O'Brien v. R-J Development Corp.

Citation398 N.W.2d 132
Decision Date17 September 1986
Docket NumberR-J,Nos. 15066,15078,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. . Considered on Briefs on Rehearing
CourtSupreme Court of South Dakota

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

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

MORGAN, Justice (on rehearing) (on reassignment).

This case is before us on a petition for rehearing. The petition deals with the part of our original decision that required petitioners to immediately exercise their future options to purchase real estate. Petitioners are J. Michael O'Brien (O'Brien) and Paula K. Lewis (Lewis), plaintiffs and appellees in the original appeal.

The procedural and factual backgrounds are set forth in great detail in our original opinion filed May 14, 1986. See O'Brien v. R-J Development Corp., 387 N.W.2d 521 (S.D.1986) (O'Brien I ). Briefly stated, this case involves a complex real estate sale with options to purchase further real estate at later times. The agreement is structured to allow O'Brien and Lewis to use the proceeds of the first phase to generate funds to exercise the first opinion. The sales of lots from the first option theoretically will generate funds to exercise the second option, and so forth.

Initially, we point out that all parties to this contract were experienced in real estate dealings. Richards is a real estate developer and holds large tracts of property. O'Brien and Lewis are real estate developers and real estate brokers. All parties were represented by experienced and competent counsel throughout the negotiations.

O'Brien and Lewis entered into an Offer and Agreement to Purchase with R-J Development Corporation by and through its president, Emma D. Richards (Richards). The agreement called for the execution of a contract for deed. Before a contract for deed could be executed by the parties, Richards backed out of the deal and this action was commenced seeking specific performance of the agreement. After trial to the court, a decision was entered granting specific performance. As noted in the majority opinion in O'Brien I, the trial court found the Offer and Agreement to Purchase of October 3, 1983, was voluntarily signed and delivered. In addition, the agreement, within its four corners, established a meeting of the minds and embodied the complete understandings reached by all parties. The court further found that the language "[t]his is a preliminary offer to purchase" required all parties to enter into subsequent paperwork necessary to the incidental execution of the contract and that no party could unreasonably withhold approval of the final document necessary to consummate the transfer of property.

The trial court entered judgment granting specific performance, setting out in detail a contract for deed in conformity with the agreement of the parties. In O'Brien I, we affirmed the trial court's decree of specific performance but the majority also held that, by seeking specific performance, O'Brien and Lewis had exercised the options under the guise of mutuality of remedy. We now reverse that portion of the decision.

Initially, we point out that the action sought specific performance of the only contract that was in existence at the time of the commencement of the action, to-wit: the agreement. There was no contract for deed at that time. The trial court's decision was predicated on enforcing the agreement. The judgment effectuated the agreement by setting out the contract for deed outlined in the agreement. Richards had agreed to enter into this contract for deed, but later refused to follow through. In this regard, the majority opinion was one step ahead of the game, for, if O'Brien and Lewis had sought to enforce specific performance of the option agreements, the doctrine of mutuality of remedy would have been appropriately applied. However, in the posture of this action, they had no contract for deed with option agreements to enforce. They simply sought to enforce the agreement originally entered into, which required Richards to execute the contract for deed. All of the terms of the contract for deed were found by the trial court to be within the four corners of the agreement. All reference to options were merely a restatement of the provisions of the agreement.

[I]f specific performance is ordered, the decree should nearly as possible require performance in accordance with the terms of the contract. (citation omitted) It does not follow, however, that a court of equity is required to enforce the contract completely, or not at all. Where it is possible to bring about substantial justice by adjusting the equities between the parties, a court of equity can grant relief.

Ellison v. Ventura Port Dist., 80 Cal.App.3d 574, 583, 145 Cal.Rptr. 665, 670 (1978).

The authority cited in the original opinion to compel O'Brien and Lewis to immediately exercise their options is inapposite. The authorities, 71 Am.Jur.2d Specific Performance Sec. 144 (1973), Asbury v. Cochran, 243 Ala. 281, 9 So.2d 887 (1942), Standard Reliance Insurance Co. v. Schoenthal, 171 Neb. 490, 106 N.W.2d 704 (1960), Mutual Life Ins. Co. v. Stephens, 214 N.Y. 488, 108 N.E. 856 (1915), and Leadbetter v. Price, 103 Or. 222, 202 P. 104 (1921), all deal with situations where the plaintiff brought suit to enforce an option contract. Situations presented in those cases indicate that the vendor was not living up to its option contract with the plaintiff, vendee. In those cases, the courts deemed the option exercised to avoid the vendor's claim that there was lack of mutuality. In other words, the courts were assisting the vendee in his attempt to force the vendor to abide by the terms of the option contract.

In this case, there is not one shred of evidence in the record to indicate that O'Brien and Lewis wish to exercise their options at this time. In fact, it appears quite plainly that they do not have the financial wherewithal to execute the options at this time. Richards, O'Brien, and Lewis were well aware of this and purposely structured the contract so the initial phases would create cash flow to enable O'Brien and Lewis to exercise their options for the remaining real estate in the future.

We now determine that the trial court was correct in its treatment of the option provisions in its original judgment. We reverse that portion of our decision in O'Brien I holding otherwise and affirm the trial court's judgment with respect to the option provisions. Because of the lapse of time involved in the appellate process, which we attribute to the actions of Richards, we direct the trial court upon remand to enter an amended judgment and decree in conformity with the opinion in O'Brien I, as amended by this opinion, with the further provision that the closing date for the resultant judgment and decree shall take place on the thirty-first day following entry of the amended judgment and decree and at the time and place as previously specified in the original judgment and decree.

WUEST, C.J., HERTZ, Circuit Judge acting as a Supreme Court Justice, and FOSHEIM, Retired Justice, concur.

HENDERSON, J., dissents.

SABERS and MILLER, JJ., not having been members of the Court at the time this action was submitted to the Court, did not participate.

HENDERSON, Justice (dissenting).

I continue to hew to the original majority opinion and the rationale of that decision with its supporting authorities.

A Petition for Rehearing seeks review of that portion of our decision which determined that Lewis and O'Brien had exercised the option provisions of the Offer and Agreement to Purchase by filing suit herein. This Court, by an Order dated June 24, 1986, through a majority vote of the Justices, granted the Petition for Rehearing, but limiting the issue thusly: Should the options contained in the Offer and Agreement to Purchase be deemed exercised under these pleadings and these facts and circumstances?

Essentially, Lewis and O'Brien believe that our previous decision is erroneous and yes, indeed, they want specific performance to be granted. But they want the options to be reinstated so that they have an opportunity to exercise the options in the future. Lewis and O'Brien cite not one single case wherein specific performance of an unexercised option was sought, or where specific performance of a contract containing future options was sought--and where a court then granted specific performance and gave the party seeking same the opportunity to exercise or not--the options in the future. The cases cited in O'Brien I have not been distinguished or contravened so far as this author is concerned.

The majority opinion, in my opinion, seeks to write around the mutuality of remedy which our Legislature directed by state statute. If one thinks about this basic principle, it is really not too hard to understand: Neither party to an obligation can be specifically compelled...

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1 cases
  • Rusch v. Kauker
    • United States
    • South Dakota Supreme Court
    • 24 Octubre 1991
    ...In O'Brien v. R-J Development Corp., 387 N.W.2d 521 (S.D.1986), reh'g granted and aff'd in part and rev'd in part on other grounds, 398 N.W.2d 132 (S.D.1986), this court upheld the trial court's determination that the offer and agreement constituted a complete agreement. Id. 387 N.W.2d at 5......

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