Mountain Courtyard Suites v. Wysong

Decision Date06 April 2020
Docket NumberCase No. 2:18-cv-00752-HCN
Citation452 F.Supp.3d 1275
Parties MOUNTAIN COURTYARD SUITES, Plaintiff, v. Jeff WYSONG, Defendant.
CourtU.S. District Court — District of Utah

Spencer W. Young, William B. Ingram, Alan R. Houston, Strong & Hanni, Salt Lake City, UT, for Plaintiff.

Benson L. Hathaway, Jr., Ryan R. Beckstrom, Kirton McConkie, Salt Lake City, UT, for Defendant.

MEMORANDUM DECISION AND ORDER DENYING PLAINTIFF'S MOTION FOR PARTIAL SUMMARY JUDGMENT AND GRANTING IN PART AND DENYING IN PART DEFENDANT'S MOTION FOR SUMMARY JUDGMENT

Howard C. Nielson, Jr., United States District Judge

This case arises out of a failed commercial real estate transaction. After Defendant Jeff Wysong terminated a contract to purchase a property from Plaintiff Mountain Courtyard Suites ("MCS"), MCS sued Mr. Wysong for breach of both the express terms of the contract and the implied covenant of good faith and fair dealing. Both parties have moved for summary judgment. MCS's motion is denied. Mr. Wysong's motion is granted in part and denied in part.

I.

In February 2018, Mr. Wysong submitted an offer to purchase a commercial property from MCS and the parties executed a purchase agreement. See Dkt. No. 16-2. Mr. Wysong deposited $100,000 as earnest money into an escrow account in connection with the offer. See id. at 2. Section 2 of the agreement stated that the agreed-upon purchase price was $5,950,000 and specified that this purchase price would be paid with the $100,000 earnest money deposit, $3,000,000 from a new loan, and $2,850,000 cash at settlement. See id. at 2. Section 8 of the contract provided that Mr. Wysong's "obligation to purchase under this Contract" was "conditioned," among other things, on Mr. Wysong's "approval of a physical condition inspection of the Property" and his "approval of the terms and conditions of any mortgage financing referenced in Section 2." Id. at 3. Addendum 1 to the contract, executed the same day, further provided that Buyer's offer was "subject to the buyer obtaining acceptable financing on or before May 1, 2018," and that "Buyer must remove all contingencies, including finance contingency in writing or this contract shall be deemed Null and Void." Id. at 8. Other relevant provisions of the purchase agreement will be discussed below.

On April 2, 2018, Mr. Wysong waived the physical-condition contingency in exchange for a $250,000 reduction in the purchase price. See Dkt. No. 16-3 at 6. On April 27, 2018, the parties extended the finance contingency by 30 days, made $10,000 of the earnest money deposit nonrefundable, and released this portion of the deposit to MCS. See Dkt. No. 16-4 at 2. On May 30, 2018, Mr. Wysong purported to issue a signed addendum to the purchase agreement stating that "[b]uyer hereby cancels contract due to being unable to obtain financing." Dkt. No. 16-5 at 3. The next day, Ralph Riedel, one of the brokers involved in the failed transaction, sent an email to another broker involved in the transaction as well as to the escrow agent. This email stated "[u]nfortunately, the condition of the property was in such disrepair that the buyer canceled the contract." Dkt. No. 16-8 at 2; see also Dkt. No. 16-7 at 93:1–25.

Approximately four months later, MCS sold the property to another buyer for $5,100,000. See Dkt. No. 16-6 at 29:11–16; Dkt. No. 16-9. MCS then initiated this action, claiming that Mr. Wysong had breached the express terms of the contract as well as the implied covenant of good faith and fair dealing. See Dkt. No. 2-2 at 7–8. In its Complaint, MCS states that it seeks "liquidated damages in the amount of $90,000" as well as "general and consequential damages in an amount to be determined at trial," "costs and reasonable attorney fees," and "such other and further relief as the Court deems just and equitable." Dkt. No. 2-2 at 10. MCS's motion for summary judgment makes clear that it is seeking "general damages" of $600,000—the difference between the purchase price that it would have received from Mr. Wysong and the purchase price it ultimately received from another buyer. Dkt. No. 16 at 9–11. It is undisputed that MCS did not release its interest in the earnest money deposit before bringing this suit. See Dkt. No. 2-2 at 6, 33, 52; Dkt. No. 16-4 at 2; Dkt. No. 19 at 4. Both parties have moved for summary judgment. MCS moves for summary judgment on its claim that Mr. Wysong breached the express terms of the purchase agreement but not on its claim for breach of the implied covenant of good faith and fair dealing. See Dkt. No. 16. Mr. Wysong moves for summary judgment on both of MCS's claims. See Dkt. No. 19.

II.

The court first addresses MCS's motion. MCS argues that Mr. Wysong breached the express terms of the purchase agreement by failing to apply for a loan in the amount of $3,000,000—the specific portion of the purchase price that Section 2 of the agreement provided would be paid with "a new loan." MCS maintains that Mr. Wysong also breached the purchase agreement by terminating it based on the property's physical condition despite waiving the physical-condition contingency in exchange for a $250,000 reduction in the purchase price. The court finds that MCS has failed to show that "there is no genuine dispute as to any material fact" and that MCS "is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a).

A.

The court finds that MCS is not entitled to summary judgment on its claim that Mr. Wysong breached the express terms of the contract by seeking financing only in amounts well above $3,000,000. To be sure, Section 2 of the purchase agreement stated that $3,000,000 of the purchase price would be paid with "a new loan." Dkt. No. 16-2 at 2. But the court has been unable to locate any provision of the purchase agreement that required Mr. Wysong to apply for a loan in this precise amount or forbidding him from applying for a loan in a higher amount. To the contrary, the purchase agreement granted Mr. Wysong broad discretion in seeking financing. In addition to specifying the purchase price and the amount to be paid with a new loan, Section 2 also provided that "Buyer shall have the right to approve the terms and conditions of the new loan as provided in Section 8(f)"—which in turn stated that Mr. Wysong's "obligation to purchase under this Contract" was "conditioned upon Buyer's approval of the terms and conditions of any mortgage financing referenced in Section 2." Id. at 2–3. Significantly, Section 8 was titled "Buyer's right to cancel based on Buyer's due diligence"—thus indicating that buyer-approved financing was considered a matter of due diligence—and provided that "[i]f Buyer, in Buyer's sole discretion , determines that the results of Buyer's Due Diligence are unacceptable, Buyer may ... cancel this Contract by providing written notice to Seller...." Id. at 4 § 8.2 (emphasis added). Addendum 1 to the purchase agreement likewise stated that Mr. Wysong's offer was "subject to the buyer obtaining acceptable financing on or before May 1, 2018," and that "Buyer must remove all contingencies, including finance contingency in writing or this contract shall be deemed Null and Void." Id. at 8.

These numerous, seemingly discretionary provisions are difficult to reconcile with MCS's contention that the express terms of the contract required Mr. Wysong to apply for financing in the specific amount of the new loan contemplated by Section 2 or otherwise tightly circumscribed his search for financing.1 If, as MCS suggested at the hearing, see Sept. 18, 2019 Hearing at 5:30–6:20, Mr. Wysong's attempts to obtain financing only in amounts well exceeding $3,000,000 reflected a lack of good faith effort to effectuate the purchase, his failure to seek financing in the amount of the contemplated new loan may have violated the implied covenant of good faith and fair dealing—a claim on which MCS has not sought summary judgment. But it does not appear to have violated the express terms of the contract. And even if the express terms of the contract did require good faith efforts to obtain financing, Mr. Wysong offered testimony at his deposition that his approach to seeking financing was reasonable and complied with industry standards. See Dkt. No. 16-7 at 90:17–21; 96:3–21. This testimony creates a genuine issue of material fact sufficient to foreclose summary judgment for MCS.

B.

The court also denies MCS's motion for summary judgment on its claim that Mr. Wysong breached the contract by canceling based on the physical condition of the property. The only evidence MCS offers in support of this proposition is an email from Ralph Riedel to Tanner Riedel and the escrow agent stating that "[u]nfortunately, the condition of the property was in such disrepair that the buyer canceled the contract." Dkt. No. 16-8 at 2; see also Dkt. No. 16-7 at 93:1–25. It is far from clear, however, that Ralph Riedel had authority to speak for Mr. Wysong. The "confirmation of agency in this transaction" executed in connection with the purchase agreement lists Ralph Riedel and Tanner Riedel as broker agents for both the buyer and the seller. Dkt. No. 16-2 at 10. But Section 5 of the purchase agreement itself lists Ralph Riedel as agent for the seller, and Tanner Riedel as agent for the buyer. See id. at 3. This is consistent with Mr. Wysong's deposition testimony that Tanner Riedel represented the Buyer and Ralph Riedel represented the Seller, though he also acknowledged that "it may be the other way around, I don't remember." Dkt. No. 16-7 at 93:07–94:18. Given that both brokers shared the same last name, such confusion is hardly surprising.

Even assuming that Ralph Riedel was authorized to speak for Mr. Wysong, his email to the escrow agent is directly contrary to the email sent by Tanner Riedel—who Section 5 of the purchase agreement and Mr. Wysong's deposition testimony indicate was Mr. Wysong's exclusive agent. Tanner Riedel's email to the escrow agent stated that "[t]he buyer has canceled the purchase...

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