O'Brien v. R-J Development Corp., R-J

Citation387 N.W.2d 521
Decision Date14 May 1986
Docket NumberNos. 15066,R-J,15078,s. 15066
PartiesJ. Michael O'BRIEN and Paula K. Lewis, Plaintiffs and Appellees, v.DEVELOPMENT CORPORATION, a corporation, and Emma D. Richards, Defendants and Appellants.
CourtSupreme Court of South Dakota

James H. Wilson of Wilson, Olson, Goodsell & Nash, P.C., Rapid City, for plaintiffs and appellees.

Robert W. Gunderson of Gunderson, Farrar, Aldrich & DeMersseman, Rapid City, for defendants and appellants.

HENDERSON, Justice.

ACTION

This appeal is taken from a complicated Judgment and Decree of Specific Performance which enforces a contract to sell real estate. We affirm in part, reverse in part and remand for entry of judgment consistent with our ruling herein. See Conclusion, infra.

PARTIES

Appellants-defendants are Emma D. Richards (Richards), and R-J Development Corporation (R-J Development). Richards is the president, major stockholder, and a member of the Board of Directors of R-J Development.

Appellees-plaintiffs are J. Michael O'Brien (O'Brien), and Paula K. Lewis (Lewis). O'Brien and Lewis are Rapid City real estate brokers and are associated with the Rapid City real estate firm of Lewis & Kirkeby Real Estate, Inc.

FACTS

In February 1983, Lewis, on behalf of Lewis & Kirkeby Real Estate, Inc., entered into a Multiple Listing Agreement with Richards and R-J Development whereby Lewis and her firm had an exclusive listing to market Trailwood Village real estate. Trailwood Village is a subdivision east of Rapid City. Some of this property is held by Richards individually and some is held in the name of R-J Development. This Listing Agreement ran from February 5, 1983, until October 5, 1983.

Marketing the Trailwood Village property, however, proved to be difficult. No lots had been sold since 1981, there were ill feelings between the homeowners and Richards, and there were problems with the subdivision's sewer line. It appears that the sewer line would not lamp, i.e., when a lamp or lantern was held at one end, the light could not be seen at the other end. This indicated a sinking or crushing of the sewer line. These sewer problems caused a loss of FHA and VA financing and the Rapid Valley Sanitary District refused to approve further construction until the sewer was fixed. A bid estimated the repairs as costing $39,788. Richards, Lewis, and Richards' attorney, Robert W. Gunderson, pursued various avenues for eliminating these problems.

During the Summer of 1983, Richards indicated to Lewis that she did not want to spend the money or undertake the physical responsibility of developing the subdivision so as to make the lots saleable. At her age, she believed she did not have the physical strength to finish the project. On several occasions, Richards and Attorney Gunderson suggested that Lewis purchase the Trailwood Village property. Lewis ran this idea/proposal past Lewis & Kirkeby Real Estate, Inc., and when the firm declined the proposition, Lewis approached O'Brien.

Lewis and O'Brien evaluated the property and prepared an Offer and Agreement to Purchase. On September 23, 1983, Lewis and O'Brien presented their Offer and Agreement to Purchase to Richards. The three met at Richards' home and discussed various aspects of the document and proposed sale. At this time, Lewis and O'Brien also suggested that Richards go over it with Attorney Gunderson. On September 26 or 27, 1983, Lewis, O'Brien, and Richards met at Attorney Gunderson's office and discussed the terms of the offer. On September 30, 1983, the parties again met at Attorney Gunderson's office. At this meeting, an Offer and Agreement to Purchase was presented by Richards to Lewis and O'Brien. This document, which was prepared by Attorney Gunderson, was nearly identical to the Lewis and O'Brien Offer and Agreement to Purchase except the selling price of the lots had been raised. Lewis and O'Brien rejected a price increase and after some discussion, it appeared the parties had agreed to return to the original price and Attorney Gunderson would then prepare an Offer and Agreement to Purchase which everyone could sign.

On October 3, 1983, Lewis and O'Brien received the newly prepared Offer and Agreement to Purchase--the document at the center of this litigation. It embodies eight typewritten pages with detailed provisions of the parties' obligations. It was a far cry from a short, standard form. When received by Lewis and O'Brien, this document had already been signed by Richards. After examination thereof, Lewis and O'Brien affixed their signatures thereto and returned the same to Attorney Gunderson's office. This October 3, 1983, Offer and Agreement to Purchase provided for the sale and purchase of 22 Trailwood Village lots and also provided three options for the future purchase and sale of additional Trailwood Village lots and undeveloped acreage. Under its terms, a $45,000 down payment was to be escrowed and used to make necessary improvements on the sewer line. Lewis and O'Brien were to negotiate these sewer corrections. They further agreed to withstand a reasonable cost overrun or increase in the cost of these repairs, over and above the down payment, with such cost overruns to be deducted from the price of the lots.

On October 3, 1983, Attorney Gunderson also had a letter and a copy of this Offer and Agreement to Purchase delivered to Attorney James W. Olson, who Lewis and O'Brien had indicated would act as their counsel. In this letter, Attorney Gunderson advised Attorney Olson as follows:

Your clients have told me that you would be apprised of the situation by this time. I am out of town, but I'm having hand delivered to you what I hope will be the last draft of an Offer and Agreement to Purchase so you can advise your clients about it. If everything seems satisfactory they can sign it and start to fix that sewer and you and I can get together and draw the contracts for deed and the options and whatever else has to be done to put this matter to bed.

Lewis and O'Brien thereafter deposited earnest money and arranged financing with First Western Federal Savings and Loan Association and the South Dakota Housing Development Authority. Attorney Olson also prepared a rough draft of a Contract for Deed and delivered it to Attorney Gunderson's office. On December 14, 1983, the parties and counsel met in Attorney Gunderson's office. At this time, Richards informed Lewis and O'Brien that she would not sell at the price agreed upon. This turnabout was apparently precipitated by Richards' relatives' views that the selling price was inadequate. Lewis and O'Brien refused to agree to a higher price and the next day, December 15, 1983, Attorney Gunderson informed Attorney Olson that Richards was not going to perform the agreement. Thereafter, Lewis and O'Brien tendered performance. There was no objection to the form of tender.

In February 1984, Lewis and O'Brien commenced the present action praying for specific performance, costs, and fees. Richards and R-J Development answered by denying that the October 3, 1983, Offer and Agreement to Purchase was a final contract, and counterclaimed to quiet title and recover damages resulting from Lewis' and O'Brien's alleged violations of their duties as professional real estate agents. After the filing of the suit herein, Richards and R-J Development unilaterally arranged for and procured sewer repairs which ultimately cost $71,182.36.

A bench trial was conducted. Lewis, O'Brien, and Richards were the only witnesses called and examined. The trial court found the October 3, 1983, Offer and Agreement to Purchase to be a firm and complete agreement or contract and that the parties therein agreed to enter into subsequent paper work necessary to the incidental execution of the contract and that a party could not unreasonably withhold approval of the final documents necessary to consummate the transfer of the property. The trial court further found the contract not to be unreasonable, unfair, or unconscionable and found there was no violation of a fiduciary responsibility on the part of Lewis and O'Brien toward Richards and R-J Development. The trial court also assessed $21,182.36 of the sewer repairs to be added to the purchase price; found no damages for any of the parties; denied an award of attorney fees; decreed specific performance; and, in its Conclusions of Law, the trial court settled the boilerplate provisions of a contract for deed.

From the entire Judgment and Decree of Specific Performance, Richards and R-J Development now appeal. From the trial court's addition of $21,182.36 to the purchase price, the denial of damages, and the denial of attorney fees, Lewis and O'Brien have filed a Notice of Review.

DECISION
I.

DID THE PARTIES INTEND THE OFFER AND AGREEMENT TO PURCHASE OF OCTOBER 3, 1983, TO BE A FINAL AND LEGALLY BINDING DOCUMENT? WE HOLD THAT THEY DID.

A trial court's findings in a specific performance action will not be disturbed on appeal unless they are clearly erroneous. Wiggins v. Shewmake, 374 N.W.2d 111, 114 (S.D.1985). See also, SDCL 15-6-52(a).

In its findings of fact, the trial court found the Offer and Agreement to Purchase of October 3, 1983, was voluntarily signed and delivered and within its four corners, it established a meeting of the minds and that a complete agreement was reached by all the parties. It further found that the language "[t]his is a preliminary offer to purchase[,]" meant that all parties shall enter into subsequent paper work necessary to the incidental execution of the contract and that a party could not unreasonably withhold approval of the final document necessary to consummate the transfer of property.

Recently, we upheld a trial court's award of specific performance which was based in part upon a purchase agreement. Wiggins. After a review of the entire record, we are not left with a definite and firm conviction that under the facts and circumstances herein, the trial...

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