Opinion
Docket No. 26364.
Filed: January 7, 2002.
Appeal from the District Court of the First Judicial District, State of Idaho, Kootenai County. Hon. Charles W. Hosack, District Judge.
Summary judgment in favor of defendant reversed, and case remanded
John F. Magnuson, Coeur d'Alene, for appellant.
Quane Smith, L.L.P., Coeur d'Alene, for respondent. Michael L. Haman argued.
Magnuson Properties Partnership ("Magnuson") filed a breach of contract action against the City of Coeur d'Alene and obtained an order of default after the City failed to file a timely answer. Thereafter, the district court granted a motion by the City to set aside the default. The City then moved for summary judgment, requesting dismissal of the action on the ground that Magnuson had not notified the City of its claim within 180 days as required by Idaho Code §§ 50-219 and 6-906. The district court granted the summary judgment motion. Magnuson appeals both the order to set aside the default and the summary judgment. We affirm the order setting aside the default, but reverse the summary judgment and remand this case for further proceedings.
I. BACKGROUND
Magnuson owns commercial property in the City of Coeur d'Alene. During January and February of 1995, Magnuson approached the City with a plan to subdivide its property into three commercial lots. The subdivision required installation of sewer lines running to the lots from the City sewer line situated under a nearby street. As a condition of its preliminary plat approval for the project, the City required that Magnuson extend the sewer pipe across the full length of Magnuson's property to its boundary with an adjoining parcel, not owned by Magnuson, that lacked sewer service. According to Magnuson's allegations in the present lawsuit, Magnuson protested this requirement because the extension would cause Magnuson to incur increased engineering and construction costs with no direct or indirect benefit to itself. Magnuson asserts that an engineer handling the project for the City's Public Works Administration represented that if Magnuson would extend the sewer line to the adjoining property, the City would reimburse Magnuson for the added project costs directly attributable to the extension. Magnuson contends that it agreed and acted in reliance upon this promise by modifying its plat proposal and extending the sewer line as the City required.
In May 1996, before the project was completed, Magnuson authorized its general contractor, Shea Construction, Inc., to submit a statement of the reimbursable costs to the City. Accordingly, by a letter of May 10, 1996, Shea Construction itemized costs totaling $30,802 and asked that the City make payment in that amount to Magnuson. The City did not respond to this letter until August 13, 1996, when the City's Public Works director sent a letter denying the alleged agreement and denying the claim for reimbursement. The letter acknowledged that the City had a longstanding policy of requiring property owners to extend sewer lines to the farthest boundary of their property when they install a sewer line. The letter further said, however, that the only costs eligible for reimbursement would be those for enlarging the size of the sewer pipe and deepening the excavation if such costs were necessitated by the extension. The letter stated that because the extension in this case did not require a larger sewer pipe nor a greater depth of excavation, no reimbursable costs had been incurred by Magnuson.
After receipt of this letter, Magnuson's agents were in frequent contact with representatives of the City through letters and telephone calls regarding the request for reimbursement. These communications culminated in a meeting on November 7, 1996, at which representatives of the City reiterated their refusal to pay Magnuson's claim. On November 11, 1996, Magnuson paid Shea Construction the balance it owed on the extension project, $30,082, which was the amount that Shea had earlier itemized as the cost of the extension. On February 18, 1997, Magnuson filed a notice of a claim against the City. The City did not respond to this notice, and on October 16, 1998, Magnuson filed the present action alleging, in the alternative, breach of contract, unjust enrichment, and related causes of action.
The City did not file a timely answer or responsive motion, and Magnuson therefore obtained an order of default (but not a default judgment) on November 24, 1998. On a subsequent motion by the City, the court set aside the default and allowed the filing of an answer. The City thereafter filed a motion for summary judgment on the ground that Magnuson's claim was barred by I.C. §§ 50-219 and 6-906 because Magnuson did not file a notice of claim within 180 days from the date when the claim arose as required by those statutes. The court granted this motion and entered judgment for the City.
Magnuson now appeals, arguing that the district court erred both in setting aside the default order and in granting summary judgment to the City. The City cross-appeals from the district court's order denying the City's request for an award of attorney fees.
II. ANALYSIS
A. Order Setting Aside Default
We consider first the propriety of the district court's order setting aside the entry of default. The standard for vacating a default is established by Idaho Rule of Civil Procedure 55(c) which states, "For good cause shown the court may set aside an entry of default and, if a judgment by default has been entered, may likewise set it aside in accordance with Rule 60(b)." Under this rule, when only a default has been entered, and not a default judgment, only the "good cause" standard must be met; satisfaction of Rule 60(b) requirements is not necessary. McFarland v. Curtis, 123 Idaho 931, 935-36, 854 P.2d 274, 278-79 (Ct.App. 1993). The Rule 55(c) "good cause" standard is more lenient than the Rule 60(b) standards for relief from a judgment. Id. at 936, 854 P.2d at 279. "The primary considerations are whether the default was willful, whether setting aside the default would prejudice the opponent, and whether a meritorious defense has been presented." Id. A trial court's decision that this standard has been satisfied will not be disturbed on appeal absent an abuse of discretion. Id. at 933, 854 P.2d at 276.
The City supported its motion to set aside the default with affidavits of its attorneys. These affidavits indicated that upon service of Magnuson's complaint, the City had referred the defense of the matter to a law firm. Two attorneys became involved in the case, and one of them began to draft responsive pleadings. According to the affidavits, the attorneys believed they had obtained an agreement from Magnuson's counsel for an extension of time to file an answer. The affidavit of one attorney states, "I discussed this case with my associate . . . at the end of October or beginning of November. It is my belief that I instructed [my associate] to contact the plaintiff's attorney to request an extension because the Answer would not be completed within twenty days of service." The associate's affidavit stated, "During our discussion, [the other attorney] may have instructed me to call [Magnuson's attorney] and request an extension of time in which to file an Answer as we were still waiting for the complete file from our client. . . . If I had been instructed . . . to request an extension, I am sure I would have discussed with [Magnuson's counsel] an extension of time in which to file an Answer in the instant case, although I do not specifically recall the details of this telephone conversation." Magnuson's counsel denied having received any request for an extension from either of the attorneys representing the City.
Based on the affidavits, the district court found that the City's failure to timely respond to Magnuson's motion for entry of default was due to an "honest mistake" in the defense attorneys' belief that they had additional time to respond to the complaint. The district court concluded that "there is sufficient excuse demonstrated by the attorneys retained by the City so that the default is not willful, as contemplated by the `good cause' requirement of Rule 55(c). . . ." The court further concluded that the proposed answer submitted by the City alleged potentially meritorious defenses, and that the standards to set aside the default had been met.
Bearing in mind the liberal standard established by Rule 55(c) and McFarland, we discern no abuse of discretion in the district court's decision to set aside the entry of default. Although it may be debated whether the affidavits of the City's attorneys demonstrated "excusable" neglect that would have been required to set aside a default judgment under Rule 60(b)(1), they sufficiently showed that the City's failure to timely respond to Magnuson's complaint was not willful. In addition, the City alleged defenses that may be meritorious, and there is no evidence that vacating the default prejudiced Magnuson in any way. Therefore, we affirm the district court's order setting aside the entry of default.
B. Summary Judgment
Summary judgment may be entered only 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). In ruling upon a motion for summary judgment, a court must liberally construe the evidence in favor of the party opposing the motion and draw all reasonable inferences and conclusions in that party's favor. Killinger v. Twin Falls Highway District, 135 Idaho 322, 17 P.3d 266 (2000); Selkirk Seed Company v. State Insurance Fund, 135 Idaho 434, 18 P.3d 956 (2000). The burden at all times rests on the moving party to prove the absence of a genuine issue of material fact. Jordan v. Beeks, 135 Idaho 586, 590, 21 P.3d 908, 912 (2001); GM Farms v. Funk Irrig. Co., 119 Idaho 514, 517, 808 P.2d 851, 854 (1991). If reasonable persons could reach different findings or draw conflicting inferences from the evidence, the motion must be denied. Id.; Rausch v. Pocatello Lumber Co., Inc., 135 Idaho 80, 14 P.3d 1074 (Ct.App. 2000).
The summary judgment here was based upon I.C. § 50-219, which provides that, "[a]ll claims for damages against a city must be filed as prescribed by chapter 9, title 6, Idaho Code." Within chapter 9, title 6, § 6-906 requires that all claims against a political subdivision "shall be presented to and filed with the clerk or secretary of the political subdivision within one hundred eighty (180) days from the date the claim arose or reasonably should have been discovered, whichever is later." The notice requirement in § 50-219 applies to all claims against a city, including those for breach of contract. Enterprise, Inc. v. Nampa City, 96 Idaho 734, 737-38, 536 P.2d 729, 732-33 (1975). Compliance "is a mandatory condition precedent to bringing suit, the failure of which is fatal to a claim, no matter how legitimate," McQuillen v. City of Ammon, 113 Idaho 719, 722, 747 P.2d 741, 744 (1987).
Based upon the evidence presented in support of and in opposition to the summary judgment motion, the district court concluded that Magnuson's claim arose on August 13, 1996, the date when Magnuson was notified that the City would not provide reimbursement for the cost of the sewer line extension. Because Magnuson did not file its notice of claim with the City Clerk until February 18, 1997 — more than 180 days later — the district court held that Magnuson's claims were barred. Magnuson contends that the district court erred in holding that the accrual date of Magnuson's claim or claims was August 13. Magnuson argues that its cause of action did not arise until November 11, 1996, the date on which it paid Shea Construction $30,082 for the extra expense attributable to the sewer extension. If November 11, 1996, is the accrual date, then Magnuson's February 18, 1997, notice of claim was timely.
Magnuson pleaded several causes of action, all alleging that the City had a reimbursement obligation, whether grounded in express contract or other legal theories. For purposes of this appeal, we deem it sufficient to determine the accrual date for Magnuson's causes of action for breach of contract and unjust enrichment.
1. Breach of contract
It has been said that cause of action for breach of contract accrues upon the breach. Spence v. Howell, 126 Idaho 763, 770, 890 P.2d 714, 721 (1995); Mason v. Tucker and Associates, 125 Idaho 429, 436, 871 P.2d 846, 853 (Ct.App. 1994). This aphorism is of little help, for in this case, the challenge is to determine when the breach occurred. That question turns upon the terms of the alleged contract and the nature of the obligation that was allegedly dishonored.
Here, Magnuson claims that the City contractually obligated itself to "reimburse" Magnuson for costs incurred to lengthen the sewer line to the boundary with an adjoining parcel. Magnuson argues that because it did not actually pay its general contractor for those costs until November 11, 1996, no "reimbursement" could have been due from the City until that date.
We conclude that Magnuson's argument has merit. "Reimburse" means "to pay back (an equivalent for something taken, lost, or expended) to someone." WEBSTER'S THIRD NEW INTERNATIONAL DICTIONARY 1914 (1976). See also Askay v. Malnoney, 179 P. 899, 902 (Or. 1919) (saying that reimbursement "means to replace as an equivalent for what has been taken, lost or expended, to refund, pay back, restore. . . ."); Los Angeles County v. Frisbie, 122 P.2d 526 (Cal. 1942) (defining reimbursement as "the recoupment of sums already paid. . . ."). Since the City's alleged obligation under the contract was to reimburse Magnuson, the City's duty of performance could not have arisen until Magnuson had paid the costs for which it claimed a right of reimbursement. Although Magnuson's general contractor had notified the City in May 1996 of what the reimbursable costs would be, under terms of the alleged contract the City could not have been legally obligated to pay until Magnuson became entitled to reimbursement by paying those costs itself. Thus, the City's letter of August 13, 1996, denying contractual liability was anticipatory in nature. Assuming, as we must for purposes of the summary judgment motion, that the contract existed on the terms alleged by Magnuson, the August 13 letter constituted an anticipatory breach or repudiation of the contract before the City's performance had come due.
We are thus presented with a question not previously addressed by Idaho appellate courts: On what date does a cause of action for breach of contract accrue when an obligation under a contract has been repudiated before the date that performance is due? The rule generally followed in other jurisdictions is that upon an anticipatory breach, the aggrieved party has a power of election. The injured party may choose to sue at the time of the anticipatory repudiation or at the time of the breach. The time of accrual of the cause of action depends upon the choice made by the injured party. The rule has been expressed as follows: "The aggrieved party is entitled to sue either when the anticipatory repudiation occurs or at the later time for performance under the contract. The time of accrual consequently depends on whether the injured party chooses to treat the anticipatory repudiation as a present breach." CALVIN W. CORMAN, LIMITATION OF ACTIONS § 7.2.1 (1991).
The rationale for this rule affording a choice to the aggrieved party is explained in a recent decision of the Nevada Supreme Court:
Other courts have concluded that the statutory prescriptive period governing actions in contract begins to run on the date of performance specified in the contract, but that the obligee may elect to commence formal legal action upon any act of anticipatory breach. In the event a plaintiff elects to sue upon the anticipatory breach and not the promisor's actual nonperformance, "`the accrual date of the cause of action is accelerated from time of performance to the date of election.'"
This rule is based upon public policy considerations. If, as urged by the [defendant], the limitation period were to begin on the date of the anticipatory breach itself, an obligee would be forced to immediately sue on the breach without providing the obligor an opportunity to reconsider and perform. Such a result would unnecessarily encourage litigation or punish a non-breaching party for giving the obligor an opportunity to cure the breach. We therefore hold that under [the statute of limitation], a cause of action in contract cases involving a wholly anticipatory repudiation accrues either on the date that performance under the contract is due or, if the plaintiff so elects, on the date that the plaintiff sues upon the anticipatory breach.
Schwartz v. Wasserburger, 30 P.3d 1114, 1116 (Nev. 2001). Thus, though an aggrieved party may elect to sue upon anticipatory repudiation, a decision to postpone suit until an actual breach occurs is not penalized through the running of the statute of limitations, for the claim has not legally accrued. Plaintiffs in Winstar-Related Cases v. United States, 37 Fed. Cl. 174, 183 (1997). See also Kinsey v. United States, 852 F.2d 556, 558 (Fed. Cir. 1988); Franconia Assoc. v. United States, 43 Fed. Cl. 702, 709 (1999); St. Regis Sales Corp. v. Wilson Cabinet Co., 90 A.2d 488, 491 (Del. 1952); Rachmani Corp. v. 9 East 96th Street Apt., 629 N.Y.S.2d 382, 384 (A.D. 1 Dept. 1995).
Although the foregoing authorities have considered the accrual issue in the context of a statute of limitation defense, we see no reason to diverge from the articulated principles in application of a statutory notice requirement. In this regard, we note that I.C. § 6-906 specifies that the time for filing a notice of claim begins to run from either the date the claim arose or the date that it reasonably should have been discovered, "whichever is later." Thus, Magnuson's knowledge in August 1996 that the City did not intend to perform the alleged contract does not require that the 180-day notice period commence on that date rather than the date in November when the alleged breach actually occurred through nonperformance. Magnuson did not elect to treat the anticipatory repudiation as a present breach but, instead, continued attempts to persuade the City to perform until the parties came to an impasse at the meeting on November 7, 1996. It was only after this meeting that Magnuson paid the cost of the sewer extension to its contractor.
The district court's summary judgment decision was based on the premise that, even if Magnuson could prove the existence of the alleged contract, the City was nonetheless entitled to judgment because Magnuson's notice of claim was untimely. This determination, we conclude, was error because Magnuson elected not to sue for any anticipatory breach but awaited the time of performance and, in the interim, attempted to persuade the City to perform. Therefore, Magnuson's cause of action for breach of contract did not accrue until at least November 11, 1996, when it paid the expenses for which it now seeks reimbursement.
2. Unjust enrichment
In the alternative to its breach of contract cause of action, Magnuson also asserted a claim against the City for unjust enrichment or quasi-contract. Therefore, we must consider when this alternative cause of action accrued, accepting the facts as they are asserted by Magnuson.
Unjust enrichment, also referred to as quasi-contract, contract implied in law, or restitution, refers to "a non-contractual obligation that is to be treated procedurally as if it were a contract." Cont. Forest Prod., Inc. v. Chandler Supply Co., 95 Idaho 739, 743, 518 P.2d 1201, 1205 (1974). This doctrine allows recovery when the defendant has received a benefit that it would be inequitable for him to retain. Anderson v. Schwegel, 118 Idaho 362, 365, 796 P.2d 1035, 1038 (Ct.App. 1990). The elements of the cause of action are (1) a benefit conferred upon the defendant by the plaintiff, (2) realization of such benefit by the defendant, and (3) acceptance of the benefit under such circumstances that it would be inequitable for the defendant to retain the benefit without payment of the value. Idaho Lumber, Inc. v. Buck, 109 Idaho 737, 745, 710 P.2d 647, 655 (Ct.App. 1985). Under this theory, a plaintiff may recover for a benefit received by the defendant only if it was the plaintiff who conferred the benefit by which the defendant was allegedly unjustly enriched. See Beco Constr. Co., Inc. v. Bannock Paving Co, Inc., 118 Idaho 463, 466-67, 797 P.2d 863, 866-67 (1990). Thus, in describing this doctrine, this Court has said:
The unjust enrichment doctrine . . . allows recovery where the defendant has received a benefit from the plaintiff that would be inequitable for the defendant to retain without compensating the plaintiff for the value of the benefit. . . . The recipient of the unjust benefit must make restitution to the party conferring the benefit but only to the extent that, as between the two, the benefit would be unjust for the recipient to retain.
Cannon Builders, Inc. v. Rice, 126 Idaho 616, 623, 888 P.2d 790, 797 (Ct.App. 1995). See also Idaho Lumber, 109 Idaho at 744, 710 P.2d at 654.
We conclude that this cause of action could not have accrued in favor of Magnuson until Magnuson had paid for the sewer line construction that allegedly conferred a benefit on the City. Until that time, Magnuson could not have possessed a cause of action for unjust enrichment because any benefit received by the City had not been conferred by Magnuson but by Shea Construction, the contractor who did the construction work. Accordingly, the asserted cause of action for unjust enrichment, like the cause of action for breach of contract, did not accrue until November 11, 1997, when Magnuson paid Shea Construction for these construction costs. It follows that the filing of Magnuson's notice of claim was timely as to this cause of action. C. Conclusion For the foregoing reasons, the district court's order vacating the entry of default against the City is affirmed, but the summary judgment in favor of the City is reversed. Our reversal of the summary judgment renders moot the City's cross-appeal from the district court's denial of attorney fees. This matter is remanded to the district court for further proceedings.
Chief Judge SCHWARTZMAN and Judge PERRY CONCUR.