Scott v. Castle

• Decision Date: 26 April 1983
• Docket Number: No. 14167,14167
• Citation: 104 Idaho 719,662 P.2d 1163
• Parties: Michael SCOTT, Plaintiff-Appellant, v. George C. CASTLE; Sawtooth Title Company, Inc., an Idaho corporation, Defendants-Respondents.
• Court: Idaho Court of Appeals

Page 1163

662 P.2d 1163

104 Idaho 719

Michael SCOTT, Plaintiff-Appellant, v. George C. CASTLE; Sawtooth Title Company, Inc., an Idaho corporation, Defendants-Respondents.

No. 14167.

Court of Appeals of Idaho.

April 26, 1983.

Rand L. Peebles, Lawson & Peebles, Ketchum, for plaintiff-appellant.

E. Lee Schlender, Ketchum, for defendants-respondents.

WALTERS, Chief Judge.

Michael Scott appeals from an order of the district court, granted after a trial, denying him preliminary and permanent injunctions against a trustee's sale under a deed of trust, denying his requests for an accounting and for declaratory relief, and ordering a hearing on damage claims made by each party against the other. ¹ He contends the court erred in entering the order, for the following reasons. First, Scott argues that he was not obligated to make the payments required by a contract for the purchase of real property and promissory note either (a) because George Castle, the seller, had breached his obligation to assist Scott in complying with a county subdivision ordinance; (b) because Scott and Castle modified the terms of payment by oral agreement and by their conduct; or (c) because Castle waived his right to demand strict performance of the payment provision by his conduct and is therefore estopped to pursue his remedy of trustee's sale under the deed of trust which secured the note. Second, Scott contends that the trustee's sale should not be permitted to go forward because Scott would suffer irreparable injury for which he could not be adequately compensated with money damages. Finally, Scott argues that the court erred in finding that he had no agreement with Castle to exchange an additional ten acres of Castle's property for property to be selected by Castle and purchased by Scott. Additionally, the respondent Castle has requested an award for reasonable attorney fees for representation on this appeal. We affirm and award attorney fees to the respondent.

On November 3, 1978, Scott entered into an agreement to purchase from Castle twenty acres of real property located in Blaine County. Castle was aware that Scott intended to subdivide the property and to sell the lots at a profit. In addition to the contract, Scott signed a promissory note secured by a deed of trust on the property sold by the contract. Both the contract and the note provided that Scott would make five annual payments of equal amounts. There were no contractual provisions imposing conditions on the payments. The dates of payment varied between the contract and the note but the parties did not dispute that the first payment, of more than $35,000, was due on February 17, 1980. This payment was not made. In January, 1980, Scott had learned that dividing Castle's property, by sale of part of it to Scott, did not comply with an applicable county subdivision ordinance. He then informed Castle that he would not make any payments to Castle until the requirements of the ordinance were satisfied and the property could be developed. Castle's only response was to inquire as to the length of time which would be required to achieve compliance. However, a $5000 payment was made by Scott to Castle in April, 1980. No further payment was made.

It is not disputed that dividing Castle's property created a subdivision which failed to comply with the controlling Blaine County ordinance. The evidence showed that Scott had two procedures available, by which he could have achieved compliance with the ordinance. He could have used a general platting procedure, for subdivision of land into five or more lots, or he could have employed a modified "short-plat" procedure for subdivision of land into no more than four lots--followed by a general plat later. Because the original division of Castle's land, by the sale to Scott, had not conformed to the subdivision ordinance, Castle's participation in a plat application was required under either of these alternatives.

The trial court found that Scott never presented a short-plat application to Castle for his signature because the short-plat procedure was a time consuming, two-step procedure. Scott testified that, if the short-plat procedure had been used, he would have had to petition to vacate the plat approved in the first step insofar as it applied to his property and then seek approval of a second plat showing a further subdivision of his property into about eighteen lots.

Scott did attempt to employ the general platting procedure; but his plat proposals went beyond the twenty acres he had purchased from Castle under the contract. Scott had expressed interest in purchasing an additional ten acres of land adjacent to his first purchase, and he included such additional land in the plats on which he tried to get Castle's participation. However, the two parties never reached agreement on precisely which ten acres Scott would acquire. Scott was unable to secure Castle's participation in plat applications which included land that Scott did not own and parts of which Castle did not want to sell. Scott did not undertake to plat the twenty acres, by themselves. Consequently, the property remained out of compliance with the county ordinance.

As mentioned, at approximately the same time that the initial contract was signed, Scott expressed interest in acquiring another ten acre parcel adjacent to the first parcel he had purchased. For tax reasons, Castle preferred an exchange of property rather than an outright sale. The record indicates that Castle was to identify properties which Castle might be interested in acquiring by exchange. A proposed "exchange agreement" was prepared and, at Castle's suggestion, Scott purchased certain real property in California to be used if an exchange did occur. However, the trial court found that the proposed agreement was not finalized because the parties failed to reach a meeting of the minds as to which ten acres Castle was to exchange. It appears that Scott later conveyed the California property to a third party.

I. SCOTT'S OBLIGATION TO MAKE PAYMENTS

Scott contends that he was not obligated to make the payments called for in the promissory note. He makes this contention on three theories.

A. Implied Covenant of Fair Dealing

First, Scott claims that the contract in question was subject to an implied covenant of good faith and fair dealing, which required that neither party should do anything which would have the effect of destroying or injuring the right of the other party to receive the "fruits of the contract." According to Scott, the parties to this contract intended that Scott would subdivide the property acquired from Castle. Scott implicitly argues that this intention necessarily included bringing the first subdivision, occasioned by dividing Castle's property into compliance with the subdivision ordinance. Therefore, Scott argues, Castle breached an implied covenant by refusing to cooperate with Scott in executing a plat to subdivide the entire original parcel owned by Castle. Scott urges that Castle's breach of the implied covenant excused Scott's failure of performance in making the required contract payments.

Scott cites Bleecher v. Conte, 29 Cal.3d 345, 173 Cal.Rptr. 278, 626 P.2d 1051 (Cal.1981), and Bastian v. Cedar Hills Investment and Land Co., 632 P.2d 818 (Utah 1981) in support of his implied covenant theory. We have been cited no Idaho authority which specifically implies a covenant of good faith and fair dealing in real estate contracts. Compare I.C. § 28-1-203 (relating to contracts governed by the Uniform Commercial Code). However, in Commercial Insurance Co. v. Hartwell Excavating Co., 89 Idaho 531, 541, 407 P.2d 312, 317 (1965), our Supreme Court observed: "It is well settled that a contract includes not only what is stated expressly but also that which of necessity is implied from its language [emphasis added]". Accord, Pern v. Stocks, 93 Idaho 866, 477 P.2d 108 (1970).

In Bleecher, buyers of real property sued for specific performance of their contract when the seller refused to proceed with the agreement. The buyers' obligation to purchase was conditioned explicitly on the buyers' approval of a tract map and on their obtaining city approval for development, though they promised in writing to do everything in their power to expedite the required approval and proceed with diligence. On these facts, the seller argued there was no mutuality of obligation and that the contract was therefore unenforceable. The court decided that the implied covenant of good faith and fair dealing imposed an enforceable good faith obligation on the buyers to proceed diligently. On this basis, the court held there was mutuality of obligation. Here, Scott would have us impose on Castle duties not contracted for, rather than qualify Castle's contractual duties with an obligation to act in good faith.

In Bastian, the buyer entered into a contract to purchase land for the purpose of development. Payment under the contract was explicitly contingent on several events, including the provision of a sufficient culinary water supply and availability of a sewer lagoon system. However, the contract did not state who was responsible to fulfill these conditions. The conditions did not occur and no payment was made beyond the payment of earnest money. The Utah Supreme Court affirmed a judgment ordering return of the earnest money to the buyer and cancellation of the sale, holding that the seller was not solely liable for the failure of the conditions to occur, because the seller was not responsible for them. The court also rejected the seller's contention that the earnest money should be forfeited to the seller, noting that although such would normally be the case and the seller was not contractually responsible for fulfillment of the conditions, the seller was legally bound not to frustrate the fullfillment of those conditions. Because of the seller's ownership of water rights and sewage lagoons and its...