Opinion ID: 2633455
Heading Depth: 2
Heading Rank: 1

Heading: Assumption Agreement

Text: [¶ 6] The trial court properly concluded the buyers are not entitled to recover for payments made pursuant to the Assumption Agreement; however, the decision was not based on the appropriate theory of law. After a thorough exploration of the issue at trial, the trial court determined the sellers had not committed fraud as claimed by the buyers with regard to the notes. However, they also could not prove the existence of the underlying obligations, and, apparently, the trial court concluded such proof was a prerequisite to the sellers' enforcing the remaining payment obligations under the agreement. Applying Commercial Union Insurance Company v. Postin, 610 P.2d 984 (Wyo.1980), the trial court determined that Mr. Collins and Mr. White were volunteers and thus not entitled to reimbursement for monies paid. We consider de novo questions of application of the law, including identification of the correct rule. Fontaine v. Board of County Commissioners of Park County, 4 P.3d 890, 892 (Wyo.2000). We do not substitute ourselves for the trial court as a finder of fact; instead, we defer to the trial court's findings unless they are not supported by the record or are erroneous as a matter of law. Kendrick v. Barker, 2001 WY 2, ¶ 12, 15 P.3d 734, ¶ 12 (Wyo.2001). [¶ 7] The language of the Assumption Agreement provides in pertinent part: WHEREAS, Finnell is obligated on two (2) notes/loans, described for purposes hereof as the Finnell Call Note, in the approximate sum of Sixty-Five Thousand Dollars ($65,000.00), and the Hillard Note, in the approximate sum of Twenty Thousand Dollars ($20,000.00); and, WHEREAS, said notes/loans indirectly relate to Empire Auto Sales, Inc., a Wyoming corporation, ownership of which is being transferred this date from Finnell to Collins and White; and, WHEREAS, Collins and White desire to assume the said notes/loans and obligations related thereto, as part of the said consideration for the sale and transfer of corporate assets referred to above, and Finnell desires to be released from said note[s]/loans and obligations. NOW THEREFORE, in consideration of the above, and of the mutual covenants and conditions herein contained and other good and valuable consideration, the parties hereto contract and agree as follows: I. Collins and White hereby assume all liability and responsibility for the Finnell Call Note and the Hillard Note, and agree to fully pay and satisfy the same within two (2) years from date hereof. II. Collins and White hereby agree to pay interest-only payments on said notes/ loans and obligations, on behalf of Finnell, until the same are satisfied and paid in full, as follows: A. Finnell Call Note: Seven Hundred Fifty Dollars ($750.00) per month; and, B. Hillard Note: One Thousand Eight Hundred Dollars ($1,800.00) per year. III. Collins and White hereby agree to save and hold harmless Finnell from any and all payments, liability and responsibility for and relating to said notes/loans and obligations. [¶ 8] The language relating to the assumed notes is also referenced in the Stock Purchase Agreement and provides in pertinent part: B. Buyer represents and warrants as follows: 1. Buyers are employees of the Corporation or are otherwise familiar with the books and records and business dealings of the Corporation. 2. Buyers are aware of all outstanding liabilities and obligations of the Corporation[], or in any way related thereto, and agree to pay and save harmless Seller as to any and all of such liabilities and obligations, of any type, nature or description, including, but not limited to taxes, assessments, financing, and floor planning, pending or threatened legal matters, the Hillard Note, and the Finnell Call Note, and all other similar liens, encumbrances and charges, leases and other contractual obligations. [¶ 9] For the buyers to recover the amounts paid under the Assumption Agreement, they had to prove fraudwhich the trial court concluded they did notor support some other claim that the monies were wrongfully paid. The contract language did not require the sellers to produce promissory notes for the specifically identified debts the buyers agreed to assume. Simply because the sellers could not produce promissory notes does not mean the payments made on those debts of the corporation were not contractually required. The plain language of the contract authorized and required the payments. The buyers cite no legal basis to support their claim for reimbursement of such payments. [¶ 10] To avoid their contractual commitment, in essence the buyers assert there was an oral condition precedent which required the sellers to produce evidence of the Hillard Note and the Finnell Call Note before they had to perform under the contract. This argument is inconsistent with the clear language of the written contract which makes no mention of such a requirement. The parol evidence rule prevents extrinsic evidence from being used to contradict, subtract from, add to, or vary the terms of an unambiguous contract. Frost Construction Company v. Lobo, Inc., 951 P.2d 390, 394 (Wyo.1998). We depart from the parol evidence rule only if parol evidence is used to establish a separate and distinct contract, a condition precedent, fraud, mistake or repudiation. Snyder v. Lovercheck, 992 P.2d 1079, 1086 (Wyo.1999). A written document, unconditional on its face and fully executed, can be shown by oral testimony to have been delivered subject to a condition precedent. As long as the condition has not occurred, so they say, no contract has been made. Therefore, oral proof of the conditional delivery is admissible in spite of the face of the document to the contrary. 3 Corbin on Contracts, § 589, pp. 530-532 (1960) Lewis v. Roper, 579 P.2d 434, 438 (Wyo. 1978). The key, however, to such a position is a showing that the parties agreed to the condition precedent. 579 P.2d at 439. Conditions precedent are not a favorite of the law and will not be read into a contract by implication. Id. [¶ 11] Significant time at trial was devoted to determining whether the sellers had committed fraud by failing to prove the existence of the assumed debt. The trial court ultimately dismissed the buyers' claim of fraud. It specifically concluded: While there may be a dispute over the significance of these instruments, the fact that the loans are not embodied in the promissory note does not mean that Finnell had committed fraud. He may have been lax in his promise to produce the notes in a timely manner, but I am not persuaded that fraud has been established by clear and convincing evidence. [¶ 12] The record does not support the conclusion that the parties agreed the sellers would produce evidence of the notes as an oral condition precedent to the buyers' performance, and the trial court made no such finding. In fact, the buyers' own testimony and conduct contradict this assertion. Mr. Collins, who as general manager of the used car business had full knowledge of the corporation's books and records, testified he signed the Assumption Agreement without evidence of the underlying debts because he trusted Mr. Finnell. For the same reason, they continued to make payments on the notes for two years without production of the promissory notes until Mr. Finnell demanded complete satisfaction of the Assumption Agreement. `[A] condition precedent may not be implied when the same might have been foreseen and provided against by express agreement.' Lewis, 579 P.2d at 439 (quoting Jaffe v. Patterson Realty Company, 133 N.E.2d 655, 659 (Ohio Ct.App.1955)). The buyers had the opportunity to insert clear language into the contract to require written proof of the underlying obligations. Short of that contractual requirement, we cannot imply the existence of an oral condition precedent where there is inadequate evidence in the record to support such an agreement by the parties. The buyers were aware that the consequence of terminating payments on the Assumption Agreement was default. Parties are free to ignore the provisions of an applicable contract, but those parties do so at their peril and must recognize they may bear the consequences of disregarding those provisions when a breach of the contract becomes a reality. Colorado Interstate Gas Company v. Natural Gas Pipeline Company of America, 842 P.2d 1067, 1070 (Wyo.1992). The buyers cite no theory of law that would support their recovery of monies paid pursuant to a valid contract. [¶ 13] The buyers urge this court to consider the theories of mutual mistake and failure of consideration. A mutual mistake is one that is reciprocal and common to both parties, each alike laboring under the same misconception. Kendrick, ¶ 19. No evidence exists that the sellers were mistaken as to the existence of the debts which were to be assumed. Thus, the theory of mutual mistake is unsupported by the record. [¶ 14] Lastly, the buyers briefly argue failure of consideration. However, this assertion is provided without any analysis. In fact, the clear contract language provides that the debts were obligations of the corporation and the assumption of the notes was consideration for the sale and transfer of corporate assets. We hold the buyers are not entitled to a refund of the monies already paid pursuant to the Assumption Agreement. [1]