Evans v. Sawtooth Partners

• Decision Date: 31 July 1986
• Docket Number: No. 16110,16110
• Citation: 111 Idaho 381,723 P.2d 925
• Parties: William H. and Helen EVANS, husband and wife, Plaintiffs-Appellants-Cross-Respondents, v. SAWTOOTH PARTNERS, an Idaho Limited Partnership, Frank J. Weinstock and Jane Doe Weinstock, husband and wife, and L. Scott Barksdale, Defendants-Respondents-Cross-Appellants.
• Court: Idaho Court of Appeals

Page 925

723 P.2d 925

111 Idaho 381

William H. and Helen EVANS, husband and wife, Plaintiffs-Appellants-Cross-Respondents, v. SAWTOOTH PARTNERS, an Idaho Limited Partnership, Frank J. Weinstock and Jane Doe Weinstock, husband and wife, and L. Scott Barksdale, Defendants-Respondents-Cross-Appellants.

No. 16110.

Court of Appeals of Idaho.

July 31, 1986.

Douglas J. Aanestad (argued), and J. Stephen Crabtree (Hogue, Speck & Aanestad), Ketchum, for appellants.

Edward A. Lawson (Lawson & Peebles), Ketchum, for respondents.

BURNETT, Judge.

This case presents a controversy over the valuation of real property. It focuses upon a highly desirable tract of undeveloped land in the Wood River Valley. The appeal is taken from a judgment denying recovery of any deficiency after a trustee's sale under a deed of trust. We are asked to review the district court's finding that the fair market value of the property was at least equal to the indebtedness secured by the deed of trust. Questions concerning costs and attorney fees are also presented. For reasons set forth below, we affirm the district court's judgment on the deficiency question, but we vacate its order on costs and attorney fees.

The background facts are undisputed. In 1981 William and Helen Evans sold the subject property, containing about five acres, to Sawtooth Partners, a limited partnership. The purchase price was $325,000, $50,000 to be paid at closing and the remainder to be carried on a promissory note. The note provided that four instalments of $70,000 each, consisting of principal and interest, would be paid semiannually, followed by a final payment of $95,000. The note was secured by a deed of trust on the property.

The partnership made one instalment payment, as well as the down payment, before defaulting. The deed of trust was foreclosed nonjudicially. By the time a trustee's sale was conducted, the outstanding balance on the note, including accrued interest, was approximately $317,000. The sellers bought the property back from the trustee with a bid of $240,000. They then sued the partnership for an alleged deficiency of about $77,000. The partnership counterclaimed for $75,000, alleging misrepresentation. However, this claim was dropped before trial. The sole issue tried was the sellers' right to a deficiency judgment.

This issue was governed by I.C. § 45-1512. The statute limits recovery of a deficiency to the difference between the outstanding indebtedness and the amount for which the property is sold by the trustee, or to the difference between the indebtedness and the fair market value of the property, whichever is less. Following a bench trial, the district court found that the fair market value of the property equaled or exceeded the remaining indebtedness of $317,000. Consequently, the court disallowed recovery of any deficiency.

I

The sellers have attacked the court's valuation of the property on several different fronts. First, they contend that the district judge erred by admitting evidence of a third party's offer to purchase the property from the partnership several months before the trustee's sale. The third party, an entity known as the American Indian Nation Trust, owned an adjacent tract. The Trust offered, through its representative, Richard Wagner, to buy the property for $300,000. The offer contained detailed terms and was accompanied by an earnest money check for $5,000. The partnership counteroffered a price of $325,000. Wagner informally agreed to this figure, but funding became a problem and a deal never was consummated. ¹

Counsel for the sellers objected at trial to all evidence of the negotiations between Wagner and the partnership. In support of his objection, counsel cited Oregon-Washington Railroad & Navigation Co. v. Campbell, 34 Idaho 601, 202 P. 1065 (1921). There our Supreme Court ruled that evidence of an unaccepted offer to purchase property could not be admitted to show fair market value in a condemnation action. Nevertheless, the district court in the present case overruled counsel's objection.

Although Campbell has not been cited in any subsequently reported Idaho case, it is not an isolated decision. Across the country, appellate courts are divided over the question whether unaccepted offers to purchase should be admissible. See Annot., 25 A.L.R. 4th 571 (1983).

Although it has been frequently held that the price at which property is bought and sold is admissible upon the issue of value, many courts have adopted the general view that evidence of unaccepted offers to purchase the property in question is not admissible as evidence of the property's value in condemnation cases ... and in other cases involving a question as to the property's value.... As support for this view, courts have noted the uncertain and speculative nature of testimony of offers to purchase, the hearsay problems associated with testimony relating to such offers, and the collateral nature of the issues raised in the course of evaluating an offer to purchase.

Id. at 575 (footnote omitted).

It appears to us that the diversity of court rulings has been produced largely by the varying degrees to which the problems noted in the Annotation can be found in the cases considered. In Campbell, the Court's opinion did not elaborate upon the evidence offered or upon the perceived problems that might result from its admission. However, the Court gave some indication of its concerns by citing with approval a United States Supreme Court decision in Sharp v. United States, 191 U.S. 341, 24 S.Ct. 114, 48 L.Ed. 211 (1903). The Sharp Court upheld a trial court's exclusion of testimony by a property owner regarding offers he had received but not accepted. The Supreme Court said that such testimony would be hearsay and that the opposing party would not be able to probe a would-be purchaser's good faith, motives, seriousness and knowledge of the property when making the offer. In the present case, none of the problems described in Sharp or by the Annotation can be found. There was nothing frivolous, ill-informed, or speculative about Wagner's offer or about his later testimony. The offer was detailed and, as noted, was accompanied by $5,000 in earnest money. Because Wagner, the offeror, testified in person, there was no hearsay or confrontation problem. Finally, the record discloses no collateral issues concerning the offer that would have defeated its probative value on the question of valuation.

We hold that the district court did not err in admitting evidence concerning Wagner's offer. In so holding, we do not purport to overrule Campbell. Rather, we simply decline to stretch the application of Campbell 's rule beyond its apparent rationale. Where, as here, the evidence is reliable nonspeculative and free from hearsay, confrontation or other problems, the general preference for allowing triers of fact to consider probative evidence, and to give it such weight as they think it deserves, militates in favor of admitting the evidence. Our view is philosophically consistent with the thrust of IDJI 712, which tells jurors to determine fair market value by taking into account "all factors which could fairly be suggested by the seller ..., and all counter-arguments which the buyer could fairly make ..., to the extent that you believe such matters would have been considered in the bargaining as to price."

The sellers further contend that even if the evidence properly was admitted, the district judge misinterpreted it. They invite attention to the court's memorandum opinion, which refers to an offer of $325,000 instead of $300,000. But we are not convinced that the judge misunderstood the evidence. As our discussion has shown, Wagner's offer of $300,000 elicited a counteroffer of $325,000, which Wagner found acceptable and would have paid if funding problems had not arisen. Taken as a whole, the evidence points to a value of $325,000.

Of course, it might have been more accurate for the court to say that the partnership's offer of $325,000 was accepted, rather than saying that Wagner offered $325,000. Anticipating this possibility, the sellers now argue that offers to sell are no more admissible in evidence than offers to buy. This argument has several defects. First, the sellers did not object at trial to Wagner's testimony about the partnership's counteroffer. Second, Wagner testified the offer was accepted, albeit informally. Third, the rationale for excluding a seller's offer from evidence appears to be that it is a self-serving statement by the owner of his opinion concerning the value of his property. See generally Annot., 25 A.L.R.4th 983 (1983). However, in Idaho, the right of a property owner to render such an opinion has long been recognized. E.g., McFarland v. Joint School District 365 in Elmore and Owyhee Counties, 108 Idaho 519, 700 P.2d 141 (Ct.App.1985). We conclude that the district court did not err by admitting evidence regarding Wagner's attempt to buy the property or by interpreting the evidence to support a value of $325,000.

The sellers' next line of attack is to challenge the overall sufficiency of evidence to support the judge's finding that the property was worth at least the amount of the indebtedness at the time of the trustee's sale--approximately $317,000. Valuation is a question of fact. We will not disturb a trial court's factual findings unless they are clearly erroneous. I.R.C.P. 52(a). Findings are deemed clearly erroneous only if they are unsupported by substantial evidence. Rasmussen v. Martin, 104 Idaho 401, 659 P.2d 155 (Ct.App.1983). We apply this standard of review to all findings, whether made upon testimonial or documentary evidence. DeMarco v. Stewart, 107 Idaho 555, 691 P.2d 801 (Ct.App.1984).

In addition to the Wagner testimony, the evidence regarding value was provided by two appraisers. An appraiser called as a witness by the sellers opined that the fair market value of the property was $265,000. An...