Title: Dosland v. Netland
Citation: 424 N.W.2d 141
Docket Number: 870228, 20170406
State: north-dakota
Issuer: north-dakota Supreme Court
Date: May 26, 1988

424 N.W.2d 141 (1988) J.P. DOSLAND and Arlis McCauley, Plaintiffs and Appellants, v. Michael W.B. NETLAND and Susan Z. Netland, Defendants and Appellees. Civ. No. 870228. Supreme Court of North Dakota. May 26, 1988. Dosland, Dosland, Nordhougen, Lillehaug &amp; Johnson, PA, Moorhead, Minn., for plaintiffs and appellants; argued by Duane A. Lillehaug. Nilles, Hansen &amp; Davies, Ltd., Fargo, for defendants and appellees; argued by Daniel J. Crothers. GIERKE, Justice. The plaintiffs, J.P. Dosland and Arlis McCauley (hereafter collectively referred to as Dosland), appeal from a district court judgment granting summary judgment in favor of the defendants, Michael and Susan Netland (Netlands). We reverse and remand. On November 17, 1985, the Netlands entered into a written agreement with Dosland in which Dosland agreed to sell to the Netlands a home located in Fargo, North Dakota, for the price of $130,000.00 with an earnest money payment of $2,000.00.[1] In accordance with the agreement, the Netlands were required to complete the purchase of the property by closing the sale on or before December 30, 1985. The Netlands did not purchase the home and subsequently the property was sold to another party for $114,000.00. Dosland commenced the instant action to recover damages in the amount of $16,000.00,[2] plus interest thereon from December 30, 1985, and costs and disbursements. On June 15, 1987, a motion for summary judgment was filed by the Netlands. Both parties filed briefs on the motion for summary judgment. In support of the motion, the Netlands argued that there is no material fact at issue, and that they are entitled to a judgment as a matter of law, limiting Dosland's recovery to the earnest money previously paid. In opposition to the motion, Dosland argued that the earnest money clause was ambiguous and must be construed in light of the intention of the parties and therefore a genuine issue of material fact existed. Dosland also argued that the liquidated damages clause of the agreement was void under Section 9-08-04 of the North Dakota Century Code. On July 24, 1987, the trial court granted Netlands' motion *142 for summary judgment. This appeal followed. Dosland initially contends on appeal that the trial court erred in granting summary judgment in favor of the Netlands because a genuine issue of material fact exists. In determining whether or not summary judgment is appropriate, this Court in Binstock v. Tschider, 374 N.W.2d 81, 83 (N.D. 1985), stated as follows: The earnest money clause in paragraph 2 of the agreement provides in part as follows: Dosland claims that the earnest money clause is ambiguous and therefore extrinsic evidence is necessary to ascertain the intent of the parties. Dosland contends that the phrase "without prejudice or other rights and legal remedies" renders the provision ambiguous because it indicates that payment of the earnest money to the owners is "without prejudice" but then suggests that there is some restriction on other rights and legal remedies. Dosland argues that the word "or" makes it impossible to determine the intention of the parties from the written agreement. We agree. We believe that the agreement contains an ambiguous clause with respect to the earnest money. Further, we believe that extrinsic evidence is necessary to determine the intention of the parties. Therefore, we conclude that the trial court improperly granted summary judgment for the defendants since a genuine issue of material fact had been raised. Even though our determination of the first issue is dispositive of this case, we believe that the second issue raised by Dosland must be addressed because it very likely will arise on remand. Dosland contends that the liquidated damages clause of the agreement is void under Section 9-08-04 of the North Dakota Century Code and therefore the trial court erred in granting summary judgment in favor of the Netlands. Section 9-08-04 of the North Dakota Century Code provides as follows: In Bowbells Public School District No. 14 v. Walker, 231 N.W.2d 173, 175-176 (N.D.1975), this Court stated that: "A contract provision, to be upheld as a valid liquidated-damages clause, must not only meet the statutory requirement of § 9-08-04, N.D.C.C., but also must fulfill the requirements imposed by case law. In Hofer, supra, in paragraph 2 of the syllabus, we delineated these requirements: "Although in Hofer, we were construing South Dakota law, the South Dakota statutes are similar to § 9-08-04, N.D. C.C., we find the rationale of that case in accord with § 9-08-04, N.D.C.C., and, accordingly, adopt Hofer as a proper construction of such section. "Hofer requires, in addition to the statutory requisite, that there be a reasonable endeavor by the parties to fix their compensation and that the amount stipulated bears a reasonable relationship, and is not disproportionate to, any anticipated damages." In Eddy v. Lee, 312 N.W.2d 326, 330 (N.D.1981), this Court stated that: We believe that summary judgment is inappropriate in the instant case because, as stated in Eddy v. Lee, supra, in determining the validity of a liquidated damages provision findings of fact must be made as to the "foundational facts". Accordingly, summary judgment is reversed and the case is remanded for trial. VANDE WALLE and MESCHKE, JJ., concur. ERICKSTAD, C.J., and LEVINE, J., concur in the result. [1] The earnest money payment of $2,000.00 is held by the Realtor in trust for Dosland. [2] The $16,000.00 figure represents the difference between the agreed upon price in the contract between Dosland and the Wetlands and the price obtained by Dosland for resale of the property to a subsequent purchaser.