Knorr v. Norberg, 20130084.

• Decision Date: 09 April 2014
• Docket Number: No. 20130084.,20130084.
• Citation: 2014 ND 74,844 N.W.2d 919
• Court: North Dakota Supreme Court
• Parties: Robert D. KNORR and Cheri Knorr, Plaintiffs and Appellees v. Jon NORBERG and Alonna Norberg, Defendants. Jon Norberg, Appellant.

844 N.W.2d 919

2014 ND 74

Robert D. KNORR and Cheri Knorr, Plaintiffs and Appellees

v.Jon NORBERG and Alonna Norberg, Defendants.

Jon Norberg, Appellant.

No. 20130084.

Supreme Court of North Dakota.

April 9, 2014.

Appeal from the District Court of McLean County, South Central Judicial District, the Honorable Thomas J. Schneider, Judge.

Sheldon A. Smith (argued) and David J. Smith (on brief), Bismarck, N.D., for plaintiffs and appellees.

James R. Bullis (argued) and Michael S. Montgomery (on brief), Fargo, N.D., for appellant.

KAPSNER, Justice.

[¶ 1] Jon Norberg appeals from a judgment allowing Robert and Cheri Knorr to buy back certain McLean County real property under an oral agreement. We conclude the district court erred in holding partial performance of an oral lease agreement with an alleged option to purchase removed the oral agreement from the statute of frauds. We reverse and remand for the court to consider the Knorrs' alternative theories of recovery based on equitable principles of promissory estoppel and constructive trust.

I

[¶ 2] In 2004, Robert and Cheri Knorr bought a lot and built a home on Lake Audubon. They intended to live at the lake home after retirement and had it built handicapped accessible to accommodate Cheri Knorr's worsening Parkinson's disease. Because of the Knorrs' successful farming operations and real estate investments in North Dakota and Arizona, they owned the lake home debt free.

[¶ 3] When the national real estate market soured in the late 2000s, the Knorrs had to mortgage the lake property and other property to satisfy loan commitments. Their financial difficulties continued, however, and they were unable to make the mortgage loan payments on the property, so they turned to family members for assistance. According to the Knorrs, family members agreed to help them by purchasing their homes in Arizona and North Dakota and leasing them to the Knorrs with an option to repurchase the homes. The Knorrs' eldest daughter and her husband purchased the Arizona home and leased the property to the Knorrs with an option to repurchase. The Knorrs' daughter, Alonna, and her husband, Jon Norberg, allegedly agreed in late 2010 to purchase the North Dakota lake home and lease it to the Knorrs with an option to repurchase.

[¶ 4] In February 2011, a lease agreement containing an option to purchase the lake home was executed by the Knorrs and sent to the Norbergs for their signatures. Alonna Norberg signed the agreement and claimed Jon Norberg did so as well, but that document has not been found. Jon Norberg claimed the lake home was leased to the Knorrs but no option to buy back the home was included in the transaction. After transferring the lake home to the Norbergs, the Knorrs continued to live in the home, made monthly payments to Jon Norberg for an amount equal to the Norbergs' mortgage payments, paid all real estate taxes on the property, maintained the property, and paid all utilities and other expenses associated with the property. In December 2011, the Knorrs gave notice to the Norbergs, who were then experiencing marital difficulties, that they were exercising the option to purchase the lake property. Jon Norberg refused to recognize the option.

[¶ 5] The Knorrs sued the Norbergs seeking an order that they comply with the option agreement or that they are entitled to buy back the property under equitable principles of promissory estoppel and constructive trust. Alonna Norberg answered and filed a cross-claim against Jon Norberg for reimbursement and indemnity should the Knorrs recover against her. Jon Norberg claimed in his answer that the alleged oral option agreement was barred by the statute of frauds.

[¶ 6] Following a bench trial, the district court ruled “there is clear and unequivocal evidence of an oral option agreement and of partial performance under that agreement to remove the contract from the Statute of Frauds and compel specific performance of the option agreement.” The court ordered that the Knorrs be allowed to buy back the lake home “in accordance with the oral terms of their agreement.” The court dismissed the cross-claim and did not address the equitable theories of recovery advanced by the Knorrs.

II

[¶ 7] Jon Norberg argues the district court erred in ruling the alleged oral option agreement is enforceable under the statute of frauds.

[¶ 8] Section 9–06–04(3), N.D.C.C., provides in relevant part:

The following contracts are invalid, unless the same or some note or memorandum thereof is in writing and subscribed by the party to be charged, or by the party's agent:

....

3. An agreement for the leasing for a longer period than one year, or for the sale, of real property, or of an interest therein.

Under N.D.C.C. § 9–06–04(3), a “long-term lease with an option to purchase would ordinarily require a signed written agreement.” Moen v. Thomas, 2001 ND 95, ¶ 16, 627 N.W.2d 146. Absent a written contract or agreement, however, N.D.C.C. § 47–10–01 allows a “court to compel the specific performance of any agreement for the sale of real property in case of part performance thereof.” In Bloomquist v. Goose River Bank, 2013 ND 154, ¶ 13, 836 N.W.2d 450, we explained:

We have clarified that, in order to remove an oral agreement from the statute of frauds, the part performance must unmistakably point to the existence of the alleged oral agreement:

To take a contract out of the statute of frauds, the party seeking to enforce the oral contract must establish part performance that is not only consistent with, but that is consistent only with, the existence of the alleged oral contract. As we explained in Rickert [v. Dakota Sanitation Plus, Inc., 2012 ND 37, ¶ 14, 812 N.W.2d 413]:

When it is alleged that partial performance removes an unwritten agreement from the statute of frauds, the most important question is whether the part performance is consistent only with the existence of the alleged oral contract. In re Estate of Thompson, 2008 ND 144, ¶ 12, 752 N.W.2d 624;Fladeland v. Gudbranson, 2004 ND 118, ¶ 8, 681 N.W.2d 431;Johnson Farms v. McEnroe, 1997 ND 179, ¶ 19, 568 N.W.2d 920. As further clarified in Estate of Thompson, at ¶ 13 (quoting Anderson v. Mooney, 279 N.W.2d 423, 429 (N.D.1979)): “ ‘Another requirement of the doctrine * * * is that the acts relied upon as constituting part performance must unmistakably point to the existence of the claimed agreement. If they point to some other relationship ... or may be accounted for on some other hypothesis, they are not sufficient.’ ”

(quoting Kohanowski v. Burkhardt, 2012 ND 199, ¶ 16, 821 N.W.2d 740);see also Trosen v. Trosen, 2014 ND 7, ¶ 24, 841 N.W.2d 687.

[¶ 9] The existence of an oral contract and the conduct of partial performance of that contract are questions of fact we review under the clearly erroneous standard of review. See Fladeland v. Gudbranson, 2004 ND 118, ¶ 14, 681 N.W.2d 431;Johnson Farms v. McEnroe, 1997 ND 179, ¶ 20, 568 N.W.2d 920. A finding of fact is clearly erroneous if it is induced by an erroneous view of the law, if there is no evidence to support it, or if, after reviewing the evidence, we are left with a definite and firm conviction a mistake has been made. Danuser v. IDA Marketing Corp., 2013 ND 196, ¶ 31, 838 N.W.2d 488. In a bench trial, the district court determines the credibility of witnesses, and we do not second-guess those credibility determinations. Id.

[¶ 10] The district court ruled:

1. The Court concludes as a matter of law that there is clear and unequivocal evidence of an oral option agreement and of partial performance under that agreement to remove the contract from the Statute of Frauds and compel specific performance of the option agreement. N.D.C.C. §§ 9–06–04(3), 47–10–01.

2. Evidence supporting the existence [of the] oral option agreement is as follows:

a. Robert and Cheri Knorr purchased the land and built the [lake] home specifically with Cheri Knorr's Parkinson's disease in mind.

b. Rob Knorr specifically testified that only family members were being considered to help out Robert and Cheri financially by buying the homes in North Dakota and Arizona with a lease and buy back option.

c. Robert and Cheri Knorr continued to live in the [lake] home even after the home was transferred to the Norbergs.

d. Jon Norberg was aware of family discussions regarding the Knorrs' financial situation and aware of the lease and buy back option discussions.

e. Jon and Alonna Norberg agreed to help out Robert and Cheri.

f. Jon Norberg admitted the existence of an oral lease with no designated end date, which should have also been in writing under the Statute of Frauds.

g. Except for a late payment by Jon Norberg to [the bank], the transfer of the [lake] home did not cost Jon and Alonna Norberg any money. Robert and Cheri Knorr paid for everything.

h. Jon Norberg never had a key to the [lake] home.

3. Evidence supporting partial performance by the Knorrs is as follows:

a. Robert and Cheri Knorr fulfilled their obligations under the oral lease and buy back option agreement by: (1) making payments to Jon Norberg (which covered the Norbergs' mortgage payment on the home[) ]; (2) paying all real estate taxes related to the [lake] home after the purchase; (3) maintaining an insurance policy on the property; (4) physically maintaining the property; (5) paying all utilities; and (6) paying all other costs and expenses associated with the home.

b. Robert and Cheri provided notice they were exercising their option to repurchase [the] home.

[¶ 11] The district court's decision is flawed. First, the court made no findings about the terms of the parties' oral agreement. An oral contract can be enforced only when the parties have agreed on its essential terms, which depend on the context of the agreement. See, e.g., B.J. Kadrmas, Inc. v. Oxbow Energy, LLC, 2007 ND 12, ¶ 12, 727 N.W.2d 270;Lonesome Dove Petroleum, Inc. v. Nelson, 2000 ND 104, ¶ 18, 611 N.W.2d 154. The court did not identify...