Hull v. Richard B. Giesler & Idaho Trust Deeds, LLC

• Decision Date: 06 August 2014
• Docket Number: No. 41306.,41306.
• Citation: 156 Idaho 765,331 P.3d 507
• Court: Idaho Supreme Court
• Parties: Gregory HULL, Plaintiff–Counterdefendant–Respondent, v. Richard B. GIESLER and Idaho Trust Deeds, LLC, Defendants–Counterclaimants–Appellants.

156 Idaho 765

331 P.3d 507

Gregory HULL, Plaintiff–Counterdefendant–Respondent,

v.Richard B. GIESLER and Idaho Trust Deeds, LLC, Defendants–Counterclaimants–Appellants.

No. 41306.

Supreme Court of Idaho, Twin Falls, June 2014 Term.

Aug. 6, 2014.

Wright Brothers Law Office, PLLC, Twin Falls, for appellants. Andrew B. Wright argued.

Terry Lee Johnson, Twin Falls, argued for respondent.

BURDICK, Chief Justice.

Richard Giesler and Idaho Trust Deeds, LLC (collectively " Giesler") appeal the Twin Falls County district court's judgment declaring the rights and obligations on a contract. This case arose out of several oral and written agreements between Giesler and Gregory Hull that related to purchasing and subdividing property. After a bench trial, the court found that Hull sold the property to Giesler, but the parties had a later oral contract where Hull promised to pay off Giesler's loans in exchange for half of the subdivision's net profits. The court held that neither party materially breached the contract and ordered Hull to timely pay Giesler's loans and Giesler to complete the subdivision within certain deadlines. On appeal, Giesler argues Hull failed to prove damages and the district court's remedies were erroneous. We affirm the district court in part, vacate in part, and remand for further proceedings.

I. FACTUAL AND PROCEDURAL BACKGROUND

Richard Giesler was friends with Gregory Hull for about twenty years. Hull owned 147 acres of farmland irrigated by a pressurized sprinkler system. Hull also owned water shares appurtenant to that land. In 2005, Giesler began negotiating with Hull to acquire a portion of the 147 acres. The parties ultimately entered into a Purchase and Sale Agreement for all 147 acres.

That Purchase Agreement provided that Hull agreed to sell Idaho Trust Deeds, LLC, approximately 150 acres for $375,000. Giesler is the sole owner of Idaho Trust Deeds, LLC. The Purchase Agreement had a section called "Included Items," which stated the purchase price included "[a]ll existing fixtures and fittings that are attached to the property" and "all water systems, wells, spring water that are now on or used in connection with the premises ..." In addition, the agreement noted the sale included "[i]rrigation fixtures and equipment, and any and all, if any, water and water rights, and any and all, if any, ditches and ditch rights that are appurtenant thereto that are now on or used in connection with the premises." The agreement also covered attorney's fees: "If either party initiates or defends any arbitration or legal action or proceedings which are in any way connected with this Agreement, the prevailing party shall be entitled to recover from the non-prevailing party reasonable costs and attorney fees, including such costs and fees on appeal." Finally, the agreement included a merger clause:

27. ENTIRE AGREEMENT: This agreement, including any Addendums or exhibits, constitutes the entire Agreement between the parties and no warranties, including any warranty of habitability or representations have been made or shall be binding upon either party unless herein set forth.

Both parties signed the agreement.

Before closing, Hull and Giesler signed an addendum that extended the closing date, specified the land was 147 acres, and reduced the price to $367,500. Giesler paid $367,500 in cash at closing. Giesler borrowed $183,748 of that amount from D.L. Evans Bank in four loans. These loans were to be paid over 15 years and carried variable interest rates. The total annual payment on those loans was $20,107.46, due April 20. Hull later signed a warranty deed that conveyed the property to Giesler. The deed does not reference irrigation equipment.

Sometime after closing, Giesler agreed to give Hull a contingent half interest in the 147 acres. His December 2007 handwritten notes stated, "Closing—I told Greg he would get back ½ interest in the property if he paid back the $186,014 loan I took out to purchase the property and made the payments on time." Hull stayed on the property on an oral agreement to farm the land in exchange for paying Giesler rent. Before March 2006, Hull agreed to accept $200,000 from Giesler for Hull's interest in half the profits of 40 of the 147 acres. Giesler paid the $200,000 to Hull.

After Giesler developed those 40 acres, the real estate market took a turn for the worse. Giesler platted part of the remaining 107 acres and drafted a subdivision plan. Giesler never developed the 107 acres. In 2012, Giesler told Hull he owned the entire 107 acres and tried to evict Hull from the property. That same year Hull removed all the irrigation equipment from the property. That equipment was composed of equipment Hull had used on the property, as well as excess pipe that Hull used on other land he owned.

On May 23, 2012, Hull filed a verified complaint against Giesler that alleged Hull held an undivided half interest in the 107 acres, title to the property was held in trust, and Hull was wrongfully evicted. Giesler raised statute of frauds and merger as defenses Giesler also counterclaimed, alleging (1) breach of contract because Hull did not pay Giesler for rent, loans, and other farm expenses; (2) conversion because Hull took irrigation equipment that Giesler owned; and (3) unlawful detainer because Hull stayed on the property.

Hull served Giesler interrogatories on December 24, 2012, and March 22, 2013. After Hull filed a motion to compel a response, Giesler responded to both sets of interrogatories on April 29, 2013. On May 10, 2013, Hull filed a motion to amend his complaint.

Hull's amended complaint added an implied in law contract claim that alleged Giesler was to develop the 147 acres into a subdivision and Hull would receive one-half share of the subdivision's market value when completed. Hull alleged that Giesler unjustly retained Hull's half share because he failed to proceed further after developing the first 40 acres. Hull requested the court give Hull his half share in the property by using partition or the current market value. Hull stated that he added this claim to reflect what he understood the agreement was after discovery.

Giesler objected and alternatively filed a motion to vacate the trial date. Giesler argued that Hull's new claims left Giesler without time to prepare for trial. The court granted Hull's motion to amend at a pretrial conference. At that conference, the court noted that current real estate valuation was not an issue, but if it became an issue the court would bifurcate that issue into another trial. The case went to trial on June 4, 2013.

After trial, the district court held that all of Hull's legal interest in the property transferred to Giesler by the Purchase Agreement and warranty deed. The court stated that any discussion about Hull owning the property merged into the deed. But the court also found that Hull and Giesler entered into a verbal agreement after the sale with mutual consideration. The agreement was that Giesler would develop 147 acres at his own cost and give Hull half the subdivision's profits. In exchange, Hull would pay the $186,014 in D.L. Evans loans that Giesler took out to pay for the property. Hull made these payments to Giesler and not directly to D.L. Evans. Hull made most of his checks to Giesler without specifying "D.L. Evans" in the memo line. The court also noted that Giesler had already bought out Hull's interest in 40 of the 147 acres for $200,000, which left 107 acres subject to the oral agreement.

The court then found both parties breached the oral contract, but neither breach was material. First, Hull breached the contract by not making his D.L. Evans loan payments on time. Second, Giesler breached the contract by not taking reasonable steps to move forward with the subdivision within a reasonable time. The district court then noted that because these breaches were non-material, Hull's contractual rights could be preserved by a court order. The court also found that the value of the property's irrigation equipment, not including the excess pipe, was $25,122. The court ordered Hull to reimburse Giesler for half of that value as conversion damages, as that equipment would have been sold as part of the subdivision and half of the value would have then belonged to Hull.

The district court then ordered further remedies. The court ordered Giesler to develop the remaining land and give Hull half of any profits, while Hull was ordered to timely pay the D.L. Evans loans. The court specified that if Hull failed to timely pay the loans, then he forfeited his expectancy interest in the subdivision's profits. As long as Hull paid the loans, the court ordered Giesler to complete all infrastructure to make the subdivision marketable and zoning compliant. The court specified that Giesler would develop the 107 acres in three phases in three years. The first phase involved Parcel 1, a part of the 107 acres that was north of the 40 acres already developed. Giesler platted Parcel 1 into 17 lots, which he stated he could develop "anytime." Giesler also got a two year extension from Twin Falls County on Parcel 1's final plat approval. The court required that Giesler complete this phase by July 31, 2014. The second phase required Giesler to develop Parcel 2 by July 31, 2015. This parcel was to the west of Parcel 1. Giesler had not platted Parcel 2. The third phase required that Parcel 3 be developed by July 31, 2016. Giesler had drafted a subdivision plat for Parcel 3, but testified that he was unsure whether he had lost the Twin Falls County entitlements to Parcels 2 and 3. The court prohibited Giesler from encumbering the property without consent from Hull or the court.

After setting these timelines, the court ordered Giesler to take reasonable efforts to sell the lots and to give Hull half the net profits of each sold lot. The court defined net profits to mean the gross sales price of each lot less selling costs, less the original land acquisition price,...