Title: HOECHER AND HOECHER v. RUNYAN

State: wyoming

Issuer: Wyoming Supreme Court

Document:

HOECHER AND HOECHER v. RUNYAN2001 WY 3921 P.3d 339Case Number: 00-156Decided: 04/17/2001
 APRIL TERM, A.D. 2001

                                                                                                        
April 17, 2001 

 

CHARLES 
C. HOECHER and

JOY L. 
HOECHER,

Appellants(Plaintiffs),

v.

ROBERT 
E. RUNYAN,

Appellee(Defendant).

 

Appeal 
from the District Court of Laramie County

The 
Honorable Nicholas G. Kalokathis, Judge

 

Representing 
Appellant:

            
Loyd E. 
Smith of Murane & Bostwick, LLC, Cheyenne, WY

 Representing 
Appellee:

          Mark A. 
Bishop of Bishop Law Office, Cheyenne, WY

 

 Before 
LEHMAN, C.J., and GOLDEN, HILL, and KITE, JJ.

             
HILL, Justice.

[¶1]      We review a 
Judgment and Order of the district court that dismissed with prejudice a 
complaint filed by the Appellants, Charles and Joy Hoecher (Hoechers).  The Hoechers sought to recover damages, 
as well as attorney's fees, from Appellee, Robert E. Runyan (Runyan), for breach 
of a real estate sales contract.

 

[¶2]      We will reverse 
and remand with directions.

 

ISSUES

 

[¶3]      The Hoechers pose 
these issues for our resolution:

 

1.  Whether the trial court erred in its 
interpretation of the contract to buy and sell real estate as a matter of 
law?

 

            
A)  Whether, under the guise 
of interpretation, the trial court rewrote the contract and imported into the 
agreement terms specifically considered and rejected by the 
parties?

 

            
B)  Whether the trial court 
erred in its interpretation of the financing provisions of the contract as a 
matter of law?

 

2.  Whether the trial court's legal 
conclusion that Appellee Robert Runyan failed to qualify for financing is 
correct as a matter of law?

 

3.  Whether the trial court's factual 
conclusion that Appellee Robert Runyan failed to qualify for financing is 
clearly erroneous?

 

4.  Whether the trial court erred as a 
matter of law in its conclusion that the Appellants waived their right to 
written notice of Appellee's intention to exercise an option to void the 
contract and their right to a written letter of declination from Appellee's 
lender?

 

5.  Whether the trial court erred as a 
matter of law in ruling that enforcing the written notice requirement would be 
unconscionable?

 

6.  Whether the trial court's non-sequitur 
conclusion that Appellee Robert Runyan validly exercised an option to void the 
contract is error as a matter of law?

 

7.  Whether Appellants, as the non-breaching 
parties, are entitled to their attorney fees incurred in this appeal and, upon 
remand, in the trial court proceedings?

 

Runyan 
provides this summary of the issues:

 

I.          
The trial court was correct in holding that Mr. Runyan's ability to 
obtain financing was a condition precedent to the 
contract.

 

II.          
The trial court was correct in finding that Mr. Runyan failed to qualify 
for financing.

 

III.         
The trial court was correct in finding that Mr. Runyan exercised his 
option to void the contract under Paragraph V.E. and that the Appellants' 
[sic] waived their right to written notice of the seller's denial of 
financing and intent to void the contract.

 

The 
Hoechers identify several rebuttal issues in their reply 
brief:

 

1.  Appellee misstates, mischaracterizes, 
and embellishes the record.

 

2.  Appellant did not waive the issue of 
whether the contract is unambiguous.

 

3.  A condition precedent cannot arise from 
ambiguity.

 

4.  Impracticability is not a defense to a 
failure to give notice of an event that never occurred.

 

FACTS

 

[¶4]      The facts are not 
so much complicated as they are lengthy.  
The Hoechers set out to sell their home in Cheyenne at an advertised 
price of $214,500.00 without the assistance of a real estate agent.  Runyan agreed to buy it.  As we proceed through the mire of facts, 
it is helpful to begin with a recitation of the facts which the district court 
determined were dispositive of this matter, hence, justifying dismissal of the 
complaint with prejudice.  The 
district court took note of the basic fact that the Hoechers and Runyan had 
entered into a contract on July 29, 1997.  
On June 10, 1997, Security First Bank (SFB) sent a letter to Runyan that 
summarized a conversation Runyan had with SFB on June 10, 1997.  The letter stated that SFB would lend 
Runyan up to $200,000.00 under these terms:

 

A 5 year 
loan, priced at 1 year Treasury plus 300 basis points, with annual interest 
adjustments.  Interest would be 
payable monthly.

 

A loan 
fee of 2% of amount financed paid by [Runyan].

 

The bank 
would lend up to 70% of appraised value of the residence purchased.  Publicly traded stock, owned by 
[Runyan], will be pledged to the Bank in the amount equal to 30% of the loan 
amount financed as additional collateral.

 

[Runyan] 
will deposit an amount into the bank equal to Principal, Interest, Taxes and 
Insurance for one year to be held by the bank to be pledged as additional 
collateral.

 

Additional 
details of the proposal were eventually spelled out in a Truth-In-Lending 
disclosure statement.  Those details 
included that, based on a loan amount of $217,104.10, Runyan would make one 
monthly payment in advance and then make 59 monthly payments of $1,565.94 
beginning October 1, 1997, and then a balloon payment of $223,160.94 on 
September 1, 2002.

 

[¶5]      This sort of loan 
is characterized as a portfolio loan.  
Once Runyan received the June 10, 1997, commitment letter, he proceeded 
to look for a home in Cheyenne.  
Runyan was aided in his search by Dawn Chymych (Agent), and the Agent was 
to be paid for her services by a 3% commission on the selling price of the 
house.  Runyan made an initial offer 
of $207,000.00, but the Hoechers rejected that.  At Runyan's suggestion, it was agreed 
that the Agent's commission would be paid by the Hoechers and, as consideration 
for that agreement, Runyan increased his offer on the home to $216,500.00  
$210,000.00 for the house, plus $6,500.00 for the Agent's 
commission.

 

[¶6]      The district 
court viewed the following provisions of the contract as important.  The contract provided that Runyan made 
an earnest money deposit of $1,000.00, and it provided that the approximate 
balance of $215,500.00 was to be paid in cash, cashier's check, electronically 
transferred, or certified funds at closing.  The district court found that the Agent 
had placed the balance to be paid at closing on the wrong line, and that no one 
noticed the mistake (the Hoechers contended that was not an "unnoticed" mistake, 
but exactly what the parties intended and, of course, that is precisely how the 
contract read).  The district court 
also found that the Hoechers knew that Runyan was seeking unconventional 
financing for this real estate deal, and that they acquiesced in that method of 
"financing."  The district court 
went on to rely heavily on Article V of the contract, which set out Runyan's 
responsibilities with respect to obtaining a loan.  The closing on the property did not go 
as originally scheduled on August 25, 1997, and because SFB and Runyan failed to 
get an appraisal until August 28, 1997, the closing was rescheduled for 
September 2, 1997, the day after Labor Day.  The appraisal valued the property at 
$209,000.00, i.e., the real value of the home, less the Agent's 
commission.

 

[¶7]      Because of these 
circumstances, SFB informed Runyan that he would have to make up for the 
difference by an additional pledge of stock.  Runyan refused to pledge additional 
stock and, hence, SFB notified Runyan that the loan would be denied, though that 
did not occur until about a week after the scheduled September 2, 1997 
closing.  That letter was issued 
simply because Runyan refused to live up to his original agreement with 
SFB.  The district court 
characterized SFB's action as changing the terms of the loan agreement and, 
therefore, Runyan had failed to qualify for such financing as initially was 
contemplated between him and SFB.  
By the terms of the contract, as construed by the district court, Runyan 
was obligated to give written notice to the Hoechers of the denial of financing, 
but he did not do so.  The district 
court opted to excuse this failure on Runyan's part because the Hoechers did 
receive oral notice, and by their actions, waived written notice, as well as 
because holding Runyan to the written notice requirement would be 
"unconscionable."

 

[¶8]      The district 
court's final conclusions were that Runyan validly exercised his option to void 
the contract, he was entitled to the return of his earnest money deposit, and 
because neither party had breached the contract, attorney's fees could not be 
assessed as provided for in the contract.  
The court then dismissed the Hoechers' complaint with 
prejudice.

 

[¶9]      We agree with the 
rendition of the facts set out by the Hoechers because they are clearly 
demonstrated in the record.  Runyan 
decided to relocate to Cheyenne because of the favorable tax climate and low 
cost of living.  Runyan began 
negotiating with SFB for a loan to buy a home, as well as to seek employment 
with SFB.  Runyan had not identified 
the house he wished to buy, but sent SFB a resume and a financial statement that 
showed he possessed assets in the amount of $793,073.99.  SFB then sent its letter of June 10, 
1997, to Runyan as set out above.  
Although the loan was an unusual one and one not salable on the secondary 
market (hence, the name "portfolio loan" because it would have to remain in 
SFB's loan portfolio), SFB was willing to propose such a loan because Runyan was 
able to offer substantial collateral and because he had considerable personal 
wealth.  Runyan then engaged the 
services of the Agent to help him find a home.  He agreed to pay the Agent a commission 
of 3% of the selling price of the home.  
The Agent contacted the Hoechers, videotaped their home, and eventually 
Runyan personally viewed the property.  
All of Runyan's communications with the Hoechers were made through the 
Agent.  After some negotiations, the 
Hoechers agreed to sell their home to Runyan for $210,000.00.  However, Runyan wanted to roll the 
Agent's commission into the selling price of the home, so the purchase price was 
amended to be $216,500.00 ($210,000.00 selling price plus $6,500.00, the 
approximate amount of the commission to be paid to the Agent).  The effect of that agreement is that 
Runyan would pay $6,500.00 more to the Hoechers, and in exchange, the Hoechers 
would pay the $6,500.00 to the Agent from the proceeds of the sale.  The end result of this arrangement is 
that Runyan would have to put absolutely no cash into the deal.  As noted above, the signed contract 
stated that Runyan would pay $215,500.00 in cash or other certified funds at 
closing.  In addition, the portion 
of the contract that spelled out the loan terms merely showed that the "Other" 
box had been checked, and all matters pertaining to the terms of any loan were 
crossed out.

 

[¶10]   Matters became more complicated 
when the house appraised for $209,000.00, and, of course, the $6,500.00 
commission had been added to that price.  
The SFB agreement was that it would lend up to 70% of the appraised value 
of the home, and the remainder of the purchase price would be collateralized by 
a margined pledge of publicly traded stock.  Since SFB would only lend 70% of 
$209,000.00, it was necessary for Runyan to pledge additional stock to make up 
the remaining 30% of the loan in order to consummate the closing.  Runyan refused to do this, even though 
SFB continued to honor its agreement with Runyan to lend him money on the terms 
set out in its June 10, 1997 letter.

 

STANDARD 
OF REVIEW

 

[¶11]   Our primary focus in construing or 
interpreting a contract is to determine the parties' intent, and our initial 
inquiry centers on the language of the contract.  If the language of the contract is clear 
and unambiguous, then we secure the parties' intent from the words of the 
agreement as they are expressed within the four corners of the contract.  Wolter v. Equitable Resources Energy 
Company, 979 P.2d 948, 951 (Wyo. 1999); Reed v. Miles Land and Livestock 
Company, 2001 WY 16, ¶10, 18 P.3d 1161, ¶10 (Wyo. 2001).  Common sense and good faith are leading 
precepts of contract construction.  
Polo Ranch Company v. City of Cheyenne, 969 P.2d 132, 136 (Wyo. 
1998); Reed, ¶10.  The 
interpretation and construction of contracts is a matter of law for the 
courts.  Mathis v. Wendling, 
962 P.2d 160, 163-64 (Wyo. 1998); Reed, ¶11.

 

DISCUSSION

 

[¶12]   We hold that the contract to buy 
and sell real estate is unambiguous.  
Article III provides that Runyan would pay the balance due under the 
contract, the sum of $215,500.00, at closing, in "cash, cashier's check, 
electronically transferred or certified funds."  Runyan bypassed the other options in 
Article III:  To obtain a new loan 
(per Article IV); to assume an existing mortgage; or, to give a note and 
mortgage to sellers.  In Article IV, 
Loan Terms, the only notation is that a box marked "Other" was checked.  The remainder of that Article was 
crossed out.  It would have been a 
simple matter to append Runyan's agreement with SFB to the contract, but that 
was not done.  Thus, we conclude 
that Article IV says nothing about the contract.  Since Article IV has no meaningful 
content, it cannot have the effect of rendering the other express terms of the 
contract ambiguous.  Article V of 
the contract sets out terms relating to a loan application.  We view this provision as also saying 
nothing about the contract.  It does 
indicate that Runyan would complete an application with a lender within five 
days, but to the extent that was done, it was pro forma and merely incorporated 
and otherwise recognized the terms of the June 10, 1997 commitment letter issued 
by SFB.  If Runyan simply followed 
through with his arrangements with SFB, then he would have had cash or certified 
funds at closing, as was required by the contract.  Both the district court and Runyan 
placed heavy reliance on paragraph E., of Article V, which allowed Runyan to 
void the contract if he failed to qualify for financing.  We have determined above that that 
provision of Article V is inapplicable and meaningless with respect to the 
interpretation of this contract.  
Our conclusion in this regard is buttressed by the fact that the viable 
terms of the contract did not include a provision that the sale was contingent 
on Runyan's ability to obtain suitable financing; indeed, Runyan unsuccessfully 
sought to renegotiate the terms of the contract, at the last minute, to include 
such a provision, as well as one that made the sale contingent on the house 
appraising at the sale price of $216,500.  
We note in passing (as did the district court at trial), that an 
appraisal in that amount was virtually impossible since at Runyan's behest 
$6,500.00 had been added to the sale price so he could pay his Agent's fee 
without the need to come up with cash to consummate the sale.  However, Runyan did not fail to qualify 
for financing.  SFB was always 
willing to live up to the bargain it struck with Runyan in its June 10, 1997 
letter.  The only "change" was 
necessitated by the fact that the house appraised for only $209,000.00.  As a result, the 70% of the loan that 
was to be secured by the home now amounted to a smaller figure than was 
originally contemplated when it was assumed that the house would appraise for 
$216,500.00.  The 30% of the loan, 
which was to be secured by a pledge of publicly traded stock, now required an 
increase in the amount of stock pledged.  
Runyan also mixes into this argument a concern about the fact that the 
roof of the Hoechers' home required some repairs.  It is evident from the record, and 
Runyan forthrightly agreed, that the condition of the roof was no impediment to 
the consummation of the contract as written.

 

[¶13]   In summary, we hold that the 
contract is unambiguous and that Runyan breached the contract.  It is necessary that the case be 
remanded to the district court to assess an award of damages in favor of the 
Hoechers.  It is possible that we 
could assess damages in the context of this appeal, but we deem it preferable 
for that to be done by the district court, as it normally would be done.  In addition, under Article XIII, the 
Hoechers are entitled to an award of all attorney's fees for the proceedings 
below, for this appeal, and for the additional proceedings required by this 
reversal and remand.

 

[¶14]   The Judgment and Order of the 
district court is reversed, and the case is remanded to the district court for 
further proceedings consistent with this opinion.