E. E. E., Inc. v. Hanson

• Decision Date: 01 April 1982
• Docket Number: Nos. 10032,10046,s. 10032
• Citation: 318 N.W.2d 101
• Court: North Dakota Supreme Court
• Parties: E. E. E., INC., Plaintiff and Appellant, v. Esther HANSON, Collection Bureau, Inc., H. R. Arneson, Jr. & Associates, Inc., Commercial Credit Corporation, Aman Collection Service, Inc., and United Accounts, Inc., Defendants, and Anneus Meester, Defendant and Appellee. Anneus MEESTER, Plaintiff and Appellee, v. Esther HANSON, Defendant and Appellant. Civ.

Page 101

318 N.W.2d 101

E. E. E., INC., Plaintiff and Appellant, v. Esther HANSON, Collection Bureau, Inc., H. R. Arneson, Jr. &

Associates, Inc., Commercial Credit Corporation,

Aman Collection Service, Inc., and

United Accounts, Inc., Defendants,

and

Anneus Meester, Defendant and Appellee.

Anneus MEESTER, Plaintiff and Appellee, v. Esther HANSON, Defendant and Appellant.

Civ. Nos. 10032, 10046.

Supreme Court of North Dakota.

April 1, 1982.

Leland F. Hagen, of Ohnstad, Twichell, Breitling, Arntson & Hagen, West Fargo, for plaintiff and appellant in No. 10032.

Alph J. Overby, Cooperstown, and Kenneth L. Dalsted, of Gilje, Greenwood & Dalsted, Jamestown, for Anneus Meester; argued by Dalsted.

Nancy S. Fay, of Fay & Griffeth, West Fargo, for defendant and appellant in No. 10046.

VANDE WALLE, Justice.

In January of 1980, Anneus Meester filed suit against Esther Hanson seeking specific performance of an earnest-money agreement to convey 300 acres of Griggs County farmland. In January of 1981, E. E. E., Inc., sued Hanson and Meester ¹ seeking foreclosure of a mortgage executed by Hanson upon the same farmland. The actions were joined by order of the court. The court ordered specific performance of the earnest-money agreement in favor of Meester, and Hanson appealed. We reverse. A judgment in favor of Hanson and Meester decreeing the mortgage invalid and dismissing the foreclosure action was entered. E. E. E., Inc., appealed. We reverse. To minimize the confusion, we will discuss the cases separately.

I. MEESTER v. HANSON

Shortly after acquiring the farmland through an estate settlement, Hanson listed it for sale with a real estate broker, Gladys Johnson. The earnest-money agreement between Hanson and Meester was prepared by Johnson. The pertinent provisions of the agreement are as follows:

NOTE: OPINION CONTAINS TABLE OR OTHER DATA THAT IS NOT VIEWABLE

All parties agree that the first earnest-money payment of $1,000 was timely made. The controversy on appeal centers on the fact that the second earnest-money payment of $10,000 was not made until August 31, 1979. ² In granting Meester specific performance, the trial court, in effect, determined that payment on August 31 was acceptable, despite the contractual language denominating August 10 as the date on which payment was due and specifying that "Time is of essence." The trial court made these relevant findings of fact:

"3. The contract refers to acts to be completed on August 10, 1979, and September 10, 1979, and the Court finds that under the same or similar circumstances 30 days has been held to be an acceptable time for a party to act.

* * *

"5. That the plaintiff, purchaser, complied with the terms of the contract in making payments of $1,000.00 and $10,000.00 within the time required to the seller, or her agents, or as directed by the agents of the seller."

What are the legal consequences of Meester's failure to tender the $10,000 earnest-money payment on the exact day specified in the contract?

According to the authorities, the question of whether or not a contract must be performed at the exact time specified therein is usually expressed in the inquiry as to whether or not time is of the essence of the contract. 17 Am.Jur.2d, Contracts, Sec. 332. Under Section 9-07-23, N.D.C.C., time is of the essence of a contract if it is provided expressly by the terms of the contract or if it was the intention of the parties as disclosed thereby. See Burwick v. Saetz, 154 N.W.2d 679, 683 (N.D.1967). The effect of a "time is of the essence" stipulation was discussed long ago in Fargusson v. Talcott, 7 N.D. 183, 73 N.W. 207, 208 (1897):

"[T]he parties may by their agreement make time of the essence thereof; ... in such a case failure to comply with the terms of the contract, at the time named therein for performance, will debar the person in default from claiming any rights thereunder, even in a court of equity."

And see Horgan v. Russell, 24 N.D. 490, 140 N.W. 99, 104 (1913); Sunshine Cloak & Suit Co. v. Roquette Bros., 30 N.D. 143, 152 N.W. 359 (1915). Although Hanson and Meester, by both handwritten and printed specifications, made "time of the essence" of their agreement, Meester did not tender payment of the $10,000 earnest money until 21 days after the specified date. Under these circumstances, we hold that Meester's failure to perform on the precise day specified in the agreement should have precluded the granting of specific performance.

The trial court's reason for ordering specific performance, in spite of Meester's delay, was its finding that a 30-day period "has been held to be an acceptable time for a party to act." In assailing this finding, Hanson has urged us to review it as a "conclusion of law" rather than determining if the finding is "clearly erroneous" under Rule 52(a), N.D.R.Civ.P. ³ We agree with Hanson's characterization. Findings of fact are the realities as disclosed by the evidence as distinguished from their legal effect or consequences. Where the ultimate conclusion can be arrived at only by applying rules of law the result is a "conclusion of law." Slope Cty., Etc. v. Consolidation Coal Co., 277 N.W.2d 124, 127 (N.D.1979). And see Kasper v. Provident Life Ins. Co., 285 N.W.2d 548 (N.D.1979). In this case, no evidence was introduced which suggested that performance within a 30-day period was considered by the parties. It appears that the trial court, sua sponte, determined the legal effect of the delay in performance, i.e., the trial court concluded that the law granted Meester a 30-day grace period.

This determination, by whatever label it wears, directly contradicts the well-established legal meaning of the "time is of the essence" clause.

Normally, parties to a contract are allowed to write the terms of the contract themselves. State Farm Fire, Etc. v. St. Paul Fire, Etc., 268 N.W.2d 147 (S.D.1978). A court may be called upon to interpret a contract written by the parties thereto but the court's authority to interpret a contract does not give a court the authority to modify it. Johnson v. Johnson, 291 N.W.2d 776 (S.D.1980). Here, the parties took special pains to assure that the contract reflected their intent that time was of the essence. In addition to the printed provision specifying that time was of the essence, the parties inserted a handwritten statement to that effect. There can be no doubt of their intent and we cannot ignore it under the guise of interpreting the contract. In Fargusson v. Talcott, supra, the court discussed the policy reasons which support the strict enforcement of provisions making time of the essence of the agreement:

"The owner of the land, having other business interests, may foresee that he will need or can use to great advantage the money at a particular time, and that if he can have the money on the very day named he can afford to sell on the terms specified. But he may be unwilling to sell on such terms if the payment is to be deferred. The profit to him may not be in the sale of the land, but in the use to which he can put the money, provided he can have it on the very day on which the vendee agrees to pay it." 73 N.W. at 208.

These reasons are as sound today as they were when first propounded in 1897. Hanson was entitled to rely on the terms of the contract.

Meester, in opposing this conclusion, points to the legal principle which excuses delay in performance if the delay is caused by the other party. See McWithy v. Heart River School Dist. No. 22, 75 N.D. 744, 32 N.W.2d 886 (1948). Relying on the written terms of the contract, Meester argues that the earnest-money contract requires additional earnest money of $10,000 to be paid on delivery (1) of evidence of title and (2) of deed. He says that the delivery of the abstract by the seller was a condition precedent to his obligation to tender the $10,000 earnest money. Meester cites the trial court's finding that "the seller ... failed to provide [the abstract]" and contends that his delay in performance is excused. ⁴

We do not agree. A condition precedent is a condition which is to be performed before some right dependent thereon accrues or some act dependent thereon is performed. Sec. 9-01-11, N.D.C.C.; Evenson v. Hlebechuk, 305 N.W.2d 13, 17 (N.D.1981). Whether the doing of an act is a condition precedent depends on the intention of the parties as deduced from the whole instrument. 17 Am.Jur.2d, Contracts, Sec. 321. We have concluded that the delivery of the abstract is not, under the terms of this earnest-money agreement, a condition precedent to the payment of the $10,000 earnest money. By the terms of the contract, the purchaser's duty to pay the balance is conditioned "upon delivery (1) of the evidence of title ... and (2) of [a] deed." In contrast, the purchaser's duty to pay the $1,000 and $10,000 earnest-money installments is made unconditional and independent. The printed form of the contract envisions payment in four steps, with delivery of the abstract required after three earnest-money installments have been paid. The parties deleted the third installment requirement in completing the form but nevertheless required the second installment to be paid before delivery of the abstract to Meester. As one learned author explained, in an installment contract such as this, "one of the parties is giving 'credit' to the other, and the transaction is in part a 'credit transaction.' " 3A Corbin on Contracts, Sec. 664. Here, the purchaser, Meester, gave credit to the seller, his promise to pay the first two installments being independent of any performance by the seller. Compare Kennedy v. Dennstadt, 31 N.D. 422, 154 N.W. 271 (1915) [agreement clearly provided that purchaser was to receive an abstract before second installment was due].

Meester's failure to pay the second installment on time, when time is of the essence of the contract, discharged Hanson from further duties under the contract. The judgment ordering specific...