Jensen v. Westberg
| Decision Date | 06 December 1988 |
| Docket Number | No. 17072,17072 |
| Citation | 115 Idaho 1021,772 P.2d 228 |
| Parties | Harlan B. JENSEN, dba Jensen Construction, Plaintiff-Counterdefendant Respondent-Cross Appellant, v. Bartlett R. WESTBERG, Barton F. Bailey, Thomas A. Dobrusky, and Minidoka Associates, Defendants-Counterclaimants Appellants-Cross Respondents. |
| Court | Idaho Court of Appeals |
Kenneth L. Mallea, Mallea & Scrivner, Boise, for defendants-counterclaimants appellants-cross respondents.
R. Brad Masingill, Weiser, for plaintiff-counterdefendant respondent-cross appellant.
This is an appeal in an action for recovery of alleged claims existing between the partners in a business venture. The action was commenced without either the plaintiff or the defendants first having requested a complete accounting of the partnership affairs or a dissolution of the partnership. 1 The dispute presents two principal issues. First, did the trial court correctly determine the damages awardable upon breach by one partner of an agreement with the other partners to sell their interests in partnership property? Second, does substantial and competent evidence support the trial court's conclusion that the partners agreed to a particular definition of construction cost overruns to be borne by the partnership rather than by the general contractor? Before explaining our reasons for affirming the court below, we will review the background of this partnership.
In the summer of 1980, Bartlett Westberg, Barton Bailey, and Thomas Dobrusky enlisted Harlan Jensen, a building contractor, in their plan to construct in Rupert, Idaho, a senior citizens' housing development to be called "C" Street Manor. Jensen eventually agreed to become a general partner in Minidoka Associates, a limited partnership formed by the four individuals. 2 The development was to be financed by the Idaho Housing Agency (IHA). Jensen agreed to act as general contractor. Although his partners had experience with IHA procedures and rules, this was to be Jensen's first experience with IHA financing or with the underlying federal Housing and Urban Development Section 8 program.
IHA agreed to provide $866,154 in construction financing. Soon thereafter, Jensen called to his partners' attention the possibility of cost overruns. Following further discussion, Jensen agreed to go ahead with the construction. Later, in June 1981, Minidoka Associates received an offer from Western Capital Associates to purchase the partnership's interest in the nearly complete "C" Street Manor. However, Jensen was still concerned about his liability for any cost overrun. A Memorandum of Understanding resulted, which purported to settle the matter. Jensen initially granted his approval for the sale. But a few months later, in October 1981--before the proposed sale was closed--Jensen rescinded that approval, apparently for tax reasons. Because a ready, willing and able buyer had been found, the real estate broker who had negotiated the sale demanded a fee of $20,000. The broker eventually settled for $8,600. Later, when IHA disallowed certain costs of construction, Jensen received a lesser contribution for cost overruns from his partners than he had anticipated. Thereafter, Jensen exercised his right under the partnership agreement to Jensen filed this action to collect the overrun expenses he deemed due. Westberg, Bailey and Dobrusky counterclaimed on behalf of themselves and the partnership for losses resulting from Jensen's failure to consummate the sale to Western Capital Associates. Initially, the district court granted summary judgment to Jensen on his claim. On appeal, we vacated that judgment and remanded the case with particular instructions. See Jensen v. Westberg, 109 Idaho 379, 707 P.2d 490 (Ct.App.1985) (Jensen I ). We directed the district court:
[115 Idaho 1024] refuse any sale. Minidoka Associates still owned "C" Street Manor when this action was tried.
to determine, from all the evidence, whether the parties actually reached a genuine meeting of minds on "cost overruns." If they did, the court shall enter judgment conforming to their mutual intent. If they did not, the court should employ equitable principles to resolve the dispute.
On remand, the district court bifurcated the trial. After taking evidence on Jensen's claim, the court found that there had been "a genuine meeting of the minds." The court construed the Memorandum of Understanding to limit recovery of cost overruns by Jensen to "the actual cost of construction as approved by the Idaho Housing Agency ... which exceeded the maximum contract amount which IHA would loan for construction." Accordingly, the court awarded only $6,990.93 of the $93,372.49 sought by Jensen from Minidoka Associates.
A trial followed on Minidoka Associates' counterclaim for damages resulting from Jensen's repudiation in 1981 of his agreement to sell the project. The court concluded that Jensen had breached a duty of good faith owed to his partners and also had breached a provision of the Memorandum of Understanding. The court held that Jensen was liable for resultant damages. However, because the court found that the fair market value of the partnership interests equaled the proposed selling price on the day of the breach, and that subsequent market value declines were "not reasonably foreseeable by a prudent investor," the court limited damages to Westberg, Bailey and Dobrusky's share of the amount paid in settlement to the broker--i.e., $6,225.
Both parties have appealed, each contending that its award was erroneously low. Asserting four grounds, Minidoka Associates and Westberg, Bailey and Dobrusky challenge the minimal damages awarded for breach of the general agreement to sell. They argue first that the measure of damages should have included decreases in the value of the partnership's property subsequent to the breach. Next, they contend that recovery should have been allowed on a theory of tortious interference with contract. Third, they maintain that the trial court should have awarded attorney fees and costs to them. Finally, they submit that prejudgment interest should have been awarded. Jensen, in turn, contends no damages should have been awarded because the court erred by admitting evidence of the settlement with the broker.
By cross-appeal, Jensen attacks the court's small cost-overrun award, asserting that the evidence adduced at trial did not support the court's finding that the parties reached an agreement with respect to cost overruns, and, therefore, an equitable recovery should have been available. He also submits that the trial court did not take sufficient time to adequately review the documentary evidence. We turn first to the court's resolution of Jensen's cost-overrun claim.
A. Cost Overruns
When remanding this case in the earlier appeal, we directed the district court to determine whether the parties reached a genuine meeting of the minds with respect to their liability for "cost overruns." At a subsequent hearing each party contended that there was a meeting of minds, but differed as to the meaning of the agreement. [t]he mutual intent of the parties was to define a cost overrun to mean the actual cost of construction as approved by the Idaho Housing Agency (hereafter called IHA) which exceeded the maximum contract amount which IHA would loan for construction.
[115 Idaho 1025] The court concluded that "the parties did reach a genuine meeting of the minds on cost overruns" and that
Because IHA disallowed $107,362.42 of the costs claimed by Jensen, 3 the court awarded only the remaining $9,321.24 of the amount claimed. On appeal, Jensen contends the evidence failed to support the court's conclusion that a meeting of minds occurred and, therefore, substantially greater equitable recovery should be available.
The question of whether there was a sufficient meeting of the minds to form an agreement is to be determined by the trier of fact. Rasmussen v. Martin, 104 Idaho 401, 659 P.2d 155 (Ct.App.1983). Findings of fact by a trial court will not be disturbed on appeal unless they are clearly erroneous. I.R.C.P. 52(a). Clear error, in turn, will not be deemed to exist if the findings are supported by substantial and competent, though conflicting, evidence. Rasmussen v. Martin, supra.
Here, the parties reduced their agreement to writing in the form of a Memorandum of Understanding. Nonetheless, Jensen contends that the terms of that agreement were so ambiguous that no meeting of the minds occurred. As we held in Jensen I, the language of the agreement was indeed ambiguous. But the district judge made a finding as to the underlying mutual intent of the parties. The question is whether substantial evidence supports that finding.
At trial, Jensen expressed the belief that he would be reimbursed for all reasonable or actual costs, and disclaimed agreeing to IHA approval as a condition precedent to reimbursement from the partnership. Bailey, Westberg, and Dobrusky testified that they understood that only cost overruns allowed or approved by IHA would be borne by the partnership. Bailey described one of the partnership's meetings on this point:
[Bailey]. At that meeting Mr. Jensen's concern was--he asked the question of Mr. Machacek [an IHA official] what would happen if there were cost overruns on this project.
[Minidoka's Counsel]. What if anything did Mr. Machacek reply?
Q. And at that point in time what if anything did you say?
A. Well, at that point in time I said that if there were cost overruns and if they were approved by the Idaho Housing Agency, we, as we had in our other projects, would agree to pay them.
Q. What if anything did Mr. Jensen say to that?
A. He said that was super, great. Let's get on with it.
Westberg and Dobrusky also testified that Jensen...
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