Selvig v. Blockbuster Enters., LC

Decision Date27 September 2011
Docket NumberNo. 20090494.,20090494.
Citation687 Utah Adv. Rep. 63,2011 UT 39,266 P.3d 691
PartiesSteven W. SELVIG and Barbara D. Selvig, Plaintiffs, Appellants, and Cross–Appellees, v. BLOCKBUSTER ENTERPRISES, LC; Highland Development, Inc.; and Joan A. Steed, Defendants, Appellees, and Cross–Appellants.
CourtUtah Supreme Court

OPINION TEXT STARTS HERE

Laura S. Scott, Christina Jepson Schmutz, Salt Lake City, for plaintiffs.

Mary Anne Q. Wood, Kathryn O. Balmforth, Salt Lake City, for defendants.

Justice PARRISH, opinion of the Court.

INTRODUCTION

¶ 1 Barbara and Steven Selvig (as sellers) and Blockbuster Enterprises (as buyer) entered into a Real Estate Purchase Contract (the Contract) for the purchase of the Kastle Inn (the Inn or the Property), a bed and breakfast located in Midway, Utah. The Contract specified that the Selvigs would deliver possession of the Inn to Blockbuster and that the deed to the Property would be recorded when Blockbuster paid the full purchase price. Before paying the full purchase price, however, Blockbuster recorded the deed. In response, the Selvigs sued for breach of contract, breach of the covenant of good faith and fair dealing, and unjust enrichment.

¶ 2 The parties tried the case to a judge in a bench trial. At the close of the Selvigs' case in chief, Blockbuster moved to dismiss under rule 41(b) of the Utah Rules of Civil Procedure. Blockbuster argued that the Selvigs' contractual claims should be dismissed pursuant to an election of remedies provision found in the Contract. This provision provided that if Blockbuster defaulted, the Selvigs could elect to either retain the earnest money deposit as liquidated damages or return the earnest money deposit and sue Blockbuster for damages. Blockbuster argued that because the Selvigs had not returned the earnest money deposit, they had elected their remedy and were barred from bringing suit.

¶ 3 The district court granted Blockbuster's motion and dismissed all of the Selvigs' claims. First, the court dismissed the Selvigs' claims for breach of contract and breach of the covenant of good faith and fair dealing, holding that the Selvigs had elected their remedy by keeping the earnest money deposit. Second, it dismissed the Selvigs' unjust enrichment claim on the ground that the dispute was covered by a valid contract governing the purchase of the Property. The Selvigs appealed.

¶ 4 Because the election of remedies provision does not apply to a breach of contract claim arising out of a wrongful recording of the deed, we hold that the district court erred in dismissing the Selvigs' claims for breach of contract and breach of the covenant of good faith and fair dealing. And because the sale of the Property was covered by a written contract, we hold that the district court correctly dismissed the Selvigs' claim for unjust enrichment. We therefore affirm the district court's order regarding the issue of unjust enrichment but reverse and remand the contractual claims.

BACKGROUND 1

¶ 5 The Selvigs owned a bed and breakfast in Midway, Utah. The Selvigs had a first mortgage on the Inn of approximately $550,000 and obtained a line of credit secured by the Inn that carried a balance of $70,000. The Selvigs listed the Inn for sale in the spring of 2005. Blockbuster saw the listing and expressed interest in purchasing the Property. On June 12, 2005, Blockbuster and the Selvigs entered into a contract for the purchase of the Inn. The Contract consisted of a standard form real estate purchase contract and three addenda. The first addendum contains a description of the Property, the second addendum describes the contents of the Inn to be included in the sale, and the third addendum describes the down payment.

¶ 6 The value of the down payment was $125,000. It included a $75,000 down payment on the Property—$1,000 due on June 6, 2005, and the remaining $74,000 due at closing—and a $50,000 construction credit on a cabin at the Utah Mini-Ranches in Duchesne County. The Utah Mini-Ranches is a development operated by Highland Development Company, which is owned by Joan Steed, who also owns Blockbuster.2

¶ 7 The agreed sale price of the Inn was $759,139, which consisted of the down payment of $125,000 and the assumption of the Selvigs' two mortgages, which totaled $634,139. The Selvigs argue that the parties also agreed that Blockbuster would convey to the Selvigs lot 139, a prime lot located at the Utah Mini-Ranches, in exchange for the contents of the Inn.

¶ 8 Blockbuster and the Selvigs agreed that the transaction would close on or before September 30, 2005. The Contract provided that closing would occur when

(a) Buyer and Seller have signed and delivered to each other ... all documents required by this Contract, by the Lender, by written escrow instructions signed by the Buyer and the Seller, and by applicable law; (b) the moneys required to be paid under these documents have been delivered to the escrow/title company in the form of collected or cleared funds; and (c) the deed the seller has agreed to deliver under Section 6 has been recorded.

¶ 9 The Contract contained an election of remedies provision, which defined the procedures to be followed in the event of default. It provided that

[i]f Buyer defaults, Seller may elect to either retain the Earnest Money Deposit as liquidated damages or to return the Earnest Money Deposit and sue Buyer to enforce Seller's rights. If Seller defaults, in addition to return of the Earnest Money Deposit, Buyer may elect to either accept from Seller as liquidated damages a sum equal to the Earnest Money Deposit or sue Seller for specific performance and/or damages .... Where a Section of this Contract provides a specific remedy, the parties intend that the remedy shall be exclusive regardless of rights which might otherwise be available under common law.

¶ 10 The parties agreed to meet and close the transaction on September 20, 2005. The Selvigs testified that they believed that Blockbuster would have either paid off or assumed the existing mortgages on the Property by that date, which was ten days before the contractual closing deadline. But when the parties met on September 20, Blockbuster told the Selvigs that it had neither assumed nor paid off the mortgages. Instead, Blockbuster presented to the Selvigs a Lease to Purchase Agreement. Under the terms of the proposed Lease to Purchase Agreement, Blockbuster would lease the Inn for twelve months and would assume the Selvigs' monthly payments on both the first and second mortgages during that time. It further provided that by September 1, 2006, Blockbuster would pay off both the first and second mortgages and the parties would then close the transaction. The Selvigs signed the Lease to Purchase Agreement and Blockbuster tendered the $74,000 down payment for the Property. During the September 20 meeting, Blockbuster produced a warranty deed for the Property and asked the Selvigs to sign it. Blockbuster promised that it would not file the deed until closing. Based on this representation, the Selvigs signed the deed.

¶ 11 After the meeting, Blockbuster took possession of the Inn and began making the monthly mortgage payments. On March 28, 2006, Blockbuster paid off the second mortgage. However, Blockbuster failed to pay off the first mortgage by the September 1, 2006 deadline.

¶ 12 Sometime in early September 2006, Blockbuster contacted the Selvigs to discuss whether they would be interested in returning to the Inn as inn-keepers for the 20062007 ski season. The Selvigs expressed interest in the position and the parties met one week later to discuss the arrangement. At the meeting, the Selvigs mentioned that they “needed to get this deal finished.” The Selvigs understood this statement to mean that Blockbuster needed to pay off the first mortgage. This was the last time the parties discussed payment.

¶ 13 On October 3, 2006, Mr. Selvig went to the Inn to determine what repairs were necessary for the reopening. After his inspection, he called Blockbuster and expressed concern about having the Inn ready for an October opening. What else was said during this conversation is unclear, but Ms. Steed testified that she believed the Selvigs intended to terminate the Contract. Therefore, on October 3, 2006, she went to the Wasatch County Recorder and recorded the deed. Later that afternoon, Ms. Steed called and left a message on the Selvigs' answering machine stating that “this is not going to work” and to “come get your stuff.” At this time, even though it had recorded the deed, Blockbuster had not paid off the first mortgage. However, it continued to make monthly mortgage payments.

¶ 14 The Selvigs filed suit on October 12, 2006. They alleged three causes of action: breach of contract, breach of the covenant of good faith and fair dealing, and unjust enrichment. The Selvigs did not return the earnest money deposit before filing suit. On November 29, 2006, while the case was awaiting trial, Blockbuster paid the first mortgage in full.

¶ 15 Upon payment of the first mortgage, Blockbuster's only outstanding obligations under the agreement were the $50,000 construction credit and its alleged agreement to convey lot 139 to the Selvigs. Blockbuster sent letters to the Selvigs expressing interest in building the cabin. However, the cabin was never built and lot 139 was never conveyed. Both parties blame each other for not moving forward with construction.

¶ 16 The case was tried to the court. At the conclusion of the Selvigs' case in chief, Blockbuster filed a rule 41(b) motion for involuntary dismissal. Blockbuster argued that the Selvigs were barred by the election of remedies provision from suing Blockbuster for damages because they had failed to refund the earnest money deposit before filing suit. Although the Selvigs argued that Blockbuster waived the election of remedies defense by not raising it earlier in the proceedings, the district court granted Blockbuster's...

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