Laybourn v. City of Wasilla, 362 P.3d 447

Background

In 2003 the Laybourns granted the City of Wasilla a 60-foot public water and sewer easement over the north edge of their property in exchange for (1) a waiver of sewer connection/PILA fees and (2) the City’s promise to apply for easement and wetlands permits and to build an access road (stated to be built in 2005), with the road construction expressly “subject to funding.”
The City installed water and sewer lines in 2003 and obtained conditional borough approval for the public use easement, but it did not complete a wetlands permit application in 2004 or secure final funding for the road.
The City sought legislative funding in 2005 and 2006 but was unsuccessful; a City Council vote denied authorization of an engineering contract (≈$50,000) needed to complete permitting, and public opposition developed.
The Laybourns sued in 2011 alleging fraudulent inducement, breach of contract, breach of the covenant of good faith and fair dealing, and seeking specific performance or rescission and damages.
The superior court found the agreement unambiguously conditional (construction contingent on permits and funding), found no actionable misrepresentations or omissions, concluded the City made reasonable efforts to satisfy conditions, and entered judgment for the City; the Supreme Court of Alaska affirmed.

Issues

Issue	Plaintiff's Argument (Laybourns)	Defendant's Argument (Wasilla)	Held
Was the City’s promise to build the road an unconditional obligation?	“Subject to funding” only set timing; the City had an ongoing obligation and should have built the road when funds accrued.	The contract language makes construction expressly conditional on approval of the public use easement, wetlands permit, and funding.	Held: Construction obligation was an express condition precedent; not enforceable because conditions were unmet.
Did the City fraudulently induce the Laybourns to sign (misrepresentations/omissions)?	Giddings misrepresented the road’s scope, funding source, and the conditionality; omitted material facts about public review and funding limitations.	Negotiations were arm’s-length; no affirmative misrepresentations; the contested information was discoverable or disclosed; City did not guarantee permits or funding.	Held: No fraudulent inducement; superior court’s credibility findings supported that City made no actionable misrepresentations or duty-to-disclose omissions.
Did the City breach the contract or implied covenant of good faith and fair dealing by failing to pursue or secure funding/permitting?	City abandoned reasonable efforts, delayed, expanded project scope, and failed to use available reserve funds or pursue alternate funding.	City pursued reasonable, available steps (permit application progress, two legislative funding requests); local funding shortfalls and Council/public opposition limited feasible action.	Held: No breach of contract or covenant; City took reasonable affirmative steps and cessation after a reasonable time was not a breach.
Were the City’s obligations indefinite or ongoing such that failure to build later constituted breach?	The parties’ expectations made the obligation ongoing beyond 2005.	Time was implied reasonable; the City’s efforts into 2006 and subsequent cessation in the face of political opposition were within a reasonable timeframe.	Held: Obligations were not indefinite; performance was to occur within a reasonable time and the City did not breach by discontinuing efforts after a reasonable period.

Key Cases Cited

Nautilus Marine Enters., Inc. v. Exxon Mobil Corp., 305 P.3d 309 (Alaska 2013) (standard for contract interpretation and use of extrinsic evidence)
Jarvis v. Ensminger, 134 P.3d 353 (Alaska 2006) (definition and treatment of conditions precedent)
Prichard v. Clay, 780 P.2d 359 (Alaska 1989) (conditions precedent and effect on performance obligations)
Casey v. Semco Energy, Inc., 92 P.3d 379 (Alaska 2004) (good faith duty may require steps to cause a condition’s occurrence)
Kay v. Danbar, Inc., 132 P.3d 262 (Alaska 2006) (words of a contract given ordinary meaning unless defined)
Calais Co. v. Ivy, 303 P.3d 410 (Alaska 2013) (favoring contract interpretations that give effect to all terms)