US Bank Nat. Ass'n v. Kuenzli

• Citation: 999 P.2d 877,134 Idaho 222
• Decision Date: 25 April 2000
• Docket Number: No. 24788.,24788.
• Parties: U.S. BANK NATIONAL ASSOCIATION, a national banking corporation, Plaintiff, v. Ronald L. KUENZLI, Ida Marie Kuenzli, and Clarence Mel Dennett, Defendants. Clarence Mel Dennett, Cross Claimant-Respondent-Cross-Appellant, v. Ronald L. Kuenzli and Ida Marie Kuenzli, Cross Defendants-Appellants-Cross-Respondents.
• Court: United States State Supreme Court of Idaho

999 P.2d 877

134 Idaho 222

U.S. BANK NATIONAL ASSOCIATION, a national banking corporation, Plaintiff, v. Ronald L. KUENZLI, Ida Marie Kuenzli, and Clarence Mel Dennett, Defendants.

Clarence Mel Dennett, Cross Claimant-Respondent-Cross-Appellant, v. Ronald L. Kuenzli and Ida Marie Kuenzli, Cross Defendants-Appellants-Cross-Respondents.

No. 24788.

Supreme Court of Idaho, Boise, December 1999 Term.

April 25, 2000.

Frank W. Stoppello Attorneys at Law, Boise, for appellants. Frank W. Stoppello argued.

Risch, Goss, & Insinger, Boise, for respondent. John B. Insinger argued.

SILAK, Justice.

NATURE OF THE CASE

This is an appeal from an order of summary judgment granted by the district court. The controversy underlying this appeal involves a real estate transaction between respondent Clarence Mel Dennett (Dennett) and appellants Ronald and Ida Marie Kuenzli (the Kuenzlis). We affirm.

I. FACTS AND PROCEDURAL BACKGROUND

A. Facts

The facts in this case were succinctly summarized by the Court of Appeals as follows:

In March 1984, Mel Dennett entered into an agreement with Ronald L. and Ida Marie Kuenzli for the sale of farm property. Although Dennett's initial asking price was $400,000, he agreed to sell the land to the Kuenzlis for $300,000. The purchase price, plus interest, was payable in twenty annual installments. The agreement provided that if the Kuenzlis prepaid the balance at any time during the life of the contract they would also be required to pay a $100,000 prepayment penalty. The parties appointed an escrow agent to hold the conveyance documents and to process the payments.

Approximately four months later, in July of 1984, the parties executed an option agreement giving Dennett the right to re-purchase the same real property at any time during the existence of the escrow. By terms of the option agreement, if Dennett elected to repurchase the property he would be required to pay the amount of all principal and interest previously paid by the Kuenzlis, plus the principal balance that was yet unpaid by them (which would, by offset, effectively cancel the Kuenzlis' liability for the balance under the original sale contract), plus $15,000.

During the fall of 1993, the Kuenzlis discovered that the farm property had greatly increased in value. To enjoy the benefit of this appreciation, the Kuenzlis decided to sell the property. Before doing so, in October 1993, the Kuenzlis called Dennett to inform him of their intention to list the property with a real estate agent and to inquire whether it would cause adverse tax consequences for Dennett if the Kuenzlis were to prepay the contract balance. Dennett did not express any opposition to the sale of the property and said that he would not suffer any tax disadvantages from prepayment. On December 7, 1993, the Kuenzlis entered into an earnest money agreement to sell the property to a third party for $975,000. However, two days later Dennett gave the Kuenzlis written notice that he was exercising his right to repurchase the property under the option agreement. In response, the Kuenzlis attempted to terminate Dennett's right to exercise the option by prepaying the remaining purchase price, including the $100,000 prepayment penalty, but this payment was refused by the escrow agent at Dennett's instruction. Dennett then tendered the amount required for exercise of the option and demanded that the Kuenzlis convey the property to him. The Kuenzlis refused. Consequently, Dennett brought an action seeking specific performance of the option agreement. The Kuenzlis counterclaimed requesting specific performance of the land sale contract or, alternatively, damages. Following a court trial, the district court granted judgment to Dennett and ordered that the Kuenzlis perform pursuant to the terms of the option agreement.

Dennett v. Kuenzli, 130 Idaho 21, 24, 936 P.2d 219, 222 (1997) (Dennett I). The Court of Appeals affirmed the district court's specific performance award. See id. at 32, 936 P.2d at 230. Dennett took possession of the property on May 15, 1997, and an escrow contract was signed by the Kuenzlis on June 10, 1997.

B. Procedural Background

On June 23, 1997 a notice of default was prepared by the Kuenzlis' attorney. The notice of default alleged that Dennett had failed to make the $30,000 installments for 1994, 1995, and 1996, the three years between Dennett's attempted exercise of the option and the district court's specific performance award. Dennett paid $99,183.25, representing the allegedly delinquent installments plus interest, "under protest" to U.S. Bank, the escrow agent. On August 22, 1997, U.S. Bank filed a verified complaint for interpleader, requesting that the district court determine who was entitled to the $99,183.25 paid by Dennett.

Dennett filed a cross-claim against the Kuenzlis seeking declaratory judgment and other relief on September 23, 1997. The district court granted summary judgment in favor of Dennett, ruling that Dennett was not in default because there was no enforceable contract between the parties until the Kuenzlis executed the sale and purchase agreement on June 10, 1997. The district court ruled that Dennett was therefore entitled to the disputed money, plus interest and other damages. A judgment in Dennett's favor was entered on April 24, 1998. On August 4, 1998, the district court issued a memorandum decision ruling that Dennett was entitled to $6,015.04 in damages, $6,500 in attorney fees and $55 in costs.

The Kuenzlis appealed. This appeal was consolidated by order of this Court with Dennett v. Kuenzli, 134 Idaho 229, 999 P.2d 884 (2000), for purposes of briefing and oral argument.

II. ISSUES ON APPEAL

The Kuenzlis present the following issues on appeal:

A. Whether the district court erred in finding Dennett's cross-claim was not barred by res judicata and collateral estoppel.

B. Whether the district court erred in reforming the real estate contract between Dennett and Kuenzli, effectively amending the judgment entered in Dennett I.

C. Whether the district court erred in awarding damages to Dennett consisting of interest and loan origination fees in the amount of $1,500.

D. Whether the Kuenzlis are entitled to an award of attorney fees in this appeal under Section 12-120(3) of the Idaho Code.

On cross-appeal, Dennett raises the following issues:

E. Whether the district court erred in offsetting the cost of servicing the loan by the amount the clerk stated would have been earned on the deposited money had the money been in an interest-bearing account.

F. Whether the district court erred in awarding an amount for attorney fees less than those actually incurred by Dennett.

III.

STANDARD OF REVIEW

In an appeal from an order granting summary judgment, this Court's standard of review is the same standard used by the district court in ruling on a motion for summary judgment. See, e.g., First Security Bank v. Murphy, 131 Idaho 787, 790, 964 P.2d 654, 657 (1998)

; Richards v. Idaho State Tax Comm'n, 131 Idaho 476, 478, 959 P.2d 457, 459 (1998). Summary judgment is appropriate only when the pleadings, depositions, affidavits and admissions on file show that there is no genuine issue of material fact and the movant is entitled to judgment as a matter of law. See Murphy, 131 Idaho at 790,

964 P.2d at 657.

IV. ANALYSIS

A. The District Court Correctly Ruled that Dennett's Cross-Claim Was Not Barred By Res Judicata And Collateral Estoppel.

The Kuenzlis argue that Dennett's cross-claim to the interpleader should be barred under the doctrines of res judicata and collateral estoppel.

1. Res judicata

It is "well established" in Idaho law that "in an action between the same parties upon the same claim or demand, the former adjudication concludes parties and privies not only as to every matter offered and received to sustain or defeat the claim but also every matter which might and should have been litigated in the first suit." Farmers Nat. Bank v. Shirey, 126 Idaho 63, 70, 878 P.2d 762, 769 (1994) (quoting Joyce v. Murphy Land & Irr. Co., 35 Idaho 549, 553, 208 P. 241, 242-43 (1922)). Under the doctrine of res judicata, or claim preclusion, "a valid and final judgment rendered in an action extinguishes all claims arising out of the same transaction or series of transactions out of which the cause of action arose." Diamond v. Farmers Group, Inc., 119 Idaho 146, 150, 804 P.2d 319, 323 (1990).

The district court ruled that res judicata did not bar Dennett's cross-claim because the issue of whether the Kuenzlis' initial breach of the option agreement excused further performance by Dennett was not ripe at the time Dennett sought specific performance. The Kuenzlis argue that Dennett's cross claim should nonetheless be barred because it arose out of the same "transaction or series of transactions" as the previous litigation. See Diamond, 119 Idaho at 150,

804 P.2d at 323 (citing RESTATEMENT (SECOND) OF JUDGMENTS § 24 (1982)).

Res judicata does not apply to Dennett's cross-claim in the interpleader action because Dennett's right to the money deposited with U.S. Bank could not have been asserted during the earlier litigation. The notice of default, which prompted deposit of the $99,-183.25, was not delivered until after the earlier litigation had run its course. It would have been impossible for Dennett to have claimed the disputed money before that money had been demanded or deposited with the escrow agent. Dennett's cross-claim was not, therefore, a claim which "might and should have been litigated under the first suit." Farmers Nat. Bank, 126 Idaho at 70, 878 P.2d at 769.

The Kuenzlis' argument with respect to Restatement § 24 is unpersuasive. Under the circumstances of this case, the second claim is not barred even under the Restatement's "transactional" approach. The Restatement's definition of "transaction" does not contemplate an event of buying or selling:

It should be emphasized that the concept of a transaction is here

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