The full case caption appears at the
end of this opinion. WALTERS, Justice This is an appeal from a decision of the district court, on remand, grantingspecific performance of a real estate purchase and sale agreement. In Kessler v. TortoiseDevel., Inc., 130 Idaho 105, 937 P.2d 417 (1997)(Tortoise I), this Court determined thatthe purchase and sale agreement was ambiguous as to the availability of specificperformance and vacated a summary judgment granted in favor of the seller. After acourt trial on remand, the district court determined that specific performance wasavailable. The court found that it would be inequitable to deny specific performance inthis case, but that it would be similarly inequitable to grant specific performance withoutthe imposition of certain conditions. Therefore, the court fashioned an equitable remedybased upon the unique circumstances of the case. We affirm. BACKGROUND AND PRIOR PROCEEDINGS In June 1991, Richard Kessler and Gerald Kingen decided to build a multi-screentheater and restaurant complex in Ketchum, Idaho. Kessler had operated a single screentheater in Ketchum for twenty years and had been planning to build a multi-screencomplex since 1986 in order to protect and expand his position in the local market.Kingen had been developing and operating restaurants in the Northwest for a numberyears. The two initially planned that Kingen would develop the project, which would becondominiumized with the theater unit sold back to Kessler and the restaurant unitretained by Kingen. In June 1991, Kingen and Kessler purchased a parcel of real property in Ketchumas the site for their planned complex. The property is located in downtown Ketchumdirectly across the street from Kessler’s single screen theater.In the spring of 1992, Kingen experienced economic problems and informedKessler that he could not continue as the developer for their project. Kingen indicated,however, that he was still interested in operating a restaurant in the complex. GeoffBushell, Kessler’s friend and a local real estate broker, agreed to replace Kingen as thedeveloper of the project. Bushell formed Tortoise Development, Inc. (Tortoise) in thefall of 1992 to develop the project. Tortoise was to obtain financing for construction,acquire title to the property previously purchased by Kessler and Kingen, construct thebuilding, condominiumize the building into two units, sell the theater unit to Kessler, andlease the restaurant to Kingen under a long term lease. Tortoise entered into a construction contract with Avery Construction, Inc., onApril 22, 1994, with a “guaranteed maximum price” of $974,623. Although Tortoise hadreceived only a conditional commitment for construction financing from Calumet FederalSavings, Avery began construction of the project on May 19, 1994. Tortoise wasultimately unable to secure a final commitment for financing from Calumet and could notpay Avery. Consequently, Avery pulled off the project on July 20, 1994, and filedconstruction liens totaling $358,299. Bushell and Kessler called Kingen the next day. Kingen traveled to Ketchum toreview the project and based upon Avery’s representation that the project could becompleted for $974,623 agreed to reassume responsibility for the project. Kingenpurchased Tortoise Development from Bushell. On the strength of Kingen’s financialstatement, Tortoise was able to secure a final commitment on the Calumet Savings loan.With this financing, Avery proceeded with construction of the project. In July 1994, before Avery pulled off the project, Kessler had executed a purchaseand sale agreement with Bushell, on behalf of Tortoise, for the purchase of the theaterunit. Bushell prepared the agreement on the standard form that he regularly used as a realestate broker. The agreement provided that Kessler would purchase the theater unit ofthe complex for $725,000 upon completion of the project. Paragraph two recited thatKessler deposited $140,000 cash as earnest money to be held by Tortoise. The remainderof the purchase price was to come from an SBA guaranteed loan, which wasconditionally approved in November 1993. The closing date was stated to be no laterthan December 15, 1994. At the time this agreement was executed, Tortoise had not yetacquired any interest in the underlying real property where the theater complex was beingbuilt. The underlying property was still owned by Kessler and Kingen. On August 23, 1994, after Kingen had purchased Tortoise, Kessler and Kingenexecuted a purchase and sale agreement with Tortoise for transfer to Tortoise of theunderlying real property. In consideration of his interest in the property, Kessler receiveda credit to be applied toward the purchase of the theater unit in the completed project.Kessler and Tortoise also executed an addendum to the theater purchase agreement. Theaddendum acknowledged that there was no cash down-payment as indicated by theoriginal agreement. Instead, Kessler was to receive a credit toward the purchase of thetheater in exchange for his interest in the underlying property as indicated in the purchaseagreement for the underlying property. The closing date was changed to February 15,1995, with an option to extend the closing date until May 15, 1995. The project proceeded. In December 1994, Kessler was permitted to begincustomizing the theater unit for his operation. On March 3, 1995, Tortoise obtained theCertificate of Occupancy necessary for Kessler to commence his theater operations.Tortoise deposited into escrow a warranty deed for the theater unit in preparation for thefinal closing then set for April 14, 1995. Kessler and Tortoise also executed a “MotionPicture Premises Lease” to run from March 3 until the April 14 closing. When Tortoise deposited the deed in escrow, the title to the property wasmarketable. However, beginning on March 9, 1995, a series of liens was filed against theproject. Despite efforts to bond around the liens, Tortoise could not obtain marketabletitle for the scheduled closing. Kessler’s financing had been only conditionally approved.When the bank handling the SBA guaranteed loan learned of the liens, it reinstatedseveral previously waived conditions and informed Kessler that it would not extend theloan beyond the April 14 closing date. Consequently, as a result of the liens, the closingdid not occur. Tortoise was ultimately able to obtain releases for the liens. But, rather than the$974,623 “guaranteed” by Avery, Tortoise was forced to pay $1,305,103 to construct thebuilding. On September 15, 1995, Kessler filed this action for specific performance of theagreement with Tortoise. Tortoise counterclaimed to remove Kessler from the theaterunit that he was occupying under the Motion Picture Premises Lease. The district courtdetermined that specific performance was not an available remedy under the purchaseand sale agreement and granted summary judgment in favor of Tortoise. Kesslerappealed. In Tortoise I, this Court determined that the purchase agreement wasambiguous with regard to the availability of specific performance. The summaryjudgment was vacated, and the case was remanded to the district court for furtherproceedings. On remand, the district court determined that none of the three potentiallyapplicable provisions in the purchase and sale agreement controlled under thecircumstances, and therefore the agreement did not limit Kessler’s right to seek specificperformance. The district court found that the property was uniquely suited for theoperation of a four-plex theater and that it would be inequitable not to grant specificperformance. The court also noted that Kingen had come in and saved the project whenKessler was unable to do so. Kingen took over Tortoise and placed Kessler in the theateron time. To do this, Kingen was forced to invest substantially more than the contractprice to construct the building. In the rush to gain release of the liens for closing,Tortoise had to pay some liens of questionable validity. The court found that it would beinequitable to award specific performance without requiring Kessler to share theincreased construction costs. Consequently, the district court ordered that Kessler wasentitled to specific performance, but only if he was willing to share the construction costs.Tortoise appealed from the court’s order of specific performance, and Kesslercross-appealed from the order requiring him to share the construction costs. Kessler alsochallenges the court’s dismissal of his cause of action for damages. DISCUSSION I. AVAILABILITY OF SPECIFIC PERFORMANCE Tortoise argues that the district court improperly granted specific performancebecause: A) the purchase agreement limited Kessler’s remedies to the return of hisearnest money under these circumstances, and B) Kessler was not ready, willing, and ableto perform the purchase agreement by the closing date. We disagree. A. The purchase agreement The purchase agreement contains three potentially applicable provisions regardingthe remedies available upon breach: the Earnest Money provision, the Default provision,and the Title Insurance Provision.
[FOOTNOTE 1] This Court addressed these provisions in Tortoise I: [O]ur reading of the default provision, the earnest money provision, andthe title insurance provision leads us to the conclusion that the purchaseagreement is reasonably subject to at least three reasonable and conflictinginterpretations concerning the remedy that is available to Kessler in thecircumstances presented here. . . . Because the purchase agreement isambiguous, its interpretation presents a question fact concerning which ofthe three provisions controls. Id. at 108, 937 P.2d at 420. This Court reversed the summary judgment granted in favorof Tortoise and remanded the case to the district court to determine which of the purchaseagreement’s provisions applied. Having determined that the agreement is ambiguousregarding the remedies available to Kessler upon default, the interpretation of theagreement is a question of fact to be determined by the district court. Doyle v. Ortega,125 Idaho 458, 461, 872 P.2d 721, 724 (1994); Bondy v. Levy, 121 Idaho 993, 829 P.2d1342 (1992). We must now defer to the findings of the district court if they are supportedby substantial and competent evidence. Conley v. Whittlesey, 133 Idaho 265, 985 P.2d1127 (1999). On remand, the district court determined that none of the three provisions appliedto the circumstances of this case and held that the purchase agreement did not preventKessler from seeking specific performance. This determination was based substantiallyupon the court’s finding that no cash earnest money was deposited by Kessler. Sincethere was no earnest money deposited, the court determined that neither the EarnestMoney provision nor the Title Insurance provision, both of which called for the return ofearnest money, were applicable. The court also found the default provision inapplicablebecause that provision deals solely with Tortoise’s remedies.Tortoise agrees that the Earnest Money provision and the Default provision do notapply to the circumstances of this case.
[FOOTNOTE 2] Tortoise argues that the district court should have found that Kessler was limited to the return of his earnest money under the Title Insurance provision, which provides: It is agreed that if the title of said premises is not marketable, or cannot bemade so within thirty (30) days after notice containing a written statementof defects is delivered to the Seller or if the Seller, having approved saidsale fails to consummate the same as herein agreed, the earnest moneyshall be returned to the Buyer and Seller shall pay for the cost of titleinsurance, escrow and legal fees if any. Tortoise contends that this provision is clear, unambiguous, and the only provision in theagreement specifically applicable to a failure of marketable title. Therefore, Tortoiseargues that the district court erred by admitting extrinsic evidence to contradict the clearmeaning of the Title Insurance provision. We do not agree that the purchase agreement clearly and unambiguously limitsKessler’s right to specific performance under these circumstances. Admittedly, thelanguage of the Title Insurance provision appears unambiguous when viewed in isolation.The ambiguities become apparent only when the Title Insurance provision is viewed inthe context of the whole agreement as amended, and the facts of this case as developedon remand.
[FOOTNOTE 3] The Title Insurance provision provides that “the earnest money shall be returned to the Buyer.” Yet it is clear from the amended purchase agreement as well asthe evidence introduced following remand that no cash earnest money was deposited, andthe parties did not intend that cash would be deposited. Kessler’s earnest money wasrepresented by his interest in the underlying property. Thus, it is not clear from theagreement what if anything the parties intended to be returned to Kessler under thisprovision. It is not clear that the parties intended, through this provision, to restrictKessler’s remedy of specific performance should Tortoise decide that it would notperform the agreement. Tortoise does not dispute the finding that there was no cash earnest moneydeposited. Instead, Tortoise argues that Kessler did contribute cash towards the purchaseof the underlying property and for some improvements to the property. Kessler receiveda credit for this contribution in exchange for his interest in the property, and, according toTortoise, he chose to treat this contribution as cash earnest money. Consequently, Tortoise argues that under the terms of the purchase agreement Kessler is only entitled tothe cash equivalent of this investment. We agree that this is a reasonable interpretation of the amended purchaseagreement, but it is certainly not the only reasonable interpretation. We hold that there issubstantial and competent evidence to support the district court’s determination onremand that none of the three potentially applicable provisions of the agreement wereapplicable and that the purchase agreement did not limit Kessler’s right to specificperformance under these circumstances. B. Kessler’s ability to perform the agreement Tortoise argues that the district court erred in granting specific performancebecause Kessler was not ready, willing, and able to close on April 14, 1995. Wedisagree. Ordinarily, where time is of the essence of a contract for sale of real estate, abuyer cannot enforce the contract without tendering payment within the time andaccording to the contract. Machold v. Farnan, 14 Idaho 258, 94 P. 170 (1908).However, a purchaser of real property is not required to tender payment where such atender would be futile. See Ford v. Lord, 99 Idaho 580, 586 P.2d 270 (1978);Esplendido Apartments v. Olsson, 697 P.2d 1105 (Ariz. App. 1984). In this case,Tortoise informed Kessler prior to the date scheduled for closing, that it could notperform. We do not reach the question of whether Kessler would have been able toperform in this case because tender of the purchase price would have been futile. Thedistrict court did not err by granting specific performance. II. DISTRICT COURT’S AUTHORITY TO CONDITIONALLY DECREE SPECIFIC PERFORMANCE On cross-appeal, Kessler argues that the district court erred by reforming thecontract to increase the purchase price. This argument mischaracterizes the districtcourt’s holding-the court did not reform the contract. The court simply found that itwould be inequitable to grant Kessler the remedy of specific performance unless he waswilling to share the unexpected costs of constructing the project. The court also requiredthe dismissal of Kessler’s claims for damages in addition to specific performance. Inother words, Kessler was given the choice of accepting conditional performance or ofpursuing his remedies at law. The question in this case is whether the district court hadthe authority to impose those conditions upon its decree of specific performance.There is no legal right to specific performance. Suchan v. Rutherford, 90 Idaho288, 410 P.2d 434 (1966). Specific performance is an extraordinary remedy that canprovide relief when legal remedies are inadequate. Hancock v. Dusenberry, 110 Idaho147, 152, 715 P.2d 360, 365 (Ct. App. 1986)(citing J. CALAMARI & J. PERILLO,CONTRACTS � 16-1 (2d ed. 1977)). The inadequacy of remedies at law is presumed inan action for breach of a real estate purchase and sale agreement due to the perceiveduniqueness of land. Perron v. Hale, 108 Idaho 578, 701 P.2d 198 (1985). But, specificperformance is an equitable remedy and should not be granted when it would be unjust,oppressive, or unconscionable. Suchan, supra. When seeking the remedy of specificperformance: [a party] comes into a court of conscience asking for a remedy beyond theletter of his strict legal right. . . . To come within the equitable rule hemust stand before the court prepared to meet its scrutiny, relying upon thefairness and equitable character of the contract. This must not only be hisown position, but he must also show that it is not unjust or oppressive tothe defendant to compel him to perform specifically. Id., 90 Idaho at 302, 410 P.2d at 442-43. The decision to grant specific performance is amatter within the district court’s discretion. Suchan (citing Bedal v. Johnson, 37 Idaho359, 218 P. 641 (1923)). When making its decision the court must balance the equitiesbetween the parties to determine whether specific performance is appropriate. Id.;Barnard & Son, Inc. v. Atkins, 109 Idaho 466, 708 P.2d 871 (1985). Specific performance should be granted under terms and conditions reflecting theequities of the case. A decree of specific performance should be equitable to both the plaintiffand the defendant, and a court of equity, being a court of conscience, iscapable of rendering a conditional decree in an action for specificperformance, because it can insist that if a party, either plaintiff ordefendant, seeks the assistance of such a court, he must do what goodconscience demands in the particular case. 71 Am. Jur. 2d. Specific Performance � 222 (1973). In circumstances where an order for specific performance would operateto benefit the petitioner inequitably and unconscionably, a court of equityhas discretion to refuse to order specific performance or where possible tocondition an order for specific performance so as to account for thepetitioner’s inequitable conduct.Boyd v. Head, 92 Idaho 389, 393, 443 P.2d 473, 477 (1968). This Court has also statedthat “once the equitable jurisdiction of the court has attached, the court should retainjurisdiction to resolve all portions of the dispute between the parties and render equity toall parties without regard to the technical niceties of pleading and procedure.” Barnard &Son, Inc. v. Akins, supra. We hold that the district court had the discretion to enter a conditional decree of specific performance in order to properly balance the equities of thecase. We do not believe that the court abused its discretion in this case. The districtcourt made the following findings in this case: The Court finds that the piece of property in question in this case is”unique” as the term is applied to the law of specific performance. Theproperty is located in a commercial area and the property has beenconstructed to host a four-plex theatre. Additionally, Kessler has operateda theatre in this specific area of Ketchum for 20 years and testified it is theperfect location for a theatre. The public is familiar with the area and theyhave developed a custom of coming to this particular area to view movies.The property is located in an area of Ketchum which provides substantialparking for customers. The property is one of a few areas in Ketchumsuitable for the development of a four-plex theatre. . . . Mr. Kessler has a 20 year history of operating a theater in the Ketchumarea. His hopes and dreams are placed in this project. Mr. Kessler hasdone a lot of footwork and put a lot of thought into this project. He hasalso invested $140,000.00 in real property. Mr. Kessler entered into thePurchase and Sale Agreement before the construction financing was inplace for the project. When the project began to fail, Kessler did not havethe personal financing to rescue the project. Kessler also refused to payadditional rent when the project went over budget, thus shifting the entireburden of saving this project to Kingen. In August of 1994, Mr. Kingen saved this project. “But for” Kingen, thisproject would have been lost. Kingen has invested $1,760,000.00 or theequivalent thereof to finish this project. Additionally, Kingen placedKessler in the theater in a timely manner. The court also noted that there was some question regarding the responsibility for theliens that prevented the closing and caused the extra construction expenses. Kingen paidthe liens, but in the rush to close and place Kessler in the theater unit some questionableliens may have been inadequately defended. The court stated “[i]t is this Court’s belief,that not all of these liens may have been well founded. We will never know the answerto this question.” Based upon these findings, the court determined that it would beinequitable either to deny Kessler specific performance entirely or to grant specificperformance without a contribution by Kessler toward the unexpected additional costs ofconstruction and the dismissal of Kessler’s damage claims. Therefore, the court held thatKessler was entitled to specific performance only upon payment of a share of theadditional costs and dismissal of Kessler’s damage claims. Under the uniquecircumstances of this case, we hold that the court did not abuse its discretion. III. ATTORNEY FEES ON APPEAL Kessler requests attorney fees under paragraph 17 of the purchase and saleagreement signed on August 23, 1994, for the sale of the underlying property fromKessler and Kingen to Tortoise. This case, however, involved Kessler’s attempt toenforce the separate agreement for the sale of the theater unit in the finished complex, notthe August 23 agreement. Kessler is not entitled to attorney fees under a provision in theAugust 23 purchase agreement. Moreover, since both parties have prevailed in part, noattorney fees are awarded on appeal. CONCLUSION The district court’s decision is affirmed. Each party shall bear its own costs andattorney fees. Chief Justice TROUT and Justices SILAK, SCHROEDER and KIDWELL, CONCUR. :::FOOTNOTES:::
FN1 The Earnest Money Provision 2. EARNEST MONEY (a) Buyer hereby deposits as earnest money and a receipt ishereby acknowledged of ONE HUNDRED FORTYTHOUSAND dollars ($140,000.00) evidenced by x Cash__Personal Check __Cashiers Check __Note Due __or_____________; . . . (c) If all conditions have been met by Buyer, Buyer and Selleragree that the earnest money (less credit report fees, andany other Buyer’s costs) shall be refunded to Buyer in theevent Buyer or Seller cannot consummate the sale due tocircumstances beyond their control. The Default Provision 14. DEFAULT. If Seller executes this agreement and title to theproperty is marketable and insurable pursuant to section _____ hereof andthe Buyer fails or refuses to comply with the terms and conditions hereofwithin five (5) days from the date on which said term or condition is to becomplied with, the Seller shall have the following options: OPTIONS (a)Seller may make a written request for the Earnest Money on deposit withthe broker. In such event, broker shall pay from said Earnest Money anyand all costs incurred by broker on behalf of the Seller and the Buyerrelated to the transaction, including but not limited to the costs of titleinsurance, escrow fees, credit report fees, inspection fees, and attorneysfees, and the balance of the Earnest Money, if any, shall be apportionedone-half (1/2) to the Seller and one-half (1/2) to the broker provided theamount to broker does not exceed the agreed commission. Any suchdisbursement of the Earnest Money shall constitute liquidated damages asagainst the buyer under this option (a) and any and all interest of the Buyerin the property, if any, shall be terminated or OPTION (b) Seller maypursue any legal remedies against Buyer which are available to Sellerunder Idaho law and shall be entitled to an award of attorney’s fees asprovided by law or court rule. In such event broker shall pay from saidEarnest Money any and all costs incurred by broker on behalf of the Sellerand the Buyer related to the transaction, including but not limited to thecosts of title insurance, escrow fees, credit report fees, inspection fees, andattorneys fees, and the balance of the Earnest Money, if any, shall berefunded to Buyer. Title Insurance Provision 19. TITLE INSURANCE. . . . It is agreed that if the title of saidpremises is not marketable, or cannot be made so within thirty (30) daysafter notice containing a written statement of defects is delivered to theSeller or if the Seller, having approved said sale fails to consummate thesame as herein agreed, the earnest money shall be returned to the Buyerand Seller shall pay for the cost of title insurance, escrow and legal fees ifany.
FN2Tortoise agrees that the Earnest Money provision is inapplicable, but not because itrefers to earnest money that was never deposited. Tortoise argues that the Earnest Moneyprovision is inapplicable in this case because it only applies “[i]f all conditions have beenmet by Buyer.” Tortoise argues that Kessler did not meet all conditions of the agreementbecause he did not tender the purchase price at closing.
FN3 Extrinsic evidence may be used to show a latent ambiguity. Williams v. Idaho PotatoStarch Co., 73 Idaho 13, 245 P.2d 1045 (1952). Even if the ambiguity was not evidentfrom the face of the amended purchase agreement, the district court could properlyconsider testimony to determine whether an ambiguity existed.
Kessler v. Tortoise Dev’t, Inc. In the Supreme Court of the State of Idaho Richard L. Kessler and Cheryl Kessler, husband and wife, Plaintiffs-Respondent-Cross Appellants, v. Tortoise Development, Inc., Defendant-Appellant-Cross Respondent. No. 24711 Appeal from the District Court of the Fifth Judicial District, State of Idaho, Blaine County. Honorable J. William Hart, District Judge. Filed: May 4, 2000 Before: WALTERS, Justice; Chief Justice TROUT and Justices SILAK, SCHROEDER and KIDWELL. Counsel: Roark Law Firm, Twin Falls, for appellant. R. Keith Roark argued.Parsons, Smith & Stone, Burley, for respondents. William A. Parsonsargued.
