Kruger v. Soreide

• Decision Date: 05 November 1976
• Docket Number: No. 9242,9242
• Citation: 246 N.W.2d 764
• Parties: Dave KRUGER and Marietta Kruger, Plaintiffs and Appellants, v. John G. SOREIDE and Dorothy L. Soreide, Defendants and Appellees, and Don Pierce and Bernard Engesser, Defendants, Appellees, and Cross-Appellants. Civ.
• Court: North Dakota Supreme Court

Page 764

246 N.W.2d 764

Dave KRUGER and Marietta Kruger, Plaintiffs and Appellants, v. John G. SOREIDE and Dorothy L. Soreide, Defendants and Appellees and Don Pierce and Bernard Engesser, Defendants, Appellees, and Cross-Appellants.

Civ. No. 9242.

Supreme Court of North Dakota.

Nov. 5, 1976.

Syllabus by the Court

1. An ambiguity in a contract exists when good arguments can be made for either of several contrary positions as to the meaning of a term.

2. The determination of whether a term is ambiguous is a question of law.

3. When a clause or term is ambiguous, it may be construed by reference to the circumstances under which the contract was made.

4. Where the clause 'This sale to be subject to buyer receiving Federal Land Bank financing' was found to be ambiguous, evidence was sufficient to support trial court's finding that the clause meant prospective buyers would not be required to include certain property in the proposed mortgage.

5. A condition precedent is one which must be performed before a duty of immediate performance arises, and may in some instances be a prerequisite to the existence of a contract. Section 9--01--11, NDCC.

6. Where financing clause is a condition precedent in an otherwise binding contract, failure to obtain financing renders the provisions of the contract ineffective.

7. Where a listing agreement between owner and broker failed to set out specific duties of broker, and no evidence was introduced to show custom and practice of brokers in the community, the court will not resort to implications to establish liability against the broker.

8. A listing agreement is an employment contract, which may be unilateral, executory, bilateral with exclusive agency or exclusive right to sell, or a combination of these, depending upon its terms.

9. Where neither the listing agreement nor the evidence set out specific duties or obligations of broker, equity does not warrant resorting to implications to impose liability on owner for payment of commission to broker.

10. Broker is not entitled to recover commission for sale of property by owner where the listing agreement had characteristics of a unilateral contract and there was an insufficient showing of substantial performance of services during the time that listing agreement was in effect and there was no evidence establishing that the sale was in any manner the result of the efforts of the broker.

Freed, Dynes, Malloy & Reichert, Dickinson, for plaintiffs and appellants; argued by George T. Dynes, Dickinson.

Stuart & Jaynes, Hettinger, and John A. Amundson, Bowman, for defendants and appellees John G. Soreide and Dorothy L. Soreide; argued by Jerome L. Jaynes, Hettinger.

T. L. Secrest, Hettinger, and Elmer V. Morland, Bowman, for defendants, appellees and cross-appellants Don Pierce and Bernard Engesser; argued by Elmer V. Morland, Bowman.

SAND, Justice.

David Kruger and Marietta Kruger, husband and wife, brought an action against John Soreide and Dorothy Soreide, husband and wife, and the Bowman Real Estate (Bernard Engesser and Don Pierce, d.b.a. Bowman Real Estate) for damages arising out of an alleged breach of purchase contract for ranch land. Bowman Real Estate counterclaimed for commission allegedly due on the second listing of the same property. A judgment of dismissal was entered on March 3, 1976, on all issues, from which the Krugers appealed, and from which Bowman Real Estate cross-appealed.

The Krugers owned a ranch consisting of approximately 3,000 acres in Bowman County which they decided to offer for sale. They entered into a listing agreement with the Bowman Real Estate Company. John and Dorothy Soreide became interested in the property, and on December 5, 1974, entered into a purchase contract prepared by Bowman Real Estate with the Krugers for the amount of $300,000. The Soreides were concerned about financing the purchase and expressed reservations about mortgaging certain portions of the land they owned. Bowman Real Estate inserted the following provision in the contract: 'This sale to be subject to buyer receiving Federal Land Bank financing.' The contract was signed by Dave Kruger, Marietta Kruger, John Soreide and Dorothy Soreide. On that date Dave Kruger requested until December 10 to think over the transaction. Within the next several days, and before December 10, Kruger contacted Bowman Real Estate and asked that they try to obtain an additional $10,000 on the contract, which they did. Soreide agreed to pay an additional $8,000, and an agreement to this effect was signed by Dave Kruger and John Soreide, but not by Mrs. Kruger nor Mrs. Soreide.

The Soreides applied to the Federal Land Bank for financing. The mortgage and proposed financing arrangements included all of the Kruger ranch and most of the Soreide property, including the farm headquarters. ¹ The North Half of Section 5, and a ten-acre tract on which the Soreides lived was not included. The application for financing was processed by the Federal Land Bank and received preliminary approval. However, Mr. and Mrs. Soreide refused to go through with the loan, giving as one of the reasons the inclusion of the farm headquarters in the mortgage. The Soreides testified that prior to signing the contract to purchase they informed Bowman Real Estate of their decision to exclude the headquarters from any security mortgage. They also testified that the Federal Land Bank was informed at the time of the initial appraisal of their decision not to mortgage the headquarters.

Subsequent to Soreides' refusal to sign the mortgage, the loan application was canceled, and Bowman Real Estate returned the earnest money of $5,000 to the Soreides. Neither Soreides nor Bowman Real Estate were aware that the North Half of Section 5 had been omitted from the mortgage until depositions were taken in preparation for trial of this case in the district court. According to testimony at trial, no buildings were located on the North Half of Section 5. Duane Hanson of the Federal Land Bank testified that it was preferable to include the headquarters in the mortgage, so that in the event of foreclosure the property would be more salable.

Even though the Krugers were disappointed with the manner in which Bowman Real Estate conducted the transaction with the Soreides they nevertheless relisted their ranch with Bowman Real Estate, and continued to make demands on the Soreides to comply with the original agreement. Bowman Real Estate was unable to find other buyers for the amount for which the property was to be sold to the Soreides. Ultimately, Krugers sold the property directly to two Montana men, Uttke and Ketterling, for $250,000. This action followed, wherein the Krugers sued Soreides and Bowman Real Estate for expenses and for $58,000 in damages due to reduction in purchase price. Bowman Real Estate counterclaimed, contending that they were entitled to the commission as set out in the second listing contract dated 30 June 1975.

The basis of Krugers' claim against Soreides is breach of the contract to purchase and the resultant loss in purchase price. Accordingly, we must decide the preliminary question whether or not the purchase agreement of December 5, 1974, between Krugers and Soreides was a binding contract.

Crucial to this determination is the significance and interpretation given to the language in the purchase contract, 'This sale to be subject to buyer receiving Federal Land Bank financing.' The trial court held that this language was ambiguous, with which we agree. A ambiguity exists when good arguments can be made for either of several contrary positions as to the meaning of a term, and the determination whether an ambiguity exists is a question of law. Grove v. Charbonneau Buick-Pontiac, Inc., 240 N.W.2d 853, 861 (N.D.1976); In re Estate of Johnson, 214 N.W.2d 112 (N.D.1973). The language, 'This sale to be subject to buyer receiving Federal Land Bank financing' could be interpreted to mean financing under whatever terms the Federal Land Bank cared to impose; or financing under the terms currently in use by the Federal Land Bank; or financing within what the Soreides felt was their ability. Because the clause was ambiguous, it was proper for the court to refer to the circumstances under which it was made and the matters to which it related in order to construe the terms. Stuart v. Secrest, 170 N.W.2d 878 (N.D.1969); § 9--07--12, North Dakota Century Code.

In construing the ambiguous phrase, the trial court referred to oral testimony of the parties concerning the circumstances surrounding the December 5 agreement. The trial court found as a fact that before the agreement was entered into, it was orally agreed between the defendants Don Pierce and Bernard Engesser of Bowman Real Estate and defendants John and Dorothy Soreide that the headquarters portion of Soreides' land would not be included in the proposed mortgage. The trial court also found that defendants John and Dorothy Soreide informed the agents of the Federal Land Bank at the time of the appraisal that the headquarters was not to be included in the proposed mortgage. From these facts the trial court concluded that the parties understood and agreed that the financing clause was meant to include the condition that Federal Land Bank financing would not require the Soreides to mortgage their farm headquarters and that such agreement was reached prior to the signing of the December 5 purchase contract.

We have examined the record and we find that there is substantial evidence to support those findings of fact made by the trial court, thus we cannot conclude that such findings were clearly erroneous. We agree with the trial court's conclusion as to the meaning of the financing clause.

The agreement having been conditioned upon obtaining Federal Land Bank financing in accordance with the understanding reached, a condition precedent to performance of the contract was created. A condition precedent...