Jones v. Amoco Oil Co.

• Citation: 483 N.W.2d 718
• Decision Date: 31 March 1992
• Docket Number: No. C9-91-1918,C9-91-1918
• Parties: Llewellyn K. JONES, Appellant, v. AMOCO OIL COMPANY, Respondent.
• Court: Court of Appeals of Minnesota

Page 718

483 N.W.2d 718

Llewellyn K. JONES, Appellant, v. AMOCO OIL COMPANY, Respondent.

No. C9-91-1918.

Court of Appeals of Minnesota.

March 31, 1992.

Review Denied May 15, 1992.

Syllabus by the Court

1. A purchaser is not financially ready and able to perform when he cannot obtain suitable financing because he does not have a proper amount of cash, credit, or a binding commitment for a loan from a financially able third party.

2. Statutory procedures for deed cancellation do not apply when a purchase agreement is not finally binding on both parties.

Michael D. Quayle, Dudley R. Younkin, Merrigan, Johnson, Quayle & Younkin, Minneapolis, for appellant.

Gary Van Cleve, Larkin, Hoffman, Daly & Lindgren, Bloomington, for respondent.

Considered and decided by RANDALL, P.J., and SHORT and HARTEN, JJ.

OPINION

HARTEN, Judge.

Appellant Llewellyn K. Jones commenced this action seeking specific performance of a real estate contract or, in the alternative, damages for breach of contract. A jury returned a verdict in favor of Jones and awarded damages of $740,000. Because the trial court found Jones had not obtained suitable financing as required in the contract, it granted JNOV in favor of Amoco. Jones appeals from the trial court's order denying his post-trial motions for amended findings or a new trial, and, by notice of review, Amoco challenges the trial court's denial of its motion for a new trial on the issue of damages. We affirm.

FACTS

For 17 years, appellant Jones leased from respondent and operated a full service gas station located in Lilydale. On December 24, 1985, the station was substantially damaged by fire. On March 14, 1987, Jones and Amoco entered into a real estate contract and addendum (the contract) involving the sale of the station property to Jones. Under the contract, Jones was to buy the real estate on which the service station had been situated, for $78,000. Jones made an earnest money payment of $7,800 and was to pay the remaining $70,200 at the time of closing. Jones was also obligated to rebuild, at his own expense, a full service facility in the "Amoco image" (the improvements) within one year of his taking title to the real estate.

The sale was contingent upon Jones "obtaining suitable financing" to cover the costs of building the new station. The contract provides, in part:

5. This is further contingent upon Purchaser obtaining suitable financing as determined by market standards, to cover the costs of improvements [rebuilding] set forth in Paragraph 4 above. In the event Purchaser is unable to obtain financing on or before the date hereinafter set forth, Purchaser shall so advise Seller in writing. It is agreed that the time granted for securing said financing shall expire two (2) months after delivery of a signed copy of the Real Estate Contract and Addendum thereto to Purchaser or his attorney. In the event Purchaser is unable to obtain said financing, this contract and Addendum thereto shall be null and void and of no further force or effect and all earnest money herein paid shall be returned to Purchaser.

(emphasis added). The sale was also contingent upon the parties' agreement on the exact specifications of the rebuilt station.

In addition to the loan on the real estate, Jones believed he needed $220,000 to rebuild the station. Jones did not personally have the cash necessary to finance the costs of the improvements and was relying on Signal Bank of West St. Paul to provide all of the financing. Tom Shank, the executive Vice-president in charge of lending at Signal Bank, viewed the financing as a two-step transaction: first, the purchase of the real estate, and then the rebuilding of the station. On May 7, 1987, the bank issued a written commitment for a $70,000 loan to finance the purchase of the real estate. That commitment had a three month expiration clause.

On July 13, 1987, Amoco wrote to Jones regarding the contract:

Please be advised that the time for securing said financing has, at this point, exceeded the two month period set forth in the Addendum. As such, if my office is not provided evidence of suitable financing prior to July 21, 1987 the contract, Addendum thereof, and all other agreements pertaining to referenced subject will be considered of no further effect and all earnest monies shall be returned to Purchaser.

Jones replied by letter dated July 20, 1987, stating that he was "ready, willing and able to close" the deal and requested a date to do so. Jones also noted in the letter that he was under no obligation to disclose to Amoco his financing for the deal.

Over the next 14 months Amoco made preparations for closing, but a closing never occurred. Jones repeatedly failed to fulfill the contingency contained in the contract regarding improvement specifications. It was not until February of 1988 that Jones submitted an acceptable plan. At this point, Amoco contacted Jones and set up a closing date at the end of March of 1988. Again, however, closing did not occur. By letter dated March 28, 1988, Jones notified Amoco that his bank needed two or three more weeks to prepare for closing. The bank had advised Jones that he must furnish to it a "Hazardous Substances Inspection Report" before the bank could consider loaning Jones the money to acquire the real estate. The bank made other demands related to the required inspection and indicated that if more environmental testing were needed, Jones would have to comply at his own expense. The bank also stated that if there was a hazard, Jones would have to take steps to solve the problem.

Amoco demanded that a closing occur by July 29, 1988. Jones finally informed Amoco that the bank was requiring further testing of the property. However, Jones continued to represent that the financing was not a problem. The parties set up a closing for September 29, 1988. At the time of the scheduled closing, counsel for Jones indicated to Amoco's counsel that the bank wanted Amoco to agree to indemnify it should any environmental liability arise. Amoco refused the bank's request. Despite several discussions, the bank and Amoco failed to reach an agreement on this issue.

By letter dated November 30, 1989, Amoco informed Jones that the purchase agreement was terminated and returned Jones' earnest money check. Claiming that he had the requisite financing, Jones sent the check back to Amoco twice. Each time Amoco sent it back to Jones. On April 23, 1990, Amoco entered into an agreement with the City of Lilydale regarding the demolition of the station and the protection of Amoco's rights to rebuild at some later date.

Jones commenced this action for specific performance, or in the alternative, for breach of contract damages. He was allowed to file a supplemental complaint to include a claim of conversion, but his motion to add a claim for punitive damages was denied. The matter was tried to a jury. At the close of Jones' case and again at the close of both parties' evidence, Amoco moved for a directed verdict. The trial court reserved its ruling pending the return of the jury's verdict. By special verdict, the jury found that Jones had obtained "suitable financing to cover cost of the improvement" within the meaning of the contract. The jury also found Jones' damages to be $740,000.

The trial court subsequently issued post-verdict findings and order for judgment granting a directed verdict in favor of Amoco. The parties then brought post-trial motions; Jones seeking amended findings or a new trial, and Amoco seeking a new trial solely on the issue of damages in the event the trial court vacated the directed verdict. Jones appeals from the trial court's order denying his post-trial motions, and, by notice of review, Amoco challenges the court's denial of its motion for a new trial on the issue of damages.

ISSUES

1. Did the trial court err by finding that Jones failed to obtain suitable financing to cover the cost of rebuilding the service station as required by the terms of the contract?

2. Was respondent Amoco required to follow the statutory cancellation procedures set out in Minn.Stat. § 559.21 (1988)?

3. Did the trial court err by denying Jones' motion to amend his complaint to include punitive damages?

ANALYSIS

Because the directed verdict was granted after all the evidence was submitted and after the jury had delivered its verdict, the granting of the motion is properly reviewed as an award of judgment notwithstanding the verdict (JNOV). See 3 Douglas D. McFarland & William J. Keppel, Minnesota Civil Practice § 2401 at 464 (2d ed. 1990).

Appellate review of a JNOV is bound by the same standards as apply to the trial court. Macho v. Mahowald, 374 N.W.2d 312, 314 (Minn.App.1985) pet. for rev. denied (Minn. Nov. 4, 1985); Les Jones Roofing, Inc. v. City of Minneapolis, 373 N.W.2d 807, 809 (Minn.App.1985). The standard is whether, when the evidence is viewed in the light most favorable to the prevailing party, there is any evidence reasonably tending to support the jury's verdict. Prichard Bros., Inc. v. Grady Co., 436 N.W.2d 460, 463 (Minn.App.1989) pet. for rev. denied (Minn. May 2, 1989); see also Sikes v. Garrett, 262 N.W.2d 681, 683 (Minn.1977) (JNOV is proper where there is no competent evidence reasonably tending to sustain the verdict).

1. Jones contends that the trial court erred by finding he failed to obtain suitable financing. We disagree.

The jury answered the following special verdict question in the affirmative:

1. Did the plaintiff [Jones] obtain suitable financing to cover the cost of the improvement as required by paragraphs 4 and 5 of the first addendum to the contract?

To "obtain suitable financing" means that a buyer is financially ready and able to perform.

The term "able" refers to the purchaser's financial ability not only to make the initial payment required to meet the terms of the seller, but also to complete the contract of purchase according to its terms.

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