Stoneburner v. Fletcher

• Decision Date: 21 July 1980
• Docket Number: No. 2-577-A-207,2-577-A-207
• Citation: 408 N.E.2d 545
• Parties: Dorothy M. (Brown) STONEBURNER, Appellant (Defendant), v. Thomas V. FLETCHER, Appellee (Plaintiff).
• Court: Indiana Appellate Court

Page 545

408 N.E.2d 545

Dorothy M. (Brown) STONEBURNER, Appellant (Defendant), v. Thomas V. FLETCHER, Appellee (Plaintiff).

No. 2-577-A-207.

Court of Appeals of Indiana, Second District.

July 21, 1980.

Edwin H. Hughes, III, Hughes & Hughes, Indianapolis, for appellant.

Marion O. Redstone, Indianapolis, for appellee.

SULLIVAN, Judge.

Dorothy M. Stoneburner ¹ (Stoneburner) and Thomas V. Fletcher (Fletcher) entered into a real estate conditional sales contract dated April 17, 1969. ² The standard form contract contained the following provisions added to and incorporated into the instrument.

"(1) Buyer shall have the privilege of paying any sums in addition to this contract and of paying the contract in full at any time after four (4) years from the date hereof.

(2) Seller is the owner of a Lot located immediately adjacent to the west of the within described real estate and agrees to give Buyers an opportunity to purchase same, in event same should be for sale at any time in the future, by paying an amount equal to the highest bona fide offer received by Seller and for which Seller is willing to sell.

(3) Buyers further agree to keep said real estate mowed."

Fletcher exercised his right under Clause (1) and paid the entire remaining balance in late November, 1974, receiving a warranty deed from Stoneburner.

In the spring of 1975, Stoneburner began negotiating with Robert and Mildred Kopecky (the Kopeckys) for the sale and purchase of a forty foot wide strip of the lot which was the subject of Clause (2) in the Stoneburner-Fletcher contract. The negotiations resulted in conveyance of the strip from Stoneburner to the Kopeckys on July 31, 1975. ³

Fletcher brought this action for equitable relief and damages for breach of Clause (2) against Stoneburner and the Kopeckys. Prior to trial, Fletcher dismissed his complaint against the Kopeckys, who in turn dismissed their counterclaim against Fletcher. The case was tried by the court, without a jury, and judgment was entered for Fletcher in the sum of $4,000.

Stoneburner argues on appeal that:

I. Clause (2) did not survive the payment and satisfaction in full of the contract regarding Parcel C and was not in full force and effect in 1975.

II. There is insufficient evidence to support the award of damages.

III. The trial court erred in finding:

A. That Fletcher was ready, willing and able to purchase the real estate on the same terms accepted by Stoneburner.

B. That Stoneburner represented to Fletcher that she had a "bona fide" offer for the real estate.

C. That Stoneburner denied that she had any "deal" for the real estate in order to deceive Fletcher and deny him his rights.

We affirm.

I.

Stoneburner argues that Finding of Fact 10 that the duration of the pre-emptive right ⁴ in Clause (2) must be construed to be for a reasonable period of time and to expire no sooner than the normal payout of the real estate contract is not supported by the evidence and, therefore, is clearly erroneous. ⁵

Stoneburner contended at trial that Clause (2) was an indivisible and interdependent covenant of the conditional sales contract which, therefore, terminated with the contract for the sale of Parcel C in November, 1974. Fletcher testified that his interpretation of the provision was that his right lasted as long as Stoneburner lived. The trial court declined to adopt either of these positions and instead construed the duration of the pre-emptive right to be until September 1, 1982, the date at which the real estate conditional sales contract would have been paid in full if Fletcher had not taken advantage of his pre-payment right and accelerated payments.

Our research, however, discloses that a pre-emptive right appears to continue for the life of the vendor unless a longer or shorter duration is specified. See Mercer v. Lemmens, supra, VI American Law of Property, supra. While the trial court's determination of a lesser duration may not be correct, we cannot say it is prejudicially unreasonable as to Stoneburner. The dispositive question, in our view, is whether the pre-emptive right expired by virtue of the transfer of Parcel C from Stoneburner to Fletcher by warranty deed. If it did, we need go no further. If it did not, the pre-emptive right continued and 1975 was well within both the reasonable time and Stoneburner's life measure of its duration.

Stoneburner analogizes the instant case to Spindler v. Valparaiso Lodge of Benevolent and Protective Order of Elks, No. 500 (1945) 223 Ind. 276, 59 N.E.2d 895. In that case, our Supreme Court held that the tenant's acceptance of a new lease, effective at the termination of a prior lease, was a surrender of the old lease and all rights the tenant had under the prior lease. Therefore, the tenant could not enforce a preferential right to purchase the leased property contained in the prior lease when the new lease contained no such provision.

We do not find the analogy convincing. The prior lease in Spindler concerned one parcel of land and contained a pre-emptive right to purchase same. The instant case presents a contract to purchase one parcel of land containing a pre-emptive right to purchase an adjoining, but separate parcel of real estate. The subject matter of the leases and the pre-emptive right were the same in Spindler, while here the subject matter of the contract to purchase and of the pre-emptive right are different. Further the court in Spindler stated:

"The acceptance of the new lease was an effectual surrender of the old, together with the estate and all other rights which the old lease secured to him. Thenceforth he was in as of a new estate, which is to be measured by the condition of things existing when it commenced, and by the covenants, conditions and reservations contained in the new lease, from which the rights of the parties must be determined and regulated."

Id., 223 Ind. at 281, 59 N.E.2d at 897 (citing Hedderich v. Smith (1885) 103 Ind. 203, 205-06, 2 N.E. 315, 316.). This language, which Stoneburner paraphrases in order to make it fit the particulars of the instant case, is language of novation, not of merger by deed or severability of contract. ⁶

The doctrine or rule of merger by deed was summarized in Thompson v. Reising (1943) 114 Ind.App. 456, 462, 51 N.E.2d 488, 491:

"In the absence of fraud or mistake, all prior or contemporaneous negotiations or executory agreements, written or oral, leading up to the execution of a deed are merged therein by the grantee's acceptance of the conveyance in performance thereof." (Citations omitted.)

The court surveyed several earlier cases in the area and stated that they: "for the most part are concerned with reservations or stipulations in a contract for a deed dealing with things or rights that would legally pass to the grantee by deed in the absence of such reservations or stipulations, and hold, in line with the weight of authority elsewhere, that such rights, if not carried forward into the deed, are extinguished thereby, and no action lies on the contract." Id.

The court continued:

"If, however, the contract for the sale of land creates rights collateral to and independent of the conveyance, the contract to that extent survives a deed that is silent in respect thereto. This is on the theory that the conveyance is not necessarily a performance of such collateral and independent agreements, as for example, a provision in the contract that the seller within a fixed time shall repair the house on the premises to be conveyed. Doty v. Sandusky etc., Cement Co., (46 Ind.App. 440, 91 N.E. 569) supra. The point is made in many decisions on the subject that collateral undertakings, not a part of the main purpose of the transaction, i. e., the conveyance of real estate, by their very nature show an intent that they should not be merged in the deed, and therefore are not extinguished thereby. Lambert v. Krum (1923), (121 Misc. 170) 200 N.Y.S. 452; Brennan v. Schellhamer (1891), Com.Pl., 13 N.Y.S. 558; Brunswick Const. Co. v. Burden (1906), (116 A.D. 468) 101 N.Y.S. 716." Id. at 463, 51 N.E.2d at 491.

See also, Dubois County Machine Co. v. Blessinger (1971) 149 Ind.App. 594, 274 N.E.2d 279; Stack v. Commercial Towel & Uniform Service, Inc. (1950) 120 Ind.App. 483, 91 N.E.2d 790.

The pre-emptive right to purchase the adjoining lot was not a part of the main purpose of the contract which was the sale and purchase of Parcel C. Further, the use of the open-ended words "at any time in the future" could be reasonably interpreted as an expression of the parties' intent, at the time of contracting, that the pre-emptive right would survive the conveyance of the principal property.

Stoneburner attacks the sufficiency of the description of the property affected by the pre-emptive right and argues that this insufficiency of description, along with the absence of a separate recital of consideration and execution by the parties, further shows that Clause (2) was so interdependent with the real estate conditional sales contract that it terminated when the contract was fulfilled.

A contract is not entire and indivisible simply because it is embraced in one instrument and executed by the same parties. Armstrong v. Illinois Bankers Life Association (1940) 217 Ind. 601, 29 N.E.2d 415, modified on other grounds, 29 N.E.2d 953. Our Supreme Court stated in Samper v. Indiana Department of State Revenue (1952) 231 Ind. 26, 37, 106 N.E.2d 797, 802:

"The usual test of the severability of a contract is the entirety or divisibility of the consideration; and whether a contract is entire or divisible is controlled by the intention of the parties as it is disclosed by the terms of the contract. It is well established that the parties to a contract intend that it be entire and indivisible when by its terms, nature and purposes it contemplates and intends that each and all of its parts, material provisions and the consideration, are common each to the other and interdependent,...