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Gaylen Clayson v. Don Zebe

July 2, 2012

GAYLEN CLAYSON, PLAINTIFF-COUNTERDEFENDANT-RESPONDENT,
v.
DON ZEBE, RICK LAWSON, AND LAZE, LLC,
DEFENDANTS-COUNTERCLAIMANTS- APPELLANTS.



Appeal from the District Court of the Sixth Judicial District of the State of Idaho, Bannock County. Hon. Stephen S. Dunn, District Judge.

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

Stephen Kenyon, Clerk

2012 Opinion No. 107

The judgment of the district court is affirmed.

This appeal arises from Gaylen Clayson's attempt to purchase a restaurant and cheese factory in Thayne, Wyoming. Prior to making a formal offer on the property, Clayson was granted access to the property in order to begin operating the restaurant and refurbishing the factory. Clayson's effort to purchase the subject property ultimately failed, and Don Zebe (Don) and Rick Lawson (referred to individually as Don or Rick, collectively as Zebe) subsequently purchased the property. Clayson then filed a breach of contract action against Zebe, alleging the existence of both express and implied contracts entitling Clayson to compensation for the pre- purchase work Clayson had performed on the property. The district court partially granted Zebe's motion for summary judgment, holding that there was no express contract between the parties. After a bench trial, the district court determined that the parties' conduct created both implied-in-fact and implied-in-law contracts, which required Zebe to reimburse Clayson $97,310.94 for costs he incurred while working on the subject property.

Zebe appeals, arguing that the district court erred because Zebe neither requested Clayson's performance nor received any benefit as a result of Clayson's work on the property. Zebe asks this Court to vacate the judgment of the district court and remand the matter for entry of judgment in their favor. We affirm.

I. FACTUAL AND PROCEDURAL BACKGROUND

In 2007, Clayson entered into discussions to purchase the Star Valley Cheese Plant (Plant) in Thayne, Wyoming, from Morris Farinella. Prior to entering into any contract, Farinella gave Clayson permission to take over operation of the restaurant attached to the Plant. On July 1, 2008, Clayson began living at the Plant to manage the restaurant and supervise the cleaning and refurbishing of the cheese factory. According to Clayson, he worked ten to twelve hours per day, six days per week from July 1, 2008, until October 8, 2008. He hired and supervised workers that performed refurbishing tasks at the Plant, which included cleaning, plaster repair, painting, floor resurfacing, and removing unnecessary equipment. Around the end of July 2008, Clayson hired Dairy Systems Company, Inc., (Dairy Systems) to upgrade the electrical system at the Plant, for which Clayson paid Dairy Systems $50,000. Overall, Clayson claims he incurred approximately $150,000 in expenses to refurbish the Plant.

A mutual friend introduced Clayson to Don and Rick sometime in the summer of 2008. Don, a real estate agent, initially became involved in the transaction to help Clayson prepare a business plan to assist in obtaining financing. Rick is an accountant who performed the financial analysis included in the business plan. At some point, Don and Rick became interested in participating in owning and operating the Plant with Clayson.

On October 2, 2008, Clayson, Don, and Rick formed a Wyoming limited liability company known as SVC, LLC (SVC), with the expectation that the three would jointly own and operate the Plant. On October 8, 2008, Clayson called Rick and requested assistance meeting the restaurant payroll. The parties dispute the exact content of that conversation, but Clayson contends that Rick agreed to reimburse Clayson for the refurbishment expenses he incurred if Clayson would withdraw from the plan to own and operate the Plant. The same day, Clayson stopped working on the Plant and left the premises. After the conversation with Clayson, Rick had the SVC articles of incorporation amended to remove Clayson's name. Clayson testified that shortly after the phone call between himself and Rick, both Don and Rick confirmed that they would pay Clayson's proved refurbishment expenses once they obtained financing for the purchase.

Clayson entered into a purchase and sale agreement (Agreement) on October 17, 2008, in which he agreed to purchase the Plant for $800,000. Neither Don nor Rick was a party to the Agreement, but Clayson assigned his interest in the Agreement to SVC on November 4, 2008. The assignment was made by way of an addendum to the Agreement and is silent as to consideration.

After Clayson assigned the Agreement to SVC, Don made several statements about his intention to pay Clayson, including the following: On January 14, 2009, Don emailed the real estate agent handling the transaction for the Plant and stated he and Rick planned to "absorb" the cost of Clayson's refurbishments, including electrical work. In order to obtain their own financing, Don and Rick also submitted a business plan to their lender, which falsely represented that SVC had already paid Dairy Systems for its work. Additionally, Don sent three emails to Dairy Systems in which he indicated that he intended to pay Dairy Systems for the work it had done at Clayson's request. SVC eventually did purchase the Plant, closing the transaction on February 24, 2009.

Clayson filed his initial complaint on June 9, 2009, alleging breach of contract and, alternatively, unjust enrichment, along with several unrelated claims. The district court granted partial summary judgment in favor of Zebe, dismissing all of Clayson's claims except the claim for reimbursement under either an implied-in-fact or implied-in-law contract. The district court dismissed Clayson's claim of breach of an express contract, finding that there was no evidence that the parties had achieved a meeting of the minds as to all terms of the contract. After a court trial, the district court found that both implied-in-law and implied-in-fact contracts existed and awarded Clayson damages totaling $97,310.24. Zebe timely appealed.

II. STANDARD OF REVIEW

Both quantum meruit (implied-in-fact contracts) and unjust enrichment (implied-in-law contracts) are "measures of equitable recovery." Farrell v. Whiteman (Farrell I), 146 Idaho 604, 612, 200 P.3d 1153, 1161 (2009) (citing Great Plains Equip., Inc. v. Nw. Pipeline Corp., 132 Idaho 754, 767, 979 P.2d 627, 640 (1999)). "The application of equitable remedies is a question of fact because it requires a balancing of the parties' equities." Farrell v. Whiteman (Farrell II), 152 Idaho 190, ___, 268 P.3d 458, 462 (2012) (citing O'Connor v. Harger Const., Inc., 145 Idaho 904, 909, 188 P.3d 846, 851 (2008)). "In all actions tried upon the facts without a jury . . . , the court shall find the facts specially and state separately its conclusions of law thereon . . . ." I.R.C.P. 52(a). When reviewing a district court's decision after a trial without a jury, this Court's review of the decision:

[I]s limited to ascertaining whether the evidence supports the findings of fact, and whether the findings of fact support the conclusions of law. A district court's findings of fact in a bench trial will be liberally construed on appeal in favor of the judgment entered, in view of the district court's role as trier of fact. It is the province of the district judge acting as trier of fact to weigh conflicting evidence and testimony and to judge the credibility of the witnesses. We will not substitute our view of the facts for the view of the district court. Instead, where findings of fact are based on substantial evidence, even if the evidence is conflicting, those findings will not be overturned on appeal. We exercise free review over the lower court's conclusions of law, however, to determine whether the court correctly stated the applicable law, and whether the legal conclusions are sustained by the facts found.

Fox v. Mountain W. Elec., Inc., 137 Idaho 703, 706-07, 52 P.3d 848, 851-52 (2002) (quoting Nampa & Meridian Irr. Dist. v. Wash. Fed. Sav., 135 Idaho 518, 521, 20 P.3d 702, 705 (2001)). III. ANALYSIS

A. The district court's finding of an implied-in-fact contract is supported by substantial and competent evidence.

Zebe makes two primary arguments in support of the contention that the district court erred. First, Zebe argues that the district court misapplied the law in finding an implied-in-fact contract because Clayson did not perform the refurbishment work at Zebe's request. The second argument is that the court erred in finding that the parties' conduct implied the existence of a contract because there was no evidence that the parties had a common understanding of the agreement.

An implied-in-fact contract exists where "there is no express agreement[,] but the conduct of the parties implies an agreement from which an obligation in contract exists." Fox, 137 Idaho at 707, 52 P.3d at 852 (quoting Cont'l Forest Prods., Inc. v. Chandler Supp. Co., 95 Idaho 739, 743, 518 P.2d 1201, 1205 (1974)). We have held that "[a]n implied in fact contract is defined as one where the terms and existence of the contract are manifested by the conduct of the parties with the request of one party and the performance by the other often being inferred from the circumstances attending the performance." Id. at 708, 52 P.3d at 853 (citing Farnworth v. Femling, 125 Idaho 283, 287, 869 P.2d 1378, 1382 (1994)). Therefore, we have stated the general rule as follows: "where the conduct of the parties allows the dual inferences that one performed at the other's request and that the requesting party promised payment, then the court may find a contract implied in fact." Gray v. Tri-Way Const. Servs., Inc., 147 Idaho 378, 387, 210 P.3d 63, 72 (2009) (quoting Homes by Bell-Hi, Inc. v. Wood, 110 Idaho 319, 321, 715 P.2d 989, 991 (1986)).

1. The district court's finding did not require proof that Clayson performed the refurbishment work at Zebe's request.

As the district court noted below, Zebe's argument that no implied-in-fact contract can exist because Clayson did not perform the refurbishment at Zebe's request "misses the mark" because that is not the basis of the district court's decision. The district court expressly stated that it did not find an implied-in-fact contract based upon Zebe's request that Clayson refurbish the Plant. Rather, the district court found that Zebe's conduct and statements created "an implied agreement to pay Clayson's refurbishment expenses when he transferred operation of the Plant and restaurant to [Zebe] on October 8, 2008." Thus, this Court must determine whether there is substantial and competent evidence to support the district court's finding that the parties' conduct gives rise to the inference that Clayson relinquished involvement in the operation of the restaurant and Plant and that Zebe promised to pay Clayson's expenses.*fn1 We hold that the district court's finding of an implied-in-fact contract based upon this conduct is not in error because it is supported by substantial and competent, although conflicting, evidence.

Clayson testified that on October 8, 2008, Rick agreed to reimburse Clayson for his expenses, but would only do so if Clayson relinquished control of the property to Rick and Don:

Q. [cross-examination] Right. So you agree with me, October 8, 2008, you called Rick Lawson and told him that you did not ...


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