Idaho Power Co. v. Hulet

• Decision Date: 28 April 2004
• Docket Number: No. 29627.,29627.
• Citation: 140 Idaho 110,90 P.3d 335
• Parties: IDAHO POWER COMPANY, Plaintiff-Respondent, v. Jay H. HULET, Defendant-Appellant.
• Court: Idaho Supreme Court

90 P.3d 335

140 Idaho 110

IDAHO POWER COMPANY, Plaintiff-Respondent, v. Jay H. HULET, Defendant-Appellant.

No. 29627.

Supreme Court of Idaho, Boise, March 2004 Term.

April 28, 2004.

Ringert, Clark, Chtd., Boise, for appellant. James D. Reid, Boise, argued.

Salladay, Davis & Miller, Boise, for respondent. G. Lance Salladay argued. SCHROEDER, Justice.

This case involves a claim by Idaho Power Company of third party beneficiary rights under a lease contract entered into on September 13, 1999, between Jay H. Hulet and Mark and Shauna Comstock. The district court granted summary judgment in favor of Idaho Power, finding such rights to exist. Jay H. Hulet appeals.

I. FACTS AND PROCEDURAL HISTORY

In 1998 and 1999 Idaho Power provided electrical power to Mark and Shauna Comstock pursuant to their irrigation account. The account became delinquent and Idaho Power was unable to collect from the Comstocks. On September 13, 1999, Comstock and Hulet executed a Real Estate Sales Agreement by which Comstock sold his dairy farm to Hulet. Contemporaneously, Hulet entered into a Dairy and Farm Lease Agreement ("Lease Agreement") in which Hulet leased back to Comstock the dairy barn and appurtenant acreage which he had just purchased from Comstock. The Lease Agreement provided that Comstock would make an initial payment of $6,000 on February 1, 2000, and that regular monthly payments of $12,950 would begin on March 1, 2000. The Lease Agreement also incorporated as a provision that Hulet "will pay the past due electric bills on lessee's behalf...." Although the party to whom the amount was owed was not specified in the Lease Agreement, Idaho Power was the exclusive provider of electrical energy in Owyhee County where the property was located. Comstock failed to make any of the payments under the Lease Agreement and breached other material terms.

On October 15, 1999, as the new owner of the real property to which the well and pump were appurtenant, Hulet contacted Idaho Power and requested that the pump and account which had previously been in Comstock's name be transferred to his name. A new account was issued to Hulet in his name as requested.

According to Comstock, Idaho Power's attorney contacted him in June, 2000, to advise him that he had to pay his outstanding bill or that a lawsuit would be initiated against him. Comstock requested that he be given time to look into and resolve the matter. Idaho Power agreed to withhold suit but indicated that it was going to continue to work through him to resolve the unpaid account. Also, according to Comstock, Idaho Power became aware of the Lease Agreement in July, 2000, and was provided a copy of that agreement in August, 2000. In December, 2000, Mr. Comstock again requested that Idaho Power give him additional time to resolve the unpaid power bill.

On December 1, 2000, Comstock and Hulet executed an Acknowledgment and Agreement which acknowledged that the Lease Agreement had been breached and acknowledged that even though Hulet might have failed to notify Comstock of his failure to perform, Hulet did not abandon any of his rights under that lease, including the right of scheduled, timely payments. On January 28, 2001, Hulet and Comstock executed a Lease with Option to Purchase Provision ("Second Lease"). The Second Lease specifically provides that it "supersedes and replaces any Lease and/or Option to Purchase agreements executed by the parties hereto and dated previous to the date hereof." On May 22, 2001, Hulet sent Comstock a Notice of Default requiring immediate cure of Comstock's failure to make payments under the Second Lease. On June 29, 2001, Hulet sent Comstock a Notice of Eviction requiring him to leave the premises leased under the Second Lease.

According to Hulet, at no time after executing the Lease Agreement did either he or his farm manager notify Idaho Power that he would be paying Comstock's past due power bills. According to Hulet, Idaho Power never contacted him or his farm manager that it intended to collect from him. The first indication that Idaho Power made to Hulet of its intention to collect from him was the lawsuit from which this appeal arose.

Idaho Power disputes Hulet's account of the facts, claiming that shortly after entering into the Lease Agreement, Hulet notified Idaho Power about the agreement and that he was taking responsibility for paying Comstock's past due Idaho Power account. Idaho Power points to the fact that Hulet requested that the account be placed in his name on October 15, 1999, as confirmation of the arrangement. An account was opened in Hulet's name, but it began with a zero balance.

Idaho Power filed a complaint against Hulet on February 4, 2002. Hulet filed a motion to dismiss. Idaho Power filed a motion for summary judgment. The district court found that Idaho Power was informed by both parties of the Lease Agreement and Hulet's assumption of Comstock's payment obligations to Idaho Power. The district court also found that Idaho Power acted on that information by adjusting its account and placing the account in Hulet's name. Further, it was found that Idaho Power transferred the irrigation account into Hulet's name and extended the time for payment and forbore its right to pursue legal action during negotiations between Hulet, Comstock and financial institutions relating to the dairy. The district court also made the findings that Idaho Power provided consideration to Hulet and was a third party beneficiary of the contract and that neither party rescinded the Lease Agreement or notified Idaho Power Company of any intent to rescind the contract. As such, the district court found there to be no genuine issues of material fact presented by either party and that the only issues presented were questions of law. The district court noted that Hulet conceded that there were no issues of fact presented in its cross motion for summary judgment and contended that the intent of the parties was the only fact issue presented by Idaho Power in its motion for summary judgment. Finally, the district court found as a matter of fact that Hulet failed to make any payments or to otherwise honor his obligations to Idaho Power pursuant to the terms of the Agreement between Hulet and Comstock to which Idaho Power was a third party beneficiary, and that as of September 3, 2000, there was due and owing the sum of $65,469.13 with additional interest owed from September 3, 2000, to the date of judgment at the rate of 12% per annum calculated on the principal sum of $45,791.71 or $15.03/day.

II. STANDARD OF REVIEW

The standard of review on appeal from an order granting summary judgment is the same standard that is used by the district court in ruling on the summary judgment motion. Baxter v. Craney, 135 Idaho 166, 170, 16 P.3d 263, 267 (2000). All disputed facts are to be liberally construed in favor of the non-moving party, and all reasonable inferences that can be drawn from the record are to be drawn in favor of the non-moving party. Eagle Water Company, Inc. v. Roundy Pole Fence Company, Inc., 134 Idaho 626, 628, 7 P.3d 1103, 1105 (2000). Summary judgment is appropriate only when the pleadings, depositions, affidavits and admissions on file show that there is no genuine issue of material fact and the movant is entitled to judgment as a matter of law. I.R.C.P. 56(c).

III. IDAHO POWER WAS NOT A THIRD-PARTY BENEFICIARY OF THE CONTRACT BETWEEN HULET AND COMSTOCK

Under Idaho law, if a party can demonstrate that a contract was made expressly for its benefit, it may enforce that contract, prior to rescission, as a third-party beneficiary. I.C. § 29-102;¹Baldwin v. Leach, 115 Idaho 713, 769 P.2d 590 (Ct.App.1989). The test for determining a party's status as a third-party beneficiary capable of properly invoking the protection of I.C. § 29-102, is whether the agreement reflects an intent to benefit the third party. Stewart v. Arrington Constr. Co., 92 Idaho 526, 446 P.2d 895 (1968). The third party must show that the contract was made "primarily for his benefit, and that it is not sufficient that he be a mere incidental beneficiary." Further, "[T]he contract itself must express an intent to benefit the third party. This intent must be gleaned from the contract itself unless that document is ambiguous, whereupon the circumstances surrounding its formation may be considered." Adkison Corp. v. American Bldg., Co., 107 Idaho 406, 409, 690 P.2d 341, 344 (1984).

As noted in Adkison Corp., a party must show that the contract was made for its direct benefit, and that it is not merely an indirect beneficiary. Id. 107 Idaho at 409, 690 P.2d 341. An example of this principle is found in Just's Inc. v. Annington Constr. Co. Inc., 99 Idaho 462, 463, 583 P.2d 997, 998 (1978), in which a contract between the city of Idaho Falls and a construction company contained a provision that specifically required the construction company to take precautions to limit the disruption to the businesses within the area to be renovated....