Case Title: 40 North Corp. v. Morrell

Citation: 

Docket Number: 97-248

State: wyoming

Court: Wyoming Supreme Court

Date: 1998-09-24T00:00:00Z

Document:
40 North Corp. v. Morrell1998 WY 120964 P.2d 423Case Number: 97-248Decided: 09/24/1998Supreme Court of Wyoming

40 
NORTH CORPORATION, a Wyoming Corporation; and Frank Neal, Appellants 
(Defendants),

v.

Donald L. MORRELL and Mary L. Morrell, Appellees 
(Plaintiffs).

 

Appeal from the District Court, Laramie County, 
Nicholas G. Kalokathis, J.

 

Georg Jensen, Cheyenne, 
for Appellants(Defendants).

Mitchell E. Osborn of Grant 
& Osborn, Cheyenne, for Appellees(Plaintiffs).

 

Before LEHMAN, C.J., and 
THOMAS, MACY, GOLDEN and TAYLOR,* JJ.

 * Chief Justice at time of expedited 
conference.

 

TAYLOR, Justice.

 [¶1] Appellants contest the issuance of summary 
judgment against them that awarded a money judgment and foreclosed a real estate 
mortgage on certain real property located in Laramie County, Wyoming. Appellants 
claim that their rights are governed by the contract for sale, in addition to 
the mortgage, promissory note, and deed that were exchanged by the parties. 
Holding that the parties' rights are governed solely by the mortgage, promissory 
note and deed, we affirm the district court.

 

                                             
I. ISSUES

 

[¶2] Appellants, 40 North 
Corporation (40 North) and Frank Neal (Neal), state the issues in this 
manner:

 

          
1. In order to prevail on a defense of Waiver is it necessary to plead 
the same as an affirmative defense?

 

2. 
Does the naming of a stockholder or officer of a corporation in a complaint 
without further allegations state a cause of action against such individual on 
which the court can grant judgment without any further 
evidence?

 

3. 
Should the court pick and choose between conflicting affidavits in rendering a 
decision on a motion for summary judgment?

 

[¶3] The appellees, Donald 
L. and Mary L. Morrell (the Morrells), articulate one 
issue:

 

1. 
Does a purchase agreement for real estate in Wyoming become merged in or 
superseded by the actual sale documents, i.e. the Warranty Deed, Mortgage and 
Promissory Note.

 

          
Answer: Yes

 

                                             
II. FACTS

 

[¶4] On August 27, 1992, the 
Morrells entered into an agreement to sell real property located in Laramie 
County to 40 North. Neal signed the agreement on behalf of 40 North as owner and 
operator of the corporation. The sale was consummated on September 21, 1992, 
when the Morrells delivered a warranty deed to 40 North in exchange for a 
promissory note and mortgage. The promissory note provided that the documents of 
sale and the payments would be deposited in escrow until the promissory note was 
paid.

 

[¶5] The contract for sale, 
styled as an Offer, Acceptance & Receipt, provided that the resulting 
mortgage "shall provide that it shall be subordinate to financing to be obtained 
by the Purchaser for the purpose of improving the property." However, the 
mortgage did not include a subordination clause as required by the initial 
contract for sale.

 

[¶6] The parties proceeded 
under the terms of the promissory note and mortgage until May 21, 1996, when the 
Morrells notified Neal that he had missed eleven payments and demanded full 
payment of the promissory note. On October 25, 1996, the Morrells discovered 
that 40 North had failed to pay property taxes due on the property for the years 
1993, 1994, and 1995 as provided in the mortgage. The property had been sold to 
satisfy the delinquent taxes. The Morrells were required to pay $1,143.55 to 
redeem the property. 40 North also failed to pay the property taxes for 1996, 
thus obligating the Morrells to pay an additional $296.38 to 
prevent the property from again 
being sold for taxes.

 

[¶7] Pursuant to the 
promissory note and mortgage agreement, the Morrells notified the escrow agent 
that 40 North had defaulted on the mortgage, and requested the contents of the 
escrow. The escrow agent, however, refused to surrender the contents of the 
escrow until directed by court order.

 

[¶8] Thereafter, the 
Morrells instituted the present action to secure delivery of the escrow 
documents or for judgment on their promissory note and mortgage. 40 North 
counterclaimed, alleging that the Morrells breached the contract by failing to 
subordinate their mortgage as provided in the contract for sale. The Morrells 
moved for summary judgment and the district court granted the motion. The 
Morrells were awarded judgment on the secured indebtedness plus interest of 
eight percent from the time of the judgment. The mortgage was foreclosed and the 
contents of the escrow were ordered to be delivered to the Morrells. The 
district court dismissed 40 North's 
counterclaim with prejudice. This timely appeal followed.

 

                                      
III. STANDARD OF REVIEW

 

[¶9] We will uphold a 
summary judgment when there is no genuine issue as to any material fact, and the 
moving party is entitled to judgment as a matter of law. W.R.C.P. 56(c). We have 
held that summary judgment is appropriate in cases involving contracts when the 
language of the agreement is plain and unequivocal. Flying J, Inc. v. Booth, 773 P.2d 144, 148 (Wyo. 1989); Dudley v. East Ridge Development Co., 694 P.2d 113, 117 (Wyo. 1985). The interpretation of an unambiguous contract is a question of 
law and, for that reason, summary judgment is appropriate with respect to 
disputes relating to unambiguous contracts. Lincoln v. Wackenhut Corp., 867 P.2d 701, 703 (Wyo. 1994); Prudential Preferred Properties v. J and J Ventures, Inc., 
859 P.2d 1267, 1271 (Wyo. 1993); Continental Ins. v. Page Engineering Co., 783 P.2d 641, 651 (Wyo. 1989). Summary judgment is a legally appropriate remedy 
because it eliminates formal trials when only questions of law are presented. 
Bryant v. Hornbuckle, 728 P.2d 1132, 1135 (Wyo. 1986).

 

[¶10] Our review of summary 
judgment is well established:

 

"We review a summary judgment in the same light as 
the district court, using the same materials and following the same standards. 
We examine the record from the vantage point most favorable to the party 
opposing the motion, and we give that party the benefit of all favorable 
inferences which may fairly be drawn from the record. A material fact is one 
which, if proved, would have the effect of establishing or refuting an essential 
element of the cause of action or defense asserted by the 
parties."

 

Raymond v. Steen, 882 P.2d 852, 856 (Wyo. 1994) (quoting Kilmer v. Citicorp Mortgage, Inc., 860 P.2d 1165, 
1167 (Wyo. 1993) and Wagner v. First Wyoming Bank, N.A. Laramie, 784 P.2d 224, 
226 (Wyo. 1989)).

 

                                          
IV. DISCUSSION

 

[¶12] 40 North's claim on 
the contract for sale fails because delivery of a mortgage, promissory note, and 
warranty deed merges the prior executory contract for sale into the current 
agreement. Bakken v. Price, 613 P.2d 1222, 1227 (Wyo. 1980). In Bakken, the 
parties agreed in a contract for sale of real property that upon seller's 
acceptance of the offer, the seller would furnish the buyer with a title 
insurance policy. Seller did not furnish the agreed upon insurance policy, but 
the buyers accepted a warranty deed in exchange for a promissory note and mortgage without the 
insurance policy. The buyers then attempted to record the deed, but could not, 
and sued to rescind the contract and recover their down payment. Id. at 1223. We 
stated that the effect of delivery of a deed in exchange for a promissory note 
and mortgage was to merge the prior executory contract for sale into the final 
agreement. Id. at 1227.

 

Since a contract is no longer executory but is 
executed upon making and delivering the deed, it is the further appropriate rule 
of law that, thereafter, the provisions of the contract are merged into the deed 
and it is the deed that controls the rights and obligations of the 
parties.

 

Id.

 

[¶14] Here, essentially the 
same thing has occurred. 40 North accepted a warranty deed to the property in 
exchange for a promissory note and mortgage. While the executory contract for 
sale stated that the resulting mortgage would have a subordination clause, the 
final agreement did not include such a clause. At the time of delivery and 
acceptance of the deed, the executory contract for sale merged into the deed, 
mortgage and promissory note. 40 North can only assert breach of contract 
against the Morrells based upon the covenants in the deed, mortgage, and 
promissory note. Since there is no subordination clause in the mortgage, 40 
North has no basis for asserting breach 
of contract.

 

[¶15] Moreover, as in 
Bakken, "the parties, indeed, undertook to act and conduct themselves in a way 
which was inconsistent with the terms of the buy-and-sell agreement. They 
clearly did not continue to rely upon their rights under the contract." Bakken, 
613 P.2d  at 1227. Even though the mortgage failed to contain a subordination 
clause as required by the contract for sale, 40 North accepted the deed in 
exchange for the promissory note and mortgage and never attempted to enforce the 
subordination clause until the declaratory judgment action was brought by the 
Morrells. 40 North conducted itself under the terms of the mortgage for four 
years.  Only when faced with default 
did 40 North attempt to assert rights under the contract for 
sale.

 

[¶16] 40 North has styled 
the issue as one of waiver, contending that it did not waive its right to 
request subordination by accepting the mortgage and promissory note. This 
argument, however, misapprehends the nature of merger. At the time the executory 
contract for sale merged into the final agreement, the contract for sale ceased 
to exist. First Southwestern Financial Services v. Laird, 882 P.2d 1211, 1216 
(Wyo. 1994); Hayes v. Production Credit Ass'n of the Midlands, 813 P.2d 1302, 
1303 (Wyo. 1991); Newman v. American Nat. Bank, 780 P.2d 336, 340 (Wyo. 1989). 
The mortgage, promissory note and deed are the only remaining instruments under 
which 40 North could waive rights.

 

[¶17] 40 North and Neal 
raise two additional issues, both of which we find to be without merit. First, 
40 North claims that the mortgage and promissory note require that in the event 
of default, 40 North is entitled to notice and time to cure such default before 
the Morrells can foreclose. However, paragraph 7 of the mortgage clearly states 
that in the event of default, "the indebtedness hereby secured * * * shall 
become immediately due and payable, at the option of the Mortgagee * * *." 
(Emphasis added.) No notice or time to cure is required by the agreement. The 
Morrells acted appropriately upon learning of the delinquent taxes in 
immediately notifying the escrow agent 
of the default.

 

[¶18] 40 North also claims 
that the inclusion of Neal in the judgment was inappropriate, as he is merely an 
officer of the corporation.  This 
argument will not be considered for two reasons. First, 40 North and Neal are 
foreclosed from bringing this issue on appeal since neither raised it at any 
time in the court below. Either 40 North or Neal could have made a motion at any 
time during the prior proceedings to sever Neal as a defendant under W.R.C.P. 
21, but neither did so. In fact, counsel for 40 North and Neal approved the form 
of the judgment that specifically named Neal as a defendant. We have 
consistently held that we do not address issues raised for the first time on appeal. Nelson v. Sheridan 
Manor, 939 P.2d 252, 255 (Wyo. 1997); Robinson v. Hamblin, 914 P.2d 152, 154 
(Wyo. 1996).

 

[¶19] Second, 40 North and 
Neal have failed to make an adequate argument to this court. "It is the duty of 
counsel to isolate and explain any theory relied upon." Scherling v. Kilgore, 
599 P.2d 1352, 1359 (Wyo. 1979); see also W.R.A.P. 7.01(f) (requiring an 
argument "with citations to the authorities, statutes and parts of the record 
relied on[.]"). 40 North and Neal have made no attempt to set out cogent 
authority for their contention that Neal is an inappropriate party. "[W]here an 
appellant asserts error but cites no authority and makes only a perfunctory 
argument in support of the contention, this court will not consider the 
contention." Scherling, 599 P.2d  at 
1359; Joly v. Safeway Stores, Inc., 502 P.2d 362, 365 (Wyo. 
1972).

 

                                          
V. CONCLUSION

 

[¶20] Once the deed, 
promissory note, and mortgage were delivered, the executory contract for sale 
was executed and merged into the final agreement, which controls the rights and 
obligations of the parties. The mortgage has no subordination clause; therefore, 
40 North defaulted on the mortgage when it failed to pay the property taxes. The 
Morrells were entitled to demand return of the escrow documents without notice 
to 40 North, as provided by the mortgage. Summary judgment was appropriate as 
there is no genuine issue of material fact, and the Morrells are entitled to 
recover under the promissory note and mortgage as a matter of law. The district 
court's order is 
affirmed.