R & F Financial Services, LLC v. Cudd Pressure Control, Inc., 011221 NDSC, 20190287

Docket Nº20190287
Opinion JudgeTufte, Justice.
Party NameR & F Financial Services, LLC, Plaintiff and Appellant v. Cudd Pressure Control, Inc., and RPC, Inc., Defendants and Appellees and North American Building Solutions, LLC, Defendant
AttorneyJoseph A. Turman (argued) and Katrina A. Turman Lang (argued), Fargo, N.D., for plaintiff and appellant. Trevor A. Hunter (argued) and Kent A. Reierson (on brief), Williston, N.D., for defendants and appellees.
Judge PanelJon J. Jensen, C.J., Gerald W.VandeWalle, Daniel J. Crothers, Lisa Fair McEvers, Jerod E. Tufte
Case DateJanuary 12, 2021
CourtSupreme Court of North Dakota

2021 ND 12

R & F Financial Services, LLC, Plaintiff and Appellant

v.

Cudd Pressure Control, Inc., and RPC, Inc., Defendants and Appellees

and

North American Building Solutions, LLC, Defendant

No. 20190287

Supreme Court of North Dakota

January 12, 2021

Appeal from the District Court of Williams County, Northwest Judicial District, the Honorable Benjamen J. Johnson, Judge.

Joseph A. Turman (argued) and Katrina A. Turman Lang (argued), Fargo, N.D., for plaintiff and appellant.

Trevor A. Hunter (argued) and Kent A. Reierson (on brief), Williston, N.D., for defendants and appellees.

OPINION

Tufte, Justice.

[¶1] R & F Financial Services, LLC, appeals from a district court order dismissing its claims against Cudd Pressure Control, Inc., and RPC, Inc., and granting Cudd's and RPC's counterclaims and cross claims. On appeal, R & F argues that the court erred in finding the Lease was not a finance lease and, in the alternative, that the court erred in finding the doctrines of impossibility of performance and frustration of purpose to be inapplicable. We affirm.

I

[¶2] North American Building Solutions, LLC ("NABS") and Cudd Pressure Control, Inc. ("Cudd") became associated with each other when NABS managing member James Morken "stopped in at Cudd['s]" business location. On August, 30, 2011, Cudd and NABS entered into a lease agreement (the "Lease") whereby Cudd agreed to lease from NABS 60 temporary housing modules. Pursuant to the agreement, NABS agreed to deliver and construct the modules on certain real property located in Williams County. The terms of the Lease required Cudd, at its sole expense, to obtain any conditional use permits, variances or zoning approvals "required by any local, city, township, county or state authorities, which are necessary for the installation and construction of the modules upon the Real Property." The Lease was set to commence following substantial completion of the installation of all the modules and was to expire 60 months following the commencement date. Originally, NABS wanted to sell the modules to Cudd, but Cudd did not want to fund the project and wanted to lease the modules.

[¶3] On April 18, 2012, Cudd accepted 28 modules from NABS pursuant to the Acceptance and Lease Schedule #1 ("Schedule #1"); NABS assigned its interest in the Lease to R & F; and NABS sold the modules to R & F by a bill of sale. Cudd was not a party to the assignment or bill of sale, and Schedule #1 did not mention either document. R & F had purchased NABS's interest in the Lease to provide funding so that NABS would have the capital to complete the project. On June 28, 2012, Cudd accepted the final 32 modules from NABS pursuant to the Acceptance and Lease Schedule #2 ("Schedule #2"), to which R & F was not a party. NABS and Cudd agreed that the new commencement date under the Lease was June 23, 2012.

[¶4] RPC, as the parent company of Cudd, guaranteed Cudd's performance of payment obligations to R & F under section 4 of the Lease. NABS was not a party to the guaranty. There is nothing in the record showing that Cudd or RPC consented to NABS's assignment of its interest in the Lease and sale of the modules to R & F. The Lease was for a set term and did not contain an option for Cudd to purchase the modules at the expiration of that set term. Paragraph 23 of the Lease provides that "in connection with such interpretation and enforcement, this Lease shall be deemed to be a commercial lease."

[¶5] At the time R & F purchased NABS's interest in the Lease, it understood the purpose of the Lease was to fulfill Cudd's need for employee housing. Given the layout of the modules, they were designed for and had limited uses other than housing. Cudd used the modules strictly for housing as required by the Lease. The County required a conditional use permit for workforce housing, and Cudd had been issued a permit allowing for the use of the modules as workforce housing. On May 24, 2012, the City of Williston annexed, among other properties, the Property into the City's corporate limits.

[¶6] In September of 2013, the City adopted Resolution 13-127, which applied to all workforce housing facilities subject to the City's jurisdiction, and declared that all workforce housing was temporary and extension of permits was subject to review and requirements. Therefore, a workforce housing facility could legally operate in the City post-annexation until its County-issued permit expired. Permits could be extended for a period of 24 months, assuming certain requirements were met. In December of 2013, the City modified the expiration date policy and extended all approvals for workforce housing facilities to December 31, 2015, such that all permits would expire the same day.

[¶7] In September of 2015, the termination date for all workforce housing facility permits was again extended to July 1, 2016, by motion. Ordinance No. 1026 codified the September motion, and under it, an existing workforce housing facility had to have been in full compliance with the City in order to be eligible for the extension. In December of 2015, Cudd complied with these requirements, and the City extended Cudd's permit for the maximum time permitted to July 1, 2016. Cudd sent a letter to NABS stating that it viewed the Lease as being terminated by operation of law as of July 1, 2016.

II

[¶8] Whether the transaction was a commercial lease or a finance lease is a question of law. This Court has stated the standard of review in interpreting contracts as follows: The parties' intent is ascertained from the writing alone if possible. The language of a contract is to govern its interpretation if the language is clear and explicit and does not involve an absurdity. When the parties' intent can be determined from the contract language alone, interpretation of a contract presents a question of law. When an agreement has been memorialized in a clear and unambiguous writing, extrinsic evidence should not be considered to ascertain intent. When a contract's language is plain and unambiguous and the parties' intentions can be ascertained from the writing alone, extrinsic evidence is not admissible to alter, vary, explain, or change the contract. If a contract is ambiguous, extrinsic evidence may be considered to determine the parties' intent, and the contract terms and parties' intent become questions of fact.

Big Pines, LLC v. Baker, 2020 ND 64, ¶ 7, 940 N.W.2d 616. At oral argument, the parties agreed that the Lease is unambiguous.

III

[¶9] "Finance lease" is defined by statute as a lease in which: (1) The lessor does not select, manufacture, or supply the goods;

(2) The lessor acquires the goods or the right to possession and use of the goods in connection with the lease; and

(3) (a) The lessee receives a copy of the contract by which the lessor acquired the goods or the right to possession and use of the goods before signing the lease contract;

(b) The lessee's approval of the contract by which the lessor acquired the goods or the right to possession and use of the goods is a...

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