Hansen v. Little Bear Inn Co.

• Decision Date: 18 July 2000
• Docket Number: No. 99-187., No. 99-186
• Citation: 9 P.3d 960
• Parties: William D. HANSEN, Appellant (Plaintiff), v. LITTLE BEAR INN COMPANY, a Wyoming corporation, and Barbara Boling, in her individual capacity, Appellees (Defendants). Little Bear Inn Company, a Wyoming corporation, and Barbara Boling, in her individual capacity, Appellants (Defendants), v. William D. Hansen, Appellee (Plaintiff).
• Court: Wyoming Supreme Court

9 P.3d 960

William D. HANSEN, Appellant (Plaintiff), v. LITTLE BEAR INN COMPANY, a Wyoming corporation, and Barbara Boling, in her individual capacity, Appellees (Defendants).

Little Bear Inn Company, a Wyoming corporation, and Barbara Boling, in her individual capacity, Appellants (Defendants), v. William D. Hansen, Appellee (Plaintiff).

Nos. 99-186, 99-187.

Supreme Court of Wyoming.

July 18, 2000.

Representing William D. Hansen: Don W. Riske and James R. Salisbury of Riske & Arnold, P.C., Cheyenne, Wyoming. Argument by Mr. Riske.

Representing Little Bear Inn Company and Barbara Boling: Terry W. Mackey and David Evans of Hickey, Mackey, Evans & Walker, Cheyenne, Wyoming. Argument by Mr. Evans.

Before LEHMAN, C.J., THOMAS, MACY,¹ GOLDEN, and HILL, JJ.

GOLDEN, Justice.

Appellant William D. Hansen contests the district court's denial of his claim for contract rescission for mutual mistake, finding Appellee Richard K. Boling² did not breach the parties' contract and an award of costs and attorneys' fees is not warranted. Boling appeals the district court's denial of his counterclaim that Hansen's failure to discharge the mortgage underlying the parties' agreement is actionable.

We affirm.

ISSUES

Hansen presents the following issues for our consideration in Case No. 99-186:

I. Whether the District Court erred in ruling that Appellant failed to carry his burden of proving mutual mistake of the parties as a basis for his claim of rescission of the Stock Agreement.

II. Whether the District Court erred in denying Appellant's Motion for Summary Judgment on his claim for breach of contract.

III. Whether the District Court erred in holding that there was an implied term in the Stock Agreement, the failure of which effectively excused performance by Appellee Boling.

IV. Whether Appellant is entitled to an award of all costs and attorneys' fees incurred as a result of Appellee's default and breach of contract, as provided for in the Stock Agreement and transaction documents.

On the issue of the counterclaim, Case No. 99-187, Hansen states the issue as:

Whether the proposed tender of payment by Richard Boling warranted release of the mortgage in favor of William Hansen encumbering the real property of Little bear Inn Company.

Appellees Little Bear Inn Company and Richard K. Boling present the following issues in Case No. 186:

I. Did Appellee's inability to be underwritten for life insurance breach the Agreement For Sale of Corporate Stock?

II. Does the Mortgage herein relate to any obligation but the payment of the Promissory Note herein?

III. Was there an assumption by the parties that Appellee would be able to purchase life insurance, and if so, does such an assumption meet the elements of a mutual mistake qualifying the contract for rescission?

IV. Did Appellee's efforts to be underwritten for life insurance breach the implied contractual duty of good faith and fair dealing?

V. Are Appellants entitled to attorney fees and costs?

On the counterclaim, Case No. 99-187, Boling and Little Bear Inn Company ask:

I. Does a proper tender of payment of amounts due under a mortgage meet the requirements of Wyoming Stat. Ann. 34-1-132?

FACTS

In 1994, William D. Hansen and Richard K. Boling purchased stock of the Little Bear Inn Company (LBI) from the McIntyres. The purchase was secured with a 15-year note, personally guaranteed by Hansen and Boling. The stock was assigned to Hansen and Boling and held as collateral by the bank for the McIntyres. Hansen became the majority stockholder, owning 62% of the stock.

On February 27, 1998, the parties executed an Agreement for Sale of Corporate Stock, and Boling purchased Hansen's stock interest for $205,000, secured by a promissory note from LBI and Boling in the amount of the purchase price and a mortgage on the property. Paragraph No. 6 of the Agreement states the following:

6. LIFE INSURANCE. The Purchaser shall, within ten (10) days following closing, purchase and shall thereafter for the term of the Promissory Note maintain term life insurance upon his life in an amount of not less than Two Hundred Five Thousand Dollars ($205,000.00). Said insurance shall name Seller as the beneficiary of such policy and coverage amount. A copy of such insurance policy and all renewals thereof shall promptly be delivered to the Seller. Failure to comply with this requirement by Purchaser shall constitute a material breach of this Agreement. Said insurance shall be "declining balance" insurance wherein Seller receives only the amount necessary to pay the principal balance hereunder with the remaining proceeds going to a beneficiary designated by Purchaser. Purchaser is relieved from this obligation if he cannot locate a company willing to underwrite said insurance for less than $150.00 per month for the initial premium. In the event that Purchaser is unable to locate a company which offers such insurance for $150.00 or less per month premium, he shall notify Seller of such fact and the amount of the premium which is required and Seller may elect, in writing, to agree to pay any difference between the required premium and $150.00 per month. Purchaser agrees to secure such insurance and keep it current as long as Seller pays any additional premium.

Two days following the agreement to purchase Hansen's stock, Boling met with an insurance agent, completed an application for a life insurance policy and executed a collateral assignment to Hansen on approval of his application. Based on blood tests indicating high cholesterol and liver enzymes, Boling was informed he was uninsurable. He then sought medical treatment and was prescribed medication and a diet regimen. Subsequent blood tests showed decreased levels, but not enough to secure a policy. A pool of 130 insurance companies declined coverage, as did five substandard brokerage companies. A second insurance agent solicited policies from high-risk brokerage companies without success. Boling informed both agents they should consider polices above the Agreement's $150 monthly premium limit, if need be. Boling pursued the purchase of life insurance for eight months, receiving the last insurance application rejection on November 3, 1998.

On August 18, 1998, Hansen filed a Complaint for Judgment alleging a material breach of the Stock Agreement by Boling. On February 25, 1999, the district court denied Hansen's motion for summary judgment, finding a genuine issue of material fact regarding whether Boling used reasonable efforts to procure a life insurance policy and "what result should obtain if Boling is uninsurable."

On March 5, 1999, Boling notified Hansen he was ready to pay off the entire principal and interest due on the mortgage, evidenced by a letter from a bank indicating funds would be available immediately, provided a release of mortgage was given by Hansen. Hansen refused to release the mortgage.

On March 12, 1999, Hansen filed an Amended Complaint alleging breach of contract, rescission of contract through mutual mistake of fact, breach of implied covenant of good faith and fair dealing, and costs of collection and attorney's fees. Boling counterclaimed, alleging Boling and LBI offered to pay the promissory note in full, based on a commitment from the bank to loan the money upon the release of Hansen's mortgage, and that Hansen refused the offer, in violation of Wyo. Stat. Ann. § 34-1-132.

At trial on March 24, 1999, Boling testified he had secured a written commitment of funds from a bank to buy out Hansen by November 6, 1998, and attempted to have Hansen removed from his personal guarantee with the McIntyres, though the McIntyres refused. Hansen and Boling both testified that on the date they entered into the agreement for purchase of Hansen's stock, neither had knowledge of any sort that would lead them to believe Boling would not be able to qualify for insurance coverage. When Hansen was asked why he agreed to the provision in Paragraph 6, which states: "Purchaser is relieved from this obligation if he cannot locate a company willing to underwrite said insurance for less than $150.00 per month for the initial premium," Hansen responded he was concerned about the cost to Boling, although he did not think the insurance would be so expensive that Boling could not afford it.

Concluding Boling had used reasonable efforts to secure a life insurance policy, the district court denied Hansen's complaint, finding no breach of contract or implied covenant of good faith and fair dealing. The trial court also found an award of attorney's fees and costs was unwarranted and that Hansen had failed to carry his burden for rescission of the contract based on mutual mistake. In denying Boling's counterclaim, the district court concluded Wyo. Stat. Ann. § 34-1-132 was designed to provide a remedy for mortgagors who have satisfied all conditions of the mortgage, but face a recalcitrant mortgagee. The trial court determined Boling did not render full performance, but only offered to do so, making the statute inapplicable. The district court concluded the parties were left in the same position as before the litigation, with the bargain still in force, except for Boling's obligation to secure life insurance, which had been fulfilled.

DISCUSSION

Standard of Review

At issue is the construction and resulting interpretation of Paragraph No. 6 of the parties' written Agreement for Sale of Corporate Stock, which this Court reviews as a matter of law. Mathis v. Wendling, 962 P.2d 160, 163 (Wyo.1998); Sanchez v. Life Care Centers of America, 855 P.2d 1256, 1257 (Wyo.1993). In so doing, we review, de novo, the district court's conclusions of law. Saulcy Land Co. v. Jones, 983 P.2d 1200, 1203 (Wyo.1999).

As we interpret the Agreement, we are mindful that our primary focus is the intent of the parties. Wolter v. Equitable Resources Energy Co., 979 P.2d 948, 951 (Wyo.1999) (citing Woods Petroleum Corporation v. Hummel, 784 P.2d 242, 243 (Wyo. 198...