Bergman v. Commerce Trust Co., N.A., No. 93,936.

• Decision Date: 10 March 2006
• Docket Number: No. 93,936.
• Parties: Bradley A. BERGMAN and Elizabeth R. Bergman, Appellants, v. COMMERCE TRUST COMPANY, N.A., and Mary Richardson, Appellees.
• Court: Kansas Court of Appeals

129 P.3d 624

Bradley A. BERGMAN and Elizabeth R. Bergman, Appellants, v. COMMERCE TRUST COMPANY, N.A., and Mary Richardson, Appellees.

No. 93,936.

Court of Appeals of Kansas.

March 10, 2006.

Bruce F. Landeck, of Overland Park, for appellants.

Leonard Rose and Amy Allen, of Lathrop & Gage L.C., of Kansas City, Missouri, for appellees.

Before GREEN. P.J., McANANY, J., and BRAZIL, S.J.

GREEN, P.J.

This is a summary judgment case involving whether certain express conditions precedent had been fulfilled. These conditions precedent qualified Bradley and Elizabeth Bergmans' right of first refusal to purchase a 10-acre tract from Crispan Richardson, now deceased. Both sides moved for summary judgment. Mary Richardson and Commerce Trust Company, N.A. (Commerce), Crispan Richardson's successor in interest, sought judgment in the action on grounds that the qualifying conditions precedent had never occurred. The Bergmans sought a ruling that the right of first refusal had been triggered. Determining that the conditions qualifying the Bergmans' right of first refusal had never been fulfilled, the trial court granted Commerce and Mary's motion for summary judgment and denied the Bergmans' motion.

We determine that two separate conditions precedent would have had to occur before triggering the Bergmans' right of first refusal: (1) Richardson or Commerce would have had to form a specific intent to sell, transfer, or convey the 10-acre tract; and (2) Richardson or Commerce would have had to receive a bona fide written offer for the purchase of the 10-acre tract that Richardson or Commerce would have accepted. Because the Bergmans have failed to show that these conditions precedent were satisfied, the Bergmans' right of first refusal never ripened into an enforceable right to purchase the property. Accordingly, we affirm.

In June 1995, Crispan Richardson and the Bergmans executed the Declaration of Restrictions and Reservations (Declaration) which granted both parties the right of first refusal on specified adjacent properties owned by each of the parties. The Declaration stated in part that Richardson would not "sell, transfer or convey" the 10 acres in dispute "to any third party without first offering the same to [the] Bergman[s], or to the survivor of them, on the same terms and conditions as any bona fide written offer which Richardson has received for the purchase of such property." Interestingly, paragraph 3(e) of the right of first refusal indicated that an offer did not constitute a bona fide written offer unless the Bergmans could match the terms and conditions of such offer. The Declaration was filed with the Johnson County Register of Deeds in June 1995.

In August 2001, Richardson executed a will and trust leaving all of his personal property and real property, including the 10 acres in dispute, to Christa Park. Park is not a party to this action. In September 2001, Richardson executed a deed conveying certain real estate, including the 10 acres in dispute, to the trust. The deed was not recorded. Richardson died several days later, and Commerce was appointed special administrator of Richardson's estate.

Mary Richardson, the decedent's sister, contested the will, claiming that Crispan Richardson did not have the mental capacity to execute the will, trust, and deed. Mary, Commerce, and Park later entered into a settlement agreement which was approved as part of the probate/estate matter. Under the settlement agreement, Commerce transferred certain real estate, including the disputed 10 acres, to Mary by a Kansas Special Administrator's Deed of Distribution. This transfer was made in December 2003.

In April 2003, before the deed of distribution was executed and delivered, Bradley Bergman made a written offer to Commerce to purchase the disputed 10 acres for $106,000. In September 2003, Patrick Smith wrote to Commerce and offered $106,000 for the disputed 10 acres. Commerce responded to Smith in a written letter, stating: "Please be advised that Commerce Bank does not view your letter as a bona fide, serious offer to purchase the property identified therein. Further, Commerce Bank would not be interested in pursuing a sale at the price suggested in your letter. Accordingly, your letter will be disregarded."

The Bergmans sued Commerce and Mary, and the parties later both moved for summary judgment. The parties stipulated that Crispan Richardson's mental competency to execute the instruments was not at issue for purposes of the summary judgment motions. Moreover, the parties stipulated that the only issue was whether the Bergmans' right of first refusal had been triggered.

The Bergmans argued that Bradley's April 2003 offer, the Smith offer, and the transfer and conveyance by Commerce to Mary triggered their right of first refusal in the subject property. On the other hand, Commerce and Mary contended that none of these events triggered the right of first refusal. Commerce and Mary asserted that Crispan Richardson and the Bergmans intended that the right of first refusal would only be triggered upon an intended sale based on a bona fide written offer from a third party.

Determining that the transfer made by Commerce to Mary was not based on a bona fide written offer, the trial court granted Commerce and Mary's motion for summary judgment and denied the Bergmans' motion for summary judgment.

On appeal, the Bergmans maintain that the trial court erroneously interpreted the plain language in the Declaration and disregarded the parties' intent in signing the Declaration. Because the summary judgment motions were decided on stipulated facts, our review of the trial court's decisions is de novo. See Roy v. Young, 278 Kan. 244, 247, 93 P.3d 712 (2004).

Moreover, when construing the right of first refusal provisions contained in the Declaration, we exercise a de novo standard of review. See Liggatt v. Employers Mut. Casualty Co., 273 Kan. 915, 920, 46 P.3d 1120 (2002). When construing this written instrument, we bear in mind the following rules:

"An interpretation of a contractual provision should not be reached merely by isolating one particular sentence or provision, but by construing and considering the entire instrument from its four corners. The law favors reasonable interpretations, and results which vitiate the purpose of the terms of the agreement to an absurdity should be avoided. [Citation omitted.]" Johnson County Bank v. Ross, 28 Kan. App.2d 8, 10-11, 13 P.3d 351 (2000).

We turn now to paragraph 1 of the right of first refusal set forth in the Declaration. The relevant language stated:

"1. Richardson will not sell, transfer or convey

the west one-half of the south one-half of the southwest quarter of Section 30, Township 14, Range 25, in Johnson County, Kansas, which property, together with the property described in paragraph 2 hereof is referred to herein as `The Property,'

to any third party without first offering the same to [the] Bergman[s], or to the survivor of them, on the same terms and conditions as any bona fide written offer which Richardson has received for the purchase of such property."

The language of the Declaration leaves no doubt that at least two separate conditions precedent must be satisfied before the Bergmans' right of first refusal would have ripened into a present enforceable contract right.

First, Commerce and Mary maintain that Commerce's desire to sell the property is a condition precedent to the Bergmans' right of first refusal. Commerce and Mary are essentially arguing that a willing seller is an "implied in fact" condition to the Bergmans' right of first refusal. "Implied in fact conditions are similar in their nature to express conditions, except that the parties have expressed their intentions not in words but in the nature of their undertakings." 15 Williston on Contracts § 48:1 (4th ed.2000); see Restatement (Second) of Contracts § 226(c) (1979).

Although not cited by either party, our Supreme Court's decision in Anderson v. Armour & Company, 205 Kan. 801, 473 P.2d 84 (1970), offers guidance on whether a preemptive right is conditioned upon a willing seller. In Anderson, the Andersons entered into a lease agreement in which they leased property from Armour. A provision of the lease agreement stated that in the event Armour desired to sell the premises, Armour would notify the Andersons in writing of its intention and of the purchase price and would allow the Andersons 15 days in which to attempt to negotiate a purchase and sale contract with Armour. Without first notifying the Andersons, Armour conveyed by warranty deed the property that was being leased to the Andersons to Iowa Beef Packers, Inc. The Andersons sued Armour and received a favorable jury verdict. Armour appealed, arguing that the lease provision was unenforceable.

On appeal, our Supreme Court determined that the provision in question gave the Andersons a preemptive right of purchase which ripened into an enforceable right to purchase when Armour decided to sell. In making this determination, our Supreme Court cited Weintz v. Bumgarner, 150 Mont. 306, Syl. ¶¶ 2-3, 434 P.2d 712 (1967), where the Montana Supreme Court set forth the difference between a purchase option and a preemptive right:

"`A pre-emption differs from an option in that a pre-emption does not give to the pre-emptioner the power to compel an unwilling owner to sell, but merely requires the owner, when and if he decides to sell, to offer the property first to the person entitled to the pre-emption at the stipulated price, and upon receiving such an offer, the pre-emptioner may elect whether he will buy, and if he elects not to buy, then owner of the property may sell to anyone.

"`Under a lease...