Cheney v. Jemmett , 107 Idaho 829 ( 1984 )

DONALDSON, Chief Justice.

On February 10, 1977, plaintiff, Ernest Cheney, and his then-wife, Janet Cheney, entered into a real estate purchase agreement with the defendants, Blaine and Nita Jemmett (the Cheney/Jemmett agreement). By the terms of that' agreement, the plaintiff and his wife agreed to sell certain real property situated in Gem County, Idaho, to the defendants. The agreement stated a purchase price of $32,500, with $5,000 being paid by the first of March, 1977, and the balance of $27,500 plus interest at 9V2% per annum, to be paid through an escrow at the Treasure Valley Bank, McCall, Idaho. The principal balance had been reduced to the sum of $22,745.27 at the time of trial.

This agreement contained a term which specified that “[t]he Purchasers agree that they will not assign this agreement, nor any interest herein or in the property hereby agreed to be sold and purchased, without first obtaining the written consent of Sellers.” The contract further contained a default clause which specified what would happen in the event the purchasers defaulted on any of the terms of the agreement.¹

Sometime later, the defendants contacted an Emmett real estate broker to sell the property involved in the Cheney/Jemmett agreement. The restriction on assignment was noted, and the plaintiff was contacted to obtain his consent. Plaintiff refused to consent to the proposed assignment. Thereafter, the real estate broker, his salesman and a prospective purchaser, Douglas Honn, consulted an Idaho attorney about the assignment problem. The attorney advised these parties to enter into a separate rental and sales agreement.

The defendants proceeded to set up a “Real Estate Agreement” (the Jemmett/Honn agreement) dated June 24,1980, accompanied by a separate and independent escrow agreement. Pursuant to this agreement, the defendants agreed to rent the property to the Honns whereupon,

“said agreement to rent continues until such time as the Jemmett-Cheney escrow in McCall, Idaho, is paid in full, whereupon, Seller does sell to Purchaser and Purchaser does purchase from Seller all of the real property aijd improvements thereon, subject to the terms of this agreement set out herein below.”

Pursuant to the Jemmett/Honn agreement, the payments made by the Honns to the defendants, were remitted by the defendants to the escrow at the Treasure Valley Bank, McCall, Idaho, to be credited to the original Cheney/Jemmett contract. The Honns were entitled to possession of the premises after June 24, 1980.

During the course of closing the final transaction between the Jemmetts and the Honns, the real estate broker discovered an encumbrance held by Treasure Valley Bank, McCall, Idaho, against the property. Plaintiff had assigned his interest in the Cheney/Jemmett contract to the bank in March of 1981, to secure a loan made by the bank to the plaintiff. The assignment was supported by a U.C.C. financing statement filed with the Gem County recorder describing the land in question. The real estate broker contacted plaintiff about the encumbrance and requested plaintiff to obtain a release from the bank removing this encumbrance. Plaintiff consented to deliver a satisfaction of the encumbrance to the real estate broker for the transaction between the Jemmetts and the Honns.

On March 17, 1981, and again on May 5, 1981, plaintiff sent the defendants written notices stating his intention to declare default, based on the alleged assignment the defendants made to the Honns. Twice, defendants claimed no such assignment had occurred. In the second notice, plaintiff advised defendants that unless they corrected their default, the entire purchase price then remaining unpaid, would be immediately due and payable. The defendants did not take any steps to cure the alleged default, but rather continued to make payments on the Cheney/Jemmett contract. Plaintiff (and Treasure Valley Bank, McCall, Idaho, by virtue of plaintiffs assignment of the Cheney/Jemmett contract to the bank) accepted all payments including those made after the first Notice of Intention to Declare Default sent on March 17, 1981.

The plaintiff brought an action against the defendants to compel the defendants to pay the balance due and owing on the contract, claiming that defendants were in default of the non-assignment clause. The case went to trial before the court, and at the conclusion of plaintiffs case, the defendants moved for an involuntary dismissal pursuant to I.R.C.P. 41(b). The record reveals that the district judge ruled from the bench, granting defendant’s motion for dismissal and directing both parties to submit proposed findings of fact and conclusions of law.

The plaintiff first contends that the district court committed reversible error by adopting in their entirety, the “enormously sweeping and self-serving” findings of fact and conclusions of law submitted by the defendants. Plaintiff contends that the judge’s conduct in this regard amounted to a flagrant disregard of I.R.C.P. 52(a) and the guidelines established by this Court.

Rule 52(a) states that “[i]n all actions tried upon the facts without a jury or with an advisory jury, the court shall find the facts specially and state separately its conclusions of law thereon and direct the entry of the appropriate judgment.” The Court of Appeals in Pline v. Asgrow Seed Co., 102 Idaho 827, 833, 642 P.2d 64, 70 (Ct.App.1982), aptly summarized our position regarding this rule.

“To adopt verbatim a party’s proposed findings of fact and conclusions of law is not the best practice, even if both sides have submitted proposals. However, it is not reversible error where, as here, those findings and conclusions essential to the decision reached are sufficient and are supported by the evidence.”

See also Marshall Bros., Inc. v. Geisler, 99 Idaho 734, 588 P.2d 933 (1978).

The findings of fact and conclusions of law adopted by the trial court, contained therein the basis for the trial court’s decision to grant defendant’s motion to dismiss: (1) that the Jemmett/Honn agreement did not violate the anti-assignment clause of the Cheney/Jemmett contract; and, (2) that the plaintiff had unreasonably withheld his consent in this matter. However, the adopted findings and conclusions also contained findings and conclusions which were not addressed by the trial court in its oral ruling. While they may have been somewhat overbroad, we do not believe the trial court committed reversible error in adopting the findings and conclusions proposed by the defendants.² Based on the views expressed infra, we affirm the trial court on the second basis stated by the trial court in its oral ruling: that the plaintiff unreasonably withheld his consent in this matter. The adopted findings and conclusions contain those findings and conclusions which are essential to the trial court’s ruling on this issue. We further believe that the adopted findings and conclusions are sufficient and supported by the evidence. Accordingly, we do not reverse this case for a re-drafting of findings and conclusions.

The plaintiff next asserts that the district court erred in holding that the non-assignment clause and the Cheney/Jemmett agreement should not be enforced pursuant to their terms.³ The district court’s conclusions of law 1 and 2 state as follows:

"1. That the June 24, 1980 agreement between Defendants and Douglas and Barbara Honn did not constitute an assignment within the meaning of the language in the February 10, 1977 agreement restricting an assignment.

“2. That the Plaintiff, Cheney, unreasonably and arbitrarily withheld his consent to the original request for consent to assignment.”

We do not reach the issue of whether the Jemmett/Honn agreement constituted an assignment within the meaning of the Cheney/Jemmett agreement because, in any event, we are persuaded that plaintiff unreasonably and arbitrarily withheld his consent to the request for assignment.

It must first be noted that “[p]rovisions in bilateral contracts which forbid or restrict assignment of the contract without the consent of the obligor have generally been upheld as valid and enforceable when called into question, although the meaning of such terms becomes a matter of interpretation.” 6 Am.Jur.2d Assignments § 22 (1963); see Annot., 37 A.L.R.2d 1251, 1253 (1954); Masterson v. Sine, 68 Cal.2d 222, 65 Cal.Rptr. 545, 436 P.2d 561 (1968). While this is generally true, it must be noted that the non-assignment clause in the present case was not absolute in its terms. The purchasers agreed not to assign “without first obtaining the written consent of Sellers.” In our view, the interpretation of a non-assignment clause conditioned on the consent of the seller as in the present case, necessarily implies that the seller will act reasonably and in good faith in exercising his right of approval. Cf. Mitsui & Co. v. Puerto Rico Water Resources Authority, 528 F.Supp. 768 (D.P.R. 1981) (consent cannot be arbitrarily withheld by party imposing restriction). The Utah Supreme Court cogently expressed our views in this regard.

“Where a contract provides that the matter of approval of performance is reserved to a party, he must ‘act fairly and in good faith in exercising that right. He has no right to withhold arbitrarily his approval; there must be a reasonable justification for doing so.’ ”

Prince v. Elm Investment Co., 649 P.2d 820, 825 (Utah 1982); (quoting William G. Vandever & Co. v. Black, 645 P.2d 637, 639 (Utah 1982)); see also W.p. Harlin Construction Co. v. Utah State Road Commission, 19 Utah 2d 364, 431 P.2d 792 (1967). Additionally, the Supreme Court of Montana has stated that “[w]hen a matter in a contract is left to the determination of one party alone, that party’s determination is conclusive if he acts in good faith.” Brown v. First Federal Savings and Loan Association, 154 Mont. 79, 460 P.2d 97, 100 (1969) (emphasis added); cf. Meredith Corp. v. Design & Lithography Center, Inc., 101 Idaho 391, 614 P.2d 414 (1980) (satisfaction requirement determined by reasonable person standard).

In Funk v. Funk, 102 Idaho 521, 633 P.2d 586 (1981), we examined the right of a lessee to sublease without the consent of the lessor when the contract between the parties conditioned the right to sublease on obtaining the lessor’s consent. Therein, we concluded that a lessor may not unreasonably withhold his consent to a prospective sublease.

“A landlord may and should be concerned about the personal qualities of a proposed subtenant. A landlord should be able to reject a proposed subtenant when such rejection reflects a concern for the legitimate interest of the landlord, such as assurances of rent receipt, proper care of the property and in many cases the use of the property by the subtenant in a manner reasonably consistent with the usage of the original lessee. Such concerns by the landlord should result in the upholding of a withholding of consent by a landlord. However, no desirable public policy is served by upholding a landlord’s arbitrary refusal of consent merely because of whim or caprice or where, as here, it is apparent that the refusal to consent was withheld for purely financial reasons and that the landlord wanted the lessees to enter into an entirely new lease agreement with substantial increased financial benefits to the landlord. If the lessor is allowed to arbitrarily refuse consent to a sublease for what is in effect no reason at all, such would virtually nullify the right of a lessee to sublet.”

102 Idaho at 524, 633 P.2d at 589.

We believe the principles and reasoning enunciated in Funk are equally applicable to the case before us today. Accordingly, we hold that when a contract grants the purchaser the right to assign his interest in the contract, or in the property in issue, conditioned upon obtaining the consent of the seller, the seller must act reasonably and in good faith in withholding his consent to a proposed assignment. Our holding today applies only to those cases where the contract specifically conditions the proposed assignment on obtaining the seller’s consent. As to those contracts which absolutely prohibit the right of assignment, we express no opinion.

The record herein discloses that the plaintiff had no objection to Honn’s credit, Honn’s reputation, or towards Honn personally. In the circumstances of the present case, we believe the plaintiff’s refusal was not given in good faith and was totally unreasonable. Thus, we affirm the order of the district court dismissing plaintiff’s claims pursuant to I.R.C.P. 41(b).

The last issue before us concerns the allowance of attorney fees in this case. The contract between Cheney and the Jemmetts provided that “[i]n the event dispute arises between the parties hereto for interpretation or enforcement of this agreement, the prevailing party shall be entitled to reasonable attorney’s fees and costs.” On the basis of this provision, the trial court awarded attorney fees and costs to the Jemmetts.

Jemmetts were the prevailing parties at the trial level, and therefore were properly awarded attorney’s fees and costs at the trial level. In view of our holding today, the Jemmetts are the prevailing party on appeal, and accordingly are entitled to reasonable attorney fees and costs on appeal.

The decision of the district court is affirmed.

Costs and attorney fees on appeal to respondents.

SHEPARD, BISTLINE and HUNTLEY, JJ., concur.

1 . In pertinent part, the default provision reads as follows:

"In the event Purchasers shall default in any of the terms of this agreement, ... Sellers may, at their option, declare this agreement and all rights of Purchasers herein forfeited, and thereupon Sellers shall be released from all obligations to convey the property herein described, and this agreement shall terminate and end, and said Purchasers shall surrender said property and all improvements thereon to Sellers as liquidated damages for the use of said property; but in the event Purchasers shall correct such default within the time specified, no such forfeiture shall take place.

“Sellers may, at their option, in the event of default as above prescribed, declare the whole sum due; or upon violation of the provisions of this agreement, enforce the provisions hereof for specific performance, in which event the Purchasers agree to pay reasonable attorney’s fees therefor. No provision of this agreement shall be held to waive any remedies or rights of the Sellers available at law for damages or otherwise.”

2 . This Court has repeatedly stated that a trial judge should exercise independent judgment in preparing findings and conclusions based on the evidence before the court. Compton v. Gilmore, 98 Idaho 190, 560 P.2d 861 (1977); Matheson v. Harris, 98 Idaho 758, 572 P.2d 861 (1977).

As we stated in Marshall Bros., Inc. v. Geisler, supra, at 737 n. 1, 588 P.2d at 936 n. 1,

“[tjhe best procedure to follow if assistance of counsel is sought in the drafting of findings of fact and conclusions of law is, as noted in Compton, [Compton v. Gilmore, 98 Idaho 190, 560 P.2d 861 (1977)] to request proposed findings and conclusions from both sides and to utilize these in the drafting of the court’s findings and conclusions.”

3 . The plaintiff-appellant urges this Court to construe the non-assignment clause in the Cheney/ Jemmett agreement, coupled with the provisions for the acceleration of the debt contained in the default clause, as a due-on-sale clause. We reject plaintiff's argument because we do not read these provisions as constituting a due-on-sale clause.