Case Title: Raymond v. Steen

Citation: 

Docket Number: 93-64

State: wyoming

Court: Wyoming Supreme Court

Date: 1994-10-03T00:00:00Z

Document:
Raymond v. Steen1994 WY 96882 P.2d 852Case Number: 93-64Decided: 10/03/1994Supreme Court of Wyoming
James 
K. RAYMOND,

Appellant 
(Plaintiff),

v.

Donald 
M. STEEN; and Schaub & Gueck Enterprises, Inc., a Nebraska 
corporation,

Appellees 
(Defendants).

Appeal 
from District Court, Goshen County, John T. Langdon, 
J.

 

Representing 
Appellant:

Michael 
E. Warren, Sawyer & Warren, Torrington, and Donn C. Raymond, Gering, 
NE.

Representing 
Appellees:

James 
A. Eddington, Jones, Eddington & Weaver, Torrington.

 

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

* 
Chief Justice at time of conference.

** 
Retired July 6, 1994.

THOMAS, 
Justice.

[¶1]      The resolution of 
this case requires the application of our rules relating to summary judgment to 
the claim of James K. Raymond (Raymond) that he is entitled to have a 
description of certain lands in a contract for the sale of land reformed because 
of mutual mistake of fact. The land Raymond claims was incorrectly described was 
the subject of a right of first refusal by Raymond. In disposing of the case by 
summary judgment, the district court ruled the seller, Donald M. Steen (Steen), 
had not received a bona fide offer from a third party, and Raymond's right of 
first refusal never ripened into an option to purchase. The district court also 
ruled there was no mutual mistake, nor was there a meeting of the minds between 
Steen and Raymond prior to the execution of the written contract. The decision 
of the district court held no genuine issues of fact existed as to either of its 
alternative rulings, and Steen and Schaub & Gueck Enterprises, Inc. (S & 
G) (the present record owner of the land) were entitled to judgment as a matter 
of law. We hold the record does disclose genuine issues of fact with respect to: 
the substantive law of mutual mistake; the concept of a meeting of the minds 
prior to the formalization of the contract in writing; and whether Steen's 
conveyance to S & G was intended to evade Raymond's right of first refusal. 
We reverse and remand the case for further proceedings.

[¶2]      Raymond, in his 
Brief of Appellant, states the issues in this way:

Was 
summary judgment properly granted by the lower court on the grounds 
that:

a. 
There was no genuine issue of fact as to a mutual mistake or that a meeting of 
the minds existed between plaintiff and defendant Steen prior to the written 
contract.

b. 
That since a purchase price was never conveyed by Steen to plaintiff, the 
plaintiff's first right of refusal could not ripen into an option to 
purchase.

[¶3]      Steen and S & 
G say in the Brief of Appellees that the issues are:

1. 
Did the lower court correctly find that there were no genuine issues of fact in 
that defendant Don Steen (hereinafter "Steen") never received a bona fide offer 
from a third party, never conveyed any offer or purchase price to the plaintiff 
and plaintiff's first right of refusal never ripened into an option to purchase 
defendant Steen's real estate?

2. 
Did the lower court correctly grant defendants' summary judgment on plaintiff's 
claim for Reformation of Contract?

[¶4]      The original 
transaction that leads to the issues here involved the purchase by Raymond of 
120 acres of land from Steen. The purchase of that tract of land was negotiated 
between Raymond and Steen's real estate agent. The contract was reduced to 
writing after its negotiation and, on February 14, 1987, Raymond and Steen 
executed the contract, which was entitled "AGREEMENT" and included the 
following paragraph:

13. 
FIRST RIGHT OF REFUSAL:1

It 
is further agreed that in the event the Seller should receive a bona fide offer 
from a third party to purchase the following-described property, 
to-wit:

Township 
22 North, Range 62 West of the 6th P.M. Goshen County, 
Wyoming

Section 
28: W ½  SW ¼  NE ¼ 

the 
terms of which are acceptable to Purchaser, on or before December 19, 1987, the 
Seller agrees to grant and give to the Purchaser the first right to purchase 
said property upon the same and identical terms and Purchaser shall have a 
period of ten (10) days from and after receipt of such notice from the Seller in 
which to accept the same in writing. This first right of refusal or to purchase 
shall automatically terminate and be cancelled as of December 19, 19897.2

[¶5]      In bringing this 
action, Raymond's fundamental contention is that the property subject to the 
right of first refusal3 should have been described in 
Paragraph 13 as the SW 1/4 NW 1/4 NE 1/4 and the NW 1/4 SW 1/4 NE 1/4, all in 
Section 28. The record discloses that the property to which Raymond wanted the 
right of first refusal to apply has peculiar value for purposes of a wild goose 
hunting pit adjacent to the Bump-Sullivan Reservoir in Goshen County used to 
take Canada geese.

[¶6]      A review of the 
contentions of the parties is an appropriate prelude to the resolution of the 
issues. Raymond essentially argues genuine issues of material fact are present 
in this case that make summary judgment inappropriate. He sought reformation of 
the legal description relating to the twenty acres of land to which he held a 
right of first refusal. To establish a meeting of the minds concerning the 
property purported to be subject to that right of first refusal, he relies upon 
the apparent authority of the real estate agent and asserts the contract, as 
drafted and executed, contained a mutual mistake of fact involving the correct 
description. Raymond then contends Steen breached the contract. His prayer is 
for specific performance and damages for lost profits. Further, he claims 
tortious interference with the contract by Steen's co-defendant, S & 
G.

[¶7]      Raymond's 
arguments are countered by Steen and S & G. Their position is that Steen 
never received a bona fide offer from a third party to purchase any twenty acres 
subject to Raymond's right of first refusal; Steen never received any purchase 
price for the subject property; and Raymond failed to accept offers to sell him 
the property. In addition, Steen and S & G argue that Raymond did not pay 
consideration for the right of first refusal; Raymond is bound by the terms of 
his written contract with Steen; the only mistake was Raymond's unilateral 
mistake, which is not sufficient for reformation of the contract; and there was 
never a meeting of the minds between Steen and Raymond with respect to the 
twenty acres that was to be subject to the right of first refusal, except for 
the twenty acres described in the written agreement. Furthermore, Steen and S 
& G contend Steen had no knowledge of any provision for a right of first 
refusal until he came to the closing to execute the February 14, 1987 agreement; 
Steen did not agree with Raymond to include the claimed property as the real 
property subject to the right of first refusal, and Raymond was inexcusably 
negligent in executing the agreement on February 14, 1987, which contains the 
alleged misdescription.

[¶8]      The record 
discloses that, after the Agreement was made between Steen and Raymond, Dan 
Gueck and Gordon Schaub, as individuals, signed an offer to Steen to purchase 
ninety-five acres of real property. After that offer, Steen offered to transfer 
140 acres to a corporation not yet in existence. Raymond stated he advised 
Schaub of his right of first refusal with respect to the twenty acres which 
were, in fact, included with additional land conveyed by Steen to S & G on 
May 27, 1987. The consideration for that transfer was the issuance of stock in S 
& G. That warranty deed included:

The 
North Half of the Southeast Quarter (N 1/ 2 S.E. 1/4) and the Northeast Quarter 
(NE 1/4) less a five (5) acre tract owned by Nye, Schaub, Gueck and Tripple in 
Section Twenty-eight (28), Township Twenty-two (22) North, Range Sixty-two (62) 
West of the 6th P.M. in Goshen County, Wyoming.

Raymond 
stated he was advised of this conveyance, but he was given no opportunity to 
purchase the twenty acres subject to his right of first refusal. He acknowledges 
the opportunity to purchase a larger tract of ninety-five acres, which included 
the twenty acres of land.

[¶9]      Three years 
later, Steen and S & G entered into a Partial Stock Redemption Agreement. 
That document provided S & G would purchase ninety-nine shares of Steen's 
stock for $20,000 and grant him a hunting lease for one day a week during the 
hunting season for a term of ten years. Interestingly enough, that agreement 
also provided for indemnification by Steen in the event of any lawsuit by 
Raymond respecting the twenty acres.

[¶10]   Both Steen and S & G, as 
defendants, sought to have Raymond's action resolved by a summary judgment. The 
trial court granted summary judgment in favor of the defendants. Raymond then 
took his appeal from that summary judgment. 

[¶11]   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. WYO.R.CIV.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 Dev. 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).

[¶12]   So far as our review of summary 
judgments is concerned, we recently quoted and reaffirmed our approach in 
Kilmer v. Citicorp Mortgage, Inc., 860 P.2d 1165, 1167 (Wyo. 1993) 
(quoting Wagner v. First Wyoming Bank, N.A. Laramie, 784 P.2d 224, 226 
(Wyo. 1989)), where we said:

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. (Citations omitted.)

[¶13]   We will address inversely the two 
premises that the district court relied upon in granting summary judgment. 
Raymond reminds us of Crompton v. Bruce, 669 P.2d 930 (Wyo. 1983). The 
case was relied upon by the district court, and the critical articulation there 
is the requirements for reformation of a contract. We 
said:

Reformation 
of a document requires three things: (1) a meeting of the minds - a mutual 
understanding between the parties - prior to the time a writing is entered into, 
(2) a written contract or agreement, (3) which does not conform to the 
understanding, by reason of mutual mistake. Rainbow Oil Company v. 
Christmann, Wyo., 656 P.2d 538, 544 (1982); Pfister v. Brown, Wyo., 
498 P.2d 1243, 1244 (1972); Russell v. Curran, 66 Wyo. 173, 206 P.2d 1159, 1163 (1949); State Bank of Wheatland v. Bagley Bros., 44 Wyo. 244, 
11 P.2d 572, 589 (1932); Grieve v. Grieve, 15 Wyo. 358, 89 P. 569, 570 
(1907); Stoll v. Nagle, 15 Wyo. 86, 86 P. 26, 28 
(1906).

Crompton, 
669 P.2d  at 934.

[¶14]   As we address the concept of the 
meeting of the minds, we acknowledge that mutuality of assent, the quintessence 
of meeting of the minds, must be present for the formation of a contract. In 
Anderson Excavating and Wrecking Co. v. Certified Welding Corp., 769 P.2d 887, 889 (Wyo. 1988) (emphasis added), we said:

A 
contract comes into being when there is a meeting of the minds concerning the 
terms of the agreement. Jackson Hole Builders v. Piros, 654 P.2d 120, 122 
(Wyo. 1982). The existence of a contract depends upon the intent of the parties 
and presents the trial court with a question of fact. United States ex 
rel. Farmers Home Administration v. Redland, 695 P.2d 1031, 1036 (Wyo. 
1985).

Critical 
to a question of the meeting of the minds between Raymond and Steen is the 
actual or apparent authority of the real estate agent.

[¶15]   If the real estate agent had actual 
or apparent authority to offer a right of first refusal on the twenty acres of 
land in dispute, a meeting of the minds between Raymond and Steen could be 
found. In denying a meeting of the minds, Steen, in effect, contends the real 
estate agent had no such authority. The agent, however, agreed with Raymond that 
the right of first refusal attached to a different twenty acres than those 
actually described in the "AGREEMENT." The agent stated he was Steen's 
authorized agent subject to Steen's ultimate authority to make changes in all 
contracts and to Steen's final approval. Steen asserted he did not authorize the 
right of first refusal with respect to the twenty acres Raymond and the real 
estate agent agreed is the correct property. Raymond said, however, he believed 
the agent had authority with respect to the right of first refusal, and he had 
no knowledge of any limitation on that authority. A genuine issue of a material 
fact exists with respect to the extent of the agent's actual authority or with 
respect to the apparent authority that he manifested to 
Raymond.

[¶16]   If the finder of fact should 
conclude that a meeting of the minds was present as to Raymond and Steen because 
of the agent's actual or apparent authority, a question remains as to whether a 
mutual mistake exists with respect to the description of the twenty acres. If 
the finder of fact concludes that there was a mutual mistake with respect to the 
property subject to the right of first refusal, instead of a unilateral mistake 
as Steen contends, reformation could be an appropriate remedy. When parties 
achieve a meeting of the minds, and the written agreement does not conform to 
that understanding because of mutual mistake, reformation is a proper equitable 
remedy. Toland v. Key Bank of Wyoming, 847 P.2d 549, 554 (Wyo. 1993) 
(citing Gasaway v. Reiter, 736 P.2d 749, 751 (Wyo. 1987)) (quoting 
Crompton, 669 P.2d at 934). If the mistake of fact was simply a 
unilateral mistake on Raymond's part, then the agreement would be enforced as 
written.

[¶17]   We must reverse this summary 
judgment. Genuine issues of material fact exist as to whether there was a 
meeting of the minds between Raymond and the real estate agent and the extent of 
the real estate agent's actual or apparent authority.

[¶18]   Turning, then, to the first premise 
for the district court's determination, we must analyze whether Steen ever 
received an offer to purchase the twenty acres from a third party. In our sister 
state, Utah, a sale is made for purposes of a right of first refusal when there 
is a transfer for value of a significant interest in the subject property to a 
stranger who thereby gains substantial control over the subject property. 
Prince v. Elm Inv. Co., Inc., 649 P.2d 820 (Utah 1982). We understand 
this definition to be limited to the transfer of the specific tract subject to 
the right of first refusal. That limitation would assure compatibility with the 
rules we articulated in Chapman v. Mut. Life Ins. Co. of New York, 800 P.2d 1147 (Wyo. 1990).

[¶19]   We are satisfied the trial court 
did not apply Chapman correctly. It is true the rule in Chapman is that a right 
of first refusal is not triggered by an offer on a larger tract which includes 
the burdened property. Neither is a right of first refusal satisfied by an offer 
to the holder of the right to sell him a larger tract. Raymond could not pursue 
his right of first refusal by claiming it was triggered by an offer to purchase 
a larger tract. The remedy suggested in Chapman, assuming Raymond is successful 
with respect to reformation of the description, is that the parties be returned 
to their status quo. In this instance, the court could order that the property 
in dispute be returned to Steen's ownership until he should receive a bona fide 
offer to purchase only the property subject to the right of first 
refusal.

[¶20]   Further, with respect to that right 
of first refusal, if there was a bona fide offer from a third party without 
notice, then Raymond was entitled to an option to purchase at the established 
price. Raymond stated, contrary to other information from Schaub, that he had 
given Schaub specific notice of his right of first refusal on two occasions. 
Schaub's testimony is that he had no actual or constructive notice. A resolution 
of this dispute would permit the fact finder to conclude that, with Schaub's 
knowledge of the right of first refusal, the right could not be avoided by the 
transaction between Steen and S & G in which the subject property was placed 
beyond Steen's control by exchanging it for stock in the corporation. We cannot 
agree Chapman would justify a sham transaction designed to evade the right of 
first refusal.

[¶21]   We, therefore, discern genuine 
issues of material fact concerning whether the conveyance by Steen to S & G 
followed by the repurchase of Steen's shares was a sham to circumvent Raymond's 
right of first refusal. The alternative determination would be that this was a 
bona fide capitalization of the corporation that resulted in S & G being a 
bona fide purchaser for value for the shares of stock issued to Steen. If that 
were the factual determination, Raymond would be limited to a claim for damages 
against Steen because the property would have passed from his control to the 
bona fide purchaser.

[¶22]   In summary, according to our 
standard for review of summary judgment, we identify multiple genuine issues of 
material fact with respect to the legal claims presented by Raymond in this 
case. The summary judgment granted by the trial court is reversed, and the case 
is remanded for further proceedings in accordance with our 
opinion.

Footnotes

1 While Paragraph 13 of the AGREEMENT is entitled "FIRST RIGHT OF 
REFUSAL," we think it would be easier to describe this paragraph as a "right of 
first refusal."

2 Subsequent to the original signing and acknowledgement of the contract, 
the 8 in 1987 was changed to 9 amending the contract to read 1997. Both Raymond 
and Steen initialed the change.

3 The right of first refusal is different from an option to purchase. An 
option to purchase generally affords the optionee the right to purchase the 
property at a set price during all or a part of the agreement. A right of first 
refusal clause in an agreement requires the grantor of the right, when and if he 
desires to sell the property, to offer the property first to the grantee of the 
right at the same price offered by the third person. If the grantee refuses to 
meet the bona fide purchase offer of the third person, the grantor of the right 
can then sell the property to the third person. The grantor must give some 
notice to the grantee of his intention to sell and the terms of the offer. 
Thomas J. Goger, Annotation, Landlord and Tenant: What Amounts to "Sale" of 
Property for Purposes of Provision Giving Tenant Right of First Refusal if 
Landlord Desires to Sell, 70 A.L.R.3d 203 
(1976).