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You can search the entire site. or go to the recent opinions, or the chronological or subject indices. Laybourn v. City of Wasilla (12/11/2015) sp-7068

Laybourn v. City of Wasilla (12/11/2015) sp-7068

           Notice:   This opinion is subject to correction before publication in the P                    ACIFIC  REPORTER.  

           Readers are requested to bring errors to the attention of the Clerk of the Appellate Courts,  


           303 K Street, Anchorage, Alaska 99501, phone (907) 264-0608, fax (907) 264-0878, email  



                       THE SUPREME COURT OF THE STATE OF ALASKA                                      

BRADLEY  K.   LAYBOURN,                                         )  

ALAN  D.   LAYBOURN,                                            )          Supreme  Court  Nos.  S-15478/15488  

DOUGLAS  K.   LAYBOURN  and                                     )  

DIAMOND  D.   LAYBOURN,                                         )          Superior  Court  No.   3PA-11-02919  CI  



                                                                           O P I N I O N  

                     Appellants and                             )  

                     Cross-Appellees,                           )  


                                                                )          No. 7068 - December 11, 2015  

           v.                                                   )  



CITY OF WASILLA,                                                )  



                     Appellee and                               )  

                     Cross-Appellant.                           )  




                        ppeal from the Superior Court of the State of Alaska, Third  


                     Judicial District, Palmer, Kari Kristiansen, Judge.  


                     Appearances: Brad D.DeNoble, EagleRiver,for Appellants.  


                     Thomas  F.  Klinkner,  Birch  Horton  Bittner  &  Cherot,  


                     Anchorage, for Appellee.  


                     Before: Fabe, Chief Justice, Winfree, Stowers, Maassen, and  


                     Bolger, Justices.  


                     MAASSEN, Justice.  



                     Property  owners  granted  a  utility  easement  to  the  City  of  Wasilla  in  


exchange for the City's promise to build an access road across their property, subject to  

----------------------- Page 2-----------------------


obtaining permits and funding.  The access road was not built, and the property owners  


sued the City, claiming that it fraudulently induced them to sign the easement agreement,  


breached the agreement, and breached the covenant of good faith and fair dealing.  


                    After trial the superior court made findings of fact and conclusions of law  


about the parties' negotiations, their reasonable expectations, the key provisions in the  


easement agreement, and the City's efforts to satisfy the agreement's conditions, and it  


ruled against the property owners on all their claims.  The property owners appeal.  The  


City  cross-appeals,  contending  that  the  property  owners'  claims  should  have  been  


dismissed on statute of limitations grounds.  


                    We agree with the superior court's interpretation of the parties' agreement  


and find no clear error in its findings of fact.  We therefore affirm its judgment in favor  


of the City and do not reach the issue raised in the City's cross-appeal.  



          A.        Facts  


                    Bradley, Alan, Douglas, and Diamond Laybourn own a piece of property  


south of the Parks Highway, between a subdivision on the east and the City of Wasilla's  


new multi-use sports complex on the west.   The site of the sports complex had no  


preexisting infrastructure for water or sewer, so before construction the City approached  


the Laybourns in the fall of 2002 seeking a utility easement over the northern 60 feet of  


their property.  


                    Archie Giddings, the City Engineer at the time, represented the City in  


negotiations with Bradley Laybourn, who represented the property owners.  Giddings  


told Bradley that the City had limited options and that a utility easement through the  


Laybourns' property would be the most cost-effective one. In accordance with the City's  


usual practice,GiddingsofferedtheLaybourns awaiver ofthesewerpayment-in-lieu-of- 


assessment  (PILA)  fees or  construction  of a  maintenance  trail  in  exchange  for  the  


                                                               - 2 -                                                        7068

----------------------- Page 3-----------------------

easement; the Laybourns rejected this initial offer. Countering, the Laybourns said they                                                                                                                                                                                                                                                                                        

would allow the utility easement in exchange for both the PILA waiver and the City's                                                                                                                                                                                                                                                                                  

construction of an access road that would run across the northern edge of their property,                                                                                                                                                                                                                                                                 

from South Mack Drive on the west (where the sports complex was being built) to their                                                                                                                                                                                                                                                                                         

property's northeast corner.                                                                                                  It was Giddings's view, however, that a road dead-ending                                                                                                                                                     

in the Laybourns' property would serve no public purpose; he envisioned instead that the                                                                                                                                                                                                                                                                                              

access road would continue east from the Laybourns' property to connect with Lake                                                                                                                                                                                                                                                                  

Lucille Drive (or Upper Road, a stub extending west from West Lake Lucille Drive),                                                                                                                                                                                                                                                                                

thus creating an alternate thoroughfare to the Parks Highway from the subdivisions near                                                                                                                                                                                                                                                                                         

Lake Lucille.                                                  

                                                            Giddings   and   the   Laybourns   continued   their   negotiations   in   several  

meetings over the course of six months.                                                                                                                                                 Giddings then drafted the terms of a public                                                                                                                             

utility   easement   agreement,   which   the   Laybourns   signed  on  May   29,   2003.     The  

agreement granted a public water and sewer easement to the City on the northern 60 feet                                                                                                                                                                                                                                                                                           

of the Laybourns' property in exchange for the following consideration:                                                                                                                                                                                            

                                                             1)	                              The City will not charge a sewer connection fee or                                                                                                                                                                            

                                                                                          sewer PILA (payment in-lieu of assessment) for future                                                                                                                                                              

                                                                                          development on the grantor's property.                                                                                                                                           

                                                            2)	                              In 2003, the City will apply for a public use easement                                                                                                                                          

                                                                                                                                                                       [  ]  

                                                                                                                                                                         1         in conjunction with a public use  

                                                                                          across parcel D2                                                                                                                                                                                                             

                                                                                                                                                                                                                     [  ]  

                                                                                          easement across parcel C2, 2                                                                                                          to provide access from  


                                                                                          Upper Road to South Mack Drive; and  


                              1                             "D2" refers to the parcel on which the sports complex was being built.                                                                                                                                                                                                                                                         



                                                            Giddings testified at trial that the references to "C2" in paragraphs 2 and  


 3 of the agreement should have been "C1," the Laybourn property. This is not disputed.  


                                                                                                                                                                                         - 3 -	                                                                                                                                                                              7068

----------------------- Page 4-----------------------

                                      3)	                 In 2004, the City will apply for a wetlands permit to                                                                                         

                                                        construct the access road that will include the dredging                                                                     

                                                        of fill material and a delineation of wetlands on parcel                                                                             

                                                        C2; and                 

                                      4)	                 Upon                approval  of                            the          public                use           easement                      and  

                                                        wetlands   permit,   the   City   will   construct   the   access  

                                                        road in 2005, subject to funding.                                   

                                      The City installed the water and sewer lines in the granted easement in the                                                                                                                         

summer   of   2003.     Around   the   same   time,   as   required   by   the   agreement's   second  

provision, the City applied for the public use easement necessary for construction of the                                                                                                                                                  

Upper Road extension and received conditional approval of it from the Matanuska-                                                                                                                                 


Susitna Borough Platting Division.                                                                     

                                      Completing the conditions for final approval of the easement would have  


cost the City approximately $5,000, funds Giddings believed it imprudent to spend in the  


absence of a wetlands permit.  The entire estimated cost of the Upper Road extension  


was approximately $500,000.   The City's local sources of funding for all its capital  


improvements  City-wide  --  for  water  and  sewer  systems,  roads,  the  airport,  and  


buildings  --  averaged  approximately  $1.2  million  in  2003  and  subsequent  years.  


Construction of the sports complex was a $20 million project which the City financed  


in part with bonding of $14.7 million. To pay the debt service on the bonds, the Wasilla  


City Council raised the City sales tax by ordinance from 2.0% to 2.5%; proceeds from  


the tax increase were dedicated to that purpose.4   The City therefore depended upon state  


                   3                  The conditions for final approval included surveying and marking the                                                                                                                               

proposed easement, obtaining alegal                                                                   reviewoftheeasement'sdescription, andrecording                                                                     

certain documents.                                     

                   4                 Under  Ordinance Serial No.  01-55(AM),  adopted by  the Wasilla City  


Council in December 2002, the sales tax increase was to remain in effect until the earlier  



                                                                                                                    - 4 -	                                                                                                           7068


----------------------- Page 5-----------------------

and federal funding for many aspects of the sports complex project, including ballfields,                                                                                                                                                                                                                                                                

paving, kitchen facilities, and water and sewer lines.                                                                                                                                                                                              Giddings testified that the City                                                                                             

initially planned to pay $50,000 toward the Upper Road extension and look to the State                                                                                                                                                                                                                                                                                         

for the remaining $450,000 of its estimated cost.                                                                                                                                                                                 The City included the Upper Road                                                                                                          

extension in its funding requests to the legislature in 2005 and again in 2006, but the                                                                                                                                                                                                                                                                                                

legislature rejected the request both times.                                                                                                                       

                                                            The City did not apply for a wetlands permit in 2004, as required by the                                                                                                                                                                                                                                                   

easement agreement's third provision.                                                                                                                                           When Giddings began the application process                                                                                                                                        

toward   the end                                                         of that year,                                                 he realized                                            he would                                         need   someone   with   engineering  

expertise to delineate the wetlands as required for the application's completion.                                                                                                                                                                                                                                                                                             This  

would require funding; in May 2006, therefore, Giddings asked the City Council to                                                                                                                                                                                                                                                                                                          

authorize a contract at an estimated cost of approximately $50,000 for the permitting and                                                                                                                                                                                                                                                                                             

design of the Upper Road extension, to include the cost of the engineer.                                                                                                                                                                                                                                                              

                                                            At a City Council meeting, several citizens voiced their opposition to the                                                                                                                                                                                                                                                  

Upper Road extension, and by a vote of five to one the Council denied Giddings's                                                                                                                                                                                                                                                                  

authorization request.                                                                                  In the face of this lack of public and City Council support,                                                                                                                                                                                           

Giddings dropped the Upper Road extension from the list of capital projects for which                                                                                                                                                                                                                                                                                     

the City sought funding from the State during the 2007 legislative session.                                                                                                                                                                                                                                                                              The City   

never finished delineating the wetlands or applying for the wetlands permit.                                                                                                                                                                                                                                          

                              B.                            Proceedings   

                                                            The Laybourns filed suit against theCity                                                                                                                                           in2011. Inan                                                   amended complaint  



of  June  30,  2012,  or  the  projected  date  the  City  was  able  to  retire  the  bonds.                                                                                                                                                                                                                                                                                                In  


accordance with these terms, Ordinance Serial No. 10-19 repealed the sales tax increase  


as of July 1, 2010.  A reserve fund of $378,163 - intended to pay for future capital  


improvements to the sports complex - remained after the complex was paid for.  


                                                                                                                                                                                          - 5 -                                                                                                                                                                                 7068

----------------------- Page 6-----------------------

they asserted, among other things, that (1) the City made misrepresentations of fact and                                                                                                                                                       

omitted facts it had a duty to disclose during the course of negotiations; (2) the City's                                                                                                                                             

failure to apply for a wetlands permit and to construct the access road breached the terms                                                                                                                                               

of the agreement and the implied covenant of good faith and fair dealing; and (3) the                                                                                                                                                           

agreement should be rescinded                                                                   because of the Laybourns' unilateral mistake.                                                                                               The  

Laybourns sought specific performance of the agreement (as they interpreted it) or,                                                                                                                                                             

alternatively, rescission and damages, including punitive damages.                                                                                                                                

                                       The City moved for partial summary judgment on the Laybourns' contract                                                                                                                     

                                                                                                                                                                                                              5     The superior  

claims, arguing they were subject to a three-year statute of limitations.                                                                                                                                                        

court denied the motion, ruling that the claims were subject instead to the six-year  


limitations period for waste or trespass on real property.6  


                                       The superior court then held a three-day bench trial. In written findings of  


fact and conclusions of law, the court rejected both the Laybourns' characterization of  


the parties' negotiations and their interpretation of the agreement's key provisions.  The  


court found that the City made no misrepresentations and omitted no material facts it had  


a duty to disclose; it also concluded that the Laybourns' claims for breach of contract and  


breach  of  the  implied  covenant  of  good  faith  and  fair  dealing  failed  because  the  


agreement expressly conditioned construction of the access road upon available funding  


and  obtaining  a  wetlands  permit,  conditions  that  did  not  occur  despite  the  City's  


reasonable efforts. The court found for the City on all the Laybourns' claims and entered  


final judgment in the City's favor.  


                                       The Laybourns appeal the judgment against them, claiming both clear  


                   5                  AS 09.10.053 (requiring that "an action upon a contract or liability" be                                                                                                                                    

brought within three years).                                 

                   6                  AS 09.10.050 (requiring that "an action for waste or trespass upon real  


property" be brought within six years).  


                                                                                                                       - 6 -                                                                                                               7068


----------------------- Page 7-----------------------

 errors of fact            and mistakes of law.                       The City cross-appeals the denial of summary                          

judgment on its statute of limitations defense.                      

III.         STANDARDS OF REVIEW                 


                        We   review   the   superior   court's   interpretation   of   a   contract   de   novo.   


 "When interpreting a contract, the goal 'is to give effect to the reasonable expectations  



 of the parties.' "             "Where the superior court considers extrinsic evidence in interpreting  


 contract terms, . . . we will review the superior court's factual determinations for clear  



                        Whether there has been a breach of contract or the covenant of good faith  



 and fair dealing is a question of fact reviewed for clear error.                                                 We review "findings of  


 fact by the superior court on issues of misrepresentation under the clearly erroneous  



 standard"            and "give particular deference to the superior court's factual findings when  


 . . . they are based primarily on oral testimony, because the superior court, not this court,  



judges the credibility of witnesses and weighs conflicting evidence."                                                        We willfind clear  

            7           Nautilus Marine Enters., Inc. v. Exxon Mobil Corp.                                              , 305 P.3d 309, 315           

 (Alaska 2013).              

            8           Id. (quoting Villars v. Villars, 277 P.3d 763, 768 (Alaska 2012)).  


            9           Id. (quoting Cookv.Cook,249P.3d1070, 1077-78 (Alaska2011)) (internal  


 quotation marks omitted).  


             10         See Casey v. Semco Energy, Inc., 92 P.3d 379, 382 (Alaska 2004); see also  


Hallam v. Alaska Airlines, Inc., 91 P.3d 279, 283 (Alaska 2004).  


             11         Anchorage Chrysler Ctr., Inc. v. DaimlerChrysler Motors Corp. , 221 P.3d  


 977, 984 (Alaska 2009).  


             12          3-D & Co. v. Tew's Excavating, Inc., 258 P.3d 819, 824 (Alaska 2011)  


 (quoting Josephine B. v. State, Dep't of Health &Soc. Servs., Office of Children's Servs.,  


 174 P.3d 217, 222 (Alaska 2007)).  


                                                                           - 7 -                                                                   7068


----------------------- Page 8-----------------------

error only when "after a thorough review of the record, we come to a definite and firm                                                                     


conviction that a mistake has been made."                                                                                                                 

                                                                                   We review all factual findings "in the light  



most favorable to the prevailing party below." 


                         We review for abuse of discretion a trial court's denial of rescission of a  



contract due to unilateral mistake. 

IV.	         DISCUSSION  


            A.	          The Superior Court Did Not Clearly Err In Finding That The City Did  


                         Not  Fraudulently  Induce  The  Laybourns  To  Sign  The  Easement  



                         The Laybourns first contend that the superior court erred when it failed to  


find that the City fraudulently induced them to enter into the easement agreement by  


misrepresenting material facts and omitting facts it had a duty to disclose.  We conclude  


that  there  was  no error.                        To  address the Laybourns'  argument we turn  first to  the  


language of the parties' agreement.  


                         1.	          The easement agreement was unambiguously conditional.  


                         "A condition is an event, not certain to occur, which must occur, unless its  



non-occurrence  is  excused,  before  performance  under  a  contract  becomes  due." 


Because conditions are disfavored, "[t]o be enforceable, a condition must be 'expressed  

             13	         Id.  (quoting  Soules v. Ramstack                           , 95 P.3d 933, 936 (Alaska 2004)).                                 

             14          Id.  (quoting  N. Pac. Processors, Inc. v. City & Borough of Yakutat                                                            , 113   

P.3d 575, 579 (Alaska 2005)).                              

             15          Dickerson v. Williams, 956 P.2d 458, 466-67 (Alaska 1998).  


             16          Jarvis   v.   Ensminger,   134   P.3d   353,   358   (Alaska   2006)   (quoting  


RESTATEMENT  (SECOND) O                             F  CONTRACTS    224 (1981)).          

                                                                             - 8 -	                                                                      7068


----------------------- Page 9-----------------------


in plain, unambiguous language or arise by clear implication.' "                                                                                                                                                                                                                                     The fourth provision                                 

of the parties' agreement says: "Upon approval of the public use easement and wetlands                                                                                                                                                                                                                                                                       

permit, the City will construct the access road in 2005, subject to funding." The superior                                                                                                                                                                                                                                                                      

court interpreted this language to mean that "[t]he City's obligation to build a road was                                                                                                                                                                                                                                                                                          

unambiguously conditioned upon availablefundingandpermittingapproval."                                                                                                                                                                                                                                                                                  Thecourt   

concluded that the Laybourns' contrary interpretation "fails as a matter of common sense                                                                                                                                                                                                                                                                                     

given the totality of the circumstances involved in this project and the plain, everyday                                                                                                                                                                                                                                                                   

meaning of the key provisions contained within the agreement."                                                                                                                                                                                                                                             We agree with the                                                          

 superior court's reading of the agreement.                                                                                                                                                         

                                                            TheLaybournsarguethat "subject to                                                                                                                                  funding"isnotacondition but instead                                                                                                   

is  "meant to qualify the year the City is to construct the access road" - that is, it is a                                                                                                                                                                      

 statement that the project will be done in 2005 if enough tax revenue has accumulated                                                                                                                                                                            

by then and that otherwise it will be done later.                                                                                                                                                                   The Laybourns contend that if funding                                                                                                        

was meant to be a condition, it would have been listed at the beginning of the sentence                                                                                                                                                                                                                                                                      

with the other conditions:                                                                                          approval of the public use easement and the wetlands permit.                                                                                                                                                                                                                       

The   Laybourns  say   they   minimized   the   importance   of   the   agreement's   "subject   to  

funding" language because they believed funding to be a "foregone conclusion," in that                                                                                                                                                                                                                                                                                              

"the only contingency in [the] agreement was the passage of enough time to accumulate                                                                                                                                                                                                                                                            

funding for the project from an increase in the City's sales tax."                                                                                                                                                                                                                               

                                                            A court's object in interpreting any contract term is to "give effect to the                                                                                                                                                                                                                                               

                                                                                                                                                                                        18              The  court  "looks  to  the  language  of  the  

reasonable   expectations   of   the   parties."                                                                                                                                                                                                                                                                                                                                    

disputed provision, the language of other provisions of the contract, relevant extrinsic  


                              17                            Id.  (quoting  Prichard  v.  Clay,  780  P.2d  359,  362  (Alaska   1989)).   

                              18                            Peterson  v.   Wirum,  625  P.2d  866,  872  n.10  (Alaska   1981).   

                                                                                                                                                                                          - 9  -                                                                                                                                                                               7068  

----------------------- Page 10-----------------------


evidence,   and   case   law   interpreting   similar   provisions."                                                                  Extrinsic   evidence   may  

include "the nature of the business, the parties' negotiations, and the structure of the                                                                                              




                             The  language  of  the  disputed  provision  supports  the  superior  court's  


conclusion that it is an express condition.  Considering the "ordinary, contemporary,  

                                          21  of "subject to" used in a contract, we note that other courts have  


common meaning" 

determined the phrase to be unambiguous as imposing a condition precedent on a party's  


duty of performance.22  Giddings's testimony supports a finding that the parties intended  


this  common  meaning.                                  Addressing  the  Laybourns'  perception  that  funding  was  a  


"foregone  conclusion,"  Giddings  testified  it  would  render  the  "subject  to  funding"  


               19            Id. ;  see also Wright v. Vickaryous                                      , 598 P.2d 490, 497 n.22 (Alaska 1979)                                    

(holding that regardless of whether the plain terms of the contract appear ambiguous,                                                                               

courts may use extrinsic evidence related to the parties' intent to interpret a contract).                                                                            

               20             Cook v. Cook, 249 P.3d 1070, 1079 (Alaska 2011).  


               21            Kay v. Danbar, Inc., 132 P.3d 262, 269 (Alaska 2006) ("[T]he words of the  


contract remain the most important evidence of intention and, unless otherwise defined,  


are given their 'ordinary, contemporary, common meaning.' " (quoting Norville v. Carr- 


 Gottstein Foods Co., 84 P.3d 996, 1001 n.3 (Alaska 2004)) (footnotes omitted)).  


               22            See, e.g., Cedyco Corp. v. PetroQuest Energy, LLC, 497 F.3d 485, 488-89  


(5th Cir. 2007) (holding that contract providing that assignment was "subject to" other  


party's consent expressly indicated a condition precedent); MidAmerica Constr. Mgmt.,  


Inc. v. MasTec N. Am., Inc., 436 F.3d 1257, 1263 (10th Cir. 2006) (holding that contract  


providing that contractor's duty to pay subcontractor was "subject to" payment by owner  


was "indicative of the creation of a condition precedent"); Cranpark, Inc. v. Rogers Grp.,  


Inc., 721 F. Supp. 2d 613, 627 (N.D. Ohio 2010), rev'd on other grounds, 498 F. App'x  


563 (6th Cir. 2012) ("The language 'SUBJECT TO . . . APPROVAL' clearly imposes  


a condition precedent."); 13 RICHARD  A. L                                                 ORD, W           ILLISTON ON                CONTRACTS   38:16 (4th                       


ed. 2009) ("[T]he words 'subject to' in a contract usually indicate a condition to one                                                                                               

party's duty of performance and not a promise by the other.").                                                         

                                                                                         - 10 -                                                                                   7068

----------------------- Page 11-----------------------


provision meaningless.                                                                                       He testified:   

                                                           [I]n 2003 the City can't guarantee we can build a road.  We                                             

                                                          don't have permits, we don't have funding. Without funding                                                                                                                                                                        

                                                          and permits - as it's pointed out earlier, you need all three   

                                                          of these things.                                                       If I have any two of these things, I can't                                                                                                                       

                                                          build the road.                                                  I can have all the money in the world and no                                                                                                                                            

                                                           [Army] Corps permit.  I could have a [public use easement]                                                                                                                                                             

                                                          and money and the Corps would say, no, there's some critical                                                                                                                                                                          

                                                          wetlands there.   

Giddings   testified  that   if   the   project   had   not   been   subject   to   funding   -   if   it   was  

dependent solely on the accumulation of sales tax revenues, which are "real predictable"                                                                                                                                                                                                                                           

-  the agreement would have said that the project "won't be subject to funding - the                                                                                                                                                                                                                                                                                      

 funding will be ready on this date if it's [solely dependent on the] sales tax."                                                                                                                                                                                                                                                              

                                                          The Laybourns contend, however, that "it defies all common sense" to                                                                                                                                                                                                                                                

believe they would have agreed to an exchange in which the City's performance was                                                                                                                                                                                                                                                                                     

completely contingent on events - funding and the approval of permits - that were                                                                                                                                                                                                                                                                                 

ultimately beyond the City's control. But the superior court found that they                                                                                                                                                                                                                                                         did  agree to   

that exchange.                                                    It found that over the course of the six-month negotiation "there was                                                                                                                                                                                                                               

considerable give and take regarding the consideration that the City would provide in                                                                                                                                                                                                                                                                                          

 exchange for the easement" and that "[t]he Laybourns enjoyed significant bargaining                                                                                                                                                                                                                                                    

power   over   the   City   to   influence   the   key   terms   placed   into   the   utility   [e]asement  

document."   These findings are not clearly erroneous and support the superior court's                                                                                                                                                                                                                                                                   

conclusion that the City's obligation to construct the access road was unambiguously                                                                                                                                                                                                                                

conditional and that the parties should reasonably have understood it in that way.                                                                                                                                                                                                                                                          



                                                          See Calais Co. v. Ivy, 303 P.3d 410, 418 (Alaska 2013) (relying on rule  


disfavoring contract interpretation that renders contract terms meaningless).  


                                                                                                                                                                                 - 11 -                                                                                                                                                                            7068  

----------------------- Page 12-----------------------

                                 2.	             The superior court did not clearly err in finding that the City                                                                                       

                                                 did not misrepresent material facts or fail to disclose facts it had                                                                                    

                                                 a duty to disclose.       

                                 The   Laybourns   contend   that   the   City,   through   Giddings,   made   three  

misrepresentations ofmaterial                                            fact during thenegotiations                                       that induced themtoenter into                                  

the easement agreement. They contend that the City misrepresented (1) the access road's                                                                                                             

planned extent (i.e., that it would not end on the Laybourns' property, as they thought,                                                                                                      

but rather would reach Lake Lucille Drive on the east);24                                                                                                      

                                                                                                                                            (2) the source of the funding  


(i.e., that it was dependent on state legislative action rather than simply the accumulation  


of City sales tax revenues); and (3) the conditional nature of the agreement (i.e., that the  


City's obligation to build the road depended on both permitting and funding, neither of  


which was guaranteed).  They further contend that the City omitted the important facts  


that the project was subject to public notice and comment as well as further approvals.  


                                 To prevail on their misrepresentation claim, the Laybourns were required  



to prove the existence of either an affirmative misrepresentation                                                                                              or an omission where  

                                                                      26      The superior court found, however, that they failed to  


there was a duty to disclose. 

                24               The Laybourns contend that Giddings's unilateral decision to seek a longer                                                                                       

access   road   than  the   Laybourns   had   in   mind   substantially   increased   its   cost   and  

"subject[ed] it to more review, public notice and comment, approvals and time."                                                                                                                       

                25               Fraudulent, negligent, and innocent misrepresentation all have a common  


element: the affirmative misrepresentation of a material fact. See Asher v. Alkan Shelter,  


LLC, 212 P.3d 772, 782 (Alaska 2009) (stating elements of fraudulent misrepresentation  


claim);  Valdez Fisheries Dev. Ass'n v. Alyeska Pipeline Serv. Co., 45 P.3d 657, 671  


(Alaska2002) (stating elements ofnegligentmisrepresentation claim); Bevins v. Ballard,  


655 P.2d 757, 761-62 (Alaska 1982) (stating elements of innocent misrepresentation  


claim  against  real  estate  broker),  superseded  by  statute,  AS  34.70.010  et  seq.,  as  


recognized in Amyot v. Luchini, 932 P.2d 244, 246 (Alaska 1997).  


                26               See Arctic Tug &Barge, Inc. v. Raleigh, Schwarz &Powell, 956 P.2d 1199,  



                                                                                                   - 12 -	                                                                                            7068


----------------------- Page 13-----------------------

prove any misrepresentation of fact.                                                                               As for the alleged omissions, the court concluded                                                                           

that "the City has no duty to disclose those facts that the Laybourns are expected to                                                                                                                                                                                   

discover by ordinary inspection and inquiry," such as that City sales tax revenues were                                                                                                                                                                         

already dedicated by ordinance to pay debt service on the bonds and that the City had to                                                                                                                                                                                  

look elsewhere for money to fund most of its capital projects.                                                                                                                                     

                                          The superior court acknowledged that "[t]he testimony at trial described                                                                                                                               

two very different perspectives of the same transaction."                                                                                                                             Since the findings as to the                                                   

parties'   stated  positions   during   the   negotiations   depended   on   the   credibility   of   the  

participants, we defer to the superior court's resolution of conflicts in their testimony as                                                                                                                                                                             

                                                                                                                                     27        Evidence at trial supported the superior  

to what was disclosed and what was not.                                                                                                                                                                                                             

court's finding that there were no misrepresentations.  About the length of the road,  


Giddings testified that if it dead-ended in the Laybourns' property, thus benefitting only  


the Laybourns, the project "[wouldn't] pass the straight-face test in Juneau, [or] at a  


council meeting"; he therefore "pitched [the project] to the Laybourns" as extending all  


the way to Lake Lucille Drive, providing a bona fide public benefit because it operated  


"as a secondary outlet" from the neighborhoods to the Parks Highway.  On the subject  


ofpermitting,althoughheacknowledged it was "possible" theLaybourns misinterpreted  


his "air of confidence" as meaning "this is a done deal," he testified that he would never  


have guaranteed a project unconditionally unless he "had the permits in hand and the  


funding," and in this case he had neither. As for funding, he testified there was "no time  




 1202 (Alaska 1998).  

                     27                   See Adams v. Adams                                                  , 131 P.3d 464, 467 (Alaska 2006) ("Because the                                                                                                        

superior court was in the best position to assess the demeanor and credibility of all the                                                                                                                                                                             

witnesses, we will follow our normal practice of 'consistently grant[ing] deference to  


trial courts where credibility is at issue.' " (alteration in original) (quoting                                                                                                                                                      Whitesides v.   

State, Dep't of Pub. Safety, Div. of Motor Vehicles, 20 P.3d 1130, 1136 (Alaska 2001))).  


                                                                                                                                - 13 -                                                                                                                          7068


----------------------- Page 14-----------------------

that we ever contemplated or communicated that we were going to put sales tax in to                                                                                                                                                                                                                         

fund this road."                                         He testified that he told the Laybourns that the City would have to seek                                                                                                                                                                   

funding from other sources and "[he didn't] think [the Laybourns] had an issue with                                                                                                                                                                                                                

that."  He testified that he "never got close to saying" that the construction of the road   

was "a done deal"; that he never guaranteed the Laybourns that it was a "foregone                                                                                                                                                                                              

conclusion"; and that because any one of three steps - the public use easement, the                                                                                                                                                                                                                     

wetlands   permit,   and   the   funding   - could                                                                                                                "derail   the   project,"   "the   City   was   not  

prepared to guarantee anything in writing."                                                                                                                  The superior court's finding that the City                                                                                             

made no misrepresentations of material fact is thus supported by Giddings's testimony,                                                                                                                                                                                        

which the superior court found credible, and the finding is not clearly erroneous.                                                                                                                                                                        

                                                We also reject the Laybourns' argument that the City omitted material facts                                                                                                                                                                         

it had a duty to disclose.                                                                     "The duty to disclose arises when facts are concealed or                                                                                                                                                    

unlikely to be discovered because of the special relationship between the parties, the                                                                                                                                                                                                                  

course of their dealings, or the nature of the fact itself."                                                                                                                                          28  The duty "is rarely imposed  

where the parties deal at arm's length and where the information is of the type which the  


buyer would be expected to discover by ordinary inspection and inquiry."29   The parties  


to  this  case  did  not  have  a  prior  course  of  dealing.                                                                                                                                            Nor  did  they  have  a  special  


relationship; as the superior court found, they dealt at "arm's length" over a six-month  


period during which the Laybourns exercised "significant bargaining power."  We also  


find  no  clear  error  in  the  superior  court's  determination  that  the  information  the  


                        28                     Hagans, Brown &Gibbs v. First Nat'l Bank of Anchorage                                                                                                                                                       , 810 P.2d 1015,                     

 1019 (Alaska 1991) (citing                                                                       Matthews v. Kincaid                                                        , 746 P.2d 470, 471-72 (Alaska 1987)                                                                             

(adopting R                                ESTATEMENT  (SECOND) OF  TORTS    551(2) (1977))).                                                                                                                                         



                                               Matthews, 746 P.2d at 472; see also Deptula v. Simpson, 164 P.3d 640, 646  


(Alaska 2007) (finding no special relationship when real estate professional represented  


both parties in an arms-length commercial transaction).  


                                                                                                                                                 - 14 -                                                                                                                                           7068

----------------------- Page 15-----------------------

Laybourns allege was omitted - largely having to do with the inner workings of local                                                                                             


government   and   its   sources   of   funding   for   capital  projects                                                                                                           

                                                                                                                                          - was  of  a  kind  not  


uniquely available to the City but rather was "either spelled out in the agreement or  


matters of public record," and it thus was of the type that one "would be expected to  



discover by ordinary inspection and inquiry." 


                             3.	           The  superior  court  did  not  clearly  err  in  finding  that  the  


                                           Laybourns benefitted from the easement agreement.  


                             Finally, we reject the Laybourns' argument that the easement agreement  


was so obviously one-sided they would not have agreed to it absent fraud by the City.  


The superior court found that the Laybourns benefitted from the agreement regardless  


of whether the access road was built. They gave the City an easement with a fair market  


value of $2,900 and received in exchange a payment-in-lieu-of-assessment waiver with  


a potential value of $32,000, depending on how their property was subdivided.   In  


addition, their property more than doubled in value between 2003 and 2013, leading the  


superior court to conclude that "[t]here is no question that the value of the [p]roperty  


with preinstalled water and sewer utility lines has benefitted the Laybourns."  These  



findings of fact are not clearly erroneous. 

              30             The Laybourns contend that they could not be expected to know "what                                                                              

approvals are necessary, who has what authority within the City, what authority the City                                                                                          

Council has over any aspect of the [a]greement, the availability of funding, how long it                                                                                                

takes to accumulate funds or fund a project, what parts if any of the [a]greement are                                                                                               

subject to public comment and notice, how long the process takes[,] and so forth."                                                                                                  

              31             Cf. Matthews,746 P.2dat 472 (observingthat "thelackofoff-street parking  


is an obvious fact which the ordinary purchaser would be expected to discover, by  


ordinary inspection and inquiry, before she bought the property advertised for sale").  


              32             The same rationale leads us to reject the Laybourns' claim that they were  


entitled to rescind the contract due to a unilateral mistake of fact.  A unilateral mistake  



                                                                                        - 15 -	                                                                                 7068


----------------------- Page 16-----------------------

                                        Having considered the language of the agreement and the superior court's                                                                                                                            

 findings of fact, we affirm the superior court's decision that the agreement was expressly                                                                                                                                          

 conditional and its finding that the Laybourns were not fraudulently induced to sign it.                                                                                                                                                                   33  


                    B.	                 The Superior Court Did Not Clearly Err In Finding That The City Did  


                                        Not Breach The Easement Agreement Or The Implied Covenant Of  


                                        Good Faith And Fair Dealing.  


                                        "If [a] condition is not fulfilled, the right to enforce the contract does  



   not come into existence."                                                          The superior court found that the City did not breach its  



 about a basic assumption on which a contract is made may render the contract void if the  


party claiming mistake satisfies three conditions, one of which is that enforcement of the  


 contract would be unconscionable.  Handle Constr. Co., Inc. v. Norton, Inc., 264 P.3d  

                                                                                                                   ESTATEMENT   (SECOND)   OF   CONTRACTS      153  

 367,  371  (Alaska  2011)  (adopting  R 

 (1981)). Unconscionability may be found if the circumstances suggest a "vast disparity                                                                                                                                                

 of bargaining power coupled with terms unreasonably favorable to the stronger party."                                                                                                                                                                              

Askinuk Corp. v. Lower Yukon Sch. Dist.                                                                                , 214 P.3d 259, 270 (Alaska 2009) (quoting                                                                                     OK  

Lumber Co. v. Alaska R.R. Corp.                                                                         , 123 P.3d 1076, 1081 n.17 (Alaska 2005)).                                                                                                 The  

 superior court'sfindingsthat                                                        theLaybourns hadthesuperior bargaining                                                                                     position and that                     

they benefitted from the contract regardless of whether the access road was constructed                                                                                                                                        

both preclude a finding of unconscionability in this case.                                                                                                                 

                    33                  The Laybourns contend that Giddings's representations to them about the  


project, if not fraudulent, are nonetheless actionable as constructive fraud or as negligent  


 or innocent misrepresentations. Because we affirmthesuperior court's finding that there  


were no misrepresentations or omissions of material fact, we need not address these  


 arguments separately.  See supra note 25.  


                    34	                 Prichard   v.   Clay,   780   P.2d   359,   362   (Alaska   1989)   (quoting   5  


                ILLISTON, W                          ILLISTON   ON   CONTRACTS    663, at 126-27 (3rd ed. 1961));                                                                                                                     see also   

 S. W 

Anchorage Chrysler Ctr., Inc. v. DaimlerChrysler Motors Corp.                                                                                                                                       , 129 P.3d 905, 911              

 (Alaska 2009) ("Performance of a duty subject to a condition cannot become due unless                                                                                                                                                        

the   condition  occurs   or   its   non-occurrence   is   excused."   (quoting   RESTATEMENT  

 (SECOND) O                         F  CONTRACTS   225(1) (1981)));                                                                Klondike Indus. Corp. v. Gibson                                                                , 741 P.2d      

 1161, 1165 (Alaska 1987) ("[W]hen a party's performance is subject to a condition                                                                                                                                                  


                                                                                                                         - 16 -	                                                                                                                  7068

----------------------- Page 17-----------------------


agreement with the Laybourns because the "subject to funding" condition was not met.                                                                            


The Laybourns challenge this finding for clear error; they contend that the City did have  


funds  to  pay  for  the  access  road  but  simply  chose  to  spend  them  elsewhere,  and  


separately that the City's failure to apply for the wetlands permit in 2004 was also a  


breach regardless of the status of funding. But ample evidence in the record supports the  


superior court's findings.  


                        First, there is no clear error in the superior court's finding that the City  


failed to acquire the necessary funding for the access road.  The evidence showed that  


the City's usual capital budget could not accommodate a $500,000 project like the Upper  


Road extension; that the sports complex itself, financed by bonds, was underfunded by  


some $6 million; that the City sales-tax increase related to construction of the complex  


was dedicated by ordinance to debt service on the bonds; that the City was dependent on  


state and federal funding sources for additional improvements; and that specific requests  


to the legislature to fund the Upper Road extension were unavailing.  


                        The Laybourns also contend that the City had enough money available to  


construct the access road because it had a "reserve" fund of $378,000 left over from the  


sales-tax increase after construction of the sports complex had been fully paid for.  The  


City admitted that the money in the reserve fund was intended to pay for future capital  


improvements  to  the  complex.                                But  not  only  is  that  amount  still  insufficient  for  


construction of the access road (estimated to cost $500,000), Giddings also testified that  



precedent, that party's duty to perform arises only if the condition is met or is excused.").  

            35          We   acknowledge   a   reading   of   the   easement   agreement   by   which   the  

obligation to seek funding never came into existence because the City never acquired the                                                                 

necessary permits.  But the superior court treated permitting and funding as parallel, not  


sequential, conditions precedent, and the City does not contend this was error.                                                                 

                                                                          - 17 -                                                                    7068


----------------------- Page 18-----------------------

using the reserve fund would still require approval by the City Council - which voted                                                                                                                                                                                                                                                                    

against funding the road, even to the limited extent of a $50,000 engineering contract to                                                                                                                                                                                                                                                                                

 support the City's application for the wetlands permit.                                                                                                                                                                                   

                                                         As for the City's failure to apply for the wetlands permit, it is undisputed                                                                                                                                                                                             

that the agreement required the City to do so in 2004 and, although it began the process,                                                                                                                                                                                                                                                     

it ultimately did not complete it.                                                                                                                But this failure caused no harm to the Laybourns;                                                                                                                            

regardless of whether the City succeeded in the other steps for permitting and approval,                                                                                                                                                                                                                                                 

the access road could never be built without funding.                                                                                                                                         

                                                         The Laybourns also challenge the superior court's finding that the City did                                                                                                                                                                                                                                

not breach the covenant of good faith and fair dealing because it took "affirmative steps"                                                                                                                                                                                                                                                             

to satisfy the agreement's funding and permitting conditions. The covenant of good faith                                                                                                                                                                                                                                                                      

                                                                                                                                                                                                                             36  As the superior court noted, "[t]o  

and fair dealing is included in all contracts in Alaska.                                                                                                                                                                                                                                                                                                     

establish a claim for breach of the covenant . . . , the Laybourns must prove that the City  


                                                                                                                                                                                                                                                                          37          "Where a duty of one  

failed to effectuate the reasonable expectations of the parties."                                                                                                                                                                                                                                                                                                


party is subject to the occurrence of a condition, the additional duty of good faith and fair  


dealing . . . may require . . . refraining from conduct that will prevent or hinder the  


occurrence of that condition or . . . taking affirmative steps to cause its occurrence."38  


A party asserting a breach of the covenant must prove that the other party failed to act  


                             36                         Anchorage Chrysler Ctr. v. DaimlerChrysler Motors Corp.                                                                                                                                                                                                    , 221 P.3d 997,                             

922 (Alaska 2009);                                                                 see also Prichard v. Clay                                                                                   , 780 P.2d 359, 363 (Alaska 1989) (stating                                                                                                        

that a party's "duty to perform may have matured despite the condition's nonoccurrence                                                                                                                                                                                                                            

if [the party] prevented or hindered its occurrence").                                                                                                                                                                            

                             37                          See Anchorage Chrysler Ctr., 221 P.3d at 992.  


                             38                           Casey v. Semco Energy, Inc., 92 P.3d 379, 384 (Alaska 2004) (alterations  


in original) (quoting Gordon v. Foster, Garner & Williams, 785 P.2d 1196, 1199 n.6  


(Alaska 1990)).  


                                                                                                                                                                              - 18 -                                                                                                                                                                         7068


----------------------- Page 19-----------------------

in subjective good faith, "meaning that it cannot act to deprive the other party of the                                                                                   

explicit benefits of the contract," or that it failed to act "in objective good faith, which                            

consists of acting in a manner that a reasonable person would regard as fair."                                                                              39  


                           The Laybourns contend that the City's inaction made it unlikely that the  


"subject to funding" condition  would  ever be satisfied.                                                                They  assert that Giddings  


expanded the project to make it more expensive and complicated; that he waited three  


years after the agreement was signed before he made his first request for funds from the  


City Council; that the City selectively chose not to tap the sales tax reserve fund after the  


sports complex was completed; that the City ignored other possible state, borough, and  


federal  sources  of  project  funds;  and  that  in  formulating  funding  requests  to  the  


legislature and the City Council, Giddings never explained to them the importance of the  


utility easement or how much money the Laybourns saved the City by agreeing to it.  


                           But we see no clear error in the superior court's finding that "[t]he City took  


affirmative steps to cause the funding and permitting conditions to be satisfied." Lacking  


sufficient local resources, the City included the capital project in two successive but  


unsuccessful  requests  to  the  legislature.                                            Although  the  Laybourns'  counsel  asked  


Giddings at trial about other sources of federal, state, and borough funding that for one  


reason or another the City did not pursue, the Laybourns presented no evidence that any  


of these sources were likely enough to pay off that it would have been reasonable to  


pursue them.  Giddings testified that he carried the wetlands permit application process  


as far as he could without expert support, then was stymied when the City Council, in the  


face of public opposition, declined to authorize the engineering contract necessary to  


complete it.  And it was only when City Council and public opposition to the Upper  



                           Id. (citing Ramsey v. City of Sand Point, 936 P.2d 126, 133 (Alaska 1997));  


see also Anchorage Chrysler Ctr., 221 P.3d at 992.  


                                                                                  - 19 -                                                                                    7068  

----------------------- Page 20-----------------------


Road extension became evident that Giddings dropped the capital project from the next  


year's funding request to the state legislature.  


                    The evidence thus shows that the City took reasonable affirmative steps to  


satisfy the conditions of the easement agreement, and it fails to show that there were  


other steps the Laybourns reasonably expected.  We find no clear error in the superior  


court's decision that the City did not breach the covenant of good faith and fair dealing.  


          C.        The City's Contractual Obligations Were Not Indefinite.  


                    Finally,  the  Laybourns  contend  that  the  City  breached  the  easement  


agreement by ultimately discontinuing efforts to seek funding; they argue that under the  


terms of the agreement and the parties' reasonable expectations, the City's obligation to  


build the access road was and still is "ongoing."  Although the superior court did not  


expressly address this argument, we assume it was implicitly rejected by the superior  


court's findings that the City discontinued its efforts in 2006 and yet did not breach the  


agreement or the covenant of good faith and fair dealing.  


                    The agreement states that "[u]pon approval of the public use easement and  


wetlands permit, the City will construct the access road in 2005, subject to funding."  


The City's second funding request to the state legislature was in 2006, and that same year  


Giddings asked the City Council to fund the engineering contract in support of the  


wetlands permit application; these activities demonstrate the City's own understanding  


that its reasonable efforts extended past 2005.  But the City's obligation was not of an  


unlimited duration.  


                    As already noted, when the occurrence of a condition precedent "is within  


the sole control of a single party, most authorities require that party to take 'reasonable'  


                                                              - 20 -                                                        7068

----------------------- Page 21-----------------------


steps to obtain the occurrence of the condition."                                                 Timing may be spelled out in the                           

contract but need not be.                         "Where no provision is made as to time of performance, a                                                       

                                                     41   Thus, "[i]f performance must occur within a reasonable  

reasonable time is implied."                                                                                                                   

time, then conditions precedent, because they imposeadutyto performon obligees, must  


also occur within a reasonable time."42                                   "Ordinarily, what constitutes a reasonable time  


is a question of fact for the trial court."43  A reasonable time is "to be determined upon  


consideration of the subject matter of the contract, what was contemplated at the time the  


contract was made, and other surrounding circumstances."44  These rules, taken together,  


in this case mean that although the City was required to make reasonable efforts to cause  


the conditions precedent to occur, it could cease its efforts after a reasonable time.45  


             40          Casey, 92P.3d               at 385 (citing           Dayan v. McDonald's Corp.                           , 466 N.E.2d 958,        

972 (Ill. App. 1984); J                   OHN  EDWARD  MURRAY, J   R., M                            URRAY ON            CONTRACTS    111(B),   

at 622-23 (3d ed. 1990)).         

             41          Hall v. Add-Ventures, Ltd., 695 P.2d 1081, 1089 (Alaska 1985); see also  


Castle Props., Inc. v. Wasilla Lake Church of the Nazarene, 347 P.3d 990, 996 n.24  


(Alaska 2014) (quoting Hall, 695 P.2d at 1089); Commercial Recycling Ctr., Ltd. v.  


Hobbs Indus., 228 P.3d 93, 102 n.27 (Alaska 2010) (quoting Hall, 695 P.2d at 1089).  


             42          Pearcy v. Envtl. Conservancy of Austin &Cent. Tex., Inc., 814 S.W.2d 243,  


246 (Tex. App. 1991) (noting that "[t]his rule prevents the enforcement of contingent  


obligations . . . beyond a period reasonably within the parties' contemplation").  


             43          Hall, 695 P.2d at 1089.  


             44          Id.  

             45          See, e.g., Airport Rd. Dev., LLC v. Lithia Real Estate Inc., No. CIV. S-08- 


 1458 GGH, 2009 WL 2051099 at  *11-13 (E.D. Cal. July  10, 2009) (finding that "a  


reasonable time is implied . . . for satisfaction of the conditions precedent" in a contract  


requiring  an  auto dealer  to  develop  a parcel  of  land  and  that  the  auto  dealer  acted  


reasonably when it ceased efforts to satisfy the conditions after the city failed to approve  


one of them, the buy-back of another parcel).  


                                                                            - 21 -                                                                       7068


----------------------- Page 22-----------------------

                                                                                              The agreement was signed in 2003 and referred to activities that the parties                                                                                                                                                                                                                                                                                                                                                                                                   

 expected to be done in 2003, 2004, and 2005. Giddings testified that the inclusion of the                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             

year 2005 in the agreement as a target date was not "arbitrary" but rather was intended                                                                                                                                                                                                                                                                                                                                                                                                                                                                       

to reflect the two-year time frame that the City contemplated for projects of this type,                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                

 accounting for the process of obtaining funding and the limits of political will. The City                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   

 failed to satisfy the funding and permitting conditions by 2005 but, as noted, continued                                                                                                                                                                                                                                                                                                                                                                                                                                                             

 its efforts into 2006 before Giddings dropped the project in the face of adverse public                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      

 comment and opposition from the City Council. Based on the superior court's findings,                                                                                                                                                                                                                                                                                                                                                                                                                                                                        

we see no clear error in its implicit rejection of the Laybourns' argument that the City                                                                                                                                                                                                                                                                                                                                                                     

breached either the terms of the agreement or the covenant of good faith and fair dealing                                                                                                                                                                                                                                                                                                                                                                                                                                                                               

when it discontinued its efforts after 2006.                                                                                                                                                                                                                   

V.                                             CONCLUSION  

                                                                                              We AFFIRM the superior court's judgment in favor of the City.46  


                                               46                                             Because we affirm the superior court's judgment, we find it unnecessary                                                                                                                                                                                                                                                                                                                                                  

to address the City's cross-appeal, arguing that the Laybourns' contract claims were                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   

barred by the statute of limitations.                                                                                                                               

                                                                                                                                                                                                                                                                                             - 22 -                                                                                                                                                                                                                                                                                        7068

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