Campbell v. Melton

• Decision Date: 14 May 2002
• Docket Number: No. 2001-C-2578.,2001-C-2578.
• Citation: 817 So.2d 69
• Parties: E.R. CAMPBELL, III, et ux. v. Harold Keith MELTON.
• Court: Louisiana Supreme Court

817 So.2d 69

E.R. CAMPBELL, III, et ux. v. Harold Keith MELTON.

No. 2001-C-2578.

Supreme Court of Louisiana.

May 14, 2002.

Tommy K. Cryer, Shreveport, Donald J. Ethridge, Dawn M. Fuqua, Michael R Mangham, Lafayette, Counsel for Applicant.

James F. Howell, Lamar P. Pugh, Francis M. Gowen, Jr., Shreveport, Counsel for Respondent.

TRAYLOR, J.¹

We granted a writ of certiorari in this case to review the lower courts' interpretation of a buy/sell agreement to purchase immovable property. We find that the lower courts improperly admitted parol evidence to determine the parties' intent regarding an unambiguous clause in the "additional provisions" clause of the contract. For the reasons that follow, we reverse the lower courts' judgments, and grant judgment in favor of the defendant.

FACTS AND PROCEDURAL HISTORY

On September 26, 1997, Edward and Kimberly Campbell entered into a purchase agreement with Harold Keith Melton for the purchase of Melton's home in Shreveport, Louisiana.² At the time of the agreement, Lynn Roos, a real estate broker, served as the dual agent for both Melton and Campbell. Through Roos, the Campbells made an "as is" offer of $400,000 for the house by a closing date "on or before December 8, 1997." In response, Melton assented to the price but countered with other conditions, including removal of the inspections clause in the contract. The Campbells countered again, in which Roos modified the purchase agreement at the Campbells' request to include an "additional provisions" clause that provided for acceptable roof, foundation and mechanical system structural reports and that "any single mechanical item repair that exceeds $2000.00 the Seller has the option to repair or the contract will be null & void." The final version signed by the parties contained this clause.

On Oct. 21, 1997, the Campbells informed Melton directly by fax the conclusions of the Campells' inspector, who found problems in the following areas: heating/ac, electrical, carpentry, plumbing/septic system, water softening system, mortar/brickwork, and tree hazards. The Campbells stated:

I would take a guess at the total cost to fix all of these problems in the $25,000 $40,000 range. There obviously are several single items that would well exceed the $2,000 threshold set in our contract and were not disclosed in the Homeowner's Disclosure Statement. I am willing to use best efforts to work through these issues and resolve them.

In response, on October 27, 1997, Melton faxed the Campbells: "After receiving your fax of 10-21-97 I believe it to be in your best interests to find a different residence. I am exercising my option under the `Additional Provisions' paragraph of the 9-26-97 sales agreement ... to declare it null and void."

The next day, the Campbells faxed Melton, stating that under the terms of the contract, it was the Campbells, not Melton, who had the option to nullify the contract. In that fax, Campbell then stated:

I was shown some of the deferred maintenance items when I first viewed the house. I agreed to take on these items and accept the house "as is" and I intend to keep my word. However, there were several items I was not shown nor were they disclosed. The items that concern me most involve the HVAC, electrical and water softening systems. At a minimum I consider you responsible for these items prior to selling to me . . .

I estimate to remedy these items will cost approximately $15,000. As a consideration to you and as good faith on my part, I am asking you to rebate back to me only the cost to fix these items. I will handle all of the other items mentioned in my October 21, 1997 memorandum to you. I estimate $5,000 on HVAC, $3,000 on water softener and $7,000 on electrical but, it could be less.

The following day, on October 29, 1997, Melton replied: "It is my position, confirmed by consultation with counsel, that upon my declining to make the repairs exceeding $2,000, as is my option, the effect of that determination is that the contract is null and void by its own terms."

The Campbells then procured legal counsel. On October 30, November 3, and November 5 of 1997, Campbell's attorney forwarded Melton certified letters stating that Melton's interpretation of the "additional provisions" clause was erroneous and that Campbell "intend[ed] to close on the purchase of the property in accordance with and under the subject Buy/Sell Contract on or before December 8, 1997...." The attorney for the Campbells also explained that if Melton did not participate in the sale closing, legal action would be instituted. The attorney hired to perform the closing also sent a package to Melton, which included a settlement statement reflecting no deductions for repairs and informing him the closing date was set for December 2, 1997. Melton did not respond to any of the correspondence.

Melton's failure to appear at the December 2, 1997 closing precipitated further correspondence. In a letter dated December 4, 1997, Campbell's attorney described Melton's actions as "legal breaches and violations of the above referenced Buy/Sell Agreement dated September 26, 1997...." which entitled Campbell to file suit against Melton unless he complied with the agreement within five days of the letter. When Melton failed to do so, the Campbells instituted suit for breach of contract and specific performance and filed a Notice of Lis Pendens on December 18, 1997. In his answer to the petition, on January 29, 1998, Melton included a reconventional demand against the Campbells seeking attorneys' fees.

In the meantime, Melton had entered negotiations to sell the property to a potential purchaser by late November 1997. On December 23, 1997, Melton sold the residence to Millennia Group, L.L.C., through its manager, John Hensarling, who moved into the residence.³ On that same day, Millennia sold a portion of the property to Huey and Melanie McGaha.⁴

On May 10, 1999, Melton sought a motion for summary judgment on the grounds that the "additional provisions" clause was unambiguous as a matter of law and provided that upon the discovery of any single mechanical cost over $2,000, Melton had the option to repair it or the contract, by its own terms, would be null and void. The Campbells followed with a motion for summary judgment on August 24, 1999 arguing that they possessed the option to void the contract and when they elected not to do so, Melton was bound to sell them the house for $400,000 by December 8, 1997.

In separate judgments, the trial court denied both motions for summary judgment on December 6, 1999. After a two day trial in June of 2000, the trial court ruled in favor of the Campbells, finding Melton had breached the agreement. The trial court reasoned that the only sensible interpretation of the "additional provisions clause" was that the Campbells had the right to terminate the contract if Melton refused to repair any single mechanical item exceeding $2,000, "given the context of this agreement."

The trial court further concluded that the Campbells' communication of October 21st was a "gentile, [sic] soft approach," not a demand for repairs. The trial court also considered the Campbells' communication of October 28 to be an invitation for discussion, rather than a demand. Based on these conclusions, the trial court ordered Melton to convey full, complete and unencumbered title of the property to Campbell, nullified all property rights acquired by Millennia and the McGahas, and assessed Melton with attorneys' fees and court costs.

On appeal, the Second Circuit affirmed, finding that the "additional provisions" clause of the purchase agreement remained inoperative until some payment of over $2000 was demanded. Campbell v. Melton, 34,810 (La.App. 2 Cir 6/20/01), 793 So.2d 235. Applying manifest error, the Second Circuit affirmed the trial court's finding that Campbell had not made a demand for payment of any costs for repair in excess of $2,000 to activate the purchase agreement's nullity provision, and thus, Melton breached the agreement. In affirming specific performance as the adequate remedy, the court of appeal noted that "Millennia and McGaha purchased the subject property at their peril and assumed the risks inherent in the purchase of a home which has a title clouded by a notice of lis pendens."⁵ Finally, the Second Circuit granted $1000 in attorneys' fees to the Campbells for successfully defending the appeal.

We granted a writ of certiorari to review the lower courts' conclusions. Campbell v. Melton, 01-2578 (La.1/4/02), 805 So.2d 1198.

LAW AND ANALYSIS

An agreement whereby one party promises to sell and the other promises to buy a thing at a later time, or upon the happening of a condition, or upon performance of some obligation by either party, is a bilateral promise of sale or contract to sell. La. Civ.Code art. 2623. A contract to sell must set forth the thing and the price, and meet the formal requirements of the sale it contemplates. Id.

In this case, neither party disputed the execution of a valid purchase agreement on September 26, 1997. At trial, all parties agreed that it was their intent to buy and/or sell the residence for a price of $400,000 on or before December 8, 1997. Nevertheless, difficulties arose over the parties' differing interpretation of the "additional provisions" clause of the agreement.

Interpretation of Contractual Language

In interpreting contracts, we are guided by the general rules contained in articles 2045-2057 of the Louisiana Civil Code. The interpretation of a contract is the determination of the common intent of the parties with courts giving the contractual words their generally prevailing meaning unless the words have acquired a technical meaning. La. Civ.Code arts. 2045, 2047; see e.g., Louisiana Ins. Guar. Ass'n v. Interstate Fire & Casualty Co., 93-0911 (La. 1994), 630 So.2d 759, 763. When the words of a contract are clear and explicit and lead to no absurd...