Opinion
Supreme Court No. S-11326.
November 2, 2005.
Appeal from the Superior Court of the State of Alaska, First Judicial District, Juneau, Larry R. Weeks, Judge, Superior Court No. 1JU-03-00202 Civil.
Michael P. Heiser, Ketchikan, for Appellant.
Ronald W. Lorensen, L. Merrill Lowden, Simpson, Tillinghast, Sorensen Longenbaugh, Juneau, for Appellee SEACAL, LLC.
Before: Bryner, Chief Justice, Matthews, Eastaugh, Fabe, and Carpeneti, Justices.
MEMORANDUM OPINION AND JUDGMENT
Entered pursuant to Appellate Rule 214.
This appeal involves a claim of breach of a contract to sell 571.7 acres of land containing a calcium carbonate mine on Prince of Wales Island. The owner, SEACAL, decided to sell the land, referred to as the Calder property, by a sealed bid auction. The initial auction advertisement indicated that the land was surrounded by national forest land and was "accessible via the USFS road system."
TRP, a sand and gravel company, was interested in bidding on the Calder property. Mary Guthrie, a managing member of TRP, and Greg York, general manager of TRP, inspected the property, guided by David Oliver, vice-president and general manager of SEACAL. The group traveled to the property by boat. During the visit, Oliver told Guthrie and York that a lodge owner had installed a gate on the Forest Service road to the Calder property and this prevented access by road. According to Guthrie, Oliver also said, or implied, that the problem the lodge owner had was with Sealaska, SEACAL's parent corporation, and that once the new owners of the mine established that they were not affiliated with Sealaska they would have the use of the road. At this point according to Guthrie:
We all wondered that a forest service road could be closed off to the public by a private business. At that time, it was the common consensus of all who were in the TRP party that the lodge and the Forest Service Road would be unfinished business. We were there to do a visual inspection of the property in anticipation of making a bid at an auction for the property.
Shortly after the visit, on September 23, 2002, TRP submitted a bid on the Calder property for a purchase price of $2,200,420 and paid a deposit of $100,000. On November 26, 2002, TRP paid an additional $120,000 and the parties signed an earnest money agreement. The agreement provided that the total deposit, $220,000, would be held in trust by the Ketchikan Title Agency as earnest money. SEACAL would order and pay for an ALTA survey of the property and two days after receipt of the survey TRP would pay the balance of the purchase price and the sale would be closed. The agreement also provided:
5. Time is of the essence of this Agreement. Closing shall occur within two (2) days of Buyer's receipt of the ALTA Survey of the Property ("closing"). If Buyer fails to pay the balance of the purchase price at closing for any reason, other than Seller's failure to convey clear title, Buyer shall immediately forfeit the earnest money and any interest earned thereon; this Agreement shall be of no further force or effect; and Seller shall retain the forfeited earnest money.
6. Possession of the Property is to be delivered to Buyer at closing, on an as-is, where-is basis, without warranty or recourse against Seller except with respect to title.
7. The Property is to be conveyed by a good and sufficient warranty deed, free and clear of all liens and encumbrances except zoning ordinances, building and use restrictions, reservations in federal patents, and easements of record.
. . . .
11. This Agreement contains all understandings and agreements between the parties hereto. Any modification hereof shall be effective only if in writing and signed by all parties hereto.
The ALTA survey was completed and TRP received it on December 30, 2002, but the sale was not closed as called for by the earnest money agreement. By January 10, 2003, TRP still had not tendered the balance of the purchase price. On that date SEACAL sent TRP a notice of breach, which also functioned as an extension of time for payment until January 17, 2003. The notice stated in part:
As a direct consequence of TRP's breach and pursuant to Section 5 of the Earnest Money Receipt and Agreement, the $220,000.00 paid as earnest money shall be forfeited by TRP, and TRP will have no right or claim to said monies after January 10, 2003. If, however, TRP makes payment in full of the remaining balance before January 17, 2003, Sealaska and SeaCal stand ready to complete the sale and convey to TRP title to the real property and to the equipment and other property at Calder. Lastly, SeaCal and Sealaska reserve the right to seek specific performance and other damages and remedies available to SeaCal and Sealaska under the law.
When TRP did not pay the closing price by January 17, York of TRP, SEACAL's attorney, Steven Sorensen, and Bob Norton of the Ketchikan Title Agency, held a teleconference on January 21, 2003. Sorensen followed up the teleconference with a letter dated January 22, 2003, indicating that York, on behalf of TRP, had stated that TRP's lender had reviewed the ALTA survey and had raised "issues" and that the issues would be resolved if the Ketchikan Title Agency would provide ALTA owner's coverage. Ketchikan Title Agency agreed to issue such a policy and, according to Sorensen, York said that closing could occur as early as Friday, January 24, 2003. Sorensen concluded by stating that if the sale and closing did not occur by January 24, or a few days following, SEACAL "will begin the process to recover the earnest money and market the property." TRP did not pay the balance of the purchase price by January 24, 2003, or thereafter. On January 29, 2003, Sorensen wrote York that SEACAL had terminated the agreement and would seek to recover the earnest money.
Ketchikan Title Agency filed an interpleader action against SEACAL and TRP in March of 2003. By stipulation the earnest money was deposited into the registry of the court. After TRP and SEACAL had answered and filed cross-claims, SEACAL moved for summary judgment, seeking a declaration that TRP had forfeited its earnest money deposit. TRP opposed the motion. The superior court granted partial summary judgment in favor of SEACAL, determining that TRP had unjustifiably breached the earnest money agreement. The court reserved the issue of damages for trial. Subsequently, a trial to the court on damages was held. At the trial the court found that forfeiture of the $220,000 earnest money deposit was justified because SEACAL's actual damages were greater than that sum. The court thereupon awarded the deposit to SEACAL, plus interest, attorney's fees, and costs.
On appeal, TRP argues that the court erred in entering summary judgment against it on the question whether it had breached the agreement. Specifically it contends that SEACAL was required to show that there was unblocked road access to the property, both as a part of SEACAL's requirement that it convey clear title and because TRP reasonably expected that such access would be available. TRP also argues that the agreement should have been rescinded because TRP was mistaken in believing that there was clear road access to the property. Summing up, TRP argues that when all reasonable inferences are drawn in its favor, as must be done on summary judgment review, "there is a genuine issue of material fact as to whether SEACAL provided land access as contemplated by the parties."
In reply, SEACAL contends that it was not required to provide unblocked road access to the property.
We conclude that SEACAL's argument is correct. The earnest money agreement did not require SEACAL to guarantee unblocked road access. TRP learned of the potential road controversy before it bid and before entering into the earnest money agreement, but decided to buy the property unconditionally, without obtaining an agreement that SEACAL would be responsible for resolving the problem. The earnest money agreement was integrated, expressly providing that it contained "all understandings and agreements between the parties" and therefore could not be varied or contradicted by prior negotiations or agreements. Further, there was no evidence that SEACAL had promised to provide unblocked road access, nor is there any indication that SEACAL's obligation to provide clear title was, or could be, reasonably understood to mean an obligation to provide such access.
The record shows that a Forest Service road extends to the Calder property, but the record is silent as to whether it remains blocked by a lodge owner and whether the lodge owner has a legal right to block it.
Alaska Diversified Contractors, Inc. v. Lower Kuskokwim Sch. Dist., 778 P.2d 581, 583 (Alaska 1989).
SEACAL accurately asserts that "[t]here is not a single document that has either been provided by TRP or that otherwise exists, or that TRP asserts exists, in which TRP has ever stated that it was concerned about the adequacy of access by land to the property prior to the commencement of litigation over this transaction." SEACAL also states "TRP omitted to ever raise land access as an issue throughout the course of dealings between the parties, either at the time the parties first entered the contract or as the parties tried to move ahead to conclude the transaction. Not once, in response to any of the warnings of potential breach from SEACAL, did TRP ever assert that land access or an ability to convey clear title was a problem or excused TRP from performance." This is also an accurate statement for summary judgment purposes even though the statement is contradicted by Guthrie's affidavit. Guthrie states that she directed York to raise access concerns with Sorensen and that York did so in a telephone conversation with Sorensen. But this part of Guthrie's affidavit is hearsay that may not be considered in opposition to a motion for summary judgment. Affidavits opposing summary judgment must be based on personal knowledge and hearsay statements contained in such affidavits "that would be inadmissible at trial are inadmissible in a motion for summary judgment." Broderick v. King's Way Assembly of God Church, 808 P.2d 1211, 1215 (Alaska 1991). SEACAL put TRP on notice of this deficiency, but TRP never filed admissible evidence, such as an affidavit by York, that access concerns were raised.
Alternatively, SEACAL contends that TRP has waived any right it might have to rely on the lack of clear road access to the property as a basis for excusing its failure to perform the agreement because TRP never raised any concerns or objections about the lack of clear road access before it was finally declared to be in default in late January of 2003. Because we conclude that SEACAL was not required to guarantee clear road access, we do not reach this argument.
TRP's argument that it should be allowed to rescind the contract for mistake of fact is waived because it was not raised before the superior court.
E.g., Hoffman Constr. Co. of Alaska v. U.S. Fabrication Erection, Inc., 32 P.3d 346, 355 (Alaska 2001).
For the above reasons the judgment of the superior court is AFFIRMED.