Ziegler Furniture and Funeral v. Cicmanec

Citation2006 SD 6,709 N.W.2d 350
Decision Date18 January 2006
Docket NumberNo. 23520.,23520.
PartiesZIEGLER FURNITURE AND FUNERAL HOME, INC., Plaintiff and Appellant, v. Bill CICMANEC, Defendant and Appellee.
CourtSupreme Court of South Dakota

Robert Gusinsky of Lynn, Jackson, Shultz & Lebrun, Rapid City, South Dakota, Attorneys for plaintiff and appellant.

Robert M. Nash of Wilson, Olson & Nash, Rapid City, South Dakota, Attorneys for defendant and appellee.

KONENKAMP, Justice.

[¶ 1.] In this breach of contract action, we are asked to decide, among other things, whether the parties formed an enforceable purchase agreement. After a trial, the circuit court ruled that only an option contract was formed and that it was unenforceable. Although it was labeled as an option contract, it had all the elements of a purchase agreement, and the parties treated it as a purchase agreement. Therefore, we reverse and remand.

Background

[¶ 2.] Since its founding, Ziegler Furniture and Funeral Home, Inc. has been the only funeral home serving Martin, South Dakota and the surrounding communities. Raymond Ziegler started the business in the 1950s, and in 1976, he handed the operation over to his son, Rick Ziegler. In 2001, Rick Ziegler sought to sell the business because he was dying of lung cancer.

[¶ 3.] Before Rick's death, his daughter, Amber Ziegler, assisted with the attempted sale of the family business. In her effort to secure a purchaser, Amber Ziegler sent an information packet to Daryl Isburg. A funeral director for nearly thirty-five years, Isburg owns an interest in numerous funeral homes, including one in Pierre, South Dakota. Isburg expressed interest. However, he wanted a partner to join in this business venture, a person located closer to Martin and respected by that community. He contacted Bill Cicmanec about the possibility of purchasing the Ziegler Funeral Home as a partnership.

[¶ 4.] On August 27, 2001, after conferring about the purchase, Isburg and Cicmanec visited Ziegler Funeral Home and met with Amber Ziegler to negotiate a deal on the business. During their visit, Amber Ziegler showed Isburg and Cicmanec the facilities and inventory. Following the tour and several hours of negotiations, Amber Ziegler, Isburg, and Cicmanec signed a document entitled "Opption [sic] to Purchase" drafted by Isburg.

[¶ 5.] The contract recited a purchase price of $170,000, with a down payment of $40,000. The purchase price clause stated that the "[b]reak down of purchase price will be stipulated in the original purchase agreement that is agreeable to both parties" and that a "cash deal must be negotiated as a discount for cash." Paragraph five, entitled "Due Diligence," provided:

This Agreement and Closing is subject to due diligence to be conducted by Buyer. The due diligence shall include, but is not limited to, review of the most recent five (5) years of Corporation's financial statements, tax returns, and individual funeral contracts, and inspection of the Acquired Property and the Funeral Home Parcel. Buyer may withdraw from this Agreement at any time after competing [sic] the due diligence, but prior to Closing, by giving written notice to Seller. In the event of Buyer's withdrawal, the parties hereto shall have no further rights or obligations under this Agreement, the parties shall pay their own respective costs incurred and shall owe no reimbursement or damages to the other party.

[¶ 6.] According to paragraph six, the scheduled closing date was to "take place after October 1, 2001 or such other time after as the parties hereto may mutually agree upon. . . . At Closing, Buyer shall provide a more formal purchase agreement at buyer's cost to prepare and seller's cost to review." If the parties sought to amend any portion of their agreement, they were required to enter into a subsequent signed writing. Isburg inserted at the bottom of the agreement his handwritten notation: "Earnest money—$500-90 days to execute purchase." At the bottom of the contract, Amber Ziegler signed on behalf of Ziegler Funeral Home; Isburg and Cicmanec signed in their individual capacities. After the signing, Amber Ziegler ended her search for other buyers.

[¶ 7.] Rick Ziegler died on September 2, 2001. Amber Ziegler and the buyers proceeded with the agreement to sell the funeral home. Shortly, though, Cicmanec's partners said that they wanted to participate in the purchase of the Ziegler Funeral Home, but without Isburg's involvement. Cicmanec asked Isburg to relinquish his association with the purchase. Isburg agreed. Cicmanec then continued with the agreement.

[¶ 8.] On September 19, 2001, the parties met. Besides Amber Ziegler and Cicmanec, also in attendance were Herb Hobson, the personal representative of Rick Ziegler's estate; Attorney Fred Cozad, the estate's counsel; and Jim Gardner, the accountant for the estate. Everyone indicated that they wanted to proceed with the sale.

[¶ 9.] After the conference, Cozad began preparing the formal contract as contemplated in paragraph six of the original agreement. On October 4, 2001, he forwarded the newly drafted agreement to George Watson, an attorney who represented the buyers. In response to the proposed contract, Watson stated that the agreement was "in pretty good form" and commented on a few provisions concerning the allocation of the purchase price between personal and real property, prepaid funeral accounts, a notice of the upcoming installment sale, and the formation of a limited liability company. Thereafter, Cozad made some further adjustments to the parties' agreement.

[¶ 10.] Meanwhile, from the time Cicmanec entered into the agreement to buy the funeral home in September 2001, and in anticipation of his purchase of the funeral home, Cicmanec became the new funeral director for the Ziegler Funeral Home. As part of his introduction to the Martin community, an advertisement in the local newspaper was taken out to promote the funeral home and Cicmanec's position as the town's new funeral director.

[¶ 11.] During the next five months, the parties sought to consummate the sale of the funeral home. Numerous attempts were made by Ziegler Funeral Home to close the deal with the purchasers. On April 12, 2002, however, Cicmanec informed Amber Ziegler that the purchase of the funeral home could not go forward because he and his partners could not obtain financing. Nothing in the agreement suggested any financing contingency, however.

[¶ 12.] Efforts continued to resolve the issue, but the sale never closed. Finally, on September 26, 2002, Amber Ziegler notified Cicmanec that his position as director was terminated. At the same time, she purchased the funeral home from her father's estate and told Cicmanec that the funeral home was no longer for sale. Shortly after being released as the director for Ziegler Funeral Home, Cicmanec and his partners opened a competing funeral home in Martin: Bennett County Funeral Service, Inc. Cicmanec became the new funeral home's director.

[¶ 13.] On November 27, 2002, Ziegler Funeral Home brought suit alleging, among other things, that Cicmanec breached the purchase agreement executed on August 27, 2001. After a one-day trial to the court, the judge ruled in Cicmanec's favor. Ziegler Funeral Home now appeals, raising the following issues: (1) Did the trial court err when it found that the agreement between the parties constituted an option?; (2) Did the trial court err when it found that the August 27 agreement was modified by Isburg no longer being involved?; (3) Did the trial court err when it failed to find damages?

Standard of Review

[¶ 14.] Contract interpretation is a question of law reviewable de novo. Schulte v. Progressive Northern Ins. Co., 2005 SD 75, ¶ 5, 699 N.W.2d 437, 438 (citation omitted). "`Because we can review the contract as easily as the trial court, there is no presumption in favor of the trial court's determination.'" Cowan v. Mervin Mewes, Inc., 1996 SD 40, ¶ 6, 546 N.W.2d 104, 107 (quoting Commercial Trust & Sav. Bank v. Christensen, 535 N.W.2d 853, 856 (S.D.1995)). "When the meaning of contractual language is plain and unambiguous, construction is not necessary. If a contract is found to be ambiguous the rules of construction apply." Pesicka v. Pesicka, 2000 SD 137, ¶ 6, 618 N.W.2d 725, 726 (citing Alverson v. Northwestern Nat'l Cas. Co., 1997 SD 9, ¶ 8, 559 N.W.2d 234, 235). "`Whether the language of a contract is ambiguous is . . . a question of law.'" Id. (quoting Enchanted World Doll Museum v. Buskohl, 398 N.W.2d 149, 151 (S.D. 1986)). We review a circuit court's decision regarding an equitable remedy under the abuse of discretion standard. Adrian v. McKinnie, 2002 SD 10, ¶ 9, 639 N.W.2d 529, 533.

Analysis and Decision
1. Option Contract or Purchase Agreement

[¶ 15.] In its conclusions of law, the circuit court ruled that the document the parties signed was "an option, not a purchase agreement and had consideration to support it." Ziegler Funeral Home maintains that the agreement "constituted a bona fide purchase agreement rather than an option" contract. An option, as Ziegler Funeral Home argues, "requires separate consideration to be enforceable." Ziegler Funeral Home contends that the undisputed testimony at trial sets forth that "the $500 earnest money deposit was not payment for an option but rather went toward the purchase price. . . ." Ziegler Funeral Home also asserts that the plain unambiguous language of the parties' agreement cannot be read to form an option agreement. Instead, according to Ziegler Funeral Home, the agreement demonstrates a clear intent to purchase the funeral home.

[¶ 16.] In our de novo review of this contract, we adhere to well-settled precepts of contract interpretation. "We must first determine whether the provision is ambiguous." Pesicka, 2000 SD 137, ¶ 8, 618 N.W.2d at 727. "A contract is...

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