Suitts v. First SEC. Bank of Idaho, NA

DONALDSON, Chief Justice.

Plaintiffs-appellants, Richard 0. Suitts and Kathryn W. Suitts (hereinafter Suitts) commenced this action on January 8, 1975, seeking damages for breach of contract based upon the alleged wrongful refusal of the escrow holder First Security Bank of Idaho, N. A. (hereinafter First Security Bank) and vendors, W. E. McMurtrey and Pauline M. McMurtrey (hereinafter McMurtreys), defendants-respondents herein, to deliver a certain warranty deed held in escrow to them pursuant to a written contract also held in escrow.

This action arises out of a contract entered into by the Suitts and the McMurtreys on or about April 15, 1969, whereby the Suitts agreed to purchase over a period of time certain real property, cattle and farm equipment from the McMurtreys. An escrow agreement was executed by the Suitts and McMurtreys, in which the Mountain Home branch of the First Security Bank was designated as escrow holder. The land sale contract, the bill of sale, a warranty deed from the McMurtreys to the Suitts, and a quitclaim deed back to the McMurtreys from the Suitts were placed in escrow. The contract provided that these documents placed in escrow would be delivered to the Suitts upon payment of the purchase price.

Prior to the full payment of the purchase price and complete execution of the contract, a series of disputes arose between the Suitts and the McMurtreys. The Suitts brought two separate actions against the McMurtreys which were ultimately consolidated into one action. The Suitts sought reformation of the legal description of the real property contained in the agreement and in addition alleged the McMurtreys were obstructing an easement granted to the Suitts over land reserved by the McMurtreys. The McMurtreys counterclaimed for breach of contract seeking a declaration of default. The trial court entered judgment reforming the property description and ordering the McMurtreys to remove a portion of a tree obstructing the easement in question. In addition, the court ruled that the Suitts were not in material breach of the contract and dismissed with prejudice the McMurtreys’ counterclaim.

In response to this decision, the McMurtreys filed and perfected an appeal to the Idaho Supreme Court. While this appeal was pending, on January 2,1975, the Suitts tendered to the First Security Bank, as escrow holder, $20,917.81, the remaining balance of the purchase price plus interest. The bank accepted the entire contract balance and tendered the same to the McMurtreys who refused to accept the payment. There is a factual dispute as to whether the bank then tendered the payment back to the Suitts, who refused to accept the payment. The bank then tendered notice to both parties that it was holding the escrow at status quo until the rights, powers and duties of the parties became finally determined by judicial action.

The Suitts then commenced this present action against the bank and the McMurtreys for the sum of $250,000 in damages for alleged wrongful failure to deliver the escrow documents. On February 18, 1976, the Idaho Supreme Court handed down its decision, which affirmed the reformation of the contract made by the trial court and also affirmed the refusal of the trial court to declare a forfeiture of the contract. However the Idaho Supreme Court reversed the part of the trial court’s decision ordering the McMurtreys to remove the alleged obstruction of the easement across their land. Suitts v. McMurtrey, 97 Idaho 416, 546 P.2d 62 (1976).

After the Idaho Supreme Court decision, the bank received authorization from the McMurtreys to release the escrow documents to the Suitts on March 4, 1976. The bank delivered the escrow instruments to the Suitts and the payment was delivered to the McMurtreys to close the escrow.

This present appeal is from district court orders granting summary judgment in favor of both the First Security Bank and the McMurtreys and dismissing the Suitts’ action for breach of contract based on wrongful refusal to deliver the escrowed documents.

I

The trial court granted summary judgment in favor of the McMurtreys dismissing Suitts’ claim for relief against them holding that “there was no breach of duty owed by the McMurtreys to Suitts for instructing the escrow holder not to deliver the deed and other escrow documents pending the decision on appeal.” The trial court held the McMurtreys had a right to stay the operation of the escrow contract pending a final determination on appeal. The trial court came to this conclusion based on its determination that under the terms of I.C. § 13-208 and I.C. § 13-211 all proceedings or actions which would affect the status quo during the pendency of an appeal are stayed.¹ The trial court stated that the continuation of the escrow contract would have ultimately led to the vesting of title in the Suitts during the appeal, thus changing the status quo and making the McMurtreys’ appeal meaningless. The trial court concluded that since the purpose of the above statutes was to preserve the status quo during an appeal, the taking of an appeal in the instant case stayed the operation of the escrow contract.

We disagree with the trial court’s analysis of the effect of the McMurtreys’ appeal on the operation of the escrow contract. Idaho Code § 13-211 provided:

“In cases not provided for in sections 13-204 [money judgment], 13-205 [judgment in replevin], 13 — 206 [judgment in specific performance] and 13-207 [judgment in ejectment], the perfecting of an appeal by giving the undertaking, or making the deposit mentioned in section 13-203, stays proceedings in the court below upon the judgment or the order appealed from . . . .”

It is clear that under I.C. § 13-211 the mere perfecting of an appeal by the McMurtreys stayed further proceedings in the district court pertaining to the action which was the subject of the appeal. Idaho Code § 13-211 in effect provides an automatic stay or supersedeas upon the perfecting of an appeal, thus divesting the trial court of “jurisdiction to act in any manner (with relation to the rights and liabilities of an appellant) except in aid of and not inconsistent with the appeal.” Coeur d’Alene Turf Club, Inc. v. Cogswell, 93 Idaho 324, 329, 461 P.2d 107, 112 (1969); Anderson v. Pickrell, 115 Ariz. 589, 566 P.2d 1335 (1977). While it is clear that the actions of the trial court below are stayed by the taking of an appeal, it is not evident that the operation of an escrow contract itself is stayed.

“[I]t has sometimes been said that self-executing judgments are not affected by a supersedeas or a stay of proceedings, on the theory that supersedeas operates only to prevent action by the trial court and not to suspend the effect of the judgment, and as a self-executing judgment requires no process for its enforcement, there is nothing upon which a supersede-as could operate.” 4 Am.Jur.2d Appeal and Error § 368, p. 842.

The California Supreme Court in Caminetti v. Guaranty Union Life Insurance Co., 22 Cal.2d 759, 141 P.2d 423, 425 (1943), in dealing with a statute which closely resembled I.C. § 13-211, stated:

“The order appealed from is self-executing in that it requires no process of the court to carry it into effect. The appeal does not stay the effectiveness of such a judgment. The writ of supersedeas acts only upon proceedings to enforce the judgment in the court below — not on the judgment itself. Sec. 949, Code Civ. Proc.; Dulin v. Pacific W. & C. Co., 98 Cal. 304, 33 P. 123; In re Imperial Water Co. No. 3, 199 Cal. 556, 250 P. 394. In the Dulin case it was pointed out that the writ of supersedeas ‘cannot be used to perform the functions of an injunction against the parties to the action, restraining them from any act in the assertion of their rights, other than to prevent them from using the process of the court below to enforce the judgment * * *.’ ”

We agree with the approach of the California court and find it particularly applicable to the fact situation in the instant case. The judgment of the lower court finding no default by the Suitts on the land sale contract for the property required no further process by the lower court for its enforcement and had intrinsic effect. A self-executing judgment, like this one, leaves no proceedings to be stayed by operation of I.C. § 13-211. “[A] judgment, order, or decree which does not command or permit any act to be done, or is not of a nature to be actively enforced by execution or otherwise, but is self-executing, is not within the statute, as there is nothing upon which a stay bond can operate in such a case.” Higgins v. Fuller, 48 N.M. 215, 148 P.2d 573, 574 (1943). The operation of the escrow contract was not stayed by the appeal perfected by the McMurtreys since the judgment of the trial court was self-executing. Upon completion of the terms of the escrow contract the Suitts had a right to the es-crowed documents, notwithstanding the appeal.

McMurtreys complain that a successful prosecution of their appeal in the original action would have been a meaningless act if during the pendency of the appeal the Suitts could have compelled First Security Bank to deliver the escrowed documents to them. Therefore, the McMurtreys argue, it was imperative to stay the operation of the escrow to preserve the property in status quo. McMurtreys contend that if the es-crowed documents were delivered to the Suitts, they in turn could have transferred the property to a bona fide purchaser from whom the property would be irretrievable— even if the McMurtreys were successful on appeal. We do not agree that a stay under I.C. § 13-211 was the only safeguard available to the McMurtreys to protect their interest in the property pending appeal.

Since the Suitts were in possession of the property and the McMurtreys’ main concern was the transfer of the property to a bona fide purchaser, the appropriate method the McMurtreys should have followed to protect their interest in the property was the filing of a lis pendens on the property. Idaho Code § 5-505 states in relevant part:

“the defendant at the time of filing his answer, when affirmative relief is claimed in such answer, or at any time afterward, may file for record with the recorder of the county in which the property or some part thereof is situated, a notice of the pendency of the action, containing the names of the parties, the object of the action or defense, and a description of the property in that county affected thereby. From the time of filing such notice for record only shall a purchaser or incumbrancer of the property affected thereby be deemed to have constructive notice of the pendency of the action, and only of its pendency against parties designated by their real names.”

Under the statute existing at the time of the initial controversy and appeal, an action is deemed pending from the time of its commencement until its final determination on appeal. I.C. § 12-606 (repealed March 31, 1975). It seems clear that under the statutory law existing at the time of the original action the lis pendens would continue to have effect until the final determination of the action on appeal. See Petty v. Hall, 257 Ala. 145, 57 So.2d 620 (1952); Maedel v. Wies, 15 N.W.2d 692 (Mich.1944); 54 C.J.S. Lis Pendens § 36. The effect of filing a lis pendens is that a person who purchases or acquires rights in the subject matter of the litigation during the pendency of the action (which encompasses appeal) takes subject to the final disposition of the case. Petty v. Hall, supra; 54 C.J.S. Lis Pendens § 36; cf. Radermacher v. Daniels, 64 Idaho 376, 133 P.2d 713 (1943) (actual notice). We conclude that the trial court erroneously granted summary judgment to the McMurtreys on the ground that the operation of the escrow was stayed pursuant to I.C. §§ 13-208 and 13-211 during the pendency of the appeal. The McMurtreys, absent a statutory stay, could have protected themselves against transfer of the property in question to a bona fide purchaser during the pendency of the appeal by filing a lis pendens.

II

The trial court granted summary judgment in favor of First Security Bank dismissing the Suitts’ action on the ground that the escrow contract allowed the bank to withhold delivery of the escrowed documents without liability until its duties were finally determined by judicial action. The relevant provision of the escrow contract reads as follows:

“You may at your option at any time without liability to anyone, withhold delivery of all said documents and property and decline to receive further payments hereunder until your rights, powers, and duties hereunder in any respect requested by you have been settled acceptably to yourselves by further written instructions of the undersigned or finally determined by judicial action.”

The duties of an escrow holder are those set out in the escrow agreement. Foreman v. Todd, 83 Idaho 482, 364 P.2d 365 (1961). Contract clauses which attempt to limit liability are construed strictly against the person relying on them, especially when that person is the preparer of the document. Anderson & Nafziger v. G. P. Newcomb, 100 Idaho 175, 595 P.2d 709, (1979). The trial court correctly determined that under the above contractual term the escrow holder has the right in appropriate circumstances to withhold delivery of the escrowed documents. However, we disagree with the court’s determination that the events which transpired in this case constituted “appropriate circumstances” for withholding the documents.

First, it appears from the language of the provision that if the escrow holder elects to withhold delivery of the documents to the buyer, it must also decline to receive further payments from the buyer. The record shows that on January 2, 1975 First Security Bank in fact received Suitts’ tender of the remaining balance of the purchase price plus interest. This amount was then tendered by the bank to the McMurtreys, who refused to accept it. There are conflicting affidavits as to whether the bank then tendered the money back to the Suitts, who also refused, or whether the bank immediately notified both Suitts and McMurtreys that it was holding the money in a suspense account. This conflict could bear on the issue of damages, and should be resolved on remand. However, in either event, the bank’s refusal to deliver the escrowed documents, once it received the full balance from the Suitts, was improper under the terms of the escrow agreement and the facts of this case. It would be one-sided in the extreme to construe the escrow agreement as allowing the neutral escrow holder to accept full payment from the purchaser while at the same time refusing to deliver the documents for which payment was made. Therefore, it was error for the trial court to grant the escrow holder’s motion for summary judgment.

First Security Bank, as escrow holder, violated the escrow provision in another respect. The clause envisions that when an escrow holder is faced with conflicting demands by the seller and buyer, it may withhold delivery of the escrowed documents and decline further payments, without liability, while it requests clarification of its rights, powers and duties. The escrow holder’s request for clarification of its duties may be satisfied (1) by agreement between the buyer and seller or (2) by final judicial determination.

We are not persuaded that First Security may invoke the protection of the above exculpatory clause by its actions in merely placing its escrow account in suspense while awaiting the outcome of the appeal in the original case. As stated above, exculpatory clauses are construed strictly against the person relying on them, especially when that party is the preparer of the clause. Anderson & Nafziger v. G. T. Newcomb, supra. To avail itself of the exculpatory protection afforded by the clause in question, it was incumbent upon First Security to take affirmative steps to seek clarification of its duties under the escrow agreement. Stripped to its relevant essentials, the clause provides that the escrow holder may withhold delivery of the documents and refuse to accept further payments until its rights, powers and duties under the escrow agreement, in any respect requested by it, have been either (1) settled acceptably to it by written instructions from the parties to the sale contract, or (2) finally determined by judicial action. The escrow term providing for clarification by the second means clearly contemplates an action brought by the escrow holder for a judicial determination of its rights, powers and duties under the escrow agreement. The responsibility of the escrow holder to seek clarification of its duties under the terms of the escrow was not satisfied by merely holding the escrow in limbo while it awaited the outcome of an appeal in an action brought by the parties to determine their rights and duties under the sale contract. The initial issue faced by First Security Bank was the determination of its own duties during the pendency of the appeal when faced with a demand by the buyers (Suitts) for the escrowed documents after they had performed all the conditions of the purchase contract. Instead of seeking judicial clarification of the effect of the appeal on the operation of the contract, First Security Bank placed the escrow contract in suspense and awaited a final judicial determination on appeal of the ultimate issue of whether there had been a default under the sale contract. As we previously held in this opinion, the appeal of the original action did not stay the operation of the escrow contract. Therefore, the Suitts had a right to the escrowed documents upon fulfillment of the terms of the purchase agreement, notwithstanding the pendency of the appeal concerning whether there had been a default. The approach adopted by First Security Bank was not in accordance with the contract provision to deliver the escrowed documents upon fulfillment of the Suitts’ duty to pay the purchase price.

We are convinced that the proper course of action for First Security Bank, as escrow holder, to have followed and one which would have invoked the protection of the clause in question, was to have brought an interpleader action pursuant to I.R.C.P. 22. “[Sjince the purpose of interpleader is to protect against multiple litigation, inter-pleader is a proper remedy whenever, as in this case, a stakeholder stands in reasonable apprehension of diverse claims against his fund.” First Security Bank of Idaho, Nat. Assn. v. Rogers, 91 Idaho 654, 656, 429 P.2d 386, 388 (1967). In First Security Bank of Idaho, Nat. Assn. v. Rogers, supra, which involved an interpleader action brought by the bank as escrow holder to adjudicate conflicting claims against the fund in question, this Court indicated that a clause identical to the one in controversy in the instant case authorized if not contemplated the bringing of an interpleader action by the escrow holder to settle diverse claims against the fund it holds. We are persuaded that the bringing of an interpleader or similar affirmative action by the escrow holder was necessary to invoke the protection of the exculpatory clause in question. The scant record before us at this stage indicates there were not sufficient affirmative steps taken by the bank as escrow holder to actuate the clause. Summary judgment therefore should not have been granted.

Judgment reversed.

SHEPARD and BISTLINE, JJ., and DUNLAP, J., Pro Tem., concur.

1 . I.C. §§ 13-208, 211 were in effect at the time of the above controversy and appeal. They were repealed in 1977 and the area of stay of proceedings upon appeal is now covered in I.A.R. 13.