Opinion ID: 890186
Heading Depth: 1
Heading Rank: 5

Heading: Whether Lake Cabin is entitled to a refund of its $250,000 option payment.

Text: ¶ 24 The Robert Hurly family argues that if Lake Cabin elected to terminate the agreement after the thirty-day due diligence period, it was entitled to do so but that Hurly would then keep the option money. It adds that Lake Cabin's extension of the closing held the Robert Hurly family to the deal for nearly a year past the date called for in the agreement. Lake Cabin argues that even if the agreement constituted an enforceable contract, it nonetheless is entitled to a refund of its $250,000 payment because the Robert Hurly family breached the implied covenant of good faith and fair dealing in the contract when Hurly proposed floor plans which could cost as much as $400,000 more than the original designs. Though the District Court determined there was no enforceable contract, it agreed with Lake Cabins and held that the Robert Hurly family's breach of the implied covenant defeated its claim for specific performance of the contract. On appeal, the Robert Hurly family has abandoned its demand for specific performance and elected to pursue only the right to retain the option payment. ¶ 25 `[I]n order ... to recover ... on a theory of breach of the implied covenant, there must be an enforceable contract to which the covenant attends.' Knucklehead Land Co. v. Accutitle, Inc., 2007 MT 301, ¶ 18, 340 Mont. 62, 172 P.3d 116 (quoting Phelps v. Frampton, 2007 MT 263, ¶ 33, 339 Mont. 330, 170 P.3d 474). The District Court's determination that there was not an enforceable contract should have foreclosed its further inquiry into the claim that the Hurlys breached the implied covenant. Having determined the contract to be valid, we conclude that the trial court's finding that Robert Hurly continued to ask for more square footage and other changes to the planswhile perhaps sufficient to defeat the Hurlys' claim for specific performancedoes not resolve the issue of entitlement to the option money under the circumstances of the parties' agreement and its termination. We turn to the contract to make this determination: Specific Performance and Forfeiture of Option Money: The parties agree that should Seller abide by all the obligations set forth herein and all conditions or contingencies are either satisfied or waived, but Buyer refuses to purchase the property, then Seller may either retain Buyer's option money and terminate this Agreement as their sole remedy, or elect to enforce this contract against Buyer by the remedy of specific performance. If all the conditions or contingencies provided for in this Agreement are satisfied or waived and if Seller should refuse to convey title to the property, the parties agree that this Contract authorizes the Buyer as Buyer's remedy to either demand immediate repayment of the option money and upon the return and acceptance of such the rights and duties of the parties under this Agreement shall be terminated or, in the alternative, to enforce this Agreement by the remedy of specific performance and require Seller to convey under the terms and conditions set forth herein, at Buyer's discretion, and/or Buyer may seek any damages caused by Seller's acts or omissions. [Emphases added.] ¶ 26 The only condition Lake Cabin asserts was not satisfied by the Robert Hurly family was the requirement that the parties agree on specifications for the new structures by August 25, 2005. We first note that the contract never made explicit that such an agreement was either a condition to performance or a contingency. In fact, the contract only provides the following in relation to contingencies:  Contingencies: This agreement is contingent on Buyer's thirty (30) day due diligence period and Buyer's review of the title commitment, as set forth above. ¶ 27 Based on Lake Cabin's communications with the Hurlys, we conclude that Lake Cabin waived the agreement's only express condition regarding the two structures, which was that the floor plans be settled by August 25, 2005. [W]aiver is the voluntary and intentional relinquishment of a known right, claim or privilege, which may be proved by express declarations or by a course of acts and conduct which induces the belief that the intent and purpose was waiver. R.C. Hobbs Enters., LLC v. J.G.L. Distrib., 2004 MT 396, ¶ 24, 325 Mont. 277, 104 P.3d 503 (quoting VanDyke Const. Co. v. Stillwater Mining Co., 2003 MT 279, ¶ 15, 317 Mont. 519, 78 P.3d 844). ¶ 28 The record is devoid of any evidence that Lake Cabin ever attempted to enforce the August 2005 deadline. In fact, in December 2005, Lake Cabin asked Robert Hurly for an extension of the closing date by six months because of the difficulties it was facing in securing a loan as well as City approval. The Robert Hurly family agreed to the extension and provided its proposed plans for the structures in August 2006. Bowden responded favorably to the proposal, stating that costs were climbing but not that the suggestions were too late or so excessive as to obviate Lake Cabin's obligation to perform. Rather, Bowden praised the plans' [m]any good ideas. At no point prior to termination of the agreement did Lake Cabin inform the Robert Hurly family there was a problem with the floor plans. Bowden stated the following at trial: MR. KNIERIM: Did youdid Robert Hurly ever tell you that he was not agreeable to making an offset or change in those plans that were listed on that exhibit? Did he ever tell you that? BOWDEN: Specifically, no. MR. KNIERIM: All right. And that's because you never got back to him with your response to his proposed changes, did you? BOWDEN: That's not the only reason, no. MR. KNIERIM: Well, it's not the only reasonis that a reason? Did you get back to him? No? BOWDEN: I did not get back to him with the cost of those specific changes. ¶ 29 Even when Lake Cabin formally terminated the contract in October 2006, it did not do so on the ostensible ground that the Robert Hurly family had failed to satisfy its obligations under the contract. Rather, Cummins's e-mail stated that Bowden was terminating the agreement  due to the actions taken by the City.  (Emphasis added.) Moreover, Lake Cabin has never argued the Robert Hurly family was unwilling to convey title to its property pursuant to the contract. In fact, the Robert Hurly family initially sought to have the contract specifically performed. The buy-sell agreement contemplated the Robert Hurly family would retain the option money if Lake Cabin exercised its right to declare the agreement null and void for reasons other than the seller's refusal to abide by the terms of the agreement. Since Lake Cabin waived the deadline for the floor plan and specifications and did not terminate the contract on the ground that the Robert Hurly family had failed to satisfy any other condition, the Robert Hurly family was entitled to retain the $250,000 non-refundable option payment. ¶ 30 3. Whether the District Court erred in awarding Lake Cabin's attorney's fees. ¶ 31 The contract contained a clause allowing attorney's fees to be awarded to the prevailing party in litigation. After concluding that there was no enforceable contract between the parties and that Lake Cabin was entitled to return of the non-refundable option payment, the court awarded Lake Cabin its attorney's fees. Lake Cabin argues that since the District Court awarded it the $250,000 option payment, it was the prevailing party and is entitled to fees. Since we have reversed that determination, we likewise reverse the fee award against the Robert Hurly family. ¶ 32 We hold that the agreement between Lake Cabin and the Robert Hurly family constituted an enforceable contract. While obviously not a model of clarity, it contained all the necessary material terms for sale of the property. The Robert Hurly family is entitled to retain the $250,000 option payment because Lake Cabin waived the deadline for final agreement on the floor plans and specifications and did not terminate the agreement for the Hurlys' failure to satisfy their obligations. The District Court's award of attorney's fees to Lake Cabin was predicated on its return of the option payment to Lake Cabin. Since we have reversed that determination, we also reverse the award of fees. The case is remanded for entry of judgment in favor of the Appellants in accordance with this opinion. We concur: JAMES C. NELSON, MICHAEL E. WHEAT, BRIAN MORRIS and JIM RICE.