Watson v. Weick

• Decision Date: 29 April 2005
• Docket Number: No. 30475.,30475.
• Parties: Rocky WATSON and Mary Watson, husband and wife, Plaintiffs-Counterdefendants-Respondents, v. John WEICK and Julie Weick, Defendants-Counterclaimants-Appellants.
• Court: Idaho Supreme Court

112 P.3d 788

141 Idaho 500

Rocky WATSON and Mary Watson, husband and wife, Plaintiffs-Counterdefendants-Respondents, v. John WEICK and Julie Weick, Defendants-Counterclaimants-Appellants.

No. 30475.

Supreme Court of Idaho, Boise, April 2005 Term.

April 29, 2005.

Ramsden & Lyons and Stephen B. McCrea, Coeur d'Alene, for appellants. Michael E. Ramsden argued.

Witherspoon, Kelley, Davenport & Toole, Coeur d'Alene, for respondents. Joel P. Hazel argued.

EISMANN, Justice.

This is an appeal from a grant of summary judgment dismissing claims for fraud and breach of contract arising out of the sale of a business. We hold that the district court misapplied Faw v. Greenwood, 101 Idaho 387, 613 P.2d 1338 (1980), in dismissing the claim for fraud and erred in dismissing one of the claims for breach of contract. We uphold the grant of summary judgment on the remaining claims, vacate the judgment, and remand for further proceedings.

I. FACTS AND PROCEDURAL HISTORY

This lawsuit arises from the sale by the plaintiffs-respondents Rocky and Mary Watson of their security business to the defendants-appellants John and Julie Weick. The parties structured the transaction as a sale of the Watsons' stock in Watson Agency, Inc., two ancillary corporations, and a parcel of real property. On October 31, 2001, they executed a written contract (Agreement) setting forth the terms of the transaction. The Agreement stated that the sale price of the stock in the three corporations was $1.15 million dollars, which the Weicks were to pay by delivering at closing: $195,000 in cash, $800,000 by certified check, $110,000 by a promissory note payable to the Watsons, and $45,000 by a second promissory note payable to the Watsons. The Weicks were also to pay at closing $277,000 in cash or cashier's check for the real property. The parties contemplated that the $800,000 payment was to come from a bank loan. The Agreement provided that the closing was to occur on October 31, 2001, but it did not occur then because the Weicks' bank loan had not yet funded.

The parties rescheduled the closing of the transaction to November 28, 2001. On that date, they appeared at the office of the closing agent and signed the documents necessary to consummate the sale. The documents signed included both promissory notes, the Watsons' resignation of their positions as officers and directors of the corporation, minutes of special meetings of the shareholders electing the Weicks as directors, and minutes of special meetings of the directors electing John Weick as president and Julie Weick as vice-president and secretary. The closing was not completed on November 28, 2001, however, because the Weicks' bank loan had still not funded. It did so in mid-December, and the closing was completed on December 15 or 17, 2001.

On November 2, 2002, the Watsons filed this action seeking to recover on the $110,000 promissory note. The Weicks initially responded by a letter from their counsel¹ stating that they wanted to rescind the transaction and were tendering their resignations from the boards of directors, their stock in the three corporations, and deeds to the real property. The Watsons did not accept the offer to rescind the transaction. On November 22, 2002, the Weicks filed an answer and a counterclaim in which they alleged fraud and breach of contract and sought rescission of the transaction or, alternatively, an award of damages. On January 8, 2003, the Watsons filed an amended complaint adding a claim to recover on the $45,000 promissory note. Although the principal and interest on that note was not due until October 31, 2006, they alleged that the Weicks had committed an anticipatory breach of the note.

After granting the Watsons' motions for summary judgment, the district court entered a judgment dismissing the Weicks' counterclaims and awarding the Watsons a judgment in the sum of $228,192.83, which included costs and attorney fees totaling $58,592.87. The Weicks then timely appealed.

II. ISSUES ON APPEAL

A. Did the district court err in granting summary judgment dismissing the Weicks' claim for fraud?

B. Did the district court err in dismissing the Weicks' claim for rescission?

C. Did the district court err in dismissing the Weicks' claims for breach of contract?

D. Did the district court abuse its discretion in its award of attorney fees, and is either party entitled to an award of attorney fees on appeal?

III. ANALYSIS

In an appeal from an order of summary judgment, this Court's standard of review is the same as the standard used by the trial court in ruling on a motion for summary judgment. Infanger v. City of Salmon, 137 Idaho 45, 44 P.3d 1100 (2002). All disputed facts are to be construed liberally in favor of the non-moving party, and all reasonable inferences that can be drawn from the record are to be drawn in favor of the non-moving party. Id. Summary judgment is appropriate if the pleadings, depositions, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law. Id. If the evidence reveals no disputed issues of material fact, then only a question of law remains, over which this Court exercises free review. Id.

A. Did the District Court Err in Granting Summary Judgment Dismissing the Weicks' Claim for Fraud?

The first issue we must address in connection with this assignment of error is whether we have jurisdiction to address it. This Court must address a question as to its jurisdiction even if not raised by the parties. Diamond v. Sandpoint Title Ins., Inc., 132 Idaho 145, 968 P.2d 240 (1998).

The Watsons first moved for summary judgment on June 3, 2003. The district court heard the motion, and on July 31, 2003, it entered an order granting partial summary judgment. In that order, the district court held that the Watsons were entitled to a judgment for the sums owing on the promissory notes, to the dismissal of the Weicks' counterclaim for fraud, and to the dismissal of any claim for breach of contract based upon conduct that occurred after November 28, 2001.

The order granting partial summary judgment included a provision stating, "Defendants' counterclaim for fraud is hereby dismissed with prejudice." At the end of that order, the district court included a Rule 54(b) certificate providing as follows, "I expressly find, pursuant to Idaho Rule of Civil Procedure 54(b), that there is no just reason for delay and expressly direct entry of judgment on Plaintiffs' action to enforce the two promissory notes consistent with this order." On October 2, 2003, the court entered a partial judgment in favor of the Watsons for the amounts owing on the promissory notes. That judgment did not include a Rule 54(b) certificate, nor did it mention the Weicks' counterclaim for fraud. The Weicks did not file their appeal until February 11, 2004. Therefore, if the Rule 54(b) certificate created a final partial judgment, we would not have jurisdiction to review that partial judgment.

The Rule 54(b) certificate was a nullity with respect to that portion of the order granting partial summary judgment on the Watsons' claim to collect on the promissory notes. Rule 54(b) only applies to a judgment or to an order that constitutes a judgment. An order simply granting a motion for summary judgment does not constitute a judgment. Camp v. East Fork Ditch Co., Ltd., 137 Idaho 850, 55 P.3d 304 (2002). That portion of the order relating to the enforcement of the promissory notes did not purport to be a judgment. It simply granted the Watsons' motion for summary judgment on that claim. Thus, a Rule 54(b) certificate regarding the order granting summary judgment does not comply with Rule 54(b) and is of no effect.

The Rule 54(b) certificate at the end of the order granting partial summary judgment does not apply to the partial judgment later entered. Rule 54(b) provides that the certificate "shall immediately follow the court's signature on the judgment." Under that provision, a Rule 54(b) certificate in the order granting partial summary judgment cannot apply to the partial judgment later entered by the district court. There is an issue, however, of whether the Rule 54(b) certificate applies to that portion of the partial summary judgment dismissing the Weicks' counterclaim for fraud. That counterclaim was asserted as a defense to the Watsons' action to collect on the promissory notes.

An order dismissing a counterclaim can constitute a judgment. Camp v. East Fork Ditch Co., Ltd., 137 Idaho 850, 55 P.3d 304 (2002). It is not clear, however, whether the district court intended that the Rule 54(b) certificate as to the "action to enforce the two promissory notes consistent with this order" also included the order dismissing the counterclaim for fraud. Regardless of whether or not it did, the order is not a final partial judgment.

A district court's determination that there is no just reason for delay in entering a final partial judgment is not binding on this Court when it appears that the district court abused its discretion in so finding. Smith v. Whittier, 107 Idaho 1106, 695 P.2d 1245 (1985). Rule 54(b) of the Idaho Rules of Civil Procedure provides in part, "If any parties to an action are entitled to judgments against each other such as on a claim and counterclaim ..., such judgments shall be offset against each other and a single judgment for the difference between the entitlements shall be entered in favor of the party entitled to the larger judgment." Where there is a claim and a counterclaim asserted by opposing parties, a district court should ordinarily await the determination of both parties' claims before seeking to enter a final judgment in favor of one party on its claim. Joyce Livestock Co. v. Hulet, 102 Idaho 129, 627 P.2d 308 (1981). There is nothing in the record indicating any hardship, injustice, or compelling reason...