Stacy v. Williams, CA

Decision Date03 June 1992
Docket NumberNo. CA,CA
Citation38 Ark.App. 192,834 S.W.2d 156
PartiesEdgar A. STACY, III, Peggy K. Stacy, and Stacy Lands, Inc., Appellants, v. W. Hunter WILLIAMS, Jr. and Alba Williams, Appellees. 91-457.
CourtArkansas Court of Appeals

Joe D. Bell, Little Rock, for appellants.

Graham Sudbury, Blytheville, for appellees.


Appellants appeal from a judgment of the Mississippi County Circuit Court which dismissed their claim for breach of contract and awarded appellees, on their counterclaim, the return of their $10,000.00 earnest money deposit. Appellants contend that the circuit judge erred in finding that appellees' ability to obtain financing to purchase appellants' property was a condition precedent to the enforcement of their contract. We find no error and affirm.

Appellants own a 588-acre farm in Mississippi County. On June 14, 1985, Hunter Williams, Jr., Alba Williams, and Hunter Williams, Sr. (now deceased), signed a contract to purchase appellants' farm for $882,000.00. Specifically, the pre-printed contract provided:

Seller covenants and agrees to sell and convey Property, with all improvements thereon, or cause it to be conveyed, by good and sufficient warranty deed, to Purchaser, or to such person or persons as Purchaser may designate; Purchaser, however, shall not be released from any of Purchaser's agreements and undertakings as set forth herein, unless otherwise stated; and Purchaser covenants and agrees to purchase and accept Property for the total price of ($882,000.00) Eight Hundred Eighty Two Thousand and no/100--Dollars, upon terms as follows:

After this language, the following typed insertion was added by appellants' real estate agent, Kemp Whisenhunt:

Buyers to pledge approximately 900 acres of land in Tallahatchie County in Mississippi together with lands herein described for loan to pay purchase price. 1985 crop rent of 1/4 cotton and 1/3 other crops to be transferred to buyer. Closing on or before August 1, 1985.

The contract also provided that appellees were to obtain possession of the property on January 1, 1986.

Initially, appellees encountered some problems in obtaining financing for the property because the farm had been leased to a third party until December 1987. Appellees sought financing from a number of different lending institutions, without any success. Equitable Life Assurance Society was the only lender appellees found that was interested in making the loan. The loan was never made, however, because Equitable ran out of farm mortgage money before the loan could be finalized. On September 15, 1985, Hunter Williams, Sr., became ill, and he died on October 10, 1985. Several months later, appellants sold the farm to their tenant, Koehler Blankenship for $630,000.00. Appellants then sued appellees for breach of contract, seeking $252,000.00, which represented the difference between the $882,000.00 purchase price offered by appellees and the $630,000.00 paid by Mr. Blankenship. Appellees counterclaimed for the return of their earnest money deposit. The case was tried to the court sitting as the jury.

The court found that the agreement referred to the purchase price as $882,000.00, upon terms that appellees pledge approximately 900 acres of land in Mississippi, together with the subject lands, for a loan to pay the purchase price. The court also found that, before drafting the sale contract, appellants' agent, Kemp Whisenhunt, was aware that appellees could not purchase the farm without first obtaining a loan. The court concluded that appellees' ability to obtain a loan was a condition precedent to their performance of the contract and, since they used more than reasonable efforts to obtain a loan and were unable to do so, the contract terminated and was unenforceable.

Appellants argue on appeal that the trial court erred in holding that appellees' ability to obtain a loan to purchase the farm was a condition precedent to their duty to purchase the farm. Appellants contend that the parties' contract does not contain language which creates a condition precedent and does not allow for appellees to be released from the contract in the event they are unable to obtain a loan.

Whether a provision in a contract amounts to a condition precedent is generally dependent on what the parties intended, as adduced from the contract itself. McMinn v. Holley, 86 Idaho 186, 384 P.2d 229, 231 (1963). When the terms of a written contract are ambiguous and susceptible to more than one interpretation, extrinsic evidence is permitted to establish the intent of the parties and the meaning of the contract then becomes a question of fact. Floyd v. Otter Creek Homeowners Ass'n, 23 Ark.App. 31, 35, 742 S.W.2d 120, 122-23 (1988). See also Marlatt v. LaGrange, 145 Colo. 50, 357 P.2d 927, 928 (1960); Hawkins & Chamberlain v. Mathews, 242 Ky. 732, 47 S.W.2d 547, 548 (1932); and Lopez v. Broussard, 308 So.2d 837, 840-41 (La.Ct.App.1975). Furthermore, evidence of a parol agreement that a written agreement is being delivered conditionally constitutes an exception to the parol evidence rule. Bradbury v. Giordano, 10 N.J.Super. 414, 76 A.2d 815, 817 (1950); see also VJK Prods, Inc. v. Friedman Meyer Prod., Inc., 565 F.Supp. 916, 919 (S.D.N.Y.1983).

Appellee Hunter Williams, Jr., testified that appellants' broker, Kemp Whisenhunt, knew that appellees did not have sufficient cash to pay for the farm unless they obtained a loan. Mr. Hunter testified that this fact was made perfectly clear to Mr. Whisenhunt. Additionally, on July 3, 1985, Hunter Williams, Jr., wrote to appellant Edgar Stacy announcing appellees' intent to rescind the contract for several reasons. One such reason provided:

There was a mutual mistake between your agent, Kemp Whisenhunt, and my family as to the market value of farm land that my family owns in Tallahassee County, Mississippi. Your agent and my family were of the opinion that the market value of this land was between $900.00 and $1,000.00 an acre. In actuality, the land only enjoys a present market value of $600.00 per acre. The basis of any offer to purchase your land was to finance the purchase by selling the Mississippi land. In fact, an exchange of property along with the cash difference between the market value of the properties was being negotiated to avoid any payment of capital gains taxes.

On July 16, 1985, Joe Bell, attorney for appellants, responded to this letter, stating in part:

The offer is not conditioned on the Mississippi land having a value of $900 to $1,000 per acre. Instead, that land, along with the Stacy farm, was to be used as collateral for a loan to your family to purchase the Stacy farm. Your position on this issue is untenable, and any further delay on your part to immediately seek such a loan, and close the sale with the Stacys, will be treated as a breach of your agreement to pay the Stacys the full purchase price.

It can be inferred from Mr. Bell's letter that appellants were aware that it would be necessary for appellees to obtain a loan in order to purchase the property. There is no testimony by appellants or their witnesses which disputes appellees' contention that their success in obtaining a loan was a condition of the agreement.

When two provisions in a contract are contradictory, typewritten provisions prevail over printed ones. Leonard v. Merchants and Farmers Bank, 290 Ark. 571, 574, 720 S.W.2d 908, 910 (1986); McKinnon v. Southern Farm Bureau Casualty Ins. Co., 232 Ark. 282, 285-86, 335 S.W.2d 709, 711 (1960). The typed insertion contained in the parties' agreement, "buyers to pledge approximately 900 acres of land in Tallahatchie County in Mississippi together with lands herein described for loan to pay purchase price ...," clearly created an ambiguity in the contract, and the intent of the parties could not be discerned from the four corners of the agreement. The circuit court, therefore, could properly consider evidence of the parties' intent in construing the language of the contract.

The findings of fact of a circuit court sitting as a jury will not be reversed on appeal unless clearly against a preponderance of the evidence, and in making that determination, we give due regard to the superior opportunity of the trial court to judge the credibility of the witnesses and the weight to be given their testimony. Bass v. Service Supply Co., 25 Ark.App. 273, 276, 757 S.W.2d 189, 190 (1988); Ark.R.Civ.P. 52(a). We cannot say that the trial court's holding that appellees' ability to obtain financing was a condition precedent to enforcement of the contract is clearly against the preponderance of the evidence.

Appellants point out that, at the time the contract was drafted, appellee Hunter Williams, Jr., was a newly-licensed first-year attorney and that, if appellees had intended to make their obtaining a loan a condition precedent to the contract, they could have clearly so provided. While this is true, it does not render the language in the agreement unambiguous. The fact that a clause fails to employ the usual words denoting a condition such as "subject to" or "if," is not controlling in determining whether a condition precedent was created. Restatement (Second) of Contracts § 226, Comment a (1981). The contract was drafted by appellants' broker, and therefore, if the language is unclear, it should be construed strictly against appellants. See Elcare, Inc. v. Gocio, 267 Ark. 605, 608-09, 593 S.W.2d 159, 161 (1980); Bradbury v. Giordano, 10 N.J.Super. at 418, 76 A.2d at 817; Hawkins & Chamberlain v. Mathews, 242 Ky. at 735, 47 S.W.2d at 548.

Furthermore, courts from other jurisdictions have construed similar language, equally unclear, to create conditions precedent. In Hawkins & Chamberlain v. Mathews, 242 Ky. at 733-34, 47 S.W.2d at 547, the following language was found to create a condition that had to be met before the contract could be enforced: "[A]t the agreed price of Nine Thousand ($9,000.) ...

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