Opinion
Case No. CV 99-607-N-EJL
June 5, 2002
REPORT AND RECOMMENDATION
Currently pending before the Court for its consideration is Defendant's motion for summary judgment (docket # 19), filed February 25, 2002. Having reviewed all briefing submitted, as well as other pertinent documents in the Court's file, and having heard oral arguments, the Court will recommend that the motion be granted and that the complaint be dismissed.
REPORT I. Background.
Plaintiff Norid, LLC ("Norid"), brings this complaint seeking the remedy of specific performance and damages for breach of contract. Norid is a company involved in logging and land acquisitions and sales. Floyd Short ("Floyd") is the owner of Norid. Ed Short ("Ed") is Floyd's son and is an attorney and licensed real estate agent who represents Norid.
Norid wanted to purchase the timber rights to two parcels located in Shoshone County, Idaho. The parcels were owned by a Texas firm by the name of Glacier Park Company ("Glacier"). The mineral and timber rights to both parcels had been separated from the fee title and were owned by another company by the name of Plum Creek Timberlands, L.P. ("Plum Creek").
Parcel A covers 440.7 acres and is located southwest of the city of Wallace. Parcel B covers 222.19 acres and is located north of Wallace. In late 1997 or early 1998, Floyd Short became aware that the parcels were listed for sale by Glacier. Floyd was actually only interested in owning the timber rights to the two parcels for potential timber harvesting. He made inquiry to the owner of the rights. Plum Creek, as to whether it would sell the timber rights. Floyd spoke with Plum Creek's in-house counsel in Seattle, Sherry Ward, who referred the matter to Jerry Sorenson in Plum Creek's regional office in Columbia Falls, Montana.
When Floyd contacted Sorenson, he was told that the timber rights to both parcels were for sale, but that Plum Creek was unwilling to sell the rights to anyone who did not own fee title to the land. Sorenson quoted prices for the timber rights on each parcel based on the estimated harvestable quantity of timber: $100,000 for parcel A and $300,000 for parcel B.
At the time that Floyd spoke with Sorenson, Floyd had already been negotiating with Glacier to purchase fee title to parcels A and B. However, Floyd found that he would be unable to gain access to Parcel A in time for closing on the land purchase with Glacier. At the time, Glacier was in merger negotiations and could not agree to extend the closing date. Floyd decided that Norid should abandon the purchase opportunity, so he forfeited the down payment made to Glacier and ceased efforts to obtain the timber rights from Plum Creek.
Later on, in mid-1999, Norid learned that the Glacier merger was complete and that parcels A and B were again available for purchase. Floyd went about negotiating prices of $55,000 for the land in parcel A and $30,000 for the land in parcel B. Floyd's son, Ed Short, was to prepare land contracts and was also to find out from Plum Creek if the timber rights were still available.
On June 24, 1999, Ed sent a proposed contract to Glacier that called for an earnest money deposit, and staggered closing dates in order that he could deal with Plum Creek on the timber rights separately for each parcel. The proposed closing date for fee title on parcel B was set for July 30, 1999, and for parcel A for September 30, 1999.
After entering into the land contracts, Ed went about contacting Sorenson again to make sure that the timber fights for each parcel were still available. Sorenson said that after he received information from Ed that identified what property he was inquiring about, Sorenson promised to then check with his supervisor, Denny Sigars, who was Plum Creek's regional manager for Montana and Northern Idaho, to determine whether the timber rights were still for sale and at what price. Ed Short alleges that he told Sorenson at that time that Norid would not complete the purchase of the land if there were no timber rights available. Ed Short testified at his deposition that he knew that the sale of the timber rights by Plum Creek required the consultation, review, and approval of Denny Sigars, Plum Creek's regional manager.
On July 15, 1999, Ed wrote a letter to Sorenson and provided the requested information identifying which two parcels. Ed also stated what the proposed land title closing dates were for each parcel. When Ed did not hear back from Sorenson as the time the date for closing title on parcel B approached, Ed requested an extension of the closing date from Glacier. Ed then contacted Sorenson and was told that the timber rights for parcels A and B were still for sale at prices discussed previously ($100,000 for parcel A and $300,000 for parcel B). Although the stock cruise estimate was that parcel A had 5.4 million board feet of timber available and parcel B had 2.2 million board feet available, parcel A was offered at less because the difficulty of the terrain would present certain challenges to logging the parcel.
The timber rights prices had been determined according to "stock" cruise prices, which meant that an estimate of the available timber on each parcel was derived from a visual inspection, as opposed to the amounts being derived from a "formal" timber cruise where actual stumps are counted and the amount of million board feet calculated from that.
In response, Ed told Sorenson that he would make an offer to buy the timber rights to parcel A, but Ed opined that the stock cruise figures for parcel B were inaccurate. Sorenson then told Ed that Plum Creek might be willing to reduce the price for the timber rights on parcel B if a formal timber cruise reflected a lower amount of harvestable timber available.
Sorenson suggested that Norid retain a Tom Richards, of Northwest Timber Management, to perform a formal cruise of parcel 13 in order to determine the amount of harvestable timber. Following this advise, Norid retained Richards to conduct a formal cruise on parcel B. Ed advised Sorenson that Norid intended to close title to the land in parcel B on August 4, 1999.
Meanwhile, as to parcel A, on August 3, 1999, Ed sent Sorenson a formal offer for the timber rights to parcel A. The letter stated: "Thank you for your quick response to our inquiry about the possible purchase of Plum Creek's timber rights to parcels at Wallace, Idaho." In addition. Ed included a written contract reflecting a proposed purchase price of $75,000 for Parcel A. Ed's letter stated, "If this offer is acceptable please notify me and I will deposit the non-refundable earnest money with Alliance Title in Wallace, Idaho, and we will proceed with closing through their offices."
On September 20, 1999, Sorenson responded orally, stating that Plum Creek would be willing to sell the timber rights to parcel A for $95,000. On September 21, 1999, Ed phoned Sorenson and accepted the oral counter-offer of $95,000 for parcel A timber rights. Ed suggested to Sorenson that Sorenson simply change the purchase price on the contract Ed had previously sent Sorenson. but Sorenson declined, saying that Plum Creek wanted a "clean" contract and asked Ed to send another contract which reflected the correct price.
In the course of conversations about timber rights to parcel A, Ed and Sorenson also discussed the timber rights for parcel B. Ed proposed that the price for timber rights to B could be established by determining the ratio of asking price to stock cruise numbers, e.g. $300,000 divided by 2,200,000, which would mean that Norid would pay $136.36 per thousand board feet, and the price would be calculated based on the actual figures presented by Richards from the formal cruise. Sorenson allegedly agreed to this approach.
Ed presented a clean contract to Sorenson on the timber rights for parcel A on September 22, 1999. In the letter accompanying the new contract, Ed stated, "If you would have your authorized agent of Plum Creek sign the agreement . . . and then forward it to the title company." However, the form of the quit claim Ed proposed was objected to by Sherry Ward, Plum Creek's in-house counsel, but she agreed that the terms were otherwise agreeable. Ed then talked with Ward directly and they agreed on a change to the contract language.
Ed inquired of Short when he would receive the signed contract. Ed needed to know because the title closing on the land was a week away and reiterated that he did not want to purchase the land unless the timber rights were also secured. Sorenson assured Ed that he would return the signed contract to Ed within a few days before closing.
However, when the signed contract for the timber rights to parcel A did not arrive as promised. Ed sought and obtained an extension on the land closing date from Glacier. Ed also called Sorenson, who explained that his boss was gone and unavailable to sign the timber rights contract. Ed reiterated to Sorenson that Norid was unwilling to buy the land in parcel A if the timber rights could not also be obtained. Sorenson allegedly told Ed that Plum Creek's signing the timber rights contract was a mere "formality" because the deal was already approved and further allegedly specifically told Ed that Norid could proceed with closing title on the land in A because the deal was set.
Based on Sorenson's assurances, Norid closed title to the land in parcel A and paid Glacier $55,000. A few days later, Ed received a voice mail message from Sorenson advising Ed that Plum Creek had negotiated a "bulk sale" of all of its Idaho timber holdings to Crown Pacific. Although Norid immediately filed this action as well as a lis pendens on each parcel, Plum Creek nonetheless sold the timber rights on the parcels to Crown Pacific.
Meanwhile, Richards completed the formal cruise, which revealed that parcel B had a timber volume of 1.185 actual million board feet available, as opposed to the 2.2 million figure from the stock cruise. Based on this, and applying the formula price of $136.36 per thousand board feet previously agreed upon, the purchase price for the timber rights to parcel B would have amounted to $161,587. Based on this calculation. Norid even went so far as to tender this amount to a title company escrow to purchase the rights, but it was rejected by Plum Creek.
Norid filed suit seeking specific performance and for breach of contract.
II Standard of review.
Motions for summary judgment are governed by Fed.R.Civ.P. 56. Rule 56, which provides in pertinent part, that judgment "shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, 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."
The United States Supreme Court has made it clear that under Rule 56, summary judgment is required if the nonmoving party fails to make a showing sufficient to establish the existence of an element which is essential to his case and upon which he/she will bear the burden of proof at trial. If the nonmoving party fails to make such a showing on any essential element of his case, "there can be `no genuine issue as to any material fact,' since a complete failure of proof concerning an essential element of the nonmoving party's case necessarily renders all other facts immaterial."
See Celotex Corp. v. Citrate, 477 U.S. 317, 322 (1986).
Id. at 323. See also Rule 56(c).
Under Rule 56 it is clear that an issue, in order to preclude entry of summary judgment, must be both "material" and "genuine." An issue is "material" if it affects the outcome of the litigation. An issue is "genuine" when there is "sufficient evidence supporting the claimed factual dispute . . . to require a jury or judge to resolve the parties' differing versions of the truth at trial," or when the "evidence is such that a reasonable jury could return a verdict for the nonmoving party." The Ninth Circuit cases are in accord.
Hahn v. Sargent, 523 F.2d 461, 463 (1st Cir. 1975) (quoting First Nat'l Bank v. Cities Serv. Co., Inc., 391 U.S. 253, 289 (1968)), cert. denied, 425 U.S. 904, 96 S.Ct. 1495, 47 L.Ed.2d 754 (1976).
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202, 212 (1986).
See British Motor Car Distributors, Ltd. v. San Francisco Automotive Industries Welfare Fund, 882 F.2d 371 (9th Cir. 1989).
In ruling on summary judgment motions, the court does not resolve conflicting evidence with respect to disputed material facts, nor does it make credibility determinations. Moreover, all inferences must be drawn in the light most favorable to the nonmoving party. As the Ninth Circuit Court of Appeals has stated, "[p]ut another way, if a rational trier of fact might resolve the issue in favor of the nonmoving party, summary judgment must be denied."
T. W. Electrical Service, Inc. v. Pacific Electrical Contractors Ass'n., 809 F.2d 626 (9th Cir. 1987).
Id. at 631.
Id.
III. Defendant's motion for summary judgment.
Defendants Plum Creek and Crown Pacific seek summary judgment on three grounds: 1) lack of mutual assent; 2) indefinite terms of the contract; and 3) statute of frauds. Plaintiffs claims for specific performance and breach of contract depend on the existence of a valid enforceable contract. Defendants maintain that no such contract was ever formed, while Plaintiff maintains there was.1. Mutual assent argument
Under Idaho law, the enforceability of an oral contract for the sale of realty is precluded by the statute of frauds, which requires any such contract to be in writing. Idaho Code § 9-503. Under Idaho law, the definition of "real property" includes "all standing timber thereon, including standing timber owned separately from the ownership of the land upon which the same may stand" Idaho Code § 63-201 (18).
In this case, there were two different transactions that were contemplated. The first was the sale of the land in parcels A and B, to be purchased from owner Glacier. The second type of transaction involved the sale of the separate timber rights on parcels A and B. to be purchased from owner Plum Creek. The first type of transaction, the sale of the land, does not appear to be in dispute as Glacier is not a party to this suit. Therefore, the Court will focus on the second type of transaction involving the sale of the timber rights on the two parcels by Plum Creek. For the purposes of the discussion, although there are two parcels with timber rights and separate sales were contemplated, for the sake of this discussion, the Court will refer to the transactions as if it only involved one contract.
While there is some evidence here that one or more proposed contracts in writing did exist, it is less certain whether there was mutual assent to the contracts for the sale of the timber rights. Defendants first argue that there was no mutual assent, or meeting of the minds, sufficient to establish that a contract existed. Plaintiff argues that the evidence "compels the opposite conclusion." (Plaintiff's response, docket # 24, at page 9.)
As Defendants point out, there is a recent case from the Idaho Supreme Court which is instructive on this issue. The case of, Intermountain Forest Management v. Louisiana Pacific (Corp., 136 Idaho 921, 31 P.3d 921 (2001), involves a logging corporation that brought a breach of contract action against a building-materials corporation. There, Intermountain Forest Management ("IFM") alleged that it entered into a logging contract with Louisiana Pacific Corporation ("LP") in September, 1996, to log 6,000 tons of logs. LP denied the existence of the contract on the grounds that it never executed a written agreement.
In 1996, IFM offered to finish a logging job for LP when the former contractor stopped working. LP's contact person presented an unsigned contract to IFM's president which contained IFM's proposed terms for the job. IFM's president immediately signed the contract without making any changes and returned it to LP's contact person. In his deposition, IFM's president admitted that the contract was unsigned by LP when he returned it and that he knew that LP's contact person had no authority to sign the contract or otherwise bind the company.
The contract was never executed by anyone on behalf of LP. However, after signing the contract, IFM's president sent LP certificates of proof of insurance for the job, purchased rain gear for crew members, and proceeded to remove about six loads of logs from the site and have them delivered to LP's mills, where they were accepted. LP argued that the lack of signature on the contract, and therefore the lack of mutual assent, precluded there having been a contract between IFM and LP as a matter of law.
In the IFM case, the record was clear, as it is here, that the contract that LP presented for signature to IFM's president was never signed by LP. Because of this, the burden shifted to IFM to come forward with sufficient evidence to create a genuine issue or fact on the element of mutual assent. !d. at 924, citing Smith v. Joint Meridian Sch. Dist. No. 2, 128 Idaho 714, 719, 918 P.2d 583, 588 (1996). Because it was uncontroverted that no representative of LP ever executed the contract, then even drawing all inferences in favor of IFM, there were no genuine issues of material fact in dispute regarding the lack of execution of a formal contract.
There, as here, however, IFM argued that despite the lack of a signature by LP, a contract was nevertheless formed. IFM argued that the undisputed facts established that, as a matter of law, LP's presentation of the contract for signature by IFM was an "oiler" and that IFM's unconditional acceptance formed a binding contract. The Idaho Supreme Court stated that, even if a lack of a signature does not necessarily prevent contract formation, IFM still had to show that a contract was formed through mutual assent. Id. at 925, citing Thompson v. Pike, 122 Idaho 690, 696, 838 P.2d 293 (1992). In other words, a distinct understanding common to both parties is necessary in order for a contract to exist. Id., citing Mitchell v. Siqueiros, 99 Idaho 396, 400, 582 P.2d 1074 (1978) (citation omitted). Whether a contract exists when contracting parties agree to reduce their agreement to writing is a question of the parties' intent. Id. As stated in Thompson v. Pike:
The intent to have a written contract is shown by such factors as: 1) whether the contract is one usually put in writing, 2) whether there are few or many details, 3) whether the amount involved is large or small, 4) whether it requires a formal writing for a full expression of the covenants and promises, and 5) whether the negotiations indicate that a written draft is contemplated as the final conclusion of negotiations. The burden of proof is one the party asserting that the contract was binding before the written draft was signed.
Thompson v. Pike, 122 Idaho at 696. An oral agreement is only valid if the written draft is viewed by the parties as a mere record, however, the oral agreement is not valid if the parties view the written draft as a consummation of the negotiation. Id. Furthermore, "[w]here it is clear that one party has agreed that an oral agreement must be reduced to writing before it shall be binding, there is no contract until a formal document is executed." Intermountain Forest Management, 136 P.2d at 925, citing Mitchell v. Siqueiros, 99 Idaho at 400.
Th Idaho Supreme Court concluded that the trial court did not err in deciding that the parties lacked the mutual assent to be bound.
In the instant case, the record reveals that a proposed contract for the purchase of timber rights was submitted by Norid to Sorenson for Plum Creek. Pursuant to Idaho Code § 63-201 (18) and § 9-503, it would be reasonable to conclude that these statutes would dictate that the common practice in the industry is to put timber sale contracts in writing. In addition, the contract involved a large amount of money and details identifying exactly what property was involved. It is apparent from the facts that the parties intended to create a written contract to govern their agreement and indeed it was Norid's attorney-agent who drew up and submitted the proposed contract to Plum Creek's Sorenson. It is also important to note that even Norid has recognized the fact that Sorenson did not have the authority to bind Plum Creek in writing. (See, e.g., Plaintiff's response brief; docket # 24, at pages 5, 7, and 10.)
Ed Short testified that about one half of his contracts are not in writing. However, as to his dealings with Plum Creek, it is clear that he contemplated having a written contract for this transaction because he prepared and forwarded a draft to Sorenson for Parcel A. In addition, Ed and Sorenson discussed the fact that Plum Creek wanted a "clean copy" of the agreement rather than do as Ed suggested, which was to modify the draft by penciling in the agreed-upon change of purchase price.
The Court finds that the parties intended from these undisputed facts that the written contract was to be the consummation of the negotiation between the parties and that a signed contract would govern their relationship. Because Plum Creek did not ever sign Norid's proposed contract(s) for the sale of the timber rights on parcels A and B, the Court can find that Plum Creek did not intend to be bound until the contract(s) were signed. Therefore, the Court finds that there was a lack of mutual assent between these parties to be bound. Accordingly, the Court finds that Defendant's motion for summary judgment should be granted as to this issue.
2. Statute of frauds argument.
Even if the Court were to find that there existed a question of fact as to whether mutual assent existed, alternatively, the Court finds that the statute of frauds has not been satisfied. As stated above, under Idaho law, the enforceability of an oral contract for the sale of realty is precluded by the statute of frauds, which requires any such contract to be in writing. Idaho Code § 9-503. Further, under Idaho law, the definition of "real property" includes "all standing timber thereon, including standing timber owned separately from the ownership of the land upon which the same may stand,. . . ." Idaho Code § 63-201 (18).
The Court finds that these statutes mandate that the type of contract contemplated here, for the sale of timber rights that are separate from fee title, is required to be in writing. In this case, although there is no dispute that one or more proposed contract(s) existed, there is equally no dispute that these writing(s) were never executed by both parties and that a written contract was never formed which would satisfy the statute of frauds. Therefore, the Court finds that it is appropriate to grant the Defendants' motion as to the issue of the statute of frauds as well.
3. Indefinite terms argument and conclusion.
Having found that the prior two issues were meritorious in favor of the Defendants, and that summary judgment should be granted, the Court does not find it necessary to address the remaining issue presented by the Defendants.
RECOMMENDATION
Based upon the foregoing, the Court being otherwise fully advised in the premises, the Court hereby RECOMMENDS that;
1) Defendant's motion for summary judgment (docket # 19), filed February 25, 2002, be GRANTED.
2) Plaintiff's complaint be dismissed in its entirety.
Written objections to this Report and Recommendation must be filed within ten (10) days pursuant to 28 U.S.C. § 636 (b)(1) and Local Rule 72.1(b), or as a result of failing to do so, that party may waive the right to raise factual and/or legal objections to the United States Court of Appeals for the Ninth Circuit.