Title: NOEL TYLER HOLST, AND JACQULYN HOLST v. FRED I. GUYNN, AND IRIS K. GUYNN; FRED I. GUYNN, AND IRIS K. GUYNN v. NOEL TYLER HOLST, AND JACQULYN HOLST

State: wyoming

Issuer: Wyoming Supreme Court

Document:

NOEL TYLER HOLST, AND JACQULYN HOLST v. FRED I. GUYNN, AND IRIS K. GUYNN; FRED I. GUYNN, AND IRIS K. GUYNN v. NOEL TYLER HOLST, AND JACQULYN HOLST1985 WY 28696 P.2d 632Case Number: 84-95, 84-96Decided: 02/19/1985Supreme Court of Wyoming
NOEL TYLER HOLST, AND 
JACQULYN HOLST, APPELLANTS (PLAINTIFFS), 

v. 

FRED I. GUYNN, AND IRIS 
K. GUYNN, APPELLEES (DEFENDANTS), 

FRED I. GUYNN, AND IRIS 
K. GUYNN, APPELLANTS (DEFENDANTS), 

v. 

NOEL TYLER HOLST, AND 
JACQULYN HOLST, APPELLEES (PLAINTIFFS).

Rehearing Denied March 
13, 1985.

 
 
Appeal from the District 
Court, Hot SpringsCounty, Gary P. Hartman, 
J.

 
 
Mark L. 
Reynolds, Lovell, for appellants in 

No. 84-95 and 
appellees in 84-96.

Ronald P. 
Jurovich and Charles K. Moss, Thermopolis, for appellees in No. 84-95 and 
appellants in 84-96.

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

BROWN, 
Justice.

[¶1.]     The Holsts initially 
brought this action against the Guynns seeking refund of the earnest money paid 
by Holsts to Guynns to purchase a home after the Holsts were unable to obtain 
financing. The Guynns filed a counterclaim seeking damages for breach of 
contract. The trial court found generally for the Guynns. The Holsts bring this 
appeal alleging error in the trial court's refusal to grant them the return of 
the earnest money. The Guynns cross-appeal alleging error inasmuch as the trial 
court off-set the counterclaim award to the Guynns by the profit they realized 
upon the resale of the house to a third party.

[¶2.]     Since we find that the 
Holsts are entitled to the return of the earnest money paid by them to the 
Guynns, we need not look at the claims asserted by the Guynns in their 
cross-appeal.

[¶3.]     The Holsts raise the 
following issues on appeal:

"I. Did the court err in 
imposing a positive duty upon plaintiffs to actively seek alternative 
financing?

"II. Did the court err in 
failing to award interest to plaintiffs for the period of time their earnest 
money was held by appellees after appellees were obligated to return the same to 
appellants?"

[¶4.]     The facts show that 
sometime in August, 1979, the Holsts agreed to purchase a house from Guynns. The 
Holsts tendered $12,000 to Guynns as earnest money and agreed to apply to the 
Veterans Administration (V.A.) for a loan for the balance. The Holsts 
subsequently applied to the V.A. for a loan which was approved by letter dated 
November 16, 1979, subject to conditions, one of them being that "There being no 
substantial reduction in income or increase in expenses between the date of your 
application and the time of loan closing."

[¶5.]     Almost one month later, 
on or about Friday, December 14, 1979, Mr. Holst was advised by his manager that 
he was being terminated from his employment. Shortly thereafter, Mr. Holst 
informed the V.A. that his job was being terminated, and the V.A. advised him 
his loan application would be denied. On December 21, 1979, the V.A. was 
formally notified by letter from Holst's employer that his employment was 
terminating effective December 31, 1979. On January 7, 1980, Mr. Holst was 
notified by letter that the V.A. could not approve his loan because his income 
was inadequate to make the loan payments.1

[¶6.]     Mr. Holst made inquiry 
as to other sources of financing, but was unsuccessful in his endeavors. During 
the latter part of December, Holst informed Guynn that he was unable to obtain 
any financing to complete the deal and requested the return of his earnest 
money. Thereupon, Guynn informed Holst that the money had been spent, but 
according to Holst, Guynn indicated the money would be returned to Holst once 
the house was resold. 

[¶7.]     During this period of 
time, Holst also sought other means of employment but was unsuccessful. 
Therefore, he decided in the early part of January, 1980, to attend college. The 
earnest money was never returned by Guynn and this suit 
followed.

I

[¶8.]     The first issue raised 
by appellant Holst is whether it was error for the trial court to impose "a 
positive duty upon [Holst] to actively seek alternative financing." The court 
found that Holst did not actively seek financing from other sources once the 
V.A. loan was disapproved and thereby demonstrated a lack of good faith. The 
applicable provisions of the sales contract read:

"The Buyers shall apply 
to the Veterans Administration for a direct loan * * * to purchase the 
aforedescribed realty and the parties realizing that circumstances may be such 
that said lending institution may not grant said loan; therefore, IT IS 
SPECIFICALLY UNDERSTOOD AND AGREED by and between the parties as 
follows:

"1. That in the event the 
Buyers' loan is not approved by the lender, the Sellers agree to return to the 
Buyers the consideration initially paid as earnest money. However, nothing in 
this paragraph shall be construed to deny Buyers the right during the term of 
this Agreement to apply for a loan through a conventional lending institution to 
purchase the real property."

[¶9.]     Indeed the trial court 
found, and we agree, that the contract provisions are clear and unambiguous. 
When the language is clear, we look no further than the four corners of the 
contract to determine the intent of the parties. Rouse v. Munroe, Wyo., 658 P.2d 74 (1983); and Busch Development, Inc. v. 
City of Cheyenne, Wyo., 
645 P.2d 65 (1982).

[¶10.]  However, we cannot agree with the trial 
court that Holst violated the agreement of the parties when he failed to seek or 
obtain alternative financing after his V.A. loan application was denied. The 
language of the contract merely said, "nothing in this paragraph shall be 
construed to deny Buyers the right * * * to apply for a loan through a 
conventional lending institution * * *." (Emphasis added.) We cannot conclude 
that Holst had a legal duty from these words to seek alternative 
financing.

[¶11.]  We are aware of the general legal 
proposition that when an earnest money agreement provides for payment of the 
balance of the purchase price conditioned upon the securement of a loan, an 
implied condition is imposed upon the vendee to use reasonable diligence to 
procure the loan. See, e.g., Martin v. 
Dillon, 56 Or. App. 734, 642 P.2d 1209 (1981); and Anaheim Company v. Holcombe, 246 Or. 
541, 426 P.2d 743 (1967). But the contract language in the present case 
expressly provided that the earnest money would be refunded if the Holsts did 
not obtain a V.A. loan. Immediately following was the provision quoted above 
saying nothing would prevent the buyers from seeking conventional financing. It 
is clear that the parties' main reliance was upon the buyers successfully 
obtaining a V.A. loan; upon a failure to obtain the V.A. loan, the earnest money 
would be refunded. As mentioned earlier, Holst made inquiry as to alternative 
sources of financing, all to no avail. As a practical matter, it is doubtful 
that Holst could have obtained financing from any source while he was 
unemployed.

[¶12.]  The contract was rescinded upon Holsts' 
failure to obtain financing. As we stated in Hagar v. Mobley, Wyo., 
638 P.2d 127, 132 (1981):

"The rescission of a 
contract is in effect a repeal or a nullification of a contract. When it is 
granted, the contract is annulled and the parties are restored to status quo; 
that is, an attempt is made to place the parties in the positions they would 
have been in, but for the contract. See 17 Am.Jur.2d Contracts § 512 
(1964)."

See also 66 
Am.Jur.2d Restitution and Implied Contracts § 10 (1973). In any event, we find 
that the Holsts did not violate the sales agreement and are therefore entitled 
under the agreement to the return of their earnest money.

II

[¶13.]  We now turn our attention to the second 
issue raised by Holst as to whether interest should have been awarded to Holst 
for the time Guynn held the earnest money after Holst informed Guynn of his 
inability to obtain financing and requested its return. Holst cites us to Mader v. James, Wyo., 
546 P.2d 190 (1976), as authority for the award of interest. In that case we 
held that a buyer of real estate was entitled to the return of his deposit when 
the deal fell through. Interest on the deposit was also awarded and it was 
stated:

"Interest is recoverable 
on liquidated but not on unliquidated claims. A liquidated claim is one readily 
computable by simple mathematical computation. United Pacific Insurance Co. v. Martin and 
Luther General Contractors, Inc., Wyo. 1969, 455 P.2d 664, 677. Not even the 
simplest arithmetic is here necessary. The amount of Fanning's claim was a sum 
certain - an amount stated. It became due on the date that Fanning accepted 
James' rescission of the contract. The record shows the first demand for the 
refund to have been made on October 3, 1973, and to have been made repeatedly 
thereafter. Fanning is entitled to interest at the rate of seven percent per 
annum from that date to judgment and at the judgment rate of ten percent 
thereafter. * * *" Id. at 195-196.

[¶14.]  It is well established in this state that 
prejudgment interest is recoverable on liquidated but not on unliquidated 
claims, a liquidated claim being one which is readily computable by basic 
mathematical calculation. Rissler & 
McMurry Company v. Atlantic Richfield Company, Wyo., 559 P.2d 25 (1977); and Zitterkopf v. Roussalis, Wyo., 
546 P.2d 436 (1976). In Rissler & McMurry, supra, at 31, 33, we 
stated:

"Some contracts 
specifically provide for interest. Those cases can be decided upon their 
contract terms and regarded as compensation for the use of money or for the 
extension of credit. The contract in such instance itself governs interest by 
way of compensation or damages for breach. We are not concerned with that type 
of contract. We are concerned, as here, with the contract that is silent with 
respect to interest. While we have statutory provision for the allowance of 
interest, it does not precisely indicate its application to recovery as a result 
of litigation.

* * * * * 
*

"Even though the 
existence of an unliquidated counterclaim or set-off necessarily puts the amount 
payable in doubt, it is well settled that it does not render the claim itself 
uncertain or deprive the claimant of the right to prejudgment interest. 
[Citations.] Mere differences of opinion as to the amount due do not preclude 
prejudgment interest nor do disputes as to liability. 
[Citation.]"

[¶15.]  We have previously held § 40-14-106(e), 
W.S. 1977, applicable in determining the rate of prejudgment interest awarded in 
the absence of a contractual provision to the contrary. Rissler & McMurry Company v. Atlantic 
Richfield Company, supra. Section 40-14-106(e), reads:

"If there is no provision 
of law for a different rate, the interest of money shall be at the rate of seven 
percent (7%) per annum."

Prejudgment 
interest is recoverable from the date Guynn received notice of Holsts' inability 
to obtain financing and their desire to have the earnest money refunded. The 
facts show that Holst telephoned Guynn on December 14, 1979, the day his job was 
terminated, stating that the V.A. loan could not be consummated due to his 
unemployment. After attempting to obtain alternative financing without success, 
Holst telephoned Guynn and told him of his failure to obtain other financing and 
requested the return of the earnest money. Under the terms of the agreement, the 
sellers agreed that the earnest money would be returned to the buyers "in the 
event the Buyers' loan is not approved by the lender." The word "lender" refers 
to the V.A. in the previous paragraph of the agreement where it is said, "the 
parties realizing * * * that said lending institution may not grant said 
loan."

[¶16.]  However, the exact date upon which Holst 
informed Guynn of his desire to have the earnest money returned is unclear. 
Holst testified it was sometime "during the last week of December," (1979), but 
did not specify the precise date. We have previously held that a party must be 
informed of the demand for return of the earnest money before interest begins to 
accrue:

"* * * The debtor must 
receive notice of the amount due before interest starts to run. A defendant 
cannot be in default if he is not informed of what to pay. There must be a fixed 
and determined amount which could have been tendered and interest thereby 
stopped. Binning v. Miller, 1944, 60 
Wyo. 114, 146 P.2d 527. If the amount of the indebtedness or the amount owing can be 
calculated and determined from statements rendered and found to be correct, it 
is a matter of mere calculation. [Citation.]" Rissler & McMurry Company v. Atlantic 
Richfield Company, supra, at 34.

[¶17.]  Since we are unable to pinpoint the exact 
date that Holst requested the return of the earnest money, we must remand this 
portion of the appeal in order to establish the date Guynn received notice of 
the demand. When that date is determined, Holst will be entitled to prejudgment 
interest on the earnest money at the rate of seven percent (7%) per annum from 
the date of demand for return to the date of judgment, and at the judgment rate 
of ten percent (10%) per annum thereafter. Section 1-16-102, W.S. 1977, 
reads:

"(a) Except as provided 
in subsection (b) of this section, all decrees and judgments for the payment of 
money shall bear interest at ten percent (10%) per year from the date of 
rendition until paid.

"(b) If the decree or 
judgment is founded on a contract, and all parties to the contract agreed to 
interest at a rate less than ten percent (10%) per year, the rate of interest on 
the decree or judgment shall correspond to the terms of the 
contract."

[¶18.]  Reversed and remanded for the taking of 
further evidence and entry of a judgment in conformity with this 
opinion.

1 The Guynns suggest in 
their brief that Holsts' bad faith was manifest because Mr. Holst informed the 
Veterans Administration that he had lost his job. This is indeed a peculiar 
notion. Holst, in fact, had a positive duty to notify the V.A. if there was a 
"substantial reduction in income." Had Holst not notified the V.A. that he had 
lost his job he certainly would not have been acting in good faith with the V.A.