Dennett v. Kuenzli

• Decision Date: 10 March 1997
• Docket Number: No. 22362,22362
• Citation: 130 Idaho 21,936 P.2d 219
• Parties: Mel DENNETT, Plaintiff-Counterdefendant-Respondent, v. Ronald L. KUENZLI and Ida Marie Kuenzli, husband and wife, Defendants-Counterclaimants-Appellants.
• Court: Idaho Court of Appeals

Page 219

936 P.2d 219

130 Idaho 21

Mel DENNETT, Plaintiff-Counterdefendant-Respondent, v. Ronald L. KUENZLI and Ida Marie Kuenzli, husband and wife, Defendants-Counterclaimants-Appellants.

No. 22362.

Court of Appeals of Idaho.

March 10, 1997.

Petition for Review Denied,

May 7, 1997.

Frank W. Stoppello (argued), Boise, for appellants.

Risch, Goss & Insinger, Boise, for respondent. James E. Risch argued.

LANSING, Judge.

This is a dispute over the validity of the exercise of an option to purchase farm property.

I. FACTS AND PROCEDURAL HISTORY

In March 1984, Mel Dennett entered into an agreement with Ronald L. and Ida Marie Kuenzli for the sale of farm property. Although Dennett's initial asking price was $400,000, he agreed to sell the land to the Kuenzlis for $300,000. The purchase price, plus interest, was payable in twenty annual installments. The agreement provided that if the Kuenzlis prepaid the balance at any time during the life of the contract they would also be required to pay a $100,000 prepayment penalty. The parties appointed an escrow agent to hold the conveyance documents and to process the payments.

Approximately four months later, in July of 1984, the parties executed an option agreement giving Dennett the right to repurchase the same real property at any time during the existence of the escrow. By terms of the option agreement, if Dennett elected to repurchase the property he would be required to pay the amount of all principal and interest previously paid by the Kuenzlis, plus the principal balance that was yet unpaid by them (which would, by offset, effectively cancel the Kuenzlis' liability for the balance under the original sale contract), plus $15,000.

During the fall of 1993, the Kuenzlis discovered that the farm property had greatly increased in value. To enjoy the benefit of this appreciation, the Kuenzlis decided to sell the property. Before doing so, in October 1993, the Kuenzlis called Dennett to inform him of their intention to list the property with a real estate agent and to inquire whether it would cause adverse tax consequences for Dennett if the Kuenzlis were to prepay the contract balance. Dennett did not express any opposition to the sale of the property and said that he would not suffer any tax disadvantages from prepayment. On December 7, 1993, the Kuenzlis entered into an earnest money agreement to sell the property to a third party for $975,000. However, two days later Dennett gave the Kuenzlis written notice that he was exercising his right to repurchase the property under the option agreement. In response, the Kuenzlis attempted to terminate Dennett's right to exercise the option by prepaying the remaining purchase price, including the $100,000 prepayment penalty, but this payment was refused by the escrow agent at Dennett's instruction. Dennett then tendered the amount required for exercise of the option and demanded that the Kuenzlis convey the property to him. The Kuenzlis refused. Consequently, Dennett brought an action seeking specific performance of the option agreement. The Kuenzlis counterclaimed requesting specific performance of the land sale contract or, alternatively, damages. Following a court trial, the district court granted judgment to Dennett and ordered that the Kuenzlis perform pursuant to the terms of the option agreement.

II. ISSUES ON APPEAL

On appeal, the Kuenzlis contend: (1) that the option agreement was not supported by consideration; (2) that the option agreement was modified, giving the Kuenzlis the right to sell the farm property without Dennett's interference through exercise of the option; (3) that Dennett was precluded from exercising the option based upon waiver, estoppel, and unclean hands; (4) that the agreement should be reformed based on mutual or unilateral mistake; (5) that the option agreement contains an ambiguous term that should have been interpreted in favor of the Kuenzlis; (6) that Dennett lost his right to exercise the option when he assigned his interest in it to a living trust; and (7) that the district court erred in awarding attorney fees to Dennett.

III. STANDARD OF REVIEW

It is well established that this Court's review of a decision following a court trial is limited to ascertaining whether the evidence supports the trial court's findings of fact, and whether those findings of fact support the conclusions of law. I.R.C.P. 52(a); Alumet v. Bear Lake Grazing Co., 119 Idaho 946, 949-50, 812 P.2d 253, 256-7 (1991). In Ficarro v. McCoy, 126 Idaho 122, 879 P.2d 30 (Ct.App.1994), we outlined the appellate court's task in such cases:

With respect to the findings of fact, the Idaho Rules of Civil Procedure provide that "In all actions tried upon the facts without a jury ... [f]indings of fact shall not be set aside unless clearly erroneous." I.R.C.P. 52(a). Thus, our task when reviewing factual findings is not to weigh the evidence nor to substitute our own view of the facts for that of the trial judge. Our task is simply to determine whether the factual findings are supported by substantial, albeit conflicting, evidence in the record. If so, the findings cannot be said to be clearly erroneous. Rasmussen v. Martin, 104 Idaho 401, 404, 659 P.2d 155, 158 (Ct.App.1983). We regard evidence as "substantial" if a reasonable trier of fact would accept it and rely upon it in determining whether a disputed point of fact has been proven. Ortiz v. State, Dept. of Health and Welfare, 113 Idaho 682, 684, 747 P.2d 91, 93 (Ct.App.1987).

Id. at 125, 879 P.2d at 33. This standard of review reflects the deference that is afforded to "the trial court's special opportunity to assess and weigh the credibility of the witnesses who appear before it personally." Rueth v. State, 103 Idaho 74, 77, 644 P.2d 1333, 1336 (1982). Conversely, the standard of review applied when assessing the district court's conclusions of law is not deferential. We exercise free review in determining the appropriate legal rules and in applying them to the facts found. Ficarro, 126 Idaho at 126, 879 P.2d at 34; Staggie v. Idaho Falls Consol. Hospitals, 110 Idaho 349, 351, 715 P.2d 1019, 1021 (Ct.App.1986).

IV. ANALYSIS

A. Adequacy of Consideration

The Kuenzlis contend that the district court erred in finding that the option contract exercised by Dennett was supported by adequate consideration. Although the option agreement recited that the option was granted "in consideration of the sum of ONE ($1.00) DOLLAR, and other good and valuable consideration, the receipt for which is hereby acknowledged," the Kuenzlis contend that Dennett did not pay the recited consideration. They assert that as a consequence of this lack of consideration, the agreement is unenforceable.

Idaho Code Section 29-103 provides that "[a] written instrument is presumptive evidence of a consideration." See also Lewis v. Fletcher, 101 Idaho 530, 531, 617 P.2d 834, 835 (1980). Once raised, however, this presumption may be rebutted by the party seeking to assert the defense of lack of consideration. Idaho Code § 29-104 specifies that, "The burden of showing want of consideration sufficient to support an instrument lies with the party seeking to invalidate or avoid it." Under this statute both the burden of going forward with evidence and the burden of persuasion rest upon the party contesting the adequacy of the consideration. W.L. Scott, Inc. v. Madras Aerotech, Inc., 103 Idaho 736, 741, 653 P.2d 791, 796 (1982) (holding that the party asserting the affirmative defense of lack of consideration must establish that defense by a preponderance of the evidence); Rosenberry v. Clark, 85 Idaho 317, 379 P.2d 638 (1963) (holding that the defense of want or failure of consideration is an affirmative defense and the burden to show lack of consideration to support an instrument lies with the one seeking to avoid it).

In this case, the record supports the district court's finding that the Kuenzlis failed to meet their burden of proof. The evidence does not establish, as argued by the Kuenzlis, that Dennett failed to give the recited consideration. Rather, the record demonstrates that, ten years after the fact, no one involved had a clear memory of everything that transpired in completing the transaction. Moreover, there was more than just the Section 29-103 presumption that weighed against the Kuenzlis' assertion of lack of consideration. In this case, the instrument itself represented that "good and valuable consideration" had been given and contained a written acknowledgement by the Kuenzlis of the receipt of such consideration. Accordingly, the district court's determination that the option contract was supported by valid consideration was based on substantial and competent evidence.

B. Modification of the Option Agreement

We next consider the Kuenzlis' contention that the district court erred when it rejected their argument that the option contract had been orally modified. According to the Kuenzlis, the original option contract was modified when Mel Dennett, during a telephone conversation with Ronald Kuenzli, assented to the Kuenzlis' proposal to sell the farm property. They argue that the conversation, which occurred in October of 1993, amounted to an oral modification of the option agreement and that Dennett's subsequent exercise of the option was a breach of the agreement as modified.

A written contract may be modified or waived by a subsequent oral agreement. Scott v. Castle, 104 Idaho 719, 662 P.2d 1163 (Ct.App.1983). In addition, the modification of an agreement "may be implied from a course of conduct in accordance with its existence and assent may be implied from the acts of one party in accordance with the terms of the change proposed by the other." Ore-Ida Potato Products Inc. v. Larsen, 83 Idaho 290, 296, 362 P.2d 384, 387 (1961). The question, however, of whether such an oral modification has been proven is one for the trier of fact. Strate v. Cambridge Tel. Co. Inc., 118 Idaho...