Case Title: Stockton v. Sowerwine

Citation: 

Docket Number: 84-25

State: wyoming

Court: Wyoming Supreme Court

Date: 1984-11-21T00:00:00Z

Document:
Stockton v. Sowerwine1984 WY 109690 P.2d 1202Case Number: 84-25Decided: 11/21/1984MARK L. STOCKTON, APPELLANT (DEFENDANT), 

v. 

E.O. SOWERWINE, III, APPELLEE (PLAINTIFF).
Supreme Court of Wyoming
MARK L. STOCKTON, 
APPELLANT (DEFENDANT), 

v. 

E.O. SOWERWINE, III, 
APPELLEE (PLAINTIFF).

 
 
Appeal from the District 
Court, ParkCounty, John T. Dixon, 
J.

 
 
Lawrence A. 
Yonkee of Redle, Yonkee & Arney, Sheridan, for appellant.

Lawrence B. 
Cozzens, Billings, 
Mont., for appellee.

Before ROONEY, C.J., and 
THOMAS, ROSE, BROWN and CARDINE, JJ.

BROWN, 
Justice.

[¶1.]     This appeal involves 
the question of an implied covenant of good faith in an option contract to 
repurchase certain real estate. The trial court found that appellant Mark L. 
Stockton (Stockton hereinafter) had exhibited bad faith 
in hindering appellee E.O. Sowerwine, III (Sowerwine hereinafter) in the 
exercise of his option to repurchase the land, and ordered specific performance 
of the contract.

[¶2.]     Appellant Stockton raises the 
following issues:

"Where the Plaintiff was 
unable to obtain funds necessary to exercise an option within the time stated 
and in the manner prescribed,

"(1) Did the Defendant's 
refusal to perform acts which were not required by the option contract until 
after it was exercised constitute hindrances which excused the Plaintiff's 
failure to perform?

"(2) Was the 
nonperforming Plaintiff entitled to specific performance where the evidence does 
not establish that this performance would have occurred except for hindrance and 
prevention by the Defendant?

"(3) Did the option 
contract prescribe a single and exclusive mode of accepting the Defendant's 
offer to sell 1,505 acres out of a parcel containing 1,510 
acres?

"(4) If the option was to 
be exercised within a stated time and in a particular manner, must that have 
been done by the Plaintiff exactly as prescribed in the written 
agreement?

"(5) Was time of the 
essence in exercising the option granted by the Defendant?

"(6) Did the Plaintiff's 
rights expire when he failed to exercise the option in the manner prescribed and 
within the time stated in the contract?"

We will 
affirm.

[¶3.]     Before June, 1981, 
appellee's father, E.O. Sowerwine, Jr., owned the property subject to this 
lawsuit. He had numerous financial problems and in order to save his ranch, was 
provided $300,000 from Stockton to discharge pressing obligations. 
Upon receiving the $300,000 from Stockton, appellee's father deeded to Stockton 1,510 acres of 
the ranch with a one-year option to repurchase 1,505 acres as set forth in an 
Agreement and Option to Repurchase, dated June 15, 1981. The parties agreed that 
upon exercise of the option Stockton could keep five acres of his choice 
from the 1,510 acres. The action arose after Sowerwine alleged that Stockton wrongfully 
hindered him in the exercise of the option. The trial court found generally for 
Sowerwine, stating that:

"* * * Defendant's 
[appellant's] actions display a conscious, methodical obstructive course of 
action towards the Plaintiff [appellee] and his attempts to exercise the option 
and such actions resulted in the actual hindrance of the 
Plaintiff."

[¶4.]     The option to 
repurchase ran for one year until June 22, 1982, and required that appellee's 
father tender to Stockton the amount of $303,000, the original purchase price 
plus the "points" which were paid by Stockton to obtain his loan from the bank, 
together with interest at the rate of 19%, in addition to all expenses incurred 
by Stockton relating to his ownership of the property, plus $20,000. There was 
evidence indicating that the property's value was in excess of $1,000,000. Also, 
Stockton had the 
right to retain five acres of the property. On April 1, 1982, appellee's father 
had not yet obtained refinancing, and at that time the option was assigned to 
appellee.

[¶5.]     In the following 
months, Sowerwine applied to the Federal Land Bank of Omaha for a loan to obtain 
refinancing. The Federal Land Bank issued a notice of loan approval on June 9, 
1982. The following day, June 10, 1982, Sowerwine wrote Stockton of his intent to 
exercise the option. This letter was received by Stockton on June 12, 1982. On June 11, 1982, 
Sowerwine requested a list of the expenses incurred by Stockton, as well as a legal description of the five acres 
that Stockton desired to retain, in order to 
close the loan with the Federal Land Bank of Omaha. Stockton 
refused to provide Sowerwine with the list of expenses and the legal description 
of the five acres which Stockton desired to retain. On June 12, 1982, 
Stockton told 
Sowerwine that he could not provide a legal description because he did not know 
which five acres he wanted to retain. However, Paul Campbell, a surveyor in 
Cody, Wyoming, 
testified that he had been contacted by Stockton 
in the summer of 1981 and again in June of 1982; Stockton had told him which five acres of the 
property he wished to retain, and discussed the possibility of having those five 
acres surveyed. Also, on June 12, 1982, Stockton and his counsel told Sowerwine, 
who did not have an attorney with him, that the option was not assignable and 
that he, Sowerwine, could not exercise such option. At trial, however, both 
Stockton and his counsel admitted that both assertions were incorrect. 

[¶6.]     Since Stockton refused to give a legal description of the five 
acres which he wished to retain, and since the closing date of June 22, 1982, 
was approaching, Sowerwine sought interim financing at the Stockgrowers State 
Bank in Worland, Wyoming, among others. Sowerwine's application 
for the loan was considered by the bank's discount committee on June 15, 1982. 
One day earlier Stockton, also a bank president, wrote a letter to the president 
of the Stockgrowers State Bank, wherein he informed the bank of the existence of 
certain restrictive covenants upon the land, averred that he did not see how the 
Federal Land Bank could make a loan on land which was restricted, and suggested 
that the president call the Land Bank to discuss this issue. This letter was not 
mailed, but was hand delivered after Stockton drove 90 miles to do so. The discount 
committee of the Stockgrowers State Bank considered Sowerwine's loan application 
on June 15, 1982, and rejected it. The rejection was based, in large part, upon 
Stockton's 
letter to the bank regarding the existence of the covenants. The minutes of the 
discount committee reflect:

"* * * Because of a 
covenance [sic], there is to be no livestock on the land and if this is the 
case, then the Federal Land Bank won't loan the money. Stockton will give back 
the sprinkler system if Sauerwine [sic] will release the covenance [sic]. Son 
wants land to add to his 465 acres. No we are not 
interested."

At trial the 
president of Stockgrowers State Bank and the loan officer in charge of 
Sowerwine's application testified that the existence of the restrictive 
covenants was a major factor in their refusal to grant the loan to Sowerwine.1

[¶7.]     The facts show that on 
the last day the option could be exercised, June 22, 1982, the Federal Land Bank 
was ready to close its loan and grant the money to Sowerwine just as soon as it 
received a complete legal description of the property. This could not be done 
since Stockton 
refused to furnish Sowerwine a legal description of the five acres which he 
wished to retain. Sowerwine had deposited sufficient money in the Stockgrowers 
State Bank to cover any excess of the repurchase price over the loan amount and 
to cover any expenses incurred by Stockton incidental to his ownership of the 
property, including the expense of surveying the five acres. However, Stockton still refused to 
provide Sowerwine with an itemized list of expenses, even though such list had 
been prepared since June 16, 1982. The list was not given to Sowerwine until the 
option period had expired.

[¶8.]     The trial court found 
that Stockton 
had intentionally violated the implied covenant of good faith in his hindrance 
of Sowerwine's attempt to validly exercise his option under the contract, 
specifically holding:

"1. While the Defendant 
may not have known that Plaintiff had applied for a bridge loan at Stockgrowers 
State Bank at the time he wrote and delivered the June 14th letter, it still 
evinces an intent to hinder the Plaintiff by his suggestion that the bank 
contact the Federal Land Bank about the covenants. Although Stockgrowers State 
Bank did not contact the Federal Land Bank about the covenants, Defendant was 
successful in hindering the Plaintiff through the Stockgrowers State Bank's use 
of the information and the part it played in the Bank's denial of the bridge 
loan.

"2. The intent of the 
Defendant is further shown by his refusal to accept the assignment of the option 
and his failure to provide a list of expenses after being asked to do so, 
especially since such a list had been prepared by the 
Defendant.

"3. The actions of the 
Defendant, taken singly, may appear justified and consistent with the actions of 
an individual protecting his own interests. But when considered as a whole, 
Defendant's actions display a conscious, methodical obstructive course of action 
towards the Plaintiff and his attempts to exercise the option and such actions 
resulted in the actual hinderance of the Plaintiff.

"4. Plaintiff has 
established sufficient equitable grounds to excuse his failure to timely 
exercise his option and he is entitled to equitable relief from this 
Court."

[¶9.]     In his treatise on 
contracts, Professor Williston states:

"It is a principle of 
fundamental justice that if a promisor is himself the cause of the failure of 
performance, either of an obligation due him or of a condition upon which his 
own liability depends, he cannot take advantage of the 
failure.

"In reflecting upon this 
jural proposition, a federal court has observed that `Where liability under a 
contract depends upon a condition precedent one cannot avoid his liability by 
making the performance of the condition precedent impossible, or by preventing 
it.' The illustrations of this principle are legion." 5 Williston on Contracts, 
§ 677, pp. 224-225 (3rd ed. 1961).

The above 
language was quoted with approval by this court in Gibson v. J.T. Allen Agency, Wyo., 407 P.2d 708, 710 
(1965):

"* * * `One who prevents 
or makes impossible the performance or happening of a condition precedent upon 
which his liability by the terms of a contract is made to depend cannot avail 
himself of its nonperformance.'" See also 17 Am.Jur.2d, Contracts, § 427, p. 882 
(1964).

[¶10.]  Referring again to Williston on 
Contracts, § 677A, it is stated:

"It is as effective an 
excuse of performance of a condition that the promisor has hindered performance 
as that he has actually prevented it. * * * Where a party stipulates that 
another shall do a certain thing, he thereby impliedly promises that he will 
himself do nothing which will hinder or obstruct that other in doing that 
thing.

"And if the situation is 
such that the cooperation of one party is an essential prerequisite to 
performance by the other, there is not only a condition implied in fact 
qualifying the promise of the latter, but also an implied promise by the former 
to give the necessary cooperation."

[¶11.]  The court in Coastal Oil Co. v. Eastern Tankers Seaways 
Corp., 29 N.J. Super. 565, 103 A.2d 26, 32 (1954), stated the rule 
succinctly:

"* * * It is well 
established as a principle of fundamental justice that if a promisor prevents or 
hinders the occurrence or fulfillment of a condition in a contract, and the 
condition would have occurred or would have been fulfilled except for such 
hindrance or prevention on the part of the promisor, then the performance of the 
condition is excused and the liability of the promisor is fixed regardless of 
failure to fulfill the condition. [Citations.]"

[¶12.]  This court has previously dealt with the 
issue of good faith in its relation to real estate contracts in Wendling v. Cundall, Wyo., 568 P.2d 888, 
890 (1977):

"* * * The Uniform 
Commercial Code as adopted in Wyoming, § 34-1-101 et seq., W.S., would not 
encompass this transaction relating to real estate. The legislature did, 
however, define `good faith' as those terms would apply to most other commercial 
transactions conducted by persons owing no fiduciary or other special obligation 
to one another. Pursuant to § 34-1-201(19), W.S., `"Good faith" means honesty in 
fact in the conduct or transaction concerned.' * * * Absent some compelling 
reason, which is not present here, it is appropriate to have a similar 
definition of good faith applicable to transactions like this as pertains to 
those governed by the Uniform Commercial Code and the law merchant. We subscribe 
to the proposition that this test requires honesty of intent rather than 
diligence or nonnegligence. * * *"

[¶13.]  Our scope of appellate review is to 
assume the evidence in favor of the successful party is true, omitting entirely 
the consideration of evidence presented by the unsuccessful party which 
conflicts with the successful party's evidence, giving every favorable inference 
that may fairly and reasonably be drawn from the successful party's evidence. City of Rock Springs v. Police Protection 
Association, Wyo., 610 P.2d 975 (1980); and Madrid v. Norton, Wyo., 596 P.2d 1108 
(1979). This court cannot substitute its judgment for that of the trial court 
made on evidentiary matters unless it is clearly erroneous or against the great 
weight of the evidence. Doenz v. 
Garber, Wyo., 665 P.2d 932 (1983); and Seeley v. Estate of Seeley, Wyo., 627 P.2d 1357 (1981).

[¶14.]  Applying those principles to the present 
case, we find that the record is replete with examples of Stockton's attempts to 
hinder Sowerwine's exercise of the option. Indeed, Stockton's attorney admitted that Stockton did not want the 
option to be exercised. Such intent is manifest through his attempt to block the 
interim financing which Sowerwine had applied for through the Stockgrowers State 
Bank, as well as his refusal to give Sowerwine a description of the five acres 
which he intended to retain, even though he had previously contacted a surveyor 
and told him the acres he wanted surveyed which he wished to retain.2 Furthermore, Stockton's intent is 
evidenced by his refusal to give Sowerwine an itemized list of expenses which 
Stockton had incurred incident to his ownership of the property which was needed 
to determine the repurchase price, even though such list had already been 
prepared.

[¶15.]  In this case we find that the trial court 
was justified in concluding that Stockton had purposely hindered Sowerwine in 
his attempts to rightfully exercise his option under the 
contract.

[¶16.]  Affirmed.

1 It should be noted that 
the Sowerwine family could release the covenants at any time, so a problem with 
the covenants never existed.

2 Under the option to 
repurchase Stockton technically had five days after the 
exercise of the option to provide Sowerwine with a description of the five acres 
he wished to retain. However, Stockton knew that Sowerwine needed the 
description to close the loan of the Federal Land Bank and that Sowerwine would 
pay for the expense of having the five acres surveyed out of money already 
deposited with the Stockgrowers State Bank. Knowing this, Stockton still refused to 
provide the legal description, a further example of his intent to hinder the 
exercise of the option.