Farmers Home Administration
v.
Richard Redland
Supreme Court of Wyoming
February 21, 1985
OPINION: This appeal is from a judgment settling claims
arising out of an option for the transfer of federal grazing rights. The
judgment awarded specific performance and damages which included actual
damages, attorneys' fees, costs and exemplary damages. The judgment also
provided for subordination of a lien of the Farmer's Home Administration. The
defendants, Malmbergs, and the United States, intervenor, have appealed this
decision. We will affirm in part and reverse in part.
This controversy centers around the ownership of the Chapman Animal Unit Months
(hereinafter called AUMs) grazing rights. The Redlands, who owned these rights,
transferred their interest to the Wyckoffs on July 21, 1977, with an option to
repurchase. On March 1, 1978, they reacquired 50% of the AUMs. These AUMs were
attached to the base property of the Bar K-B Ranch. On September 27, 1978, the
Redlands sold the ranch to the Malmbergs, retaining the Chapman AUMs. At this
time the Malmbergs signed an option for purchase of the Chapman AUMs, which
provided the right of purchase for six months and a right of first refusal for
an additional six months. At the end of this time, the Malmbergs were to
transfer the Chapman AUMs from the Bar K-B property to land to be acquired by
the Wyckoffs and Redlands to which the AUMs could attach. The Bar K-B Ranch
property was by now part of the Three Quarter Circle Land and Cattle Company.
The Wyckoffs signed this option sometime in April 1979. In September 1979, when
the option expired, the parties agreed to extend the period because the
Wyckoffs and the Redlands had been unable to acquire a new base property. The
Bureau of Land Management was involved in the discussions concerning the option
and knew that the AUMs had been excluded in the sale even though the Three
Quarter Circle Land and Cattle Company was the record owner.
On December 18, 1979, the Malmbergs wrote to the Redlands requesting that they
have the grazing rights transferred from the Three Quarter Circle Land and
Cattle Company by March 1, 1980 or to make some arrangement concerning those
rights which would satisfy the BLM. By February 29, 1980, the Redlands and
Wyckoffs had acquired a base property to which the AUMs could be attached. The
parties met at the BLM office on this date to sign a grazing transfer
agreement. At this time there were trespass charges against the Chapman AUMs
which had not been resolved. Malmberg testified that he signed the transfer
with the condition that the BLM not act on it until the trespass charges were
either resolved or arrangements made so that the trespass liabilities would go
with the transfer. Redland testified that he did not hear this condition.
Redland testified that he offered to put the amount of the trespass charge into
an escrow account, but that this offer was ignored. The concerned parties
signed the transfer agreement.
After this date the BLM asked for advice from their solicitor concerning the
trespass violations. He stated that:
"If disciplinary action should be necessary some time in the future for
this or any other adverse action, any suspensions or cancellations would be
from the Three Quarter Circle Ranch grazing preference."
The memorandum also stated that the solicitor saw no reason to delay or reject
any transfer of preference because of the trespass situation; that if the
parties met the qualifications specified in the regulations, the transfers
could be approved. When the Malmbergs found that their ranch might be liable
for the trespass, they withdrew the transfer. The trespass charges were
dismissed on July 22, 1981.
In the Spring of 1979, the Wyckoffs ran their cattle on the grazing lands. The
Malmbergs paid the grazing fee and were reimbursed by the Wyckoffs. After the
transfer was withdrawn, in April of 1980, the Malmbergs refused to allow the
Wyckoffs' cattle on the grazing rights. At this time they took the position
that the Wyckoffs had had a reasonable amount of time to transfer the AUMs and
since they had not done this, they no longer had a right to the AUMs. At some
point, the Malmbergs relied on the theory that the initial transfer from the
Redlands to the Wyckoffs in 1977 terminated their interest in the AUMs by
operation of law. Their theory was that grazing rights cannot be owned by one
who does not own the necessary base property and therefore the transfer
effectively terminated the rights. The Malmbergs used the Chapman AUMs for the
grazing seasons of 1980, 1981, and at least part of 1982. On March 31, 1981,
the Malmbergs traded a portion of the Chapman AUMs to the Sun Land and Cattle
Co. for different AUMs. On October 10, 1981, the Malmbergs signed a lien with
the Farmers Home Administration (hereinafter FmHA) against their interest in
the Chapman AUMs.
The Redlands and Wyckoffs initiated this lawsuit alleging breach of contract.
After the evidentiary hearing, a second hearing was held on damages. The United
States intervened between the two hearings to protect the FmHA lien on the
Malmberg cattle which dated from the sale of the ranch.
Appellants and appellant-intervenor have raised numerous issues on appeal,
however, we find the following issues dispositive:
1. Whether a Wyoming state court has jurisdiction to settle the dispute.
2. Whether or not there was an enforceable contract to transfer the grazing
rights.
3. Whether the damages awarded were appropriate.
4. Whether the court properly imposed an equitable and statutory lien on the
cattle with priority over the United States' lien.
I
The Land Department of the United States, which includes the Bureau of
Land Management, is vested by statute with substantially exclusive jurisdiction
to determine questions of fact, determining "* * * * the disposition,
acquisition, and control of the public lands, so long as the legal title
thereto remains in the United States * * * *." 63A Am.Jur.2d Public Lands
§ 39. However, state courts may enforce contracts between parties concerning
public lands. 63A Am.Jur.2d Public Lands § 124. State courts have a related
jurisdiction with the Land Department, "* * * * they may protect a
possession lawfully acquired, or restore one wrongfully interrupted, for that
is a matter which is not confided to the Land Department, and may be dealt with
by the courts in the exercise of their general powers. * * * *" Northern
Pacific Railway Company v. McComas, 250 U.S. 387, 39 S. Ct. 546,
548, 63 L. Ed. 1049 (1919). Appellants contend that the question to be
resolved is not an interpretation of a contract, but rather whether the parties
are qualified to lease federal lands under the Taylor Grazing Act, 43
U.S.C. § 315, et seq., and therefore the case raises a federal question
which is exclusively within the province of the Secretary of the Interior and
the federal courts.
In this situation, it is not necessary to decide the ultimate ownership
of the Chapman AUMs as determined by federal regulations. By limiting our
decision to the rights between the respective parties and determining the legal
effect of the contract, we find that this inquiry does not conflict with the
BLM's exclusive jurisdiction determining ownership or control of grazing
rights. We note that other states have resolved questions which involve the
Taylor Grazing Act when the underlying question was a contract determining the
rights of various parties. Watson v.
Barnard, 155 Mont. 75, 469 P.2d 539 (1970); Phoenix Title
and Trust Co. v. Smith, 101 Ariz. 101, 416 P.2d 425 (1966); Force v.
Peccole, 77 Nev. 143, 360 P.2d 362 (1961). See also, Dredge Corp.
v. Husite Co., 78 Nev. 69, 369 P.2d 676 (1962).
II
Appellants contend that there was not an enforceable contract because
the Wyckoffs did not have control over the subject matter, i.e., the Chapman AUMs.
They base this argument on the theory that the Redlands lost control over the
AUMs when they transferred their interest to the Wyckoffs in 1977 and that this
transaction terminated their rights "as a matter of law." Therefore
the Wyckoffs had no interest which could be transferred in the option agreement
in 1978. They cite 43 C.F.R. 4115.2-1(e)(8)(i) n1 in support of this
proposition. We cannot allow appellants to attack the subject matter of the
option by raising defenses which might or could have happened but did not.
Possibly the BLM could have made a determination that these rights terminated;
however, it did not at that time and presumably does not now regard these
rights as terminated.
n1 43 C.F.R. § 4115.2-1(e)(8)(i) states:
"(e) Terms and conditions.--The issuance and continued
effectiveness of all regular licenses and permits will be subject to the
following terms and conditions:
* * * *
"(8) If a licensee or permittee loses ownership or control of:
"(i) All or part of his base property, the license or permit, to the
extent it was based upon such lost property, shall terminate immediately
without further notice from the District Manager; except that, if the
licensee or permittee notifies the District Manager * * * *." (Emphasis added.)
Appellants also contend that there was no consideration, mutuality or
obligation; and, furthermore, the contract should be deemed illegal,
impossible, and fraudulent. Whether a contract has been entered into depends
upon the intent of the parties and is a question of fact. Robert W.
Anderson Housewrecking & Excavating, Inc. v. Board of
Trustees, School Dist. No. 25, Fremont County, Wyoming, Wyo., 681
P.2d 1326 (1984). At the end of the evidentiary hearing, the court found
"* * * * that defendants failed to show fraud or misrepresentation as to
fact or law on the part of plaintiffs, failed to establish the defense of
illegality of contract, failed to establish the defense of lack of mutuality
and failed to establish the defense of impossibility of performance. The Court
also finds that there was consideration for the execution of the option
agreement and finds it to be a valid and enforceable contract * * * *."
The district court found consideration involved in the whole transaction concerning
the sale of the ranch. There was no evidence, and we cannot speculate what
particular concessions were given for the right to have the Chapman AUMs remain
attached to the base property. However, we defer to the trial court's finding
that the transaction surrounding the sale involved consideration for the
option.
Appellants' contention regarding mutuality is based on an alleged
misunderstanding of the essential terms. Whether the Malmbergs could have
purchased the Chapman AUMs under the option or whether the Wyckoffs actually
intended to sell the AUMs is irrelevant. This case concerns the portion of the
contract regarding the transfer, and as to that element there was no mistake.
Appellants also contend that the option did not require each party to be bound
to the agreement. However, in regard to the provision concerning the transfer,
the Malmbergs were obligated to sign a transfer agreement and the Wyckoffs were
obligated to find base property, which they did.
Appellants contend that the option was illegal and violates public policy.
Appellants base this contention on the fact that the underlying reason for the
option was to allow the Wyckoffs to control the Chapman AUMs until they could
find other qualified based property. They contend that this option circumvented
the BLM regulations requiring that grazing privilege holders own or control
base property. Contracts which are contrary to public policy will not be
recognized by the court and the parties to the contract will be left as the
court finds them. Tate v.
Mountain States Telephone and Telegraph Co., Wyo., 647 P.2d 58
(1982). However, we do not find that this contract was, per se, illegal or
against public policy. The BLM, which is responsible for enforcing its own
regulations, was involved with and condoned this option and apparently
acquiesces in this method of retaining the rights to grazing privileges. It is
immaterial to the resolution of this case whether or not the BLM could have
terminated the Wyckoffs' grazing privileges. It is also immaterial whether the
BLM office would have accepted the transfer of the grazing rights. The option
obligated the Malmbergs to sign the transfer agreement. It did not obligate
them to be responsible for the actions of the BLM after that point. This factual
situation might afford an adequate basis for cancellation by the United States.
However, it does not enable appellants to complain if the United States does
not cancel the rights or to attack appellees' rights collaterally. Northern
Pacific Railway Company v. McComas, supra.
Appellants contend that performance was impossible on two erroneous
assumptions: (1) that they did not have a right to be transferred; and (2) that
the Wyckoffs and Redlands failed to secure qualified base property. Their argument
that the "illegal" assignment of the AUMs in July of 1977 terminated
them has already been answered in this opinion, and the Wyckoffs and Redlands,
by February 29, 1980, had secured a qualified base property to which the rights
could have been transferred.
Appellants also contend that the option agreement was tainted by fraud. In this
case there was no evidence in the record of a misrepresentation of a material
fact, reliance, or of damage to the Malmbergs. This is a spurious argument and
has no basis in fact.
Appellants also contend that if the contract is deemed valid, then they did not
breach it, arguing that a valid tender of performance, not accepted, excuses
the tendering party from performance. Kammert
Brothers Enterprises, Inc. v. Tanque Verde Plaza Company, 102 Ariz.
301, 428 P.2d 678 (1967). The record does not support this contention. The
trial court found that after the option expired in September 1979, the parties
had a reasonable time in which to transfer the AUMs. The Redlands and the
Wyckoffs had obtained base property by the February 29, 1980 meeting.
Appellees' offer to place the amount of the trespass liability into escrow
would have protected the Malmbergs from any potential liability. The offer was
not accepted. The Malmbergs did not offer a valid tender of performance and
cannot now be excused from that obligation.
III
Appellants contend that the damages were incorrectly awarded. The judgment
included damages for actual expenses incurred for grazing the cattle in Texas, rather
than on the Chapman AUMs, court costs, attorneys' fees, and punitive damages.
The parties had stipulated to damages based on the rental value of the Chapman
AUMs. At the end of the evidentiary trial, the court awarded tentative damages
based upon the rental value of the AUMs. At the trial on damages, appellees
presented evidence of the actual expenses spent for grazing the cattle in Texas
rather than Wyoming. There was also testimony by Redland that grazing
privileges were probably available in Wyoming during this time, but he did not
remember if he had attempted to locate any.
We have stated that,
"Compensatory damages are awarded in order to compensate an individual for
a loss suffered as a result of another's failure to perform some duty. They are
designed to make the individual whole--that is to place him in the condition he
would have been in if the other party had adequately performed the duty
owed." Hollon v.
McComb, Wyo., 636 P.2d 513, 516 (1981).
We approved the use of fair rental value as the measure of damages where a
property owner has lost the use of property. Wheatland
Irrigation Dist. v. McGuire, Wyo., 562 P.2d 287 (1977). This is
in accord with the general rule that the measure of damages for the temporary
loss of property is the fair rental value of that property. Scott v.
Elliott, 253 Ore. 168, 451 P.2d 474 (1969). See, Nelson v.
Hy-Grade Const. and Materials, Inc., 215 Kan. 631, 527 P.2d 1059
(1974). The damage caused by delay in performance often takes the form of
loss of use of the item of property involved. "Where the property is
realty, damages are generally measured by the rental value of the realty
involved." 22 Am.Jur.2d Damages § 50. We have used this standard in other
cases where the damage was caused by delay rather than injury. Quin Blair
Enterprises, Inc. v. Julien Construction Co., Wyo., 597 P.2d 945
(1979). See, Mullinax
Engineering Co. v. Platte Valley Construction Co., 412 F.2d 553
(10th Cir. 1969). In this case, the actual damages presented were
considerably greater than the fair rental value of the AUMs because additional
expense occurred in shipping the cattle to Texas. We cannot find that the
actual damages incurred by grazing the cattle in Texas rather than Wyoming flow
from appellants' failure to timely perform under the option agreement. The
parties stipulated to a fair rental value of $10 per AUM per grazing season.
Therefore, damages should be awarded to appellees in a sum of $41,080 for each
of the years 1980, 1981, and 1982, and subsequent grazing seasons, if any,
until appellants' cattle are removed from the AUMs and the use of grazing
privileges have been restored to appellees. This sum shall be calculated with
ten percent interest.
Appellants also protest the awarding of court costs. Section 1-14-126,
W.S.1977, allows a court to award and tax costs as it deems right and
equitable. Appellants argue that § 1-14-127, W.S.1977, is applicable. That
statute provides that:
"When several actions are brought on one (1) instrument in writing against
several parties who might have been joined as defendants in the same action, no
costs shall be recovered by the plaintiff in more than one (1) of the actions
if the parties proceeded against in the other action were openly within the state
at the commencement of the previous action."
This statute is not applicable because several actions were not brought against
several parties who might have been joined as defendants. Appellees brought
only this action which related to the option agreement; they have not
previously litigated the option with other parties and been awarded court costs
in different proceedings. Therefore, this statute does not bar recovery of
costs in this case.
Appellants also question the awarding of attorneys' fees and punitive damages.
As a general rule one is unable to recover attorneys' fees without specific
statutory authority or a contractual obligation. Kvenild v.
Taylor, Wyo., 594 P.2d 972 (1979); Mader v.
Stephenson, Wyo., 552 P.2d 1114 (1976). In this case there is
no statutory authority nor a contractual provision relating to the awarding of
attorneys' fees. The parties entered into a written option. At that time they
could have provided for attorneys' fees if they chose to do so. This was not
done.
"It is one thing to interpret a contract or to discern the contractual
intent of the parties pursuant to established legal rules, but it is another
thing to make a contract for the parties. We are obliged to do the former, and
we are prohibited from doing the latter." McCartney v.
Malm, Wyo., 627 P.2d 1014, 1020 (1981).
There is a split in authority as to whether counsel fees and other expenses in
litigation may be included in estimating damages in a case where punitive
damages are awarded. 22 Am.Jur.2d Damages § 168. However, we do not need to
address that question because we cannot uphold the award of punitive damages.
Punitive damages are not properly given against one who acts in good faith
under an erroneous sense of duty or against a defendant who acts in good faith
and under the advice of counsel. 22 Am.Jur.2d Damages § 253. In this case, the
Malmbergs acted under the advice of their attorney and in reliance upon his
analysis of their legal rights. They also relied upon officials at the BLM office
in regard to the trespass charge and the consequence of the transfer. We do not
find this reliance indicative of recklessness, wantonness, willfulness, or
malice. An unjustified breach of a contract does not entitle the opposing party
to punitive damages. The general rule regarding damages for breach of contract
limits the award to the pecuniary loss sustained.
Modern Air
Conditioning v. Cinderella Homes, Inc., 226 Kan. 70, 596 P.2d 816
(1979).
"Courts in this country, as in most of the rest of the world, expressly
reject the notion that remedies for breach of contract have punishment as a
goal, and with rare exceptions, refuse to grant 'punitive damages' for breach
of contract. In so refusing they confidently claim to be blind to fault, and they
purport not to distinguish between aggravated and innocent breach. So Holmes
said, 'If a contract is broken the measure of damages generally is the same,
whatever the cause of the breach.'" (Footnotes omitted.) E. Allan
Farnsworth, Legal Remedies for Breach of Contract, 70 Colum. L.Rev. 1145, 1146.
We stated in Waters v.
Trenckmann, Wyo., 503 P.2d 1187, 1190 (1972) that in order to
properly award punitive damages in an action upon breach of contract
"there would have to be conduct on the part of defendant amounting to
aggravation, outrage, malice or willful and wanton misconduct." We also
stated that there must be evidence of spite, ill will or willful and wanton
misconduct at the inception of a fraudulent contract and that the remedy for wrongful
acts occurring afterwards would be compensatory damages for breach of contract.
Several jurisdictions have stated the rule that punitive damages can be awarded
in a breach of contract action if the conduct constituting the breach rises to
the level of an independent tort. Jorgensen v.
John Clay and Co., Utah, 660 P.2d 229 (1983); Temmen v.
Kent-Brown Chevrolet Co., 227 Kan. 45, 605 P.2d 95 (1980); Miscione v.
Bishop, 130 Ariz. 371, 636 P.2d 149 (1981).
Appellees present no argument nor cite any cogent authority which would
sustain the award of punitive damages. Their entire argument consists of
"We submit with 2 Trial Judges awarding $50,000 punitive damages,
the findings of 'theft' and 'outrageous' conduct are ample justification for
those damages."
We cannot agree. We find nothing to indicate that at the time the option
was signed that the Malmbergs did not intend to carry out their obligations
under the agreement. The Malmbergs were wrong in breaching the contract.
However, from a reading of the record, we do not find that appellants' conduct
creating the breach rose to a level of aggravation, outrage, malice, or willful
and wanton misconduct. In addition to the reasons stated, it is also apparent
that an award of punitive damages cannot be here sustained because appellees
did not satisfy their burden of presenting evidence of appellants' financial
worth. The only evidence relating to appellants' financial status consisted of
appellees' attorney asking:
"Mr. Malmberg, if you're broke as you've previously characterized
yourselves to be, what difference does it make to you how much the damages are
that are awarded in this proceeding? It doesn't make any difference; does
it?"
and appellants responded:
"I guess I can't answer that. I don't know whether it would or not. Just a
matter of trying to hang on, I guess. It would be easier to hang on if you're
two hundred thousand in the hole than if you're six hundred thousand in the
hole."
This is hardly sufficient to meet the requirements of a bifurcated trial
establishing the factor of financial condition set forth in Cates v.
Eddy, Wyo., 669 P.2d 912 (1983) and Campen v.
Stone, Wyo., 635 P.2d 1121 (1981) nor the holding in Adel v.
Parkhurst, Wyo., 681 P.2d 886, 892 (1984), which stated that:
"In the absence of evidence of a defendant's wealth or financial condition
an award of punitive damages cannot be sustained."
IV
The United States protests the action of the court imposing an equitable
judgment lien on the Malmberg cattle with priority over the lien of the United
States. The United States was granted permission to intervene between the two
trials. An equitable lien is a remedial device. It is not judicially recognized
until the court declares its existence and then it relates back to the point it
was created by the conduct of the parties. 51 Am.Jur.2d Liens § 22. The
elements necessary for an equitable lien are (1) a duty or obligation from one
person to another; (2) a res to which that obligation attaches; (3) which can
be identified with reasonable certainty; and, (4) an intent that the property
serve as security for that purpose. 51 Am.Jur.2d Liens § 24.
An equitable lien which does not arise from a contract is essentially a
tool which is used by courts to prevent unjust enrichment. The unjust
enrichment must result from the receipt of particular property upon which the
lien is imposed. Marriage of
Bull, 48 Ore. App. 565, 617 P.2d 317 (1980). To give rise to an
equitable lien, the parties must have intended to impress the particular fund
or thing with the charge of the underlying debt. Kinne v.
Kinne, 27 Wash.App. 158, 617 P.2d 442 (1980). It is essential
to the establishment of an equitable lien or constructive trust that an
identifiable res is present. Penn Central
Transportation Co. v. Consolidated Edison Company of New York, 333
F. Supp. 81 (E.D. Pa. 1971). An equitable lien is essentially a creature of
equity, based on the equitable doctrine of unjust enrichment. It may be
declared by a court of equity out of a consideration of right and justice as
applied to the relationships involved. Caldwell v.
Armstrong, 342 F.2d 485 (10th Cir. 1965).
The elements necessary for an equitable lien are not present with regard
to the Malmbergs' cattle. The United States did not have a duty or obligation
to appellees concerning the cattle. There was no intent; there was no contract;
there was no unjust enrichment. We sympathize with the trial judge's motivation
in attempting to create a secured judgment. However, where legal principles do
not permit imposition of an equitable lien, it may not be imposed merely from a
sense of justice in a particular case. Phoenix
Mutual Life Ins. Co. v. Harden, Okla., 596 P.2d 888 (1979).
The parties have set forth some twenty-four assignments of error, all of which
have been considered and disposed of by our discussion of the legal principles
involved herein. Therefore, the judgment is affirmed as to appellees concerning
the ownership of the Chapman AUMs and reversed in part as to damages. We affirm
the original decree awarding the rental value of the AUMs to Redlands and
Wyckoffs; we reverse the portion of the judgment pertaining to attorney fees
and punitive damages. The judgment is also reversed to the extent that the judgment
lien was given priority over the United States' lien against the Malmbergs'
cattle.
Reversed for entry of judgment inconsistent with this opinion.