In Re Thomas Mecham Ricks
| Decision Date | 27 July 2010 |
| Docket Number | Bankruptcy No. 09-00215-JDP.,Adversary No. 09-6067. |
| Citation | 433 B.R. 806 |
| Parties | In re Thomas Mecham RICKS, Debtor.Jeremy J. Gugino, Chapter 7 Trustee, Plaintiff/Counterdefendant,v.Kastera, LLC, an Idaho Limited Liability Company, Defendant/Counterclaimant. |
| Court | U.S. Bankruptcy Court — District of Idaho |
COPYRIGHT MATERIAL OMITTED
COPYRIGHT MATERIAL OMITTED
Jeremy J. Gugino, Chapter 7 Trustee, Plaintiff, appearing Pro Se.
Thomas G. Walker, Cosho Humphrey, Boise, ID, for Chapter 7 Debtor Thomas Mecham Ricks.1
Jed W. Manwaring, Evans Keane, and Thomas C. Morris, Belnap Law, Boise, ID, for Defendant Kastera.
In this contest, two would-be real estate developers disagree concerning the terms and enforceability of their unsuccessful business agreements, and about the consequences that should flow from their alleged respective failures to perform their contractual obligations.
On January 29, 2009, Thomas Mecham Ricks (“Ricks”) filed a chapter 11 petition to reorganize his real estate and agricultural businesses.2 Kastera LLC (“Kastera”) filed a creditor's proof of claim in that bankruptcy case on May 27, 2009, contending in it that, as of the petition date, Ricks owed Kastera $3,036,066 3 in damages for his breach of their contracts.
On August 26, 2009, Ricks initiated this adversary proceeding against Kastera. In his complaint, Ricks alleged, among other things, that it was Kastera that had breached the contracts with Ricks, and that Kastera had defrauded him in their dealings. See Docket No. 1. For relief, Ricks objected to Kastera's proof of claim contending that no debt to Kastera was owed. Id. Moreover, Ricks sought an award of money damages against Kastera. Id.
Kastera filed an answer to the complaint, along with a counterclaim against Ricks. In its counterclaim, Kastera alleged that the parties' agreements were invalid and unenforceable, and that they should be deemed to have been rescinded. See Docket No. 6. Alternatively, Kastera alleged that it was actually Ricks who breached the agreements and defrauded Kastera. Id. Kastera sought a return of the monies paid to Ricks via validation of its proof of claim in the bankruptcy case.
While each party sought a summary judgment, on March 4, 2010, the Court denied those motions, concluding that there were a variety of disputed material fact issues that needed to be decided after trial. See Docket No. 41. On April 8 and 9, 2010, the Court conducted the trial.4 The parties thereafter submitted their closing arguments via written briefs, and the issues were taken under advisement by the Court. See Docket Nos. 58-61.
Then, on June 18, 2010, on motion of Kastera, the Court entered an order converting Ricks' chapter 11 case to a case under chapter 7. Because Ricks' claims against Kastera asserted in the adversary proceeding are property of the bankruptcy estate, and because a chapter 7 trustee, Jeremy Gugino, had been appointed to administer that estate, the Court convened a status conference on July 8, 2010 to discuss how this matter should proceed. Gugino, and the attorneys for Ricks and Kastera participated in that conference. See Minutes of Status Conference, Docket No. 64. At that conference, all parties agreed that Gugino should be immediately substituted as the party-plaintiff in this action, something the Court accomplished via entry of an order that same day. Docket No. 65. In addition, Gugino asked that the Court proceed to decide the issues under advisement and issue a decision without further hearing or argument, a course of action also endorsed by Ricks and Kastera.
Having now carefully considered the evidence and testimony, the parties' submissions, and the applicable law, the Court issues this Memorandum of Decision which constitutes the Court's findings of fact and conclusions of law. Rule 7052.
It is not hyperbole to say that, in 2005, the residential real estate market in Idaho's Treasure Valley was red hot. In particular, lots suitable for building homes in the area of Eagle, Idaho were in extremely high demand, and in very short supply.
At that time, Kastera was a start-up home builder. It was therefore critical to its business plan that it acquire building lots near Eagle so it could construct and sell its homes. Var Reeve (“Reeve”) was the principal of Kastera. While he was enthusiastic and energetic, he was burdened by a lack of prior experience in real estate development or construction.
Ricks was a long-time resident of the area, and had considerable experience in acquiring and developing residential real estate. While he also had other projects underway and in planning, in December 2004, Ricks had undertaken to develop and further subdivide approximately 15.75 acres of residential property in Eagle. He referred to this project as the Bellemeade and Bellewood Village subdivisions, and he intended to market the lots in the subdivisions as the first phase of a larger project he called “Spur Ranch.” 6
In the spring of 2005, Ricks and Reeve were introduced to one another by a mutual acquaintance, and began discussing potential joint development projects, including the Spur Ranch development. Ricks considered Kastera to be an attractive potential buyer for the development because the company apparently had access to capital to finance the development of, and to then purchase, virtually all of the finished building lots that Ricks could finish within Spur Ranch. According to Ricks, this was desirable since he needed money for his business ventures, and because it relieved him of the need to deal with multiple buyers and real estate agents in order to market the property. The notion of a deal with Ricks was also attractive to Kastera because it could provide Kastera with a large number of building lots built out to its standards within a relatively short time to meet growing demand for new homes in Eagle. At bottom, both Ricks and Kastera saw a business marriage as potentially profitable.
By June 2005, Ricks and Reeve had reached an informal, oral understanding regarding the terms of Ricks' development, and Kastera's purchase, of the building lots in Spur Ranch. The parties agreed that Kastera would fund Ricks' development of the lots to Kastera standards, and then buy the lots in Spur Ranch for a per lot price. To accomplish this plan, Reeve, on behalf of Kastera, agreed to advance a portion of the final purchase price for the lots to Ricks when Ricks obtained preliminary plat approval for the subdivision from the City of Eagle. The balance of the purchase price would be payable by Kastera to Ricks when the development was complete, the final plat had been approved, and Ricks could convey lots to Kastera so it could begin constructing houses on them. While this was to be a multi-million dollar venture, incredibly, no written agreement was prepared to evidence the parties' deal at that time.
On June 3, 2005, Ricks filed a Preliminary Plat Application with the City of Eagle.7 Ex. 239. In the application Ricks proposed to subdivide the three parcels comprising Bellemeade/Bellewood Village into forty-eight (48) residential lots and fourteen (14) common area lots, for a total of sixty-two (62) lots, in what would be known as “Phase I” of Spur Ranch. Id. The project narrative, attached to the application, indicated that the land was owned 8 by Ricks, and that he was the developer.
Ricks and Reeve were both present at a public meeting of the Eagle City Council in September 2005 when the application was reviewed by the council, and conditionally approved. After the hearing, formal findings of fact and conclusions of law were issued by the city to evidence its decision to approve the preliminary plat on October 11, 2005. They stated, in part, that Ricks had been approved to develop forty-seven (47) residential lots and sixteen (16) common lots,9 and that the size of common area would be 3.00 acres, or 19.05% of the total project. Exhibit 103. As is frequently the case, the City's approval of the plat was subject to a number of standard and other “site-specific” conditions. One condition required Ricks to comply with the requirements of Drainage District # 2 concerning the property. Id. The findings and conclusions also required Ricks to provide documentation from the Army Corp of Engineers (“Army Corp”) to the city engineer regarding whether the development would need a so-called “404-permit” 10 in dealing with a drainage ditch on the property. Id. Kastera received a copy of the city's approval of Ricks' preliminary proposal, its findings and conclusions, and Reeve and other Kastera agents were aware of the limiting conditions for approval of the preliminary plat.
Although the City had approved the preliminary plat, Kastera did not immediately advance any funds to Ricks as contemplated by the parties' oral understanding. Anxious to move forward with their deal and project, Ricks prepared a short, six-paragraph, handwritten memorandum which purported to memorialize the terms of the parties oral deal, or at least his understanding of its terms. Ex. 135. Ricks' son, Thomas Aaron Ricks (“Aaron”) 11, typed the memorandum 12 and forwarded it to Thomas Morris (“Morris”), Kastera's newly hired in-house general counsel. See Ex. 136. As might be expected, since the contract contemplated a deal requiring Kastera to pay Ricks over $5 million, lawyer-Morris had several concerns with Ricks' bare-bones draft of the agreement.
On November 30, 2005, Ricks, Aaron, Reeve, and Morris met at Kastera's offices to discuss whether the parties intended to go forward with the deal and the draft contract terms. At that meeting, among other topics, the parties briefly discussed the estimated date that the completed lots would be available to Kastera, the precise purchase price for the lots and the amount Kastera would advance as an initial payment to Ricks, the quality...
To continue reading
Request your trial
-
Rainsdon v. Garcia (In re Garcia)
...625, 200 P.3d 1174,1177 (2009) (citing Hoffman v. S V Co., Inc.), 102 Idaho 187, 628 P.2d 218, 221 (1981); Gugino v. Kastera, LLC (In re Ricks), 433 B.R. 806, 818 (Bankr.D.Idaho 2010). However, when viewed as of the petition date, the agreement between Debtors and Defendants memorialized in......
-
Old Cutters, Inc. v. City of Hailey (In re Old Cutters, Inc.), Bankruptcy No. 11–41261–JDP.
...Agreement to which its lien attached satisfies Idaho's statute of frauds as analyzed by this Court in Gugino v. Kastera, LLC (In re Ricks), 433 B.R. 806 (Bankr.D.Idaho 2010). Pursuant to the Annexation Agreement, Hailey claims its lien attaches to the “Market Rate Lots” in the proposed deve......
-
In re Best View Constr. & Dev.
...it refers.") (quoting City of Kellogg v. Mission Mountain Interests Ltd., Co., 135 Idaho 239, 244, 16 P.3d 915, 920 (2000)); Gugino v. Kastera, 433 B.R. at 818. the facts of every case are unique, the case law on this issue establishes some of the parameters of what constitutes a sufficient......
-
Elsaesser v. Mountain W. IRA (In re Shiloh Mgmt. Servs.)
...Allen v. Kitchen, 16 Idaho 133, 100 P. at 1053). This Court has deviated from that rule under particular circumstances. For example, in Gugino v. Katera, LLC (In re Ricks), Judge Myers found that a property description of "all the lots in the first phase of Spur Ranch (recorded name of Bell......