Magic Lantern Productions, Inc. v. Dolsot

• Decision Date: 07 March 1995
• Docket Number: No. 21511,21511
• Citation: 892 P.2d 480,126 Idaho 805
• Parties: MAGIC LANTERN PRODUCTIONS, INC., an Idaho corporation, Plaintiff-Appellant, v. Joseph DOLSOT, an individual, Thomas Monge, an individual, Baird Woolsey, an individual, Cinema Plaza Partners, an Idaho partnership, and Block 56 Associates, an Idaho limited partnership and successor in interest to Cinema Plaza Partners, Defendants-Respondents. Boise, November 1994 Term
• Court: Idaho Supreme Court

Page 480

892 P.2d 480

126 Idaho 805

MAGIC LANTERN PRODUCTIONS, INC., an Idaho corporation, Plaintiff-Appellant, v. Joseph DOLSOT, an individual, Thomas Monge, an individual, Baird Woolsey, an individual, Cinema Plaza Partners, an Idaho partnership, and Block 56 Associates, an Idaho limited partnership and successor in interest to Cinema Plaza Partners, Defendants-Respondents.

No. 21511.

Supreme Court of Idaho,

Boise, November 1994 Term.

March 7, 1995.

Cosho, Humphrey, Greener & Welsh, Boise, for appellant. Richard H. Greener argued.

Kneeland, Korb, Collier, Legg & Haukaas, Ketchum, for respondents Joseph Dolsot, Cinema Plaza Partners and Block 56 Associates. Bruce Collier argued.

Donovan & Praggastis, Ketchum, for respondents, Thomas Monge and Baird Woolsey. Michael F. Donovan argued.

JOHNSON, Justice.

This is a breach of contract and fraud case in which the trial court granted summary judgment dismissing the claims and awarded attorney fees to the prevailing parties pursuant to I.C. § 12-120(3).

We conclude that the trial court correctly granted the summary judgment dismissing the breach of oral contract and fraud claims. We conclude that the trial court should not have granted the summary judgment dismissing the breach of written contract claim because there was a genuine issue of material fact concerning whether the alleged contract was breached by one of the defendants. Because of this disposition, we find it unnecessary to address the award of attorney fees to that defendant.

I.

THE BACKGROUND AND PRIOR PROCEEDINGS.

Magic Lantern Productions, Inc. (Magic Lantern) operated a movie theater in Ketchum, Idaho. Joseph Dolsot, Thomas Monge, and Baird Woolsey, calling themselves Cinema Plaza Partners (CPP), owned real property (the property) in Ketchum as tenants in common. In fact, CPP was not a partnership. CPP planned to build a mini-mall (the project) on the property and to include a cinema.

CPP entered into discussions and negotiations with Magic Lantern's president, Richard Kessler, concerning Magic Lantern's participation in the project. Kessler provided CPP with information (the information) concerning the construction and operation of the proposed cinema. Kessler also reviewed and provided suggestions for improving the architectural plans (the plans) for the project. Kessler's suggestions were incorporated into the plans by CPP's architect.

Monge wrote to Kessler on August 15, 1989, stating that CPP was a partnership with a combined net worth in excess of $5,000,000, and that the expected sale price of the cinema portion of the project would be in the range of $400,000 to $450,000. Construction was expected to begin in April of 1990 and to be completed by November 1, 1990.

On August 17, 1989, Kessler wrote to CPP, stating:

This letter is regarding the proforma and selected material pertaining to the cinema and mini mall project in Ketchum, Idaho, that we have been discussing over the past several months. The material has been provided to permit further discussion & evaluation by you and/or your partnership (currently called the Cinema Plaza Partners), for the project. You understand that this letter and materials do not constitute either an offer of an interest, or a solicitation of an investment, but are provided for your information only.

By accepting this letter as indicated by your signature on the duplicate original to be returned to me, you and you partners have agreed to limit your use of the materials to the purposes stated in the previous paragraph, to assure that it will not be disclosed to any other parties, to treat it in all respects as proprietary information owned by Magic Lantern, and to refrain from any use of the material adverse to the project, or in competition directly or indirectly with Magic Lantern.

Dolsot signed the letter, indicating his acceptance of the terms stated by Kessler.

In early 1990, CPP decided not to proceed with the project. In March 1990, CPP advertised the property for sale and included this statement: "Owners have preliminary plans for a cinemaplex (movie theatre) to be included with the purchase." In May 1991, Monge and Woolsey sold their interest in the property to a third party who joined Dolsot in forming a limited partnership, Block 56 Associates (Block 56), to develop the project. Block 56 agreed to lease space in the project to another theater operator.

Magic Lantern sued Dolsot, Monge, Woolsey, CPP, and Block 56, as the successor in interest to CPP, alleging:

1. Dolsot and CPP breached the contract contained in the letter of August 17 1989, by providing the information to third parties.

2. Dolsot, Monge, Woolsey, and CPP fraudulently represented to Magic Lantern that CPP was a partnership that would build a cinema by November 1990, which would be sold to Magic Lantern for $400,000 to $450,000.

3. Dolsot and Monge acting individually and on behalf of CPP breached an oral contract with Magic Lantern that CPP would not proceed with the project without the direct participation of Magic Lantern.

Pursuant to a stipulation, the trial court granted Magic Lantern a preliminary injunction, which the trial court dissolved after a hearing.

Later, the trial court granted summary judgment dismissing Magic Lantern's claims. The trial court also awarded attorney fees to Dolsot, Monge, Woolsey, and Block 56, pursuant to I.C. § 12-120(3), on the ground "that this is a commercial transaction."

Magic Lantern appealed. We assigned the case to the Court of Appeals, which upheld the trial court's decision. This Court then granted review.

II.

THERE IS NO ENFORCEABLE ORAL CONTRACT.

Magic Lantern asserts that the trial court should not have granted summary judgment dismissing its oral contract claim. We disagree.

In effect, the alleged oral contract was a covenant not to compete, that is, an agreement not to allow some theater operator other than Magic Lantern to participate in the project.

In order to be enforceable, a covenant not to compete must be reasonable in duration and geographic scope. Shakey's Inc. v. Martin, 91 Idaho 758, 764, 430 P.2d 504, 510 (1967). In this case, the alleged oral contract does not contain limitations concerning duration and geographic scope. Although there may be an implicit limitation on the geographic scope of the covenant because of Ketchum's isolation from other cinema markets, the covenant is unreasonable because it lacks duration. Therefore, the alleged oral contract is unenforceable.

III.

THE TRIAL COURT WAS CORRECT IN GRANTING SUMMARY JUDGMENT DISMISSING THE FRAUD CLAIM.

Magic Lantern asserts that the trial court should not have granted summary judgment dismissing its fraud claim. We disagree.

CPP admits that the representation that a partnership existed was false. The representations that CPP would build a cinema by November 1990 and would sell it to Magic Lantern for $400,000 to $450,000 are statements concerning future events. Generally, the representation forming the basis of a claim for fraud must concern past or existing material facts. Representations concerning future events are usually not considered actionable. First Sec. Bank of Idaho v. Webster, 119 Idaho 262, 268, 805 P.2d 468, 474 (1991). A promise or statement that an act will be undertaken, however, is actionable, if it is proven that the speaker made the promise without intending to keep it. Id. Therefore, CPP's representations as to future events would be actionable only if Magic Lantern could show that CPP made these representations without intending to honor them.

CPP presented...