Trear v. Chamberlain

• Decision Date: 24 August 2018
• Docket Number: No. 115,819,115,819
• Citation: 425 P.3d 297
• Parties: Kevin W. TREAR, Appellant/Cross-appellee, v. Susan J. CHAMBERLAIN, Nathan Goodell, and Jamie Jasnoski, Appellees/Cross-appellants.
• Court: Kansas Supreme Court

425 P.3d 297

Kevin W. TREAR, Appellant/Cross-appellee,

v.Susan J. CHAMBERLAIN, Nathan Goodell, and Jamie Jasnoski, Appellees/Cross-appellants.

No. 115,819

Supreme Court of Kansas.

Opinion filed August 24, 2018

Stuart N. Symmonds, of Symmonds & Symmonds, LLC, of Emporia, argued the cause, and Robert N. Symmonds, of the same firm, was with him on the briefs for appellant/cross-appellee.

Vernon L. Jarboe, of Sloan, Eisenbarth, Glassman, McEntire & Jarboe, LLC, of Topeka, argued the cause and was on the supplemental brief for appellees/cross-appellants, and Karen K. McIlvain, of McIlvain Law Office, LLC, of Madison, was on the briefs for appellees/cross-appellants.

The opinion of the court was delivered by Biles, J.:

This is an action for equitable relief stemming from a 1986 real estate contract containing a "first right of refusal" applicable to a separate land tract. Kevin W. Trear seeks specific performance and title to a smaller parcel that was sold after he ignored an earlier offer to sell him the entire tract subject to the 1986 contract. The district court and a Court of Appeals panel differed on how they approached the issues and arrived at conflicting outcomes. We granted review and now affirm the Court of Appeals judgment as right for the wrong reason.

As we view the contract's language, this first right of refusal was fulfilled after Trear failed to respond to the offer to sell him the full tract subject to the contract. We remand to the district court for further proceedings because there remains an unresolved claim as to whether the parties discharged their implied duty of good faith and fair dealing when the offer was presented. Answering this question will determine whether the first right of refusal provision lapsed when Trear failed to respond.

FACTUAL AND PROCEDURAL BACKGROUND

In 1986, Trear purchased real estate in Lyon County from Susan Chamberlain and her now-deceased husband. The sale contract included a preemptive provision for adjoining land Chamberlain and her husband were retaining. The provision stated in relevant part:

"The parties mutually agree that in the event the real estate presently owned by SELLERS which is adjoining the real estate which is the subject of this Contract, is offered for sale by SELLERS, SELLERS shall extend unto PURCHASER the first right of refusal to purchase said adjoining real estate at a price and upon terms mutually agreed upon by the parties. If the parties cannot agree, this right of first refusal shall lapse and thereafter be considered null and void."

The contract further stated it was "binding upon the heirs, legal representatives, and assigns of the parties hereto."

After Chamberlain's husband passed away in 2013, she attempted to sell Trear the 73 adjoining acres covered by the 1986 contract. The tract included the house where Chamberlain and her husband had lived. The sale price was $289,000. The offer's written terms stated it would expire eight days later and further explained, if Trear did not reply, "any obligations [Chamberlain] may or may not have to offer the real estate to [Trear would] be fulfilled." Trear did not respond.

Chamberlain then listed the 73-acre tract with a real estate agency at a $295,000 asking price. In a follow-up letter to Trear, Chamberlain's attorney advised him of the listing and asked him to contact the agent if Trear wished to purchase the property. The letter also expressed the belief that Chamberlain had fulfilled her obligation to offer the property to Trear first. Trear made no offers, counteroffers, or other attempts to negotiate with Chamberlain or otherwise pursue the sale.

The listed property did not sell and was taken off the market. About a year later, Chamberlain sold 64 of those 73 acres to her daughter, Jamie Jasnoski, and Nathan Goodell for $91,124. This sale did not include the house.

Trear sued Chamberlain, Jasnoski, and Goodell, alleging the sale violated his first right of refusal. He sought various equitable remedies, including specific performance permitting him to purchase the 64 acres for the price Jasnoski and Goodell paid.

The district court entered summary judgment for defendants. It decided the first right of refusal clause—when combined with the binding provision on heirs, legal representatives, and assigns—violated the rule against perpetuities and was unenforceable. But the court rejected defendants' alternative arguments that the first right of refusal clause violated the statute of frauds and that Chamberlain had complied with the contract by offering to sell the 73 acres to Trear the year before selling the smaller tract to someone else.

On Chamberlain's claim that the failure to reach mutually agreeable terms in 2013 extinguished her obligation, the district court ruled:

"The ‘right of first refusal’ is a term of art and allows a party the right to refuse a price offered to another person even though it does not say that in this contract . The court finds that the intent of the parties could not have been to offer it to a party for double or triple the price, then turn around and sell it to another party for much less. The court finds that the ‘right of first refusal’ means the right to accept an offer that has been agreed to by the seller with someone else, and as such, Ms. Chamberlain's actions did not satisfy provision 6 of the contract." (Emphasis added.)

The district court did not address Trear's argument that Chamberlain failed to satisfy the contract provision because she breached the implied covenant of good faith and fair dealing. It also did not consider defendants' argument that Trear did not exhibit good faith and fair dealing by ignoring the 2013 offer and listing. We presume this is because the ruling on the other issues rendered those questions moot.

Trear appealed from the dispositive rule-against-perpetuities decision. Defendants cross-appealed, arguing they were entitled to judgment on their alternative statute of frauds and contract compliance arguments. A Court of Appeals panel reversed, disagreeing with the district court's rule-against-perpetuities decision. Trear v. Chamberlain , 53 Kan.App.2d 385, 391, 388 P.3d 607 (2017). It also held the first right of refusal clause was enforceable under the statute of frauds and agreed with the district court that defendants were not entitled to judgment on their claim that Chamberlain fully performed under the 1986 contract. 53 Kan.App.2d at 393, 388 P.3d 607.

We granted defendants' petition for review solely on the panel's contractual compliance analysis. The rule against perpetuities and statute of frauds questions are not before us.

Jurisdiction is proper. K.S.A. 20-3018(b) (petition for review of Court of Appeals' decision); K.S.A. 60-2101(b) (providing Supreme Court jurisdiction over cases subject to review under K.S.A. 20-3018 ).

THE FIRST RIGHT OF REFUSAL PROVISION

Defendants argue Chamberlain's 2013 offer to sell the 73-acre tract discharged the contractual obligation she owed Trear under the 1986 agreement. We hold the panel both misread the contract and improperly inserted terms inconsistent with the plain language under consideration.

Standard of Review

Our standard for reviewing a district court's summary judgment ruling is well known:

" ‘ "Summary judgment is appropriate when the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. The trial court is required to resolve all facts and inferences which may reasonably be drawn from the evidence in favor of the party against whom the ruling is sought. When opposing a motion for summary judgment, an adverse party must come forward with evidence to establish a dispute as to a material fact. In order to preclude summary judgment, the facts subject to the dispute must be material to the conclusive issues in the case. On appeal, we apply the same rules and where we find reasonable minds could differ as to the conclusions drawn from the evidence, summary judgment must be denied." ’ " Armstrong v. Bromley Quarry & Asphalt, Inc. , 305 Kan. 16, 24, 378 P.3d 1090 (2016).

The issue is whether the 1986 contract required Chamberlain to offer Trear the smaller 64-acre tract at the same price that the smaller tract was sold nearly one year later after he ignored her previous efforts to sell him the entire 73-acre tract that included the disputed property. We must interpret the 1986 contract to resolve this matter.

To the extent "material facts are uncontroverted, an appellate court reviews summary judgment de novo." Superior Boiler Works, Inc. v. Kimball , 292 Kan. 885, 890, 259 P.3d 676 (2011) (citing Central Natural Resources v. Davis Operating Co. , 288 Kan. 234, 240, 201 P.3d 680 [2009] ; Troutman v. Curtis , 286 Kan. 452, Syl. ¶ 1, 185 P.3d 930 [2008] ).

"The interpretation and legal effect of written instruments are matters of law over which appellate courts exercise unlimited review, including whether a written instrument is ambiguous." Thoroughbred Assocs. v. Kansas City Royalty Co. , 297 Kan. 1193, 1207, 308 P.3d 1238 (2013). Our review is "unaffected by the lower courts' interpretations or rulings." Born v. Born , 304 Kan. 542, 554, 374 P.3d 624 (2016) (citing Prairie Land Elec. Co-op. v. Kansas Elec. Power Co-op. , 299 Kan. 360, 366, 323 P.3d 1270 [2014] ).

" ‘The primary rule for interpreting written contracts is to ascertain the parties' intent. If the terms of the contract are clear, the intent of the parties is to be determined from the language of the contract without applying rules of construction.’ [Citations omitted.] If, on the other hand, the court determines that a written contract's language is ambiguous, extrinsic or parol evidence may be considered to construe it. [Citations omitted.] In addition,

" ‘[a]n interpretation of a contractual provision should not be reached merely by isolating one

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