Wiener v. Eastern Arkansas Planting Co.

• Decision Date: 03 September 1992
• Docket Number: Nos. 91-2079,91-2184,s. 91-2079
• Citation: 975 F.2d 1350
• Parties: Bailey L. WIENER; Lee R. Wiener, Appellees, v. EASTERN ARKANSAS PLANTING COMPANY, an Arkansas General Partnership, West Memphis, Arkansas; N.S. Garrott & Sons, an Arkansas General Partnership, West Memphis, Arkansas; Appellants, AgriBank, FCB. Bailey L. WIENER; Lee R. Wiener, Appellees, v. EASTERN ARKANSAS PLANTING COMPANY, an Arkansas General Partnership, West Memphis, Arkansas; N.S. Garrott & Sons, an Arkansas General Partnership, West Memphis, Arkansas, AgriBank, FCB, Appellant.
• Court: U.S. Court of Appeals — Eighth Circuit

Page 1350

975 F.2d 1350

Bailey L. WIENER; Lee R. Wiener, Appellees, v. EASTERN ARKANSAS PLANTING COMPANY, an Arkansas General

Partnership, West Memphis, Arkansas; N.S. Garrott

& Sons, an Arkansas General Partnership,

West Memphis, Arkansas; Appellants,

AgriBank, FCB.

Bailey L. WIENER; Lee R. Wiener, Appellees, v. EASTERN ARKANSAS PLANTING COMPANY, an Arkansas General

Partnership, West Memphis, Arkansas; N.S. Garrott

& Sons, an Arkansas General Partnership,

West Memphis, Arkansas,

AgriBank, FCB, Appellant.

Nos. 91-2079, 91-2184.

United States Court of Appeals,

Eighth Circuit.

Submitted Jan. 8, 1992.

Decided Sept. 3, 1992.

Joseph M. Rogers, West Memphis, Ark., argued, for N.S. Garrott & Sons and Eastern Arkansas Planting Co.

Mark G. Arnold, St. Louis, Mo., argued, for Farm Credit Bank.

Leslie H. Wiesenfelder, Washington, D.C., argued (R. Clinton Saxton, West Memphis, Ark., on the brief), for Bailey L. Wiener and Lee R. Wiener.

Before JOHN R. GIBSON, Circuit Judge, FLOYD R. GIBSON, Senior Circuit Judge, and WOLLMAN, Circuit Judge.

JOHN R. GIBSON, Circuit Judge.

Agribank, FCB ¹ appeals from the district court's ² summary judgment granting Bailey and Lee Wiener specific performance on contracts to buy two farms, "New Hope" and "Louise," which the Bank's predecessor in interest, the Farm Credit Bank of St. Louis, also contracted to sell to Eastern Arkansas Planting Co. and N.S. Garrott & Sons, respectively. The Bank argues that the option under which the Wieners bought the farms contains a latent ambiguity, which properly interpreted, would give Eastern Arkansas and Garrott superior rights to the land. Eastern Arkansas and Garrott also appeal the judgment, arguing that they have a superior claim to the property by virtue of the Agricultural Credit Act of 1987, 12 U.S.C. § 2219a (1988), which they contend gives them a right of first refusal over the farms. We affirm the district court's judgment.

In 1983, Eastern and Garrott, two partnerships owned in whole or in part by members of the Garrott family, filed bankruptcy petitions seeking Chapter 11 reorganization. As part of their joint reorganization plan, they entered escrow agreements with the Bank under which the titles to New Hope (owned by Eastern) and Louise (owned by Garrott & Sons) would be held in escrow until the partnership had made certain payments to the Bank. In 1985 Eastern and Garrott defaulted on scheduled payments, and the Bank declared a default. In January 1986, the Bank sold the Wieners options to buy the farms. In February 1986, the escrow agent transferred the deeds to the Bank pursuant to the escrow agreement. Eastern and Garrott unsuccessfully sued the Bank for cancellation of the deeds, claiming that the Bank had not complied with the escrow agreement. This court approved the transfer of the deeds to the Bank. Eastern Arkansas Planting Co. v. Federal Land Bank of St. Louis, No. H-C-86-22 (E.D.Ark. Nov. 16, 1987), aff'd, 871 F.2d 1093 (8th Cir.1988) (per curiam).

However, the Garrott family remained in the farmhouses on the properties. The Bank applied for a Writ of Assistance to evict the Garrotts from the farmhouses, which Eastern and Garrott opposed, arguing that they were entitled to relief from the earlier judgment due to the Agricultural Credit Act of 1987, 12 U.S.C. § 2219, which they claimed gave them a right of first refusal over the farms. The district court granted the writ of assistance, Eastern Arkansas Planting Co. v. Federal Land Bank of St. Louis, No. H-C-86-22 (E.D.Ark. May 2, 1989), characterizing the right of first refusal argument as unripe because there was as yet no transaction to trigger such a right: "The court can see no authority for the proposition that the tenants have a right to remain in the dwellings.... As for a future sale or lease of those properties, the Court must assume that defendant will comply with all applicable law in the application, management, sale or lease of its holdings." Id. We affirmed, 894 F.2d 1341 (8th Cir.1989) (per curiam), stating that Eastern and Garrott had waived the first refusal argument by failing to raise it in their first appeal. Slip op. at 2.

While it was trying to evict the Garrott family, the Bank extended the Wieners' options on the farms several times. A contract dated December 29, 1989, extended one of the options until March 30, 1990, and stated that the option was "subject ... to the right-of-first-refusal provisions of the Farm Credit Act of 1971, as amended by the Agricultural Credit Act of 1987."

On March 1, 1990, the Bank sent Garrott and Eastern forms entitled "Notice of Right of First Refusal to Purchase Property," which gave Eastern and Garrott the right to make offers to buy the two farms.

The Wieners promptly exercised the option to buy the Louise farm on March 14, 1990, before Garrott exercised its right of first refusal on March 22, 1990. On March 26, 1990, the Bank returned to the Wieners the check they had tendered, notifying them that the Bank considered the Wieners' option mooted by Garrott's exercise of first refusal rights. On April 4, the Bank accepted Garrott's offer.

Instead of promptly exercising the option on New Hope Farm, on March 21, 1990, the Wieners and the Bank once again extended the option to buy the New Hope Farm until April 30, 1990, still "subject ... to the right-of-first-refusal provisions" of the Agricultural Credit Act of 1987. Eastern offered to buy the New Hope farm on March 27, and the Bank accepted Eastern's offer on April 4. ³ Not until April 12, 1990, did the Wieners exercise their option to buy the farm. The Bank promptly returned the Wieners' earnest money.

The Wieners then sued the Bank, Eastern, and Garrott asking for specific performance of their option contract. Eastern and Garrott counterclaimed for intentional interference with contract, and cross claimed against the Bank for specific performance of their contracts to buy the farms, or for damages.

The Wieners, Eastern and Garrott all moved for summary judgment. The district court granted the Wieners summary judgment, holding that Eastern and Garrott had no right of first refusal under the Agricultural Credit Act of 1987, because the Bank acquired title to the farms two years before the Act became effective on January 6, 1988. Wiener v. Farm Credit Bank of St. Louis, 759 F.Supp. 510, 515-16 (E.D.Ark.1991). The court held that the language in the Act making property "that is acquired" subject to a right of first refusal was intended to apply to property acquired by the Bank after the effective date. Id. at 516. The Wieners also argued that Garrott and Eastern were barred by res judicata and collateral estoppel from asserting a right of first refusal, but the district court did not reach these issues because it had already held there was no such right. Id. at 516-17.

The court rejected Garrott's and Eastern's attack on the sufficiency of consideration to support the extension of the Wieners' options, holding that the mutual promises of the Bank and the Wieners were sufficient consideration. Id. at 517.

The court also rejected the Bank's argument that the language in the option should be interpreted to subordinate the option to a right of first refusal whether or not the Agricultural Act of 1987 created any such right. The court held that the option contract was unambiguous and that the Wieners' rights were only subject to a right of first refusal arising under the Act--of which there was none. Id. at 518-19.

As between Eastern's and Garrott's contractual rights to buy the farms, on the one hand, and the Wieners' rights under their options, the court found that the Wieners had superior rights in both farms. The Wieners exercised their option on the Louise farm before the Bank accepted Garrott's offer; therefore, the Wieners' rights to the Louise farm were superior. Id. at 522. The more difficult case was the New Hope farm, since Eastern had contracted with the Bank to buy it before the Wieners exercised their option. The court found that Eastern had notice of the Wieners' option before it made its offer, and that therefore the Wieners, not Eastern, were entitled to specific performance. Id. at 522.

The court dismissed Eastern and Garrott's cross claim against the bank for enforcement of statutory rights under the Agricultural Credit Act of 1987, holding that it lacked subject matter jurisdiction to enforce any such right under Zajak v. Federal Land Bank of St. Paul, 909 F.2d 1181 (8th Cir.1990). 759 F.Supp. at 523. The court also dismissed Eastern and Garrott's counterclaim for tortious interference with contract for failure to state a claim. Id. at 524.

As to Garrott and Eastern's cross-claim against the Bank for money damages for breach of contract, the court declined to enter summary judgment. Id. at 523-24.

I.

Eastern and Garrott attack the validity of the Wieners' options, arguing that the Wieners had no rights in the farms at the time Eastern and Garrott entered contracts to buy the farms. Eastern and Garrott argue that the option extensions were not supported by new consideration.

This argument need not detain us long. The Wieners bought Louise under an extension signed on December 29, 1989, of an option due to expire on December 31, 1989. Similarly, they bought New Hope under an extension signed March 21, 1990, of an option due to expire on March 30. The Wieners had paid $5,000 for each of the options and were entitled to rescind the option and to get that money back if the Bank was not able to perform its duties under the option contract, including providing a title insurance commitment and delivering possession. The Bank concedes that it was not able to obtain a clean title insurance commitment. By taking extensions of the options instead of demanding return of their cash, the Wieners effectively put up $5,000 for each extension. This benefit was sufficient consideration to support the extensions of the options.

II.

Eastern also...