Savre v. Santoyo

• Decision Date: 01 July 2015
• Docket Number: No. 20140358.,20140358.
• Citation: 865 N.W.2d 419
• Court: North Dakota Supreme Court
• Parties: Darwin SAVRE, d/b/a Savre's Heavy Truck & Auto Repair, Plaintiff and Appellee v. Jose SANTOYO, Defendant and Appellant.

865 N.W.2d 419

Darwin SAVRE, d/b/a Savre's Heavy Truck & Auto Repair, Plaintiff and Appellee

v.Jose SANTOYO, Defendant and Appellant.

No. 20140358.

Supreme Court of North Dakota.

July 1, 2015.

Ann E. Miller, Fargo, N.D., for plaintiff and appellee.

Andrew D. Cook, West Fargo, N.D., for defendant and Appellant.

Opinion

McEVERS, Justice.

[¶ 1] Jose Santoyo appeals from a judgment awarding damages to Darwin Savre for overpayments under the parties' lease and purchase option agreement and dismissing Santoyo's counterclaim for damages to the leased property. We conclude the district court did not clearly err in finding that Santoyo had breached the agreement and that Santoyo had waived strict compliance with the option agreement's terms when he accepted Savre's late lease payments. We further conclude that the court failed to make sufficient findings of fact to explain dismissal of Santoyo's counterclaim for damages. We affirm in part, reverse in part, and remand for further proceedings.

I

[¶ 2] Savre owns and operates Savre's Heavy Truck & Auto Repair, an auto repair business in Fargo. Santoyo owns the two parcels of real property and building that are the subject of the leases and option agreement in this case. In June 2008, Savre and Santoyo entered into a lease agreement for a portion of the property including commercial building space. The original lease term was from June 15, 2008, to June 15, 2010, with Savre paying rent of $2,300 per month until June 15, 2009, at which time the rent would increase to $2,708.33.

[¶ 3] About the time of the rent increase, Savre and Santoyo entered into a “Lease to Purchase Option Agreement.” Under this new agreement, Savre would lease Santoyo's two parcels of property for a period of time, after which Savre could exercise the option to purchase the property if certain terms and conditions were met. On July 15, 2009, Savre and Santoyo executed the option agreement which provided in part:

1. OPTION TERM. The option to purchase period commences either on April 1, 2013, and expires at 11:59 PM April 30th, 2013, or will commence at such time that [Savre] has made & been given receipt of not less than $180,000 in consideration toward the purchase of the subject property.

2. NOTICE REQUIRED TO EXERCISE OPTION. To exercise the Option to Purchase, [Savre] must give a minimum of 60 days notice, & deliver to [Santoyo] written notice of [Savre's] intent to purchase. In addition, the written notice must specify a valid closing date. The closing date must occur before the original expiration date of the Lease Agreement, or the date of the expiration of the Option to Purchase Agreement designated in paragraph 1, whichever occurs later.

....

4. PURCHASE PRICE. The total purchase price for the [Building] is $550,000. Provided that [Savre] timely executes the option to purchase, is not in default of the Lease Agreement, & closes the conveyance of the [Building], [Santoyo] shall credit towards the purchase price at closing ... the total sum of $4,000 for every monthly lease payment that [Savre] timely made, beginning from the date of the fully accepted Option to Purchase Agreement. In addition to the lease payments; [Santoyo] will credit any additional payments or mutually agreed upon consideration that [Savre] may make from time to time throughout the duration of the lease(s) and/or this Option to Purchase contract.... [Savre] shall receive no credit at closing for any monthly lease payment that [Santoyo] received after the due date specified in the Lease Agreement(s). Receipts of additional payments, consideration & [Santoyo ] allowed delinquent lease payments are to be kept & maintained by both parties and copies will be freely given to one another upon written request.

5. EXCLUSIVITY OF OPTION. This Option to Purchase Agreement is exclusive & non-assignable & exists solely for the benefit of the named parties above. Should [Savre] attempt to assign, convey, delegate, or transfer this option to purchase without [Santoyo's] express written permission, any such attempt shall be deemed null & void.

....

8. FINANCING DISCLAIMER. The parties acknowledge that it is impossible to predict the availability of obtaining financing towards the purchase of this Property. Obtaining financing shall not be held as a condition of performance of this Option to Purchase Agreement. The parties further agree that this Option to Purchase Agreement is not entered into in reliance upon any representation or warranty made by either party.

9. REMEDIES UPON DEFAULT. If [Savre] defaults under this Option to Purchase Agreement or the Lease Agreement, then in addition to any other remedies available to [Santoyo] at law or in equity, [Santoyo] may terminate this Option to Purchase by giving written notice of the termination. If terminated, [Savre] shall lose entitlement to any refund of rent or option consideration. For this Option to Purchase Agreement to be enforceable & effective, [Savre] must comply with all terms & conditions of the Lease Agreements.

....

16. ENTIRE AGREEMENT; MODIFICATION. This document sets forth the entire agreement & understanding between the parties relating to the subject matter herein & supersedes all prior discussions between the parties. No modification of or amendment to this Option to Purchase Agreement, nor any waiver of any rights under this Option to Purchase Agreement, will be effective unless in writing signed by the party to be charged.

The lease incorporated by the option agreement also provided:

18. DEFAULT. If [Savre] fails to pay the rent as agreed, or fails to fulfill any of the conditions herein contained, then [Santoyo] may, at [his] option, by written notice to [Savre], immediately declare this Agreement terminated and evict [Savre] in accordance with the laws of the State of North Dakota....

(Emphasis added.)

[¶ 4] Although the lease and option agreement required Savre to pay his monthly rent payments on the first of each month, Savre was frequently late in his payments from the beginning of the lease. Santoyo accepted the payments and did not give Savre written notice of any intent to terminate the lease based on Savre's late payment. Savre made monthly payments in varying amounts under the option agreement, and the district court found he paid at least a total of $4,000 each month.

[¶ 5] In the fall of 2012, Savre and another individual formed JDDS, LLC, intending to use the entity to finance the purchase of Santoyo's property. The district court found, however, that Savre did not attempt to assign, convey, delegate or transfer his purchase option to JDDS. On December 21, 2012, Savre made his first attempt to exercise his option to purchase the property with a handwritten notice to Santoyo. On February 27, 2013, Savre made a second attempt to exercise the option with another handwritten notice to Santoyo. Santoyo did not respond to Savre's attempts to exercise the purchase option. The court found that at the time Savre attempted to exercise the option on February 27, 2013, Savre had paid at least $180,000 in monthly payments, satisfying the option agreement requirement of paying $180,000 toward the purchase of the property.

[¶ 6] After Santoyo did not sell him the property, Savre stopped making monthly payments. Santoyo initiated eviction proceedings against Savre in the district court. The court granted the eviction and entered judgment against Savre for unpaid rent and Santoyo's costs and disbursements. Savre vacated Santoyo's property at the end of June 2013 and began leasing a different space in Fargo. Savre subsequently commenced this action, alleging that Santoyo breached the option agreement when he failed to sell the property leased to Savre after he exercised his option and that Santoyo had been unjustly enriched. Santoyo denied the allegations and counterclaimed, alleging Savre violated his contractual and statutory duties by damaging the property upon being evicted from the premises.

[¶ 7] After a bench trial, the district court found Santoyo had breached the option to purchase agreement and awarded Savre damages in the amount of $31,996, for overpayments Savre made under the lease agreement. The court denied Savre's additional claimed damages for lost business profits and costs of moving into a new commercial building as speculative. In dismissing Santoyo's counterclaim for Savre's alleged damages to the property, the court found Santoyo failed to meet his burden of proof.

II

[¶ 8] Our standard for reviewing an appeal after a bench trial is well-established:

In an appeal from a bench trial, the trial court's findings of fact are reviewed under the clearly erroneous standard of N.D.R.Civ.P. 52(a) and its conclusions of law are fully reviewable. 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 all the evidence, we are left with a definite and firm conviction a mistake has been made. In a bench trial, the trial court is the determiner of credibility issues and we do not second-guess the trial court on its credibility determinations.

Brash v. Gulleson, 2013 ND 156, ¶ 7, 835 N.W.2d 798 (citations and quotation marks omitted).

III

[¶ 9] Santoyo argues the district court erred as a matter of law when the court concluded Santoyo had a contractual duty to sell his property to a third party that did not exist at the time of the agreement and had no rights under the agreement.

[¶ 10] The general rules for contract interpretation also apply to the interpretation of leases. See Sterling Dev. Grp. Three, LLC v. Carlson, 2015 ND 39, ¶ 13, 859 N.W.2d 414; Abelmann v. SmartLease USA, L.L.C., 2014 ND 227, ¶ 13, 856 N.W.2d 747. When the parties' intent can be ascertained from the contract language alone, the interpretation of the contract to decide its legal effect is a question of law. Abelmann, ¶ 13. The object of contract interpretation is to give effect to the parties' mutual intention when the...