Johnson Farms v. McEnroe, 970045

• Decision Date: 10 September 1997
• Docket Number: No. 970045,970045
• Citation: 568 N.W.2d 920,1997 ND 179
• Parties: JOHNSON FARMS, a general partnership, Plaintiff and Appellant, v. George E. McENROE and Donna McEnroe, Defendants and Appellees. Civil
• Court: North Dakota Supreme Court

Page 920

568 N.W.2d 920

1997 ND 179

JOHNSON FARMS, a general partnership, Plaintiff and Appellant, v. George E. McENROE and Donna McEnroe, Defendants and Appellees.

Civil No. 970045.

Supreme Court of North Dakota.

Sept. 10, 1997.

Douglas A. Christensen (argued), of Pearson, Christensen, Larivee, Clapp, Fiedler & Fischer, Grand Forks, for plaintiff and appellant.

Robert Vaaler (argued), of Vaaler, Warcup, Woutat, Zimney & Foster, Grand Forks, for defendants and appellees.

NEUMANN, Justice.

¶1 Johnson Farms, a general partnership, appealed from a summary judgment dismissing its action against George and Donna McEnroe seeking specific performance of an oral agreement for the purchase of real property, or in the alternative, a return of part of the purchase price it paid for property adjacent to that for which specific performance is sought. We conclude summary judgment was inappropriately granted because there exist genuine issues of material fact. We reverse and remand.

¶2 We review the evidence in the light most favorable to Johnson Farms, the party who opposed the motion for summary judgment. See Sternberger v. City of Williston, 556 N.W.2d 288, 289 (N.D.1996). Johnson Farms' partners include Bert Johnson and his son, Al Johnson. According to Bert Johnson's affidavit, he began negotiating in 1992 on behalf of the partnership to purchase from the McEnroes 59.17 acres of property near Grand Forks. In 1993 Johnson Farms agreed to purchase that property from the McEnroes for $9,000 per acre, totaling $532,530. For the McEnroes to avoid paying federal capital gains taxes, Johnson Farms agreed to structure the transaction as a "like-kind" exchange under 26 U.S.C. § 1031.

¶3 Because of the large purchase price, the parties agreed the transaction would occur in two phases. The first phase took place when Johnson Farms purchased land for $373,000 from Bill and Pamela Rychart and, in January 1994, exchanged that property for 30.61 acres of the McEnroes' property. The transaction resulted in Johnson Farms effectively paying $3,185.56 per acre more than the agreed $9,000 per acre sale price for that 30.61 acres of property. Johnson Farms then owed the McEnroes $159,530 for the balance of the 59.17 acres.

¶4 In February 1994, George McEnroe executed an option which said Johnson Farms could either provide "like-kind property" or deposit $159,530 with a " 'qualified escrow agent', 'trustee', or 'middleman' " by April 1, 1995 to pay for the balance remaining due on the McEnroe property. Johnson Farms and George McEnroe looked for other property acceptable to the McEnroes to complete the last part of the "like kind" exchange. This posed some difficulty because the amount Johnson Farms was authorized to bid for the McEnroes was limited by the amount the McEnroes would authorize in light of the balance owing on the property. For example, in February 1995 Bert Johnson and the McEnroes' son, Tom McEnroe, attended an auction where Tom unsuccessfully tried to purchase in Johnson Farms' name property acceptable to his parents to complete the exchange.

¶5 According to Bert Johnson, he and Tom McEnroe had the following conversation at a Grand Forks restaurant in March 1995:

"At that time I asked Tom McEnroe if his father was an honest man. I explained to him that the option date was soon to expire and Johnson Farms was prepared to deposit the money required to complete our purchase of the balance of the Subject Property. I wanted to know if McEnroe wanted the money ($159,530) deposited in escrow or if the option would be extended. Tom McEnroe told me he would get a hold of his father in Arizona and get back to me to tell me what his father wanted done."

¶6 Later in March 1995, Bert and Al Johnson asked Tom McEnroe what his father had said about extending the option deadline. According to Bert:

"At that time Tom indicated that he had spoken with his father. Tom told us that McEnroe had not found any farmland which was acceptable to him. He went on to state that McEnroe did not want any money deposited into an escrow account because McEnroe wanted more time to find an acceptable parcel of farmland for Johnson Farms to purchase which could then be exchanged for the balance of the Subject Property. Tom McEnroe told us that the option wouldn't expire on April 1, rather the option would be extended beyond the April 1 date. Tom McEnroe said when his father got back from Arizona he would get together with us and we could continue to look for a suitable parcel of farmland to buy to exchange with him to complete the original deal."

¶7 After April 1, 1995, George McEnroe returned from Arizona, and the parties continued to look for suitable farmland to exchange. George McEnroe told Bert Johnson he wanted to wait to see if Congress lowered the capital gains tax rate before Johnson Farms could deposit any money in an escrow account. Johnson Farms did not put any money into an escrow account.

¶8 Thinking the sale would be completed, Tim Crary, on behalf of Johnson Farms and Crary Homes, began to plat a part of the remaining property as Prairie View Estates First Addition to Grand Forks. George reviewed and approved the proposed plat on several occasions, and it was given final approval by the Planning and Zoning Commission and the Grand Forks City Council. Johnson Farms spent about $6,500 to have the Prairie View Estates First Addition platted.

¶9 The apparent cooperation between the parties in seeking a successful completion to the second part of the real estate transaction began to sour during summer 1995. Land immediately west of part of the remaining property was considered as a possible location for a new Grand Forks events center. This property was eventually selected as the site for the Aurora. George McEnroe asked Bert Johnson if he would release some of the remaining property from the agreement so George could sell it as commercial property, but Bert refused.

¶10 In January 1996, George and Tom McEnroe met with Bert Johnson and Crary. George told Bert he was no longer interested in completing the transaction and would not convey the balance of the property to Johnson Farms. George explained any rights Johnson Farms had to purchase or acquire the balance of the property expired on April 1, 1995 under the terms of the option.

¶11 In February 1996, Johnson Farms sued the McEnroes seeking specific performance of their oral agreement for the purchase of the property. Johnson Farms asserted partial performance took the transaction out of the statute of frauds. In the alternative, Johnson Farms sought a return of a part of the purchase price originally paid to the McEnroes, because the value of the first property purchased by Johnson Farms and exchanged with the McEnroes had a value greater than the agreed upon price per acre for the entire property.

¶12 In June 1996, the McEnroes moved for summary judgment. George McEnroe argued the option he had given Johnson Farms had expired and was therefore unenforceable. Donna McEnroe asserted the option contract was unenforceable and she was entitled to a homestead exemption under N.D.C.C. § 47-18-01. Johnson Farms responded, asserting the unilateral option was not relevant and, even if it was, Tom McEnroe, as an ostensible agent of the McEnroes, had extended the option. By affidavit, Tom denied holding himself out as an agent for his parents, telling Bert Johnson he would contact his father in Arizona, or that his father would waive the option deadline. By affidavit, George McEnroe asserted he did not authorize Tom McEnroe to be his agent and Tom did not accept an appointment as his agent.

¶13 Johnson Farms argued Donna McEnroe's homestead exemption defense was not relevant because she had consented to the oral contract and had participated in the partial performance by conveying the first part of the property. Johnson Farms also asserted summary judgment could not be granted because, under N.D.R.Civ.P. 56(f), it had not had a reasonable opportunity to conduct discovery.

¶14 The trial court granted the McEnroes' motion for summary judgment. The court ruled "[a]ll negotiations recording the sale of land ... were merged in the deeds exchanged between the parties dated January 18, 1994, conveying tracts of land to ... George G. and Donna McEnroe, in consideration of their conveyance to [Johnson Farms] of 30.61 acres...." The court apparently reasoned this rendered Johnson Farms' allegations of a partially performed oral agreement for the full parcel of McEnroe property irrelevant. The court held the time provided in the option had expired and, as a matter of law, any interest Johnson Farms had to any further conveyance of the remaining property had expired with the option. The trial court also ruled expiration of the option and lack of a "duly executed contract for deed" defeated Johnson Farms' alternative request for money damages. The trial court did not address Johnson Farms' request for additional discovery under N.D.R.Civ.P. 56(f). Johnson Farms appealed.

¶15 Summary judgment is a procedural device for the prompt and expeditious disposition of a controversy without trial if either party is entitled to judgment as a matter of law, if no dispute exists as to either the material facts or the inferences to be drawn from undisputed facts, or if resolving disputed facts would not alter the result. Ohio Farmers Ins. Co. v. Dakota Agency, 551 N.W.2d 564, 565 (N.D.1996).

¶16 The statute of frauds, N.D.C.C. § 9-06-04, provides an agreement for the sale of real property is invalid unless there is a contract, note, or memorandum in writing subscribed by the party to be charged. In Erickson v. Wiper, 33 N.D. 193, 157 N.W. 592 (1916), this Court held the statute of frauds does not apply when one party has fully performed an oral contract for the sale of land. The Court also held the predecessor statute to N.D.C.C. § 9-06-07, governing when a written contract supersedes oral negotiations,...