Title: ABC Agra v. Critical Access Group

State: idaho

Issuer: Idaho Supreme Court (civil)

Document:

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IN THE SUPREME COURT OF THE STATE OF IDAHO   
Docket No. 40573 
ABC AGRA, LLC, an Idaho limited liability 
company, 
 
       Plaintiff-Appellant, 
 
v. 
 
CRITICAL ACCESS GROUP, INC., a 
Minnesota non-profit corporation, 
 
       Defendant-Respondent. 
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Twin Falls, June 2014 Term 
 
2014 Opinion No. 80 
 
Filed: August 6, 2014 
 
Stephen W. Kenyon, Clerk  
 
Appeal from the District Court of the Fifth Judicial District, State of Idaho, 
Jerome County.  Hon. Robert J. Elgee, District Judge. 
District court dismissal of declaratory judgment, affirmed.  
Robertson & Slette, PLLC, Twin Falls, for appellant.  Gary D. Slette argued. 
Givens Pursley, LLP, Boise, for respondent.  Martin C. Hendrickson argued. 
_______________________________ 
BURDICK, Chief Justice 
 
This appeal arises out of ABC Agra, LLC’s (“ABC”) action seeking a declaratory 
judgment against Critical Access Group, Inc. (“CAG”) regarding the enforceability of a real 
property use restriction. Because there were no existing or proposed uses that implicated the 
restriction, the district court determined that the claim was not ripe and granted CAG’s 12(b)(6) 
motion to dismiss. We affirm this dismissal.  
I. FACTUAL AND PROCEDURAL BACKGROUND 
The facts of this case are not at issue because CAG accepts the facts ABC alleged in its 
complaint as true for the purposes of its 12(b)(6) motion and this appeal.  
ABC is the developer of Crossroads Point Business Center PUD (the “PUD”), a large 
scale commercial planned unit development located at the intersection of Interstate 84 and 
Highway 93 in Jerome County, Idaho. In 2007, St. Benedict’s, the local hospital in Jerome, 
concluded that its aging hospital facility required a replacement and so executed an option 
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agreement to purchase property from ABC located within the PUD.1 The option agreement 
provided that St. Benedict’s had an option to purchase Lot 6 in the PUD, and that if they elected 
to purchase that property, ABC would gift them Lots 7 and 8 to facilitate the construction of the 
new hospital campus. The option agreement included a covenant that restricted the three lots to 
use solely for the construction of healthcare facilities. By its terms, the option agreement was 
binding upon St. Benedict’s successors and assigns. St. Benedict’s also required ABC to execute 
a restrictive covenant as against all other property in the PUD prohibiting the provision of 
healthcare services. In addition, the option agreement gave ABC an option to repurchase the 
three lots if St. Benedict’s “does not commence construction of a healthcare facility on the Real 
Property within three years of its exercise of the option” for the same price St. Benedict’s 
originally purchased the property. ABC recorded a Memorandum of Option Agreement 
identifying ABC and St. Benedict’s as the parties, and specifically acknowledging that the option 
agreement was binding on the parties with regard to all three lots.  
On October 3, 2011, St. Benedict’s conveyed its lots to CAG without notice to ABC. 
Upon learning of the conveyance, counsel for ABC sent CAG a letter dated January 30, 2012, 
informing CAG of the healthcare restriction contained in the option agreement. Counsel for CAG 
responded on February 9, 2012, as follows: 
I was also asked to confirm that CAG is aware of the March 14, 2007 Option 
Agreement and does understand your client has taken certain positions with 
respect to that document. The fact that CAG is aware of your client’s previous 
position should not be interpreted as a statement that CAG agrees with such 
positions. 
Based on the uncertainty ABC perceived that CAG had created through the above 
correspondence, ABC filed a complaint for declaratory relief on May 11, 2012. ABC sought a 
declaration that under the restrictive covenant in the option agreement, only a “healthcare 
facility” could be constructed on the three lots CAG owns within the PUD.  
CAG moved to dismiss the complaint on ripeness grounds. CAG’s motion to dismiss 
argued that there was no present controversy for the Court to resolve, and therefore the case was 
not ripe. In support of its argument, CAG points to the lack of any allegation that it has used or 
even threatened to use the property for any purpose other than construction of a healthcare 
facility. In its reply brief, CAG raised the doctrine of merger as one potential defense to ABC’s 
                                                 
1 St. Alphonsus was included in the option agreement, but assigned all of its rights to the option to St. Benedict’s. 
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declaratory judgment to demonstrate the waste of time and money that would occur if the parties 
were forced to litigate issues based on hypothetical facts. Following briefing and oral argument, 
the district court took the matter under advisement on July 27, 2012.  
The district court agreed with CAG and granted its motion to dismiss on September 4, 
2012. ABC timely appealed.  
II. ANALYSIS 
A. Standard of Review 
“This Court reviews de novo a district court’s dismissal of a complaint under Idaho Rule 
of Civil Procedure 12(b)(6).” Brooksby v. Geico Gen. Ins. Co., 153 Idaho 546, 547, 286 P.3d 
182, 183 (2012). After viewing all facts and inferences from the record in favor of the non-
moving party, this Court then looks only at the pleadings to determine whether a claim for relief 
has been stated. Young v. City of Ketchum, 137 Idaho 102, 104, 44 P.3d 1157, 1159 (2002). “The 
issue is not whether the plaintiff will ultimately prevail, but whether the party is entitled to offer 
evidence to support the claims.” Id. 
B. Ripeness of ABC’s declaratory judgment claim 
ABC’s request for relief is in the form of a declaratory judgment. Idaho courts have the 
power to declare the rights, status and legal relations of persons affected by contracts.2 I.C. §§ 
10-1201 & 1202. Breach of a contract is not required for the issuance of a declaratory judgment 
regarding a contract dispute. I.C. § 10-1203; Utah Power & Light Co. v. Idaho Pub. Utils. 
Comm’n, 112 Idaho 10, 12, 730 P.2d 930, 932 (1986) (noting that Idaho Code section § 10-1203 
“provides for the issuance of a declaratory judgment in a contract dispute ‘before or after there 
has been a breach.’”) However, an actual or justiciable controversy is still a prerequisite to a 
declaratory judgment action; thus, courts are precluded “from deciding cases which are purely 
hypothetical or advisory.” Bettwieser v. N.Y. Irrigation Dist., 154 Idaho 317, 326, 297 P.3d 1134, 
1143 (2013) (quoting Wylie v. Idaho Transp. Bd., 151 Idaho 26, 31, 253 P.3d 700, 705 (2011)). 
Idaho has adopted the constitutionally based federal justiciability standard. Davidson v. Wright, 
143 Idaho 616, 620, 151 P.3d 812, 816 (2006). Ripeness is that part of justiciability that “asks 
whether there is any need for court action at the present time.” Id. (quoting Gibbons v. 
                                                 
2 Idaho Code section 10-1202 provides that “[a]ny person ... whose rights, status or other legal relations are affected 
by a statute, municipal ordinance, contract or franchise, may have determined any question of construction or 
validity arising under the instrument, statute, ordinance, contract or franchise and obtain a declaration of rights, 
status or other legal relations thereunder.” I.C. § 10-1202. 
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Cenarrusa, 140 Idaho 316, 317, 92 P.3d 1063, 1064 (2002)). “The traditional ripeness doctrine 
requires a petitioner or plaintiff to prove 1) that the case presents definite and concrete issues, 2) 
that a real and substantial controversy exists, and 3) that there is a present need for adjudication.” 
Paddison Scenic Props., Family Trust, L.C. v. Idaho Cnty., 153 Idaho 1, 4, 278 P.3d 403, 406 
(2012) (quoting Noh v. Cenarrusa, 137 Idaho 798, 801, 53 P.3d 1217, 1220 (2002)).  
The district court held that ABC’s declaratory judgment action was not ripe for 
adjudication because the controversy ABC alleged involves “uncertain or contingent future 
events that may not occur as anticipated or indeed may not occur at all.” The court noted that 
ABC’s complaint was void of any “threat, evidence or allegation that the property will not be 
developed in accordance with the specified definition of a healthcare facility.”  
On appeal, ABC argues that CAG’s letter coupled with the arguments it put forward to 
the district court created a real and substantial controversy as to the validity of the restrictive 
covenant contained in the option agreement. ABC also claims that it is necessary to adjudicate 
this controversy now because the uncertainty caused by CAG’s position as to the covenant’s 
validity presently harms ABC’s ability to market the remainder of its development property. 
Specifically, ABC can no longer make warranties of exclusivity, like the one made to CAG’s 
predecessor, to future purchasers of property within the PUD because ABC is no longer sure 
what CAG will do with its property. In response, CAG argues that the district court correctly 
held that ABC’s claim was not ripe because it is based on hypothetical facts that may never 
occur. CAG contends that because there are no allegations that CAG plans or ever planned to 
build anything other than a healthcare facility on its property, there is no real and substantial 
controversy, and so, no present need for adjudication. CAG also argues that this Court should not 
consider any arguments CAG made in its Reply Brief to the district court as establishing a 
controversy because courts are confined to the facts alleged in the pleadings when ruling on 
motions brought pursuant to I.R.C.P. 12(b)(6).  
 
In this case, there is a definite and concrete issue ABC wants decided, but it has failed to 
demonstrate that an actual controversy exists. In order for there to be a justiciable controversy 
there must be more than a difference or dispute of a hypothetical or abstract character. Davidson, 
143 Idaho at 620, 151 P.3d at 816. Accordingly, “a litigant seeking a declaratory judgment must 
demonstrate that an actual controversy exists and that the requested relief will provide actual 
relief, not merely potential relief.” Bettwieser, 154 Idaho at 326–27, 297 P.3d at 1143–44. For 
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example, this Court has held that a declaratory judgment action concerning the legality of a 
proposed ordinance was not ripe until the proposed ordinance was passed by the voters. 
Davidson, 143 Idaho 616, 151 P.3d 812. “The substance of Davidson’s proposed initiative will 
not be ripe for judicial review unless or until passage by the voters brings up the problem of 
enforcing a potentially invalid law. Until then, any judgment on the merits of this case would be 
an academic discussion on a hypothetical set of facts.” Id. at 621, 151 P.3d at 817.  
Similarly, in Wylie v. Idaho Transp. Bd., this Court held that Wylie was not entitled to a 
declaratory judgment on his claim to invalidate an ordinance that limited his access to a state 
highway because no justiciable controversy existed. 151 Idaho at 31, 253 P.3d at 705. On the 
question of justiciability, this Court held that: 
Wylie has been unable to articulate how a judgment declaring the Ordinance 
invalid would provide him any relief. The Agreement clearly precludes direct 
access to SH 20-26 and the provisions of the Agreement are not dependent upon 
the Ordinance. Further, even if we were to declare the Ordinance invalid, ITD has 
denied Wylie's encroachment permit, which would still preclude his desired 
access. 
Id. at 34, 253 P.3d at 708. In response to Wylie’s argument that he would have an opportunity to 
petition the state for an access point if the court invalidated the ordinance, the Court stated that 
“a remote contingency is not sufficient to satisfy the requirements for a justiciable controversy.” 
Id. In both Davidson and Wylie, no controversy had actually arisen and the alleged facts showed 
that one might never arise. Therefore, neither claim was ripe for judicial review.  
 
In contrast, where the facts of the case presently call for court action, this Court has held 
that an actual controversy exists. For example, a challenge to a county ordinance that required 
state and federal agencies to comply with the county’s land use plan was ripe despite testimony 
from county board members that they did not intend to enforce the ordinance. Boundary 
Backpackers v. Boundary Cnty., 128 Idaho 371, 913 P.2d 1141 (1996). This Court stated: “We 
will not speculate whether the board members will choose another form of enforcement or 
whether a new board will choose to enforce the ordinance by fines or penalties. The ordinance 
requires the plan to be enforced.” Id. at 376, 913 P.2d at 1146. Thus, although the plaintiff had 
not yet suffered the harm, a controversy presently existed and so the claim was ripe for review.  
Likewise, in Schneider v. Howe, 142 Idaho 767, 133 P.3d 1232 (2006), on appeal from an 
adverse ruling confirming the existence of an easement, the defendant claimed that the matter 
was not ripe because the plaintiff had not filed an application with the county to develop the 
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property subject to the alleged easement. However, the plaintiff in Schneider alleged that he 
intended to subdivide the property and that the easement afforded the only access. Id. at 773, 133 
P.3d at 1238. He also alleged existing harm based upon the defendant’s refusal to allow him to 
use the easement. Id. Given the plaintiff’s present inability to use the easement and his 
allegations that he intended to subdivide the property, the Court held that delaying adjudication 
would add nothing material to the litigation.  
Even where there is no immediately apparent damage, claims may be ripe for 
adjudication. In the Ninth Circuit case, Principal Life Ins. Co. v. Robinson, 394 F.3d 665, 671 
(9th Cir. 2005), plaintiff and defendant were parties to a long-term lease which provided for rent 
adjustment in the thirty-first and sixty-first years of the lease. Robinson, 394 F.3d at 668. The 
parties disagreed as to the interpretation of this provision, and when they renegotiated the lease 
they included this disagreement in a lease amendment. Id. When one of the parties tried to sell its 
interest, it could not because of the disagreement. Id. The Ninth Circuit agreed that their case 
was ripe for decision because there was “a substantial controversy, between parties having 
adverse legal interests, of sufficient immediacy and reality to warrant the issuance of a 
declaratory judgment.” Id. at 671. In that case, there was no question as to the presence of a 
disputed term in the contract. Indeed, the disagreement had been amended into the contract and 
actually prevented plaintiff’s sale of its interest in the property. The only question was whether 
the controversy between the parties had “become sufficiently immediate, such that the district 
court has Article III jurisdiction to decide it.” Id.   
 
In this case, there is no clear contract dispute similar to the one in Robinson. CAG’s letter 
stating that its “awareness should not be interpreted as a statement that CAG agrees with such 
positions” does not establish disagreement as to the covenant’s validity. ABC argues that if CAG 
does not agree with ABC’s position, the only conclusion that can be drawn is that CAG disagrees 
with it. However, that is but one conclusion to be drawn. CAG’s letter simply refuses to go on 
the record as agreeing or disagreeing with ABC’s interpretation. It does not mean CAG will 
challenge the provision or that CAG necessarily even disagrees, just that CAG does not want to 
presently acquiesce to ABC’s interpretation.  
 
ABC argues that it has been pushed to litigation by CAG, but that is hardly the case. 
ABC sought written confirmation from CAG that it agreed with its interpretation of the 
restrictive covenant. CAG had no obligation to give such confirmation, and its refusal does not 
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rise to a real and substantial conflict. In Schneider, the plaintiff had a plan to pave the easement 
and the defendant informed him that he was not even able to use the easement. 142 Idaho at 769-
70, 133 P.3d at 1234-35. Even if the plaintiff had commenced no part of his plan to pave the 
easement, a clear conflict existed between him and the defendant as soon as the defendant told 
him he could not use the easement. Similarly, a clear dispute existed in Robinson. It was not 
merely an allegation that the parties likely would not agree on the meaning of the renegotiation 
term in the lease if the leasehold interest was ever sold, but that the parties presently did not 
agree on its meaning, had memorialized the disagreement, and the disagreement had actually 
prevented the sale of the leasehold. No similar facts exist here. ABC simply alleges that CAG 
likely disagrees with its interpretation of the restrictive covenant and this disagreement may 
affect its ability to market ABC’s other properties. The district court was correct in finding that 
these facts were too hypothetical and contingent to establish a justiciable controversy.  
 
ABC argues that even if the letter does not signal a clear contract dispute, the arguments 
CAG raised in its Reply Memorandum in Support of Motion to Dismiss filed with the district 
court is sufficient to establish a dispute as to the validity of the restrictive covenant. Arguments 
CAG made in response to ABC and in an attempt to support its argument that litigation of 
ABC’s declaratory judgment claim was not only unnecessary, but would be costly and difficult, 
are not an appropriate consideration in determining the existence of a justiciable controversy. See 
Taylor v. McNichols, 149 Idaho 826, 833, 243 P.3d 642, 649 (2010) (“A 12(b)(6) motion looks 
only at the pleadings to determine whether a claim for relief has been stated.”). Moreover, the 
arguments CAG previously put forth, considered in context, do not establish a justiciable 
controversy.  
 
In its Reply Brief in support of its motion to dismiss, CAG raised the doctrine of merger 
as one potential defense to ABC’s declaratory judgment. In doing so, CAG stated, “The point 
here is not to argue the merits of the merger question, but to point out that litigating complicated 
legal matters that may never need to be addressed is a waste of time, money, and judicial 
resources.” Thus, the merger defense was only brought up in the first place to emphasize the 
waste of time and money that would occur if the parties were forced to litigate issues based on 
hypothetical facts.  
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We affirm the district court’s decision that ABC has failed to establish the existence of a 
real and substantial controversy between itself and CAG over the validity of the restrictive 
covenant in the option agreement. 
C. Attorney Fees. 
 
Both ABC and CAG ask for attorney fees pursuant to paragraph 11 of the option 
agreement and Idaho Appellate Rules 40 and 41 and both concede that the prevailing party on 
appeal is entitled to attorney fees under these provisions. Because CAG is the prevailing party on 
appeal, it is entitled to attorney fees under the option agreement. 
III. CONCLUSION 
We affirm the district court’s dismissal of ABC’s complaint and award CAG costs and 
attorney fees on appeal.  
Justices EISMANN and HORTON, CONCUR. 
J. JONES, Justice, specially concurring.  
 
I fully concur in the Court’s opinion. Although ABC cannot be faulted for having 
concerns about CAG’s intentions, based on its 2/9/12 letter, that does not necessarily create a 
real and substantial controversy justifying a declaratory judgment action. After the action was 
filed, CAG may have stoked ABC’s concerns by raising its “potential” merger defense. 
However, that issue was raised in a hypothetical sense and still did not produce a justiciable 
controversy.  
 
In the event that CAG tries to dispose of the property in contravention of the restrictive 
covenant, ABC will have a genuine justiciable dispute to pursue in court and can at that time 
seek preliminary injunctive relief. If CAG then raises the merger defense, there will be an 
opportunity to squarely address it in the judicial process. At that time, the parties can present 
evidence on the question of whether the restrictive covenant was merged into the terms of the 
deed or whether it was a collateral stipulation. See Fuller v. Callister, 150 Idaho 848, 853, 252 
P.3d. 1266, 1271 (2011). While each alleged collateral stipulation must be considered on its own 
merits, CAG’s successful invocation of the attorney fee provision in the option agreement may 
complicate any contention that the option agreement was merged. ABC may well contend that 
CAG is judicially estopped from claiming merger of the restrictive covenant after receiving the 
benefit of the fee provision. However, considering such theoretical arguments at this time 
demonstrates the necessity for having an actual controversy at hand in order to pursue a 
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declaratory judgment action. It is best not to issue hypothetical decisions based on hypothetical 
claims or defenses.