Court Opinion

ID: 6552968
Source: CourtListenerOpinion
Date Created: 2022-07-19 22:30:29.279133+00
Date Added: 2024-06-11T15:55:59.070681
License: Public Domain

Josephine Linker Hart, Judge, dissenting. I respectfully dissent from the prevailing opinion’s affirmance of the chancery court’s determination that appellants waived their right to declare the contract at issue void because they did not specifically fist in their August 15, 1994, written addendum to the contract appellees’ failure to comply with the seller’s disclosure provision as a breach of contract committed by the appellees. I conclude that the chancery court clearly erred in finding that appellants waived their right to declare the contract void based on appellees’ breach of the disclosure provision. Because I so conclude, I also dissent from the prevailing opinion’s affirmance of the chancery court’s award of a $5,000 attorney’s fee to appellees’ counsel. The chancery court erred in applying the legal principle of waiver to appellants’ August 15, 1994, addendum to the contract. “Waiver” has a particular meaning in the law of contracts. Professor Farnsworth defines waiver as a term of art in the law of contracts as follows: The meaning of waiver has provoked much discussion. Although it has often been said that a waiver is “the intentional relinquishment of a known right,” this is a misleading definition. What is involved is not the relinquishment of a right and the termination of the reciprocal duty but the excuse of the nonoccurrence of or a delay in the occurrence of a condition of a duty. II E. Allan Farnsworth, Farnsworth on Contracts § 8.5 at 425 (2d ed. 1998) (footnotes omitted). As a matter of Arkansas case law, the non-breaching party to a contract waives the other party’s breach in two ways: by specifically excusing the breach or by permitting the breaching party to continue to perform, thereby becoming estopped from subsequently refusing to perform his contractual obligation on the basis of the other party’s breach. See, e g., Arkansas Mun. Bond Bureau, Inc. v. Fouke Special Sch. Dist. No. 15, 203 Ark. 677, 158 S.W.2d 28 (1942) (estoppel); Wolff v. Alexander Film Co., 186 Ark. 848, 56 S.W.2d 424 (1933) (estoppel); Keopple v. Delight Lumber Co., 105 Ark. 233, 151 S.W. 259 (1912) (explicit excuse of breach); Stephens v. West Pontiac-GMC, Inc., 7 Ark. App. 275, 647 S.W.2d 492 (1983) (estoppel). As noted in the prevailing opinion, on September 9, 1994, appellants stated in a letter to the appellees’ real estate agent that they wished to terminate the contract because of appellees’ breach of the disclosure provision. From August 15, 1994, when appellants first stated their intention to declare the contract void, until the end of September 9, 1994, when appellants specifically stated that they wanted to terminate the contract because of appellees’ failure to comply with its disclosure provision, appellants never excused the appellees’ breach of the contract nor accepted efforts by appellees to repair the house; therefore, appellants did not waive appellees’ failure to comply with their contractual duty to disclose defects in the house. The prevailing opinion affirms the chancery court’s analysis of the waiver issue based on the following statement cited in 17A C.J.S. Contracts § 492(1) at 697 (1963): “Where a party refuses to perform the contract on the ground of a specific breach by the other party he waives all other breaches then known to him.” This statement in C.J.S. is supported by a footnote citation to Warner Co. v. MacMullen, 112 A.2d 74 (Pa. 1955). However, the Pennsylvania Supreme Court’s reasoning in Warner Co. belies the expansive interpretation given the decision by the author of C.J.S. Like the instant case, Warner Co. involved an appeal of an order granting a plaintiff specific performance of a contract for the sale of real property. The court’s reasoning in Warner Co. is based on estoppel — a theory that is inapposite to the instant case, given that appellants never indicated they were willing to accept efforts by appellees to repair the house. With regard to waiver of a breach of contract by estoppel, in Warner Co. the Pennsylvania Supreme Court stated: It is a firmly established principle, founded on the doctrine of equitable estoppel, that a refusal to perform the obligations of a contract on the ground of a specific breach assigned as the reason for such refusal, constitutes a waiver of all other breaches then known to him; where a party gives a reason for his conduct and decision touching anything involved in a controversy, he cannot, after litigation has begun, change his mind, to the detriment and disadvantage of the other party, and seek to justify his action by advancing some other reason. Warner Co., 112 A.2d at 77-78 (internal footnote omitted) (emphasis added). If the facts of this case were before it, the Warner Co. court would not conclude that appellants were estopped, by waiver, from declaring the contract at issue void. It would not do so because appellants did not wait until after appellees sued them for specific performance to put forth appellees’ failure to comply with the seller’s disclosure provision of the contract as a basis for their refusal to purchase the appellees’ house. As noted above, appellants first noted this failure in a letter their counsel sent to appellees’ real estate company on September 9, 1994. Appellees did not file suit against appellants, seeking specific performance, until seven months later, in April 1995. I dissent from the prevailing opinion’s affirmance of the chancery court’s determination of the “waiver” issue because it rests, via C.J.S., on an overly broad interpretation of Warner Co., supra. Moreover, I am unpersuaded by the prevailing opinion’s citation of Arkansas Mun. Bond Bureau, Inc. v. Fouke Special Sch. Dist. No. 15, 203 Ark. 677, 158 S.W.2d 28 (1942). This case is merely an example of the estoppel sort of waiver of a breach of contract. It holds that the non-breaching party to a contract waives the other party’s breach by permitting that party to continue to perform, thereby becoming estopped from subsequently refusing to perform his contractual obligations on the basis of the other party’s breach. The prevailing opinion finds a factual basis for its estoppel analysis by noting that the appellees incurred expenses by hiring an engineer to inspect their house to determine whether it was structurally sound. It also notes that the engineer prepared a report of his inspection of appellees’ house before appellants specifically stated that they wanted to terminate the contract because of appellees’ failure to comply with the contract’s disclosure provision. The prevailing opinion’s effort to find a factual basis for its estoppel theory is unavailing. As the prevailing opinion itself notes, the appellees had a right, pursuant to the contract, to repair defects in their house, but only if the repair would not cost more than $2,000. It was the appellees’ intention to pursue this contractual right that led them to hire an engineer to inspect their house. The appellants never took the position that they would buy the house if appellees would have it inspected by an engineer and have any defects in the house repaired. Appellants did not permit or induce appellees to hire the engineer. In effect, the prevailing opinion asserts that appellants are estopped by their initial silence concerning appellees’ failure to comply with the seller’s disclosure provision as a breach of the contract. However, estoppel arises out of silence if the action taken by the party asserting estoppel was the natural result of the silence. See Anadarko Petroleum Co. v. Venable, 312 Ark. 330, 850 S.W.2d 302 (1993). The appellees’ decision to hire an engineer to inspect their house arose out of their pursuit of their contractual right to have their house repaired, not out of any silence by appellants. With regard to the chancery court’s award of a $5,000 fee to appellees’ counsel, I note that pursuant to statute a trial court may award attorney’s fees to the prevailing party in an action involving breach of contract. Ark. Code Ann. § 16-22-308 (Repl. 1994). However, because I would reverse the chancery court’s order directing specific performance of the contract at issue, the appellees would no longer be the prevailing parties. When a judgment is reversed on appeal, any attorney’s fee award made by the trial court to the appellee’s trial counsel is also reversed. American Health Care Providers, Inc. v. O’Brien, 318 Ark. 438, 886 S.W.2d 588 (1994); Brookside Village Mobile Homes v. Meyers, 301 Ark. 139, 782 S.W.2d 365 (1990); Mecco Seed Co. v. London, 47 Ark. App. 121, 886 S.W.2d 882 (1994). For the reasons set forth above, I respectfully dissent from the prevailing opinion in this case. I conclude that the chancery court’s order directing appellants to close the purchase of appellees’ house should be reversed and this case remanded. Robbins, C.J., and Neal, J., join in this dissent.