Black Canyon Racquetball Club, Inc. v. Idaho First National Bank

• Decision Date: 09 January 1991
• Docket Number: No. 17129
• Citation: 804 P.2d 900,119 Idaho 171
• Parties: BLACK CANYON RACQUETBALL CLUB, INC., an Idaho Corporation; and Russell D. Campbell, individually, Plaintiff-Appellants, v. IDAHO FIRST NATIONAL BANK, N.A., Defendant-Counterclaimant-Respondent, and Russell D. Campbell, Counterdefendant-Appellant.
• Court: Idaho Supreme Court

804 P.2d 900 (1991)

119 Idaho 171

BLACK CANYON RACQUETBALL CLUB, INC., an Idaho Corporation; and Russell D. Campbell, individually, Plaintiff-Appellants,v. IDAHO FIRST NATIONAL BANK, N.A., Defendant-Counterclaimant-Respondent, and Russell D. Campbell, Counterdefendant-Appellant

No. 17129.

Supreme Court of Idaho

January 9, 1991.

Elam, Burke & Boyd, Boise, for appellants. Bobbi K. Dominick argued.

Holland & Hart, Langroise, Sullivan, Boise, for respondent. Steven B. Anderson argued.

BAKES, Chief Justice.

Plaintiff filed a complaint alleging that Idaho First National Bank (Idaho First) made an oral agreement to loan Black Canyon Racquetball Club, Inc., (Black Canyon) $174,000 in order to expand and remodel the club. Specifically, in its complaint Black Canyon alleges that on October 22, 1981, Idaho First loan officer Karen Kreps and Dale Bartles, a branch manager, orally agreed that once the club had obtained 150 members Idaho First would loan Black Canyon the principal sum of $174,000 at an interest rate of 13.75% to be repaid in equal monthly payments over a twelve year period. Idaho First denied entering into any binding and enforceable contract with Black Canyon, alleging that the discussions were too indefinite and lacked essential terms. The loan which Idaho First was allegedly committed to make was to be a Small Business Administration (SBA) guaranteed loan. The Emmett branch of Idaho First did submit two written applications for SBA loans on behalf of Black Canyon, which were signed by plaintiff Russell D. Campbell, the director and managing agent of Black Canyon. Both applications were declined. Idaho First declined to make a loan to Black Canyon, and this lawsuit ensued.

In its original complaint, filed on September 4, 1985, Black Canyon alleged various contractual claims stemming from the alleged oral agreement by Idaho First to make a loan to Black Canyon. Idaho First filed an answer and counterclaim on November 26, 1985. On June 5, 1987, one and one-half years later, Idaho First moved for summary judgment. Immediately thereafter, on June 11, 1987, Black Canyon moved to amend its complaint to include, for the first time, tort claims including a "tort of bad faith," "negligent failure to disclose," and "negligent infliction of emotional distress," as well as breach of fiduciary duty. On July 24, 1987, the district court denied Black Canyon's motion to amend its complaint to include these additional theories stating that the allegations were "barred by the applicable statute(s) of limitations."

On August 12, 1987, the district court granted Idaho First's summary judgment motion on the amended contract claims, stating that "the alleged oral contract lacked complete and definite terms and accordingly was unenforceable...." The district court explained its ruling as follows:

a. The terms of the alleged contracts are too indefinite to constitute a legally enforceable and binding contract.

b. Where a prospective borrower is seeking to have a lender make a SBA-guaranteed loan, as in the present case, the terms of an oral contract to loan money are not definite and certain so as to constitute a legally enforceable contract until the SBA has committed to participate in any such proposed loan.

(Emphasis added.)

On appeal Black Canyon raises three issues: (1) whether the trial court erroneously granted Idaho First's motion for summary judgment on its contract claims; (2) whether the trial court erroneously denied Black Canyon's motion to amend its complaint to add tort causes of action; and (3) whether Idaho First was estopped to deny the existence of the alleged oral contract. We affirm the trial court, focusing our attention on the contract issue first.

I

Black Canyon alleges that Idaho First entered into an enforceable oral contract to provide Black Canyon with a loan. In its memorandum in support of summary judgment, Idaho First denied the existence of the enforceable oral contract, asserting among other things that "no enforceable agreement existed between Black Canyon and the Bank because essential terms were indefinite." The district court agreed, holding that the "terms of the alleged contract are too indefinite and uncertain to constitute a legally enforceable and binding contract." The district court also held that the terms of an oral contract to make an SBA-guaranteed loan "are not definite and certain so as to constitute a legally enforceable contract until the SBA has committed to participate in any such proposed loan."

In so ruling, the district court did not err. In Giacobbi Square v. Pek Corporation, 105 Idaho 346, 670 P.2d 51 (1983), we reaffirmed the well-established rule that the terms of a contract must be sufficiently definite and certain in order to be enforceable. See also Barnes v. Huck, 97 Idaho 173, 540 P.2d 1352 (1975) and Dales Service Company, Inc. v. Jones, 96 Idaho 662, 534 P.2d 1102 (1975). Applying this rule to the facts of this case, we conclude that the terms of the alleged contract are too indefinite to be legally enforceable.

Appellants' argument that the terms of the alleged contract are sufficiently definite is contradicted by Russell Campbell's own testimony. In his deposition, Campbell first testified that the loan was to be for $174,000 at 13.75 percent interest, to be repaid over a twelve-year period, and that the bank would make the loan when Black Canyon had sold 150 memberships. However, Mr. Campbell later testified that the amount of the loan may have changed after the original agreement was made, although he was not entirely sure. Black Canyon Racquetball Club offered several types of memberships. Mr. Campbell testified that when the racquetball club opened, only full-single, full-family and lifetime memberships were offered, but later weight-only, fitness-only, racquetball-only, corporate, and student memberships were added. Each of these limited memberships could be for a single person, a couple, or a family, and each type of membership cost a different amount. While Mr. Campbell acknowledged that he believed the bank had made a distinction between the types of memberships that would have counted toward the 150 membership requirement, he did not know what that distinction was. Regarding the interest rate, he stated that it "may have varied from time to time," depending on when the loan was made. His deposition testimony was as follows:

Q. So in October of 1981, the bank did not commit to any particular interest rate?

A. Well, I would say market rate. And at that time, it was 13.75.

Q. They committed to market rate, whatever that was, at any time in the future when the loan finally was made.

A. Yeah, I think that's it.

Q. Was it market rate—what kind of market rate? Prime rate?

A. I don't think they ever decided that. I guess that was just the rate at that time.

Q. When you say market rate, that can mean a lot of different kinds of interest.

A. Well, mortgage rate.

Q. Mortgage rate?

A. Yeah, because it was going to be on the building anyway, building equipment. I assumed that's what it was because otherwise they wouldn't have had the security of the building to back it up.

Q. When you say you assume, that's your assumption and not necessarily the bank's.

A. Yes.

Finally, Campbell specifically acknowledged that the Small Business Administration (SBA) would have to approve his application before any loan would be made. In his deposition, Campbell testified that:

Q. How was the Small Business Administration going to be involved in that loan?

A. I assumed they were going to guarantee a percentage of the loan.

Q. So you know about Small Business Administration's involvement in that oral commitment that you claim existed?

A. Yes, I did.

Q. The fact is, Mr. Campbell, you knew that Small Business Administration had its own requirements for loan applicants, financial information, documentation which it required before it would approve or go in on a loan with a bank, did you?

A. Yes, I did.

Q. And you didn't have any reason to believe that the money would be coming solely from the Idaho First National Bank without participation by SBA at all, did you?

A. No.

Q. So you knew about SBA's involvement and knew their requirements would have to be satisfied as well. Correct?

A. Yes.

Clearly, given the above testimony, the terms of this alleged contract are not sufficiently definite to enforce. The amount of the loan, originally $174,000, could have gone up or down. The interest rate, originally 13.75%, also could have varied according to the "market," yet the parties had not agreed upon which "market" which would apply. Mr. Campbell merely "assumed" it would be the market mortgage rate, yet he acknowledged that he and the bank had not agreed on that. The loan was to have been made when Black Canyon had sold 150 club memberships, although the type of memberships required was never specified. Finally, as Mr. Campbell testified, until the SBA had committed to participate in the proposed loan, and determined the conditions under which it would participate, such as the amount, the interest rate, the security, etc., there could be no final agreement. Therefore, while Mr. Campbell has alleged that an enforceable oral contract existed between Black Canyon and the bank, his evidence proffered in the summary judgment proceeding did not show any specific, enforceable terms. Thus, the trial court did not err in concluding that the terms of the agreement were too indefinite to constitute an enforceable contract.

II

We next turn to Black Canyon's assertion that the district court erroneously denied Black Canyon's motion to amend its complaint to add several tort claims, namely: (1) the tort of bad faith based on Idaho First's actions after the formation of the alleged oral contract; (2) the negligent failure of Idaho First to disclose information showing that the SBA was unlikely to guarantee the loan; (3) the negligent infliction of emotional distress based on Idaho First's actions...