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Independent School District of Boise City v. Harris Family Limited Partnership

March 18, 2011

INDEPENDENT SCHOOL DISTRICT OF BOISE CITY, PLAINTIFF-COUNTERDEFENDANT,
v.
HARRIS FAMILY LIMITED PARTNERSHIP, AN IDAHO LIMITED PARTNERSHIP, DEFENDANT-COUNTERCLAIMANT.
HARRIS FAMILY LIMITED PARTNERSHIP, AN IDAHO LIMITED PARTNERSHIP, THIRD PARTY PLAINTIFF-APPELLANT,
v.
BRIGHTON INVESTMENT LLC, AN IDAHO LIMITED LIABILITY COMPANY THIRD PARTY DEFENDANT-RESPONDENT,
AND STATE OF IDAHO, BY AND THROUGH THE STATE BOARD OF EDUCATION ACTING AS BOARD OF TRUSTEES OF BOISE STATE UNIVERSITY, THIRD PARTY DEFENDANT.



Appeal from the District Court of the Fourth Judicial District of the State of Idaho, Ada County. Hon. Ronald J. Wilper, District Judge.

The opinion of the court was delivered by: Horton, Justice

2011 Opinion No. 36

Stephen Kenyon, Clerk

The district court orders dismissing the claims for breach of contract and breach of the implied duty of good faith and fair dealing and granting summary judgment on the unjust enrichment claim are affirmed.

Brighton Investments, LLC (Brighton) purchased real property from the Harris Family Limited Partnership (Harris). The parties' purchase and sale agreement contained restrictive covenants that ran with the land and limited the uses of the property. Several months later, Brighton conveyed a portion of the real property to Boise State University (BSU), thereby realizing a considerable profit. Brighton knew that BSU intended to swap it for property belonging to the Boise Independent School District (School District) and that the School District then intended to construct new junior high facilities thereon, in contravention of the restrictive covenants.

After the School District received title to the property, Harris and the School District stipulated to the School District's condemnation of the restrictive covenants, and the School District constructed the junior high school. Harris brought third party claims against Brighton, including breach of contract, breach of implied duty of good faith and fair dealing, and unjust enrichment. Pursuant to Idaho Rules of Civil Procedure 12(b)(6) and 12(g)(2), the district court granted Brighton's motion to dismiss the claims for breach of contract and breach of the implied duty of good faith and fair dealing. It later granted Brighton's motion for summary judgment on the unjust enrichment claim. Harris timely appealed. We affirm.

I. FACTUAL AND PROCEDURAL BACKGROUND

Harris owns hundreds of acres of real property in east Boise that are part of its comprehensive development, commonly known as the Harris Ranch project. On December 31, 2005, pursuant to a purchase and sale agreement, Harris sold Brighton approximately forty-four acres of land for $100,000 per acre. The parties also entered into and recorded a memorandum of agreement. The two documents contained virtually identical "post-closing obligations" (the Restrictive Covenants or the Covenants) that stated in relevant part that 1) the Restrictive Covenants were expressly intended to survive closing and "protect and enhance the value of the Property and adjacent properties;" 2) the property Harris retained and the property Brighton purchased were subject to existing governmental approvals; and 3) both parties would submit both initial and final development plans, consistent with nearby developments and existing governmental approvals, to one another for approval. The purchase and sale agreement also provided that in any action arising from a breach of the agreement, the prevailing party was entitled to costs and reasonable attorney fees.

Around the time of the Harris-Brighton transaction, BSU wished to acquire from the School District the property where the former East Junior High School was located in order to permit future development of an athletic complex. The School District and BSU developed a plan under which BSU would acquire land in the vicinity of the Harris Ranch project upon which a new junior high school would be constructed. BSU would then transfer that land to the School District in exchange for the former East Junior High campus. BSU and the School District identified a suitable twenty-acre parcel owned by Harris and began negotiations. Harris offered the parcel for approximately $5.0 million. However, Harris conditioned the sale on Boise City's approval of Harris' comprehensive development, apparently for the purpose of obtaining the School District's support of the Harris Ranch development. BSU and the School District could not guarantee the City's approval of the project, and ended negotiations with Harris in October 2006 because the School District was running out of time to complete construction of the new junior high school.

After the School District ended negotiations with Harris, its broker identified several other properties suitable for the junior high school, including the property Brighton had acquired from Harris. The School District and BSU approached Brighton about the availability of that property. Brighton agreed to work with the School District and BSU after it was assured that their negotiations with Harris were at a complete end. The parties entered into negotiations to convey to BSU 21.54 acres (the Property) of the forty-four acres Brighton had purchased from Harris. In a November 27, 2006 email, Brighton informed BSU and the School District that, pursuant to the Restrictive Covenants, "the [P]roperty was anticipated to be residential development . . . " and development plans would require Harris' approval. The School District attempted to gain that approval, but Harris rejected its efforts. In early May 2007, Brighton conveyed the Property to BSU. The Property was appraised at $6,100,000. BSU paid a purchase price of $3,500,000, and Brighton was credited with a charitable donation for the difference between the purchase price and the appraised value of the Property.

On May 14, 2007, the School District exercised its power of eminent domain to condemn the Restrictive Covenants, pursuant to I.C. § 7-701. On July 20, 2007, Harris filed a third party complaint against Brighton, alleging breach of contract and breach of the implied duty of good faith and fair dealing. In essence, Harris claimed that Brighton's conveyance to BSU "with the prior knowledge and intent" that the Property would eventually be used by the School District for a non-residential use was a breach of the Restrictive Covenants, and that Brighton was unjustly enriched when it enjoyed a significant profit on the sale to a public entity, thereby effectively avoiding the Restrictive Covenants. The purchase and sale agreement, the memorandum agreement, and the warranty deed conveying the Property from Harris to Brighton were attached as exhibits to Harris' third party complaint.

Harris and the School District subsequently stipulated that the School District's taking of the Restrictive Covenants was necessary to the School District's legal use of the Property. On July 26, 2007, the district court condemned the Covenants, stating that Harris "reserves and is not waiving any other rights or claims [Harris] has asserted . . . ." Harris and the School District later entered into a mutual release and settlement agreement that valued the Restrictive Covenants at $175,000. The School District paid Harris severance damages in that amount. On October 11, 2007, Brighton filed a motion to dismiss most of the counts in Harris' third party complaint, pursuant to I.R.C.P. 12(b)(6) and 12(g)(2). The district court dismissed Harris' claims for breach of contract and breach of the implied duty of good faith and fair dealing, stating that "knowledge of a likely breach in the future is not a breach that gives rise to a cause of action," and reasoning that the condemnation action had foreclosed all of Harris' rights to enforce the Restrictive Covenants. The court reasoned that since the purchase and sale agreement did not limit the third parties to whom Brighton could sell the Property and since the Covenants had been condemned and were thus no longer enforceable, Harris had failed to state claims upon which relief could be granted.

Harris filed an amended third party complaint on December 27, 2007, which included an additional claim against Brighton for unjust enrichment. This claim alleged that Harris bestowed a benefit on Brighton when it sold the Property to Brighton for a discounted purchase price because the Property was burdened by the Restrictive Covenants. Brighton filed a motion for summary judgment dismissing that claim on June 13, 2008. An affidavit in support of Harris' opposition to the motion contained an expert appraiser's estimate that the Restrictive Covenants were valued at $2,250,000. Harris claimed that Brighton was unjustly enriched either in that amount or by the increase in the Property's market value that arose between Brighton's purchase and sale. The district court dismissed Harris' unjust enrichment claim, reasoning that the record demonstrated that Harris sold the Property to Brighton for its market value, not at a discounted rate, and therefore Harris had not conferred any benefit upon Brighton.

Harris timely appealed the district court's dismissal of its claims for breach of contract and the implied covenant of good faith and fair dealing and the summary judgment order dismissing its unjust enrichment claim. Both parties seek an ...


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