting that the $9,502 he collected from VP was solely for the paint-defect claim, and that the remaining $5,900, in payment for the steel defect claim, was rightfully his.
The superior court did not hold an evidentiary hearing. Although the superior court stated that the $9,502 was for the "paint/rust claim," it made no findings as to whether the remaining $5,900 was rightfully Miller's.
The central issue in this case is the meaning of the accepted offer of judgment. Specifically, we must determine whether the accepted offer warrants an offset in these circumstances. Rule 68 allows a party to make an offer of judgment "[a]t any time more than 10 days before the trial begins."
"The goal of contract interpretation is to give effect to the parties' reasonable
As a preliminary matter, we reject Miller's argument that the offer of judgment should be interpreted in light of the communications his attorney had with Handle's attorney after the offer was made. Again, Rules v. Sturn
The same rule applies here. Because the only extrinsic evidence a court can look to in interpreting an offer of judgment is that which existed at the time the offer was made, the post-offer communications expressing Miller's intent to collect the $5,900 from VP are irrelevant to the accepted offer of judgment's meaning. Miller contends that Rules only precludes post-offer extrinsic evidence that modifies the offer, and does not prevent courts from looking to post-offer extrinsic evidence to determine the offer's meaning. We disagree. We stated in Rules that "the extrinsic circumstances to which one can refer to determine the meaning of [an] offer [of judgment] should be those existing at the time the offer is made."
Miller goes on to argue that an offset is warranted because, as a result of the post-offer communications, Handle knew that Miller intended to collect the $5,900 from VP. It is true that when one party knows or has reason to know that the other party attaches a different meaning to the contract, the contract is interpreted in accordance with the second party's meaning.
Miller argues that even if post-offer extrinsic evidence is not taken into account,
In his Rule 68 offer of judgment, Miller offered to pay $18,000 plus add-ons "in complete satisfaction of Plaintiff's claims." As Miller argues on appeal, this implies that Miller intended the $18,000 to settle all of Handle's claims against him, including the claim arising out of the steel defect. The superior court held that these circumstances did not warrant an offset because Miller failed to include an express offset term. But the superior court failed to acknowledge the terms that every offer of judgment implies. When a party makes a Rule 68 offer, he implicitly expresses his willingness to give up a specific amount of his own money in exchange for certainty that this is the only amount he will lose going forth with respect to the claims at issue. This exchange is the essence of settlement. When Miller offered $18,000 "in complete satisfaction of Plaintiff's claims," he reasonably expected that Handle's acceptance would guarantee that this was the only amount of Miller's money Handle would receive for this set of damages after the offer was made.
If the $5,900 was Miller's money, then it was unreasonable as a matter of law for Handle to expect that it could both accept the offer of judgment and retain the $5,900 it accepted from VP on Miller's behalf. Miller did not need to include express language to that effect; if the $5,900 was indeed Miller's, this conclusion follows from the offer's implied terms, and an offset would be warranted. However, if the $5,900 was not rightfully Miller's, then Handle's acceptance of both the offer of judgment and the $5,900 would not be inconsistent with the implied terms described above, and the agreement would not entail an offset.
Because the superior court's factual findings are insufficient, we are unable to determine whether the accepted offer of judgment warrants an offset in these circumstances. We REMAND to the superior court for an evidentiary hearing to determine whether the $5,900 was rightfully Miller's money.
CHRISTEN, Justice, with whom CARPENETI, Chief Justice, joins, dissenting.
I write separately to express my disagreement with the court's decision to remand to the superior court for a finding on whether the $5,900 paid by VP to Handle was rightfully Miller's money.
In my view, the uncontested facts known to the parties when Miller made his offer of judgment clearly establish that the VP payment belonged to Miller. It is uncontested that Handle was never in privity of contract with VP, and Handle's counsel confirmed at oral argument that Handle never brought a claim against VP. Indeed, Handle went out of its way to communicate that its contract was with Miller and that it would look to Miller to satisfy its claim for cost overruns. In addition, although Miller enlisted Handle as the appropriate agent to negotiate the rust and steel defect claims with VP—an entirely reasonable step in light of Handle's first-hand knowledge of the construction process—Handle has not alleged that Miller ever agreed or even suggested that Handle could keep the settlement it negotiated with VP. These facts are part of the extrinsic evidence that must be considered in determining the parties' reasonable expectations regarding the settlement offer.
