Kline v. Clinton

Decision Date07 May 1982
Docket NumberNo. 13525,13525
Citation103 Idaho 116,645 P.2d 350
PartiesOtis E. KLINE, Jr., and Miriam R. Kline, husband and wife; Ross E. Wait and Shirley Wait, husband and wife; and George W. Lindell and Linda Lindell, husband and wife, Plaintiffs-Appellants, v. Vernon B. CLINTON and Rosemary Clinton, husband and wife; Acequia, Inc.,; and Clinton Ranch, Inc., Defendants-Respondents.
CourtIdaho Supreme Court

Michael R. Orme of Hansen, Boyle, Beard & Martin, Chartered, Idaho Falls, for plaintiffs-appellants.

Gary L. Cooper of Racine, Huntley & Olson, Pocatello, for defendants-respondents.

BAKES, Chief Justice.

Appeal is taken from a partial summary judgment on plaintiffs' amended complaint seeking to judicially establish a partially written, partially oral contract for the purchase of a large ranch known as the Clinton Ranch, and from the expungement of a purchaser's lien and lis pendens filed by plaintiff appellants.

Plaintiff appellants herein are Otis Kline, George Lindell and Ross Wait. Defendant respondents are: Vernon B. Clinton and Rosemary H. Clinton, husband and wife; Acequia, Inc., the record owner of most of the real property involved in this dispute, its president and sole stockholder being Vernon B. Clinton; and, Clinton Ranch, Inc., the operating company which operated the farm and ranch enterprise conducted on the real property prior to November, 1976.

In the summer of 1976, plaintiffs and defendants entered into negotiations in regard to the purchase of Clinton Ranch. The trial court found that Kline, Lindell and Wait prepared financial statements in order to induce Vernon Clinton to enter into negotiations and to enable them to acquire the farm ranch property. The prospective buyers sent financial statements to Vernon Clinton in which they misrepresented their financial status. Kline represented that he owned a Time Certificate of Deposit (TCD) valued at $500,000. In fact, the record discloses that neither Kline, nor Lindell nor Wait ever owned the TCD; instead, they had rented it and arranged with the owner to advise anyone who called seeking ownership verification that Kline owned the TCD. The trial court determined that Kline's financial statement represented his net worth at $1,268,000 when his actual net worth was approximately $760,000. Lindell and Wait also overstated the values of their assets, representing each of their net values to be in excess of $200,000, when in fact they were between $50,000 and $100,000. It is apparent from the record that Vernon Clinton also made misrepresentations. There was evidence in the record that during negotiations Clinton represented that the Clinton Ranch had an appraised value of $15.4 million, while subsequent appraisals established the value of Clinton Ranch to be $5 million less than represented. Furthermore, the written agreements subsequently entered into by Clinton through his corporation, Acequia, Inc., the nominal seller, identified certain livestock and property to be included in the sale. Although all livestock listed in the agreement carried the Clinton Ranch brand, this livestock did not in fact belong to Acequia, Inc., the seller, but to Hailey Livestock, a sole proprietorship conducted exclusively by Rosemary Clinton. Finally, Clinton admitted that a 320-acre portion represented as part of the Clinton Ranch to be sold by Acequia, Inc., was in fact owned by Hailey Livestock. With the misrepresentations of both parties piercing the very foundation of their relationship, the eventual disagreements giving rise to this suit are hardly surprising.

The parties first entered into a memorandum agreement on September 10, 1976, which is contained in the record. This agreement provided for a purchase price of $12 million, with a down payment of $4 million. The balance was to be paid in semiannual installments at an interest rate of 8% per annum. The memorandum agreement stated that the offer was subject to the plaintiffs being able to obtain a $5 million loan. With this loan, the plaintiffs were to make the $4 million down payment and use the additional $1 million exclusively for capital improvement expenses. The September agreement further provided that the parties would execute a real estate contract outlining payment of the balance of the purchase price.

The plaintiff buyers were unable to obtain financing and offered to forego the purchase. Defendants rejected this proposal and suggested that the plaintiffs' purchase of Clinton Ranch be subject to no down payment and the balance be paid in more lenient terms. These proposals led to another written agreement, the October 18, 1976, memorandum.

The October memorandum agreement continued to contemplate a purchase price of $12 million, with a payment on or before May 1, 1977, of $200,000 and a payment on or before the first day of November, 1977, of $550,000; additional payments of interest at 8% per annum were to be made on May 1, 1978, and November 1, 1978, and on the first day of May and November thereafter. Principal payments were to be made on the first day of November in 1980, 1982, and 1984, with a final payment on November 1, 1986. Alternatively, in the event permanent financing was obtained, the provisions relating to the payment of the down payment and the use of the proceeds of a $5 million loan as set out in the September 10, 1976, memorandum agreement would go into effect. The terms of the October agreement further provided that on or before December 1, 1976, the parties would enter into "an agreement detailing each and every condition of (the) transaction."

Plaintiffs formed the Clinton Ranch Partnership and took possession of the ranch on November 1, 1976, as provided in the October 18, 1976, memorandum agreement. In their depositions, plaintiffs claim that in anticipation of a final purchase agreement they invested substantial sums of their own money in ranch operations, totaling $70,000 by January, 1977, and began to incur and pay all bills. The record before the lower court showed that plaintiffs created a tax shelter investment, representing themselves as owners of Clinton Ranch, and sold interests to limited partner investors to raise additional operating funds. Plaintiffs invested $92,500, half the money raised, directly into ranch operations. Ultimately, the money raised by the tax shelter device was repaid to the investors, the $92,500 put into operation of the ranch being paid back from money advanced by Vernon Clinton. Additionally, in March, 1977, Clinton Ranch Partnership sold the cattle on the ranch owned by Hailey Livestock for $123,000 and used the funds raised to run the ranch.

Plaintiffs remained unsuccessful in their efforts to secure financing. The record discloses that in late January, 1977, Vernon Clinton and Clinton Ranch Partnership met to "clear the air." Plaintiffs claim at that meeting to have advised the defendant that the TCD was non-existent; however, they admittedly did not go into detail regarding the extent of exaggeration or overstatements on their financial statements. Plaintiffs again offered to abandon the purchase, but allege that defendant insisted that the meeting would effect no changes in their existing relationship and proposed that thereafter they join in their efforts to procure the financing contemplated by the memorandum agreements. Plaintiffs also claim that defendant, at that meeting, orally agreed that the earnings from the operation of the ranch would be the source for unscheduled periodic purchase payments and that defendant would put up the Clinton Ranch as security for a loan, if acquired. Plaintiffs allege that these statements form the basis of the oral modifications which plaintiffs sought to rely upon in the trial court.

On the other hand, defendant claims he was told only that plaintiffs could not borrow against the TCD or withdraw the $500,000. Defendant also maintains that Clinton Ranch Partnership status was left undefined, but that he allowed them to continue to operate the Clinton Ranch property in the fashion previously operated without agreeing to any oral modifications of the existing agreements. The record establishes that the parties never entered into a final written agreement detailing each and every condition of the transaction. However, plaintiffs continued to operate the ranch for nearly another year and a half.

In April, 1977, defendant began advancing operating funds to Clinton Ranch Partnership. Many of these loans were evidenced by promissory notes indicating the obligation of Clinton Ranch Partnership to defendant. Additional operating funds were obtained by plaintiffs from the sale of livestock, crops and equipment.

In the summer of 1977, Vernon Clinton and Acequia, Inc., obtained a $4 million loan from Prudential Insurance Company on the Clinton Ranch. Plaintiffs claim this transaction was pursuant to the agreement to jointly pursue financing, and that the loan satisfied the September memorandum agreement's requirement, as orally modified, that they obtain a loan for $5 million. In direct conflict, Vernon Clinton maintains that he alone obtained the loan and that there was no oral modification to the effect that the loan obtained in his name was pursuant to and satisfied the September memorandum agreement. The record discloses that defendant put up Clinton Ranch as security for the loan and paid the $40,000 commitment fee. The only document signed by plaintiffs in regard to the loan transaction was a disclaimer, disclaiming any ownership rights in the equipment and real estate. The disclaimer states, and defendant maintains, that plaintiffs' status in regard to the ranch and equipment was merely as lessees for the crop year 1977. Plaintiffs, however, claim to have signed the disclaimer only upon defendant's positive representations that such disclaimer was necessarily a part of their joint effort to acquire the loan, particularly to satisfy the lender's requirements, and that acquisition of...

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    ...favorably to the opposing party and the moving party is entitled to a judgment as a matter of law. I.R.C.P. 56(c); Kline v. Clinton, 103 Idaho ---, 645 P.2d 350 (1982); Palmer v. Idaho Bank & Trust of Kooskia, 100 Idaho 642, 603 P.2d 597 (1979). When terms of a contract are ambiguous, their......
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