Opinion ID: 2596761
Heading Depth: 2
Heading Rank: 2

Heading: The District Court's Awards of Summary Judgment

Text: Next, the appellants appeal from the district court's awards of summary judgment. We affirm the district court's award of summary judgment against LP and LPI's counterclaims for misrepresentation and breach of the implied covenant of good faith and fair dealing, and the court's award of summary judgment in favor of the respondents' cross-claim for breach of contract. However, we reverse the district court's award of summary judgment against Vreeken on the Golds' cross-claim for indemnification.
When reviewing an order for summary judgment, this Court applies the same standard of review that was used by the trial court in ruling on the motion for summary judgment. Cristo Viene Pentecostal Church v. Paz, 144 Idaho 304, 307, 160 P.3d 743, 746 (2007). Summary judgment is proper if the pleadings, depositions, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law. I.R.C.P. 56(c). The burden is on the moving party to show that there are no genuine issues of material fact. Cafferty v. Dep't of Transp., Div. of Motor Vehicle Servs., 144 Idaho 324, 327, 160 P.3d 763, 766 (2007). If there is no genuine issue of material fact, only a question of law remains, over which this Court exercises free review. Cristo, 144 Idaho at 307, 160 P.3d at 746 (quoting Infanger v. City of Salmon, 137 Idaho 45, 47, 44 P.3d 1100, 1102 (2002)). When an action is tried before the court without a jury, which occurred in this case, resolution of the possible conflict between the inferences is within the responsibilities of the trial court as fact finder. Chapin v. Linden, 144 Idaho 393, 396, 162 P.3d 772, 775 (2007). The trial judge is not constrained to draw inferences in favor of the non-moving party, but rather the judge is free to arrive at the most probable inferences to be drawn from the uncontroverted evidentiary facts, despite the possibility of conflicting inferences. Id.
LP and LPI argue the district court erred in granting partial summary judgment against their counterclaim for misrepresentation. In ruling on the motion, the district court limited its analysis to oral representations made by Thomas Gold, since Vreeken testified during his deposition that he only relied upon verbal information received from Thomas Gold. The district court went on to determine that LP and LPI had failed to establish that Thomas Gold made any oral misrepresentations, and, more importantly, that any reliance placed on these alleged misrepresentations could not have been justified. LP and LPI, however, argue there is evidence in the record demonstrating the Golds made affirmative misrepresentations to Vreeken concerning LP and LPI's operations, financial solvency, and customer base, and that Vreeken justifiably relied on these misrepresentations. Accordingly, LP and LPI argue genuine issues of material fact remain as to their counterclaim for misrepresentation. Pursuant to section 2(h) of the MOU, the parties agreed to release all claims against each other except for claims grounded in fraud or claims related to the MOU. Since LP and LPI's counterclaim for misrepresentation is grounded in fraud, this claim was not released under the settlement agreement. The MOU provides that all claims allowed under the agreement are governed by Massachusetts law. Thus, we must turn to Massachusetts law on misrepresentation. To sustain a claim for fraudulent or negligent misrepresentation in Massachusetts, the plaintiff must show, at a minimum, that the defendant made a false representation of a material fact with knowledge of its falsity for the purpose of inducing the plaintiff to act thereon, and that the plaintiff reasonably relied upon the representation as true and acted upon it to his damage. Russell v. Cooley Dickinson Hosp., Inc., 437 Mass. 443, 772 N.E.2d 1054, 1066 (2002) (quoting Danca v. Taunton Sav. Bank, 385 Mass. 1, 429 N.E.2d 1129, 1133 (1982)). Such reliance must be justified. Masingill v. EMC Corp., 449 Mass. 532, 870 N.E.2d 81, 88 (2007). On appeal, LP and LPI argue there is evidence in the record showing that the Golds made affirmative misrepresentations to Vreeken concerning LP and LPI's operations, financial solvency, and customer base. In support of their argument, LP and LPI cite to various portions of the record, including correspondence, various documents, as well as excerpts from the deposition testimonies of Jan Vreeken, Melanie Harris, Lorna Schubert, and John Teti, but do not specify what misrepresentations were made. This same evidence was presented before the district court in support of the respondents' motions for summary judgment. Contrary to LP and LPI's assertion, these portions of the record do not address any representations made by the Golds concerning LP and LPI, much less misrepresentations. The only evidence of any misrepresentation is found in Vreeken's blanket assertion that he relied on Thomas Gold's oral representations about LP and LPI. However, Vreeken also testified that he was unable to recall what Thomas Gold said in these oral representations. Because LP and LPI failed to present evidence on this essential element of their claim, summary judgment was proper. Furthermore, even if the Golds had misrepresented facts about LP and LPI, Vreeken could not have justifiably relied on any such representations. There is evidence in the record demonstrating that Vreeken was aware of the accounting issues with LP prior to entering into the MOU. On August 10, 1999, Ceuppens and Schipper sent Vreeken a management letter detailing the significant management and accounting issues with LP. A short time later, Vreeken sent Thomas Gold a memorandum demonstrating that he was fully aware of the accounting problems experienced by LP. In this memorandum, Vreeken stated: [LP's] administrative and financial organization is in shambles. Vreeken also rejected Thomas Gold's valuation of LP in the memorandum, stating it puzzles me how you arrived at the amounts to buy you out. Therefore, we affirm the district court's award of partial summary judgment against LP and LPI's counterclaim for misrepresentation.
In addition, LP and LPI argue that the district court erred in granting partial summary judgment against their counterclaim for breach of the implied covenant of good faith and fair dealing. They assert that the Golds breached the covenant by conducting inaccurate inventory and accounting methods, which resulted in Vreeken paying an overvalued amount for the Golds' portion of LP and LPI under the MOU. The district court determined that even if the Golds engaged in inaccurate inventory and accounting practices, this conduct occurred prior to the execution of the MOU and, therefore, was not subject to the implied covenant of good faith and fair dealing. Under Massachusetts law, every contract is subject to an implied covenant of good faith and fair dealing. Anthony's Pier Four, Inc. v. HBC Assocs., 411 Mass. 451, 583 N.E.2d 806, 821 (1991). This means that neither party shall do anything that will have the effect of destroying or injuring the right of the other party to receive the fruits of the contract.... Id. at 820 (quoting Druker v. Roland Wm. Jutras Assocs., 370 Mass. 383, 348 N.E.2d 763, 765 (1976)). Because the MOU is governed by Massachusetts law, the parties are subject to the implied covenant of good faith and fair dealing. We find the district court properly granted summary judgment against LP and LPI on their counterclaim for breach of the implied covenant of good faith and fair dealing. Until the parties signed the MOU, their rights were not established under the agreement. Thus, any alleged misconduct that occurred prior to the execution of the MOU was not subject to the implied covenant of good faith and fair dealing, as it would not have the effect of destroying or injuring the right of the other party to receive the fruits of the contract. Id. This includes the Golds' allegedly inaccurate inventory and accounting methods. Therefore, we affirm the district court's award of partial summary judgment against LP and LPI on their counterclaim.
The appellants collectively argue the district court erred in granting summary judgment on the respondents' cross-claim for breach of contract. The appellants admittedly failed to contest the respondents' motion for summary judgment regarding this claim but argue the record before the district court contained genuine issues of material fact surrounding the alleged breach of the MOU. Specifically, the appellants assert that the respondents' evidence contained inconsistencies, unexplained expenses, and unrelated charges. The appellants argue the district court should have searched the record to discover these genuine issues of material fact. The respondents argue that because the appellants did not object to their motion for summary judgment, the appellants are several years too late with their objection. Therefore, we must first determine whether the appellants may appeal the district court's award of summary judgment in the absence of an objection below. For purposes of summary judgment, the moving party bears the initial burden of proving the absence of a genuine issue of material fact. Sherer v. Pocatello Sch. Dist. No. 25, 143 Idaho 486, 489, 148 P.3d 1232, 1235 (2006). Only then does the burden shift to the non-moving party to come forward with sufficient evidence to create a genuine issue of material fact. Id. When reviewing an order for summary judgment, we apply this same standard of review. P.O. Ventures, Inc. v. Loucks Family Irrevocable Trust, 144 Idaho 233, 237, 159 P.3d 870, 874 (2007). Accordingly, the appellants are not precluded from appealing the district court's award of summary judgment just because they failed to object to the respondents' claim for breach of contract below. However, contrary to the appellants' assertion, the district court was not required to search the record looking for evidence to create a genuine issue of material fact. In Esser Electric v. Lost River Ballistics Technologies, Inc., 145 Idaho 912, 919, 188 P.3d 854, 861 (2008), this Court recently held that the trial court is not required to search the record looking for evidence that may create a genuine issue of material fact; the party opposing the summary judgment is required to bring that evidence to the court's attention. Based on the evidence before the district court, we find the respondents met their burden of proving the absence of a genuine issue of material fact. Therefore, we affirm the district court's award of summary judgment on the respondents' breach of contract claim.
Finally, Vreeken argues that the district court erred in granting summary judgment on the Golds' claim for indemnification. The district court determined that the drafters of the MOU intended for Vreeken to indemnify Richard Gold on the Citizens Bank loan and to indemnify Thomas Gold on the EIEDC loan. Vreeken asserts that the district court wrongly determined that the Golds had an unqualified right of indemnification, rather than a limited one. As set forth above, the MOU is governed by Massachusetts law. The principal guide to contract interpretation under Massachusetts law is the contract itself. Where there is no ambiguity in the contract language, the contract must be enforced according to its terms. Freelander v. G. & K. Realty Corp., 357 Mass. 512, 258 N.E.2d 786, 788 (1970). In this case, the parties do not argue that the language under section 2(c) of the contract is ambiguous. Therefore, the Court must enforce section 2(c) in accordance with the express terms. In Massachusetts, a right to indemnification may either be express or implied. See Fall River Hous. Auth. v. H.V. Collins Co., 414 Mass. 10, 604 N.E.2d 1310, 1312-13 (1992). An implied right to contractual indemnity is only recognized where there are special factors surrounding the contractual relationship that indicate an intention by one party to indemnify another in a particular situation. Id. at 1313. Section 2(c) of the MOU states in pertinent part: The Lockwood Entities will use their best efforts to effect the release of: (i) [Thomas Gold] and [Richard Gold] from certain personal guarantees they have made with regard to the following loans and (ii) certain securities pledged by [Richard Gold] which is being held as collateral for the Citizen's Loan, as defined below. If necessary to effect such releases, Vreeken agrees to personally guarantee such loans. If the Lockwood Entities fail to provide such release by the earlier of: (w) three (3) months after all audited financials for fiscal years 1999 and 2000 are completed or (x) March 1, 2001, then [the Golds] shall have the option of terminating this Agreement as provided in Section 11 hereof, unless Vreeken shall expressly opt to indemnify [the Golds] from any damages they may incur as a result of such personal guarantees. Until the earlier of: (y) the releases pursuant to this Section 2(c) are effected or (z) this Agreement is terminated as provided herein, any damage [the Golds] may incur as a result of such personal guarantees not being released shall be secured by the assets of [LP] and [LPI]. (Emphasis added). The loans listed in section 2(c) included the Citizen's Bank loan in the principal amount of $225,000, and the EIEDC loan in the principal amount of $262,500. There are only two other references to indemnity in the agreement. Under Section 1(c), the respondents agreed not to compete, directly or indirectly, with LP or LPI for a period of three years, unless [the Golds] are not being indemnified by Vreeken with regard to their personal guarantees as specified in Section 2(c).  (Emphasis added). The MOU also provides that [t]he Lockwood entities will indemnify [the Golds] against suits from third parties. (Emphasis added). Based on the plain language of section 2(c), and the other references to indemnification in the MOU, Vreeken is correct that the Golds do not have an unqualified right to indemnification for the Citizens Bank and EIEDC loans. Section 2(c) states that if Lockwood, LP, and LPI fail to release the Golds from their personal obligations under the loans, and Vreeken does not personally effectuate such releases, then the Golds have the option to terminate the contract unless Vreeken expressly opts to indemnify the Golds from any damages they may incur as a result of their personal guarantees. It is undisputed that Lockwood, LP, and LPI did not obtain the releases and that Vreeken was ordered to effectuate personal guarantees on the Citizens Bank and EIEDC loans; however, there is no evidence in the record that Vreeken expressly opted to indemnify the Golds. The district court found [i]mplicit in the agreement to use best efforts [was] the undertaking that Vreeken and the Lockwood [E]ntities [would] hold the Golds harmless in the agreement. In other words, the district court found that an implied right to indemnification existed under the contract. This finding was in error as section 2(c) had already provided an express right to indemnification. The express right was subject to the condition that Vreeken elect to indemnify the Golds. In essence, the district court awarded indemnification as an equitable remedy. In order for the doctrine of equitable indemnity to apply, there must be some basis for tort liability against the proposed indemnitor. 41 Am.Jur.2d Indemnity § 20 (2005). [An] implied contractual indemnity between the indemnitor and the indemnitee can provide a basis for equitable indemnity. Id. Here, the district court erred in granting equitable indemnification for two reasons. First, there was no basis for tort liability in this case since the Golds did not have an implied contractual right to indemnification. In addition, the Golds had an adequate remedy at law. Lockwood, LP, and LPI's failure to use their best efforts to release the Golds from their obligations under the bank loans interfered with the Golds' rights under the contract. Their conduct was attributable to Vreeken as the individual in control of the entities. Thus, the Golds had an adequate remedy available to them under the contract for breach of the implied covenant of good faith and fair dealing. It is well-established that equitable remedies will not be allowed if adequate remedies are available at law. Meikle v. Watson, 138 Idaho 680, 683, 69 P.3d 100, 103 (2003). Therefore, we reverse the district court's award of summary judgment on the Golds' claim for indemnification. Because the issue of indemnification was not related to the issues presented at trial, we will consider Vreeken's arguments regarding the district court's judgment after trial before remanding the case.