Title: Prudential Preferred Properties v. J and J Ventures, Inc

State: wyoming

Issuer: Wyoming Supreme Court

Document:

Prudential Preferred Properties v. J and J Ventures, Inc1993 WY 119859 P.2d 1267Case Number: 93-1Decided: 09/21/1993Supreme Court of Wyoming
The 
PRUDENTIAL PREFERRED PROPERTIES, a Wyoming corporation, 

Appellant 
(Plaintiff),

v.

J 
AND J VENTURES, INC., an Idaho corporation; and James E. Miller, 

Appellees 
(Defendants).

Appeal 
from The District Court, Campbell County, Dan R. Price II, 
J.

Paul 
J. Drew of Drew & Carlson, Gillette, for 
appellant.

James 
L. Edwards of Stevens, Edwards & Hallock, Gillette, for 
appellees.

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

TAYLOR, 
Justice.

[¶1]      A failed attempt 
to sell Wyoming ranch property resulted in this controversy. As the payee of a 
promissory note in default, a listing broker sued the maker, who was also the 
corporate purchaser of the property, and an individual guarantor to collect the 
unpaid principal and interest. The broker also sued the sellers of the ranch to 
collect the equivalent of unpaid commission fees under provisions of a listing 
contract that entitled the broker to a share of a forfeited earnest money 
deposit from an executory contract to sell real estate. Through summary 
judgment, the district court denied all claims.

[¶2]      Our analysis, 
differing from that of the district court, discloses that in attempting to 
create the promissory note, the broker failed to provide consideration in return 
for the promise to pay. Therefore, we hold that the promissory note was invalid 
and the broker cannot recover against either the maker or the guarantor. The 
promissory note was apparently intended as security for the purchaser's earnest 
money in the executory contract. However, this motive was never realized. No 
consideration flowed from the broker, as the payee of the promissory note, to 
the sellers. As a result, the earnest money deposit, which was necessary to 
create the executory contract between the sellers and the purchaser, was never 
received. The invalid executory contract prevents the broker from recovering 
against the sellers.

[¶3]      With these 
modifications, we affirm the decision to deny all claims by the broker. 
Ambiguity in the final order of the district court requires a remand to issue an 
order in conformity with this decision. On remand, we order the district court 
to reconsider the taxation of reasonable attorney's fees and costs in light of 
our decision.

I. 
ISSUES

[¶4]      Appellant, The 
Prudential Preferred Properties of Gillette, Wyoming, the listing broker of the 
failed sale (hereinafter Prudential, broker or payee), presents a single 
issue:

Whether 
the liquidated damages provision of the subject real estate purchase contract, 
which allows the sellers to retain a defaulting buyer's earnest money, is 
unenforceable as a matter of law.

[¶5]      Appellees, J and 
J Ventures, Inc., the maker of the promissory note and purchaser of the real 
estate (hereinafter J and J, maker or purchaser), and James E. Miller, the 
guarantor of the promissory note (hereinafter Miller or guarantor), characterize 
the issue on appeal differently:

     Was Summary Judgment 
properly granted by the District Court in favor of 
appellees?

[¶6]      Appellees, Larry 
Pabst and Connie Pabst, the sellers of the real estate (hereinafter sellers), 
did not participate in this appeal, but reserved a right to request further 
relief on remand. The person who transfers real property by sale is commonly 
referred to as the "vendor." However, the relevant documents at issue in this 
case use the term "seller" or variants. We shall preserve that usage in specific 
references to the parties to this action since authorities acknowledge it as 
being proper. Black's Law Dictionary 1360 (6th ed. 1990).

II. 
FACTS

[¶7]      A chronology of 
events involved in this controversy offers the best opportunity for 
understanding and analysis. Several agreements create the relevant relationships 
between the parties. While the documents are styled in various forms, each is a 
simple contract between the parties.

[¶8]      On October 9, 
1990, the sellers executed a listing contract with the broker. This contract 
granted a right to sell the Pabst Ranch, located fifty miles north of Gillette 
in Campbell County, Wyoming, for a listing price of $750,000.00 to be paid in 
cash or by a new loan. The broker agreed "to accept deposits" made in 
conjunction with the sale of the property. For these services, the sellers 
agreed to pay five percent of the selling price to the broker as a commission. 
The parties provided another means of payment for the broker in the listing 
contract. "In the event of forfeiture of payments made by a prospective 
purchaser, the sums received shall be divided between the broker and the 
[sellers], 50% thereof to said broker, but not to exceed the commission agreed 
upon herein, and the balance to the [sellers]." As part of an incorporation 
clause, the parties agreed that no verbal agreements modified any of the terms 
or conditions of the listing contract. The term of the listing contract was 
extended through January 9, 1992.

[¶9]      On October 18, 
1991, J and J, as maker, and Miller, as guarantor, executed a promissory note 
with the broker, as payee. The promissory note provided:

     For value 
received, 
J And J Ventures, Inc., an Idaho Corporation, hereinafter called Maker, promises 
to pay to the order of The Prudential Preferred Properties, hereinafter called 
Payee, the sum of $150,000.00, together with interest at the rate of 10% per 
annum.

     The amount due herein 
shall be paid as follows:

     Entire balance due 
October 25, 1991[.]

     If suit is brought to 
collect this note, the Payee shall be entitled to collect all costs and 
expenses  Any requirement for 
presentment of notice of dishonor, demand, and protest are hereby waived by 
Maker and any guarantor. Any extension of time of payment on allowance of 
partial payment shall not constitute a waiver of any of Payee's rights under 
this note.

     J. and J. Ventures, 
Inc.

     By: [Signature] 
James E. Miller, Secretary

     For value 
received, 
each of the undersigned unconditionally guarantee payment of this instrument and 
waive any requirement of demand, protest and notices of payment. All questions 
of diligence on the part of Payee are also waived and extensions may be granted 
without giving notice to the undersigned. 

[Signature] 
James E. Miller

(Emphasis 
added.)

[¶10]   On October 18, 1991, J and J, as 
purchaser, also formalized an executory contract with the sellers. The "Offer, 
Acceptance and Receipt Specific Performance Contract (Farm & Ranch & 
Vacant Land)" detailed various responsibilities of the parties. The purchaser 
offered to buy the ranch for $750,000.00 payable as $150,000.00 "earnest money 
deposit" and $600,000.00 "cash or certified funds at closing." The sellers 
accepted the offer.

[¶11]   According to the language of the 
executory contract, the broker accepted the earnest money deposit "as a 
fiduciary for Seller and/or Purchaser" and agreed to "retain such deposit in its 
trust account." On the signature page, the broker acknowledged receipt of "the 
earnest money deposit on the 18 day of October, 1991 at 5:00 o'clock P.M." under 
the signature of an agent. On page one, the broker acknowledged receipt of 
"($150,000.00) One Hundred Fifty Thousand Dollars from Purchaser in the form of 
Promissory Note."

[¶12]   The parties agreed to a closing 
date of November 15, 1991. If the purchaser defaulted, the executory contract 
provided, in pertinent part:

In 
the event of default by the Purchaser, and if Seller elects to treat this 
Contract as terminated, then all payments made hereunder shall be paid to Seller 
as liquidated damages, such amount being agreed by the parties hereto to 
constitute compensation for the loss of opportunity suffered by the Seller due 
to such breach.

The 
sellers reserved the right to continue to offer the property for sale until 
closing. If another offer was accepted, the sellers acknowledged that a breach 
of contract might occur.

[¶13]   The sellers and the broker did have 
negotiations underway with other potential interested parties. A limited 
partnership extended an offer to buy on October 14, 1991 promising to pay 
$825,000.00 during the period of an option contract. This offer was secured by 
an earnest money deposit of $40,000.00. On October 25, 1991, the offer was 
modified to a "backup" offer, in the event that the sale to J and J was not 
completed. As part of the modification, the limited partnership's earnest money 
payment was reduced to $30,000.00 cash which was already on deposit in the 
broker's trust account.

[¶14]   On October, 29, 1991, the broker 
sent a default notice to Miller making a demand on J and J, as maker, and 
Miller, as guarantor, to pay the principal and interest owed on the promissory 
note. It is undisputed that no payments were made prior to the notice or 
subsequent to the notice.

[¶15]   On November 6, 1991, the sellers 
made a counter-offer to the limited partnership. The counter-offer amended the 
option period to five years from six, and moved a payment date. The limited 
partnership accepted the counter-offer as a "backup" by November 12, 
1991.

[¶16]   On November 15, 1991, the closing 
date for the executory contract, the purchaser defaulted on that agreement. 
Apparently, the purchaser did not have sufficient cash to complete the 
transaction. On the same day, the sellers accepted the "backup" offer and sold 
the ranch to the limited partnership under terms of the option 
contract.

[¶17]   On December 4, 1991, the broker 
filed this action seeking to collect from the maker and the guarantor the unpaid 
principal and interest on the promissory note. On January 29, 1992, the broker 
filed an amended complaint adding a cause of action against the sellers for the 
equivalent of the unpaid commission fees after termination occurred on the 
executory contract. The broker claimed the fees were due under provisions of the 
listing contract permitting the broker to share in any forfeited earnest money 
deposit.

[¶18]   The maker and the guarantor 
answered that the broker had not been damaged by the default on the note and 
that any amounts claimed under the termination clause of the executory contract 
amounted to an impermissible forfeiture or penalty. The sellers also denied the 
broker suffered any damage as a result of the termination of the executory 
contract since the property was sold to the limited partnership on the same day 
for a higher price and with potentially larger commission fees. The sellers 
claimed, as affirmative defenses, that the broker was barred from asserting its 
claims due to a failure of consideration and a breach of fiduciary 
duties.

[¶19]   Ruling on cross-motions for partial 
summary judgment, the district court granted the motion of the maker and the 
guarantor and denied the motion of the broker. The district court found that the 
terms of the promissory note were unambiguous, but the broker was denied 
recovery. Considering the broker to be an agent of the sellers, the district 
court concluded, as matter of law, that the termination provisions of the 
executory contract constituted an unenforceable penalty. In addition, the 
district court decided that the sellers had waived any rights to recover unpaid 
earnest money. In the district court's decision letter, the district judge 
determined there were no remaining claims upon which relief could be granted and 
said the complaint should be dismissed against "all parties" with prejudice. 
Each party was to bear its own attorney's fees and costs.

III. 
DISCUSSION

[¶20]   In evaluating the propriety of a 
summary judgment, we determine whether there is no genuine issue of material 
fact and whether the prevailing party is entitled to judgment as a matter of 
law. Equality Bank of Evansville, Wyo. v. Suomi, 836 P.2d 325, 328 (Wyo. 1992); 
W.R.C.P. 56(c). Summary judgment is appropriate when the terms of the parties' 
agreement do not raise issues of material fact and the district court must 
interpret the language of an unambiguous contract. J & M Investments v. 
Davis, 726 P.2d 96, 98 (Wyo. 1986). This court accords no deference to the 
district court's decisions on issues of law. Coones v. F.D.I.C., 848 P.2d 783, 
795 (Wyo. 1993) (quoting Powder River Oil Co. v. Powder River Petroleum Corp., 
830 P.2d 403, 406-07 (Wyo. 1992)).

[¶21]   Ascertaining whether a contract is 
ambiguous is a question of law for the reviewing court. Ferguson v. Reed, 822 P.2d 1287, 1289 (Wyo. 1991); Coates v. Kaufman, 818 P.2d 1141, 1143 (Wyo. 1991). 
When the provisions are clear and unambiguous, the examination is confined to 
the "four corners" of the document to construe the intent of the parties. Holst 
v. Guynn, 696 P.2d 632, 634 (Wyo. 1985). Extrinsic evidence is not admitted to 
contradict the plain meaning of an unambiguous contract. Ferguson, 822 P.2d  at 
1289. Without a valid reason for variance, the intent of the parties stated in 
their agreement must be given effect. Wyoming Bd. of Certified Public 
Accountants v. Christensen, 800 P.2d 853, 856 (Wyo. 1990).

[¶22]   We agree with the district court's 
finding that the language of the promissory note is unambiguous. The language is 
plain and the parties to it are specifically stated. Furthermore, we find the 
language of the listing contract and of the executory contract for sale of real 
estate to be unambiguous. Therefore, each document before the court represents 
an integrated contract requiring the court to construe the parties' intent from 
the terms of that particular agreement. Coates, 818 P.2d  at 
1143.

[¶23]   Fundamental to permitting 
enforcement of the terms of the agreement is a finding that the individual 
contract is valid. It is at this point that our analysis departs from that of 
the district court. We will focus first on the validity of the promissory note 
and then turn our attention to the validity of the executory 
contract.

[¶24]   It has long been recognized that a 
promissory note is a species of contract subject to the ordinary requirements of 
contract law. J & M Investments, 726 P.2d  at 98 (holding promissory note was 
enforceable because it was supported by separate consideration and did not 
result in unjust enrichment); B-T Ltd. v. Blakeman, 705 P.2d 307, 315 (Wyo. 
1985) (discussing need for every promise to answer for the debt of another to be 
memorialized as a note or memorandum in writing); 10 C.J.S. Bills and Notes § 
143 at 599 n. 88 (1938 & Cum.Supp. 1993) (collecting cases requiring 
consideration for promissory notes to be valid). "As between the maker and the 
payee, a promissory note is but a simple contract to pay money. * * * It may be 
defended against for want of consideration, for fraud and deceit, and for any of 
the other causes which will avoid simple contracts." Vancouver Nat. Bank v. 
Katz, 142 Wn. 306, 252 P. 934, 937 (1927). The Uniform Commercial Code preserves 
the defenses for failure of consideration. Wyo. Stat. § 34.1-3-303(b) (1991). 
See also Wyo. Stat. § 34.1-3-305(a)(ii) (1991).

[¶25]   The basic elements of a contract 
require an offer, acceptance and consideration. Miller v. Miller, 664 P.2d 39, 
40 (Wyo. 1983). The party seeking to recover on the contract carries the burden 
of proving the contract. Id. Part of this burden is proving consideration. 
Transamerica Commercial Finance Corp. v. Naef, 842 P.2d 539, 542 (Wyo. 1992) 
(quoting Moorcroft State Bank v. Morel, 701 P.2d 1159, 1161 (Wyo. 1985)). "Lack 
of consideration goes to the validity of contract formation. Absent some indicia 
of actual consideration, a contract will be held invalid by the courts." Miller, 
664 P.2d  at 41.

[¶26]   This court furnished a recitation 
of various definitions of consideration in Moorcroft State Bank, 701 P.2d  at 
1161-62. Restatement (Second) of Contracts § 71 (1981) provides a succinct 
statement:

(1) 
To constitute consideration, a performance or a return promise must be bargained 
for.

(2) 
A performance or return promise is bargained for if it is sought by the promisor 
in exchange for his promise and is given by the promisee in exchange for that 
promise.

(3) 
The performance may consist of

(a) 
an act other than a promise, or

(b) 
a forbearance, or

(c) 
the creation, modification, or destruction of a legal 
relation.

(4) 
The performance or return promise may be given to the promisor or to some other 
person. It may be given by the promisee or by some other 
person.

Ultimately, 
in testing to determine if consideration is present, the court is asking: "What 
did you give to get what you got?"

[¶27]   The seminal case in Wyoming 
refusing to enforce a contract for debt because of a failure of consideration is 
Miller, 664 P.2d  at 43. In a complex series of transactions between members of 
the same family, a variety of obligations were created. One of them was a 
promissory note signed by the mother as maker. The note was evidence of a 
$60,000.00 debt owed to a Wyoming bank. The executor of the mother's estate 
claimed that one son had obligated himself to pay the promissory note. This 
court determined that evidence of the son's motive in offering to pay the 
promissory note was not a substitute for the necessary element of consideration. 
Id. at 41.

[¶28]   Similarly, this court held in 
Transamerica Commercial Finance Corp., 842 P.2d  at 542, that the wife of a maker 
of a promissory note could not be held liable as a guarantor because separate 
consideration did not support her promise to pay made after the original 
transaction creating the obligation. The court applied a rule first announced in 
Moorcroft State Bank, 701 P.2d  at 1161 that a naked promise to pay is not 
sufficient. In Moorcroft State Bank, the court determined that no consideration 
was provided for a guarantee given after a promissory note was signed. "The bank 
did not give up anything nor promise anything." Id. at 
1162.

[¶29]   When we examine what indicia of 
actual consideration the broker, as payee, provided to the maker or to the 
guarantor for the promissory note, we find none. The promissory note contains a 
bare recitation that the promise to pay was, "[f]or value received * * *." 
However, no consideration flowed from the broker to the maker or to the 
guarantor. It is undisputed, for example, that the broker did not give 
$150,000.00 to the maker or the guarantor. The maker's and guarantor's motives 
in promising to pay cannot substitute for the broker's failure to provide 
consideration for the promissory note. Miller, 664 P.2d  at 41; 3 Richard A. 
Lord, Williston on Contracts, § 7:17 (4th ed. 1992). There was no performance or 
return promise from the broker to the maker or guarantor sufficient to 
constitute consideration for the promissory note. Restatement (Second) 
Contracts, supra, § 71.

[¶30]   We recognize that the performance 
or return promise from the broker does not have to be directed only to the 
maker. Restatement (Second) Contracts, supra, § 71. Consideration for a 
promissory note may flow to a third party. Barrett v. Mahnken, 6 Wyo. 541, 545, 
48 P. 202, 203 (1897). See also Houghton v. Thompson, 57 Wyo. 196, 115 P.2d 654, 
658 (1941). The Restatement summarizes the flow of consideration to a third 
party in a transaction involving a promissory note. "A makes a promissory note 
payable to B in return for a payment by B to C. The payment is consideration for 
the note." Restatement (Second) of Contracts, supra, § 71 cmt. 
e.

[¶31]   Applying the Restatement formula, 
Unruh v. Nevada Nat. Bank, 88 Nev. 427, 498 P.2d 1349 (1972) provides an example 
of consideration going to a third party. The Unruhs executed a $10,000.00 
promissory note with a Nevada bank, but the Unruhs did not receive any money. 
Instead, the bank issued a cashier's check for $10,000.00 to a railroad to 
purchase treasury stocks. The Unruhs were mailed a copy of the receipt for the 
check. The court held that the consideration for the promissory note had flowed 
to a third party and the note was valid. Id. at 1350. See also Godchaux Sugars, 
Inc. v. Fink, 188 Miss. 531, 195 So. 318, 319 (1940) (holding a promissory note 
is not binding unless consideration flows to the maker or the third party). The 
consideration in Barrett was not money, but a written release signed by a 
scorned fiancée releasing her former suitor from his promise to marry her. The 
fiancée was the payee of two promissory notes given by two of the suitor's 
relatives. This court held that consideration for the promissory notes had 
flowed to the suitor and the notes were valid. Barrett, 6 Wyo. at 545, 48 P.  at 
203.

[¶32]   It is undisputed that the broker 
did not deposit $150,000.00 in the sellers' trust account on behalf of J and J 
to serve as earnest money in the executory contract. The broker did not provide 
any performance or return promise to any third party sufficient to constitute 
consideration in return for the maker's and guarantor's promises to pay. Unruh, 
498 P.2d  at 1350; Restatement (Second) of Contracts, supra, § 71 cmt. 
e.

[¶33]   The fact that the promissory note 
and the executory contract were formalized contemporaneously does not establish 
consideration for the promissory note. In Houghton, 115 P.2d  at 657, this court 
weighed whether additional consideration for an oil and gas lease could be found 
in other writings arguably from the same transaction. Justice Kimball wrote that 
the consideration recited in the single document at issue 
controlled:

It 
is argued that the four writings prepared July 24, 1926, were parts of a "single 
deal," and authorities are cited in support of the rule that all writings 
forming part of the same transaction are interpreted together. * * * We may 
concede that the four writings were parts of the same transaction within the 
mentioned rule of interpretation, but we cannot see that that is important on 
the question under discussion. The part of the transaction that led to the 
making of the Bryner lease and the conditional promise to convey the 2% interest 
is the subject of a separate contract evidenced by a separate writing which by 
its terms shows that intention of the parties that the promise on the one side 
to make the lease was set off as the agreed exchange for the conditional promise 
on the other side. The other writings contain nothing to show a different 
intention.

Id. 
at 657-58.

[¶34]   The rule in Houghton is 
dispositive. While the broker acknowledged in the executory contract receipt of 
"$150,000.00 One Hundred Fifty Thousand Dollars from Purchaser in the form of 
Promissory Note," this general language cannot be read in such a manner as to 
impart consideration for the promissory note from the sellers' promise to sell 
in the executory contract. Green River Valley Foundation, Inc. v. Foster, 78 Wn.2d 245, 473 P.2d 844, 846 (1970) (holding that a promissory note and earnest 
money agreement would be read together only when each of them made specific 
reference to the other). The promissory note signed by J and J and Miller is a 
separate writing without any reference to the executory contract. The terms of 
the promissory note disclose a bargain in which a promise to pay was given by 
the maker and the guarantor in return "[f]or value received * * *" from the 
broker. The specific agreed exchange between the broker, the maker and the 
guarantor did not occur. The broker provided no value to the maker or the 
guarantor.

[¶35]   Another reason the promissory note 
and executory contract must be considered separate agreements is that the 
parties to the agreements differ. See Daily v. Warren, 16 Wn. App. 726, 558 P.2d 1374, 1378 (1977) (enforcing a forfeiture provision of an executory contract 
which specifically incorporated a partial earnest money deposit in the form of a 
promissory note given to the vendor as payee). The sellers are not identified as 
parties to the promissory note. The broker, while identified as a fiduciary, is 
not a party to the executory contract. The guarantor, as an individual, is not a 
party to the executory contract. The only party common to both agreements is J 
and J as the maker of the promissory note and the purchaser in the executory 
contract.

[¶36]   While the district court did not 
specifically address whether consideration was present in the creation of the 
promissory note, the district court found the broker, as payee, to be the agent 
of the sellers by resorting to parol evidence. While it is true that the listing 
contract made the broker an agent for certain purposes, including accepting 
earnest money deposits, the unambiguous language of the listing contract 
prevented oral modifications. In addition, the fact of that agency as the broker 
cannot overcome the unambiguous language of the promissory note. Ferguson, 822 P.2d  at 1289. Restatement (Second) of Agency § 323 (1958) provides that whatever 
the understanding of the parties, the language of an integrated contract 
controls:

(1) 
If it appears unambiguously in an integrated contract that the agent is a party 
or is not a party, extrinsic evidence is not admissible to show a contrary 
intent, except for the purpose of reforming the contract.

[¶37]   Since the promissory note lacks 
words of negotiability, Wyo. Stat. § 34.1-3-104(a) (1991), we do not consider it 
necessary to determine if this promissory note is a negotiable instrument. It 
is, for our present purposes, sufficient that the promissory note is merely a 
contract between the parties for payment of a debt. Rubbelke v. Strecker, 53 Wn. App. 20, 765 P.2d 314, 315 (1988). However, Restatement (Second) of Agency, 
supra, § 324 requires, in pertinent part:

(1) 
In the absence of reformation, an agent signing a negotiable instrument in his 
own name is a party to it although the fact of agency appears upon it, unless 
the name of the principal also appears.

The 
Uniform Commercial Code includes a similar provision requiring the 
representative's signature to show unambiguously that it is made on behalf of a 
represented person who is specifically identified in the instrument. Wyo. Stat. 
34.1-3-402(b)(i) (1991). See also 1 James J. White & Robert S. Summers, 
Uniform Commercial Code, § 13-5 (3rd ed. 1988). In Mid-America Real Estate & 
Inv. Corp. v. Lund, 353 N.W.2d 286, 289 (N.D. 1984), the court applied the 
Uniform Commercial Code formulation and said that "[w]here the instrument 
neither names the principal nor indicates representative capacity, however, 
there is no ambiguity regarding the signature and extrinsic evidence is 
inadmissible under [the U.C.C. provision]."

[¶38]   The unambiguous language of the 
promissory note names the broker as payee. There is no reference to the broker 
acting in a representative capacity for the sellers. The sellers are not named 
in the promissory note as principals. Therefore, either as an integrated 
contract or a negotiable instrument, extrinsic evidence is not admissible to 
show other intent.

[¶39]   We hold that the promissory note is 
invalid due to a failure to provide consideration. No consideration flowed from 
the broker directly to the maker or the guarantor. No consideration flowed to 
the sellers, as third parties. The broker simply gave nothing and did nothing in 
return for the promise to pay.

[¶40]   The evident motive for the 
promissory note was to provide security for the purchaser's earnest money in the 
executory contract. The executory contract does not define the terms "earnest 
money" or "earnest money deposit." Therefore, this court gives effect to the 
words in accord with the meaning that would be conveyed to reasonable persons at 
the time and place of their use. Wangler v. Federer, 714 P.2d 1209, 1213 (Wyo. 
1986).

[¶41]   Earnest money is commonly defined 
as a comparatively small amount of money made as a deposit of partial 
payment on the purchase of property for a sale to be consummated at some time in 
the future. Stewart v. Robertson, 490 So. 2d 13, 14 (Ala. Civ. App. 1986); 
Mortenson v. Financial Growth Inc., 23 Utah 2d 54, 456 P.2d 181, 184 (1969). The 
earnest money deposit demonstrates that the purchaser is in earnest and good 
faith acting with the understanding that if the purchaser fails to purchase the 
property, the deposit will be forfeited. Bishop Ryan High School v. Lindberg, 
370 N.W.2d 726, 728 (N.D. 1985). In its usual and ordinary meaning, "money" 
means coins and paper currency and does not embrace notes, bonds, evidences of 
debt or other personal or real estate. Black's Law Dictionary, supra, at 1005. 
See Kortz v. American Nat. Bank of Cheyenne, 590 P.2d 1338, 1340 (Wyo. 
1979).

[¶42]   In effect, an earnest money deposit 
operates as liquidated damages. McMurry Oil Co. v. Deucalion Research, Inc., 842 P.2d 584, 587 (Wyo. 1992) (holding that the retention of an earnest money 
deposit was the only damage claimable by vendor when purchaser refused to 
close). However, the parties may agree that earnest money will be refunded in 
some circumstances. Holst, 696 P.2d  at 634 (holding that the purchaser was 
entitled to return of the earnest money deposit according to contract language 
that expressly provided for refund if unable to qualify for financing). In a 
unique factual situation, this court has refused to enforce an earnest money 
deposit forfeiture provision when the purchaser defaulted on an executory 
contract, but the vendor waived a right to claim liquidated damages and failed 
to prove that any damage had been suffered. Walker v. Graham, 706 P.2d 278, 282 
(Wyo. 1985).

[¶43]   The good faith and earnest effort 
showing supposedly represented by an earnest money deposit could not have 
occurred in this transaction. Since no consideration flowed from the broker to 
the sellers in return for the promissory note, there was no earnest money 
deposit. The language of the contract required the broker, as a fiduciary, to 
acknowledge receipt of the earnest money deposit as a part of the offer. While 
the broker acknowledged receipt of the deposit, the undisputed evidence is that 
there was no money, under the usual definition of the term, on deposit in the 
broker's trust account. Without the deposit, there could not have been an offer 
and acceptance. No valid executory contract for the sale of real estate was 
formed by the parties.

[¶44]   The broker sought to recover the 
equivalent of unpaid commission fees from the seller. The listing agreement 
entitled the broker to those fees in the event of "forfeiture of payments made 
by a prospective purchaser * * *." Forfeiture would have occurred under terms of 
the executory contract following a default by the purchaser and termination by 
the sellers. However, since the parties failed to enter into a valid executory 
contract, the broker is not entitled to any commission from this transaction. 
Goetz v. Anderson, 274 N.W.2d 175, 182 n. 1 (N.D. 1978); Ferguson Realtors v. 
Butts, 37 Ohio App.3d 30, 523 N.E.2d 534, 538-39 (1987). The simple reality is 
that since the broker did not provide consideration for the promissory note to 
flow to the sellers, there is no earnest money deposit to forfeit and be shared 
with the broker.

[¶45]   In its decision letter, the 
district court directed that the motion for summary judgment by J and J and 
Miller should be granted and that the motion for summary judgment made by 
Prudential should be denied. The district court then stated that "plaintiff's 
complaint as to all parties should be dismissed with prejudice, each party to 
bear its own costs and attorney's fees." The final order of the district court, 
however, does not specifically refer to any disposition of the cause of action 
against the sellers. On remand, we direct the district court to correct this 
ambiguity and to reconsider the issue of reasonable costs and attorney's fees in 
light of this opinion.

IV. 
CONCLUSION

[¶46]   Consideration remains fundamental 
to the creation of a valid contract. In this instance, the failure to provide 
consideration for the promissory note resulted in an invalid promissory note and 
the failure to create a valid executory contract. "Nothing is agreed until all 
is agreed." It may be a maxim, but it is an apt description of what happened 
when only paper exchanged hands in this attempt to sell a 
ranch.

[¶47]   We affirm, as modified, and 
remand.