Johannsen v. Utterbeck

• Decision Date: 16 October 2008
• Docket Number: No. 34023.,34023.
• Citation: 146 Idaho 423,196 P.3d 341
• Parties: Robert JOHANNSEN, Plaintiff-Respondent-Cross Appellant, v. Robert W. UTTERBECK; Brookside, LLC, an Idaho limited liability company, Defendants-Appellants-Cross Respondents.
• Court: Idaho Supreme Court

196 P.3d 341

146 Idaho 423

Robert JOHANNSEN, Plaintiff-Respondent-Cross Appellant, v. Robert W. UTTERBECK; Brookside, LLC, an Idaho limited liability company, Defendants-Appellants-Cross Respondents.

No. 34023.

Supreme Court of Idaho, Idaho Falls, September 2008 Term.

October 16, 2008.

Cox, Ohman & Brandstetter, Chartered., Idaho Falls, for appellant. John Ohman argued.

Beard, St. Clair, Gaffney, PA, Idaho Falls, for respondent. Michael Gaffney argued.

W. JONES, Justice.

I. FACTUAL AND PROCEDURAL BACKGROUND

In early 2001, Robert Utterbeck ("Appellant") and Robert Johannsen ("Respondent") formed Brookside, LLC ("LLC") to develop the Brookside subdivision ("Brookside"). Soon thereafter the parties executed the LLC Operating Agreement, which includes the following relevant clauses:

2.04. Capital Contributions. A member's capital contributions to the Company may consist of cash, property, services rendered, or a binding written promise to contribute cash, property or services in the future. The value of all capital contributions shall be determined by the members. A member shall not be entitled to withdraw a capital contribution without the consent of all other members. A member shall not be entitled to interest on or with respect to any capital contribution. Additional capital contributions may be made by a member only with the consent of all other members. The capital contributions required of new members shall be determined by the existing members. The initial capital contributions and the initial proportionate ownership interests of the initial members of the Company are set forth in Exhibit A.

It is anticipated that the Capital Contributions of each of the initial members, [sic] shall be contributed by each as follows:

1. Robert Johannsen shall contribute certain real property to the limited liability company herein, and shall be given a credit for said contribution of said real property, in an amount equal to $8,000.00 per acre, or any pro-rata amount contributed.

2. Robert Utterbeck shall contribute cash to the limited liability company, in an amount equal to the value as indicated above for the capital contribution of Robert Johannsen's real property.

This arrangement for capital contributions shall be contributed incrementally during the development of the development project as the members shall agree.

....

3.01. Management by Members. The Company shall be managed by the members. The Company shall not have managers within the meaning of the Idaho Limited Liability Company Act. No member shall be entitled to compensation for managing the Company unless otherwise approved in advance by the members.

3.02. Authority of Members. Subject to the provisions of the foregoing section, each member may exercise all powers of the LLC and perform any lawful act or function deemed necessary or appropriate in the ordinary course of the Company business, except as otherwise provided in the Operating Agreement. However, a member may not perform any of the following acts or functions without the written consent of all members:

... (4) Incur a Company liability in excess of $2,000.00.

A preliminary plat showed Brookside was to be comprised of approximately 57 acres. By September 2004, Respondent deeded approximately 27 of the contemplated 57 acres of real property to the LLC in three separate transactions. During trial Appellant admitted that it took him a full year to make final payment to the LLC in an amount equal to the value of real property contributed by Respondent.

By late 2005 the relationship between Respondent and Appellant broke down and Respondent filed suit against Appellant and the LLC for breach of contract, an accounting and dissolution of the LLC. Respondent alleged in the complaint that Appellant failed to make required capital contributions in violation of the Operating Agreement and that he acted beyond the scope of his authority by, among other things, incurring unauthorized debts on behalf of the LLC. Appellant filed an answer including affirmative defenses and a counterclaim for breach of contract, an accounting and dissolution.¹ In June 2006, the district court appointed a receiver to carry out an accounting for dissolution and to wind up the LLC.

In October 2006, Respondent filed a motion for summary judgment and a motion to preclude Appellant, under the parol evidence rule, from presenting evidence as to the intent and interpretation of the Operating Agreement. Respondent argued that the Operating Agreement was unambiguous and did not require him to contribute any particular amount of land to the LLC and that since the document was unambiguous, Appellant should be precluded from introducing any evidence as to the parties' intent. In ruling on the motion, the court found that the language "certain real property" in the Operating Agreement was ambiguous. It then held that parol evidence could be used to resolve the ambiguity. The court's written decision is perplexing and contradictory. After stating that the phrase "certain real property" was ambiguous, the court went on to state that "[t]he documents subsequently signed by Respondent² resolved the ambiguity and indicate that the approximately 57 acres were destined to be used in the Brookside Development." Not only would it be inappropriate for the court to resolve ambiguous language on a motion for summary judgment, since such a matter would be for the jury, but the court went on in its written decision to hold that since the contract was ambiguous, summary judgment must be denied. On appeal, Appellant argues that the court's language that "the approximately 57 acres were destined to be used in the Brookside Development" establishes the law of the case and that the jury should have been so instructed.

The case proceeded to a jury trial, resulting in a verdict finding that Respondent did not breach the contract. Appellant then filed a motion for JNOV or, in the alternative, a new trial, both of which the court denied. The court held a hearing on dissolution and winding up of the LLC and found that Appellant was not entitled to be paid for any management services and further held there was no evidence presented establishing intangible rights or assets in either of the parties. The court then entered an order distributing liabilities and dividing assets according to each party's equity.

The district court found Respondent to be the prevailing party and awarded him $10,000.00 in attorney's fees and $800.00 in costs.

II. ISSUES ON APPEAL

Appellant Robert Utterbeck raises the following issues on appeal:

(1) Did the district court establish the law of the case in its opinion denying Respondent's motion for summary judgment?

(2) Did the district court err in denying Appellant's motion for JNOV, or in the alternative, for a new trial?

(3) Did the district court err in denying Appellant's motion for a mistrial?

(4) Was the Order of Final Dissolution clear error?

Respondent/Cross-Appellant Robert Johannsen raises the following issue on his cross-appeal:

(1) Did the district court abuse its discretion in awarding Respondent only $10,000 in attorney's fees?

Both Appellant and Respondent seek attorney's fees on appeal. We will discuss each of these issues in turn.

III. ANALYSIS

A. Did the district court establish the law of the case in its written opinion denying respondent's motion for summary judgment?

In this case the district court issued a written order denying summary judgment on the issue of whether the Operating Agreement required Respondent to contribute a specific amount of real estate to the LLC. As noted above, the written order is problematic because the district court entered findings that directly contradict its conclusion. After stating the proper standard of review, the district court determined that the phrase "certain real property" in the Operating Agreement could be interpreted in more than one way, so it found the agreement ambiguous as a matter of law as to whether Respondent was required to contribute a specific amount of land to the LLC.

We agree that the phrase "certain real property" as used in the Operating Agreement is ambiguous. It is clear that the ambiguity creates an issue of fact precluding summary judgment and that parol evidence is admissible to clarify an ambiguous contract. See Cannon v. Perry, 144 Idaho 728, 170 P.3d 393 (2007); Swanson v. Beco Const. Co., Inc., 145 Idaho 59, 175 P.3d 748 (2007); Howard v. Perry, 141 Idaho 139, 106 P.3d 465 (2005). Appellant seizes upon the language in the district court's opinion that "the approximately 57 acres were destined to be used in the Brookside Development" as resolving any ambiguity and argues that the jury should have been instructed that the parties intended that all 57 acres be contributed to the LLC. Appellant's argument, however, is flawed. Despite the poor choice of language used by the district court, it is obvious that the court did not intend to finally resolve the ambiguity in the Operating Agreement, or it would not have denied summary judgment and proceeded with a jury trial to determine the meaning of the ambiguous contract. Moreover, the district court did not have the authority to resolve the ambiguity, since it was not within the province of the district court to resolve factual issues in a motion for summary judgment. Whether the parties intended that all 57 acres be contributed to the LLC was a factual matter to be left for the jury to decide.

During trial, Respondent argued that the Operating Agreement does not identify a specific amount of property that he was required to contribute. He relied upon the language in the Operating Agreement that "capital contributions shall be contributed incrementally during the development of the development project as the members shall agree," arguing that such language indicates that the real property was to be contributed in portions, thus permitting, but not requiring, Respondent to...