Court Opinion

ID: 9640310
Source: CourtListenerOpinion
Date Created: 2023-08-22 17:02:59.146699+00
Date Added: 2024-06-11T09:03:35.071216
License: Public Domain

Judith Rogers, Judge, dissenting. I respectfully dissent from the decision of the majority because the language employed in the purchase agreement did not create a condition precedent. The majority affirmed the chancellor’s holding that a condition precedent existed in the contract which conditioned the appellees’ obligation to purchase appellants’ farm on their ability to obtain financing. This interpretation is clearly contrary to the terms of the agreement. We have held that, when contracting parties express their intention in a written instrument in clear and unambiguous language, it is our duty to construe the written agreement according to the plain meaning of the language employed. Student Loan Guar. Found. v. Barnes, 34 Ark. App. 139, 147, 806 S.W.2d 628, 632 (1991). In construing a contract, the intention of the parties is to be gathered, not from some particular phrase, but from the whole context of the agreement. Arkansas Power & Light Co. v. Murry, 231 Ark. 559, 563, 331 S.W.2d 98, 100 (1960). In North v. Philliber, 269 Ark. 403, 602 S.W.2d 643 (1980), the supreme court stated: It is also a well-settled rule in construing a contract that the intention of the parties is to be gathered not from particular words and phrases but from the whole context of the agreement. In fact, it may be said to be a settled rule in the construction of contracts that the interpretation must be upon the entire instrument and not merely on disjointed or particular parts of it. The whole context is to be considered in ascertaining the intention of the parties, even though the immediate object of inquiry is the meaning of an isolated clause. Every word in the agreement must be taken to have been used for a purpose, and no word should be rejected as mere surplusage if the court can discover any reasonable purpose thereof which can be gathered from the whole instrument. The contract must be viewed from beginning to end, and all its terms must pass in review, for one clause may modify, limit, or illuminate the other. Taking its words in their ordinary and usual meaning, no substantive clause must be allowed to perish by construction, unless insurmountable obstacles stand in the way of any other course. Seeming contradictions must be harmonized, if that course is reasonably possible. Each of its provisions must be considered in connection with the others, and, if possible, effect must be given to all. 269 Ark. at 406-07, 602 S.W.2d at 645 (quoting Fowler v. Unionaid Life Ins. Co., 180 Ark. 140, 144-45, 20 S.W.2d 611, 613 (1929)). The contract does not contain any language creating a condition precedent. The contract clearly provides that the purchaser “shall not be released from any of [p]urchaser’s agreements and undertakings as set forth herein, unless otherwise stated....” No provision for release of the appellees in the event they are unable to obtain financing is included in the contract. In fact, the contract specifically provides for the only conditions under which appellees can be released: If the title is not good and cannot be made good within a reasonable time after written notice has been given that the title is defective, specifically pointing out the defects, then the above earnest money shall be returned to Purchaser and the usual commission shall be paid to the undersigned Agent by Seller. If the title is good and Purchaser shall fail to pay for Property as specified herein, Seller shall have the right to elect to declare this contract cancelled, and upon such election, the earnest money shall be retained by and divided equally between Seller and Agent, as liquidated damages and commission respectively, but in no event shall Agent’s share exceed the regular commission. The right given Seller to make the above election shall not be Seller’s exclusive remedy, and either party shall have the right to elect to affirm this contract and enforce its specific performance or recover full damages for its breach. . . . For the majority to find the contract is conditional renders this language meaningless. A construction which neutralizes any provision of the contract cannot be adopted if the contract can be construed in a way which gives effect to all its provisions. Lindell Square Ltd. Partnership v. Savers Fed. Sav. and Loan Ass’n, 27 Ark. App. 66, 71, 766 S.W.2d 41, 44 (1989). The majority has affirmed the chancellor’s finding that the following typed language the parties inserted in the printed agreement created a condition precedent: Buyers to pledge approximately 900 acres of land in Tallahatchie County in Mississippi together with lands herein described for loan to pay purchase price. 1985 crop rent of 1 /4 cotton and 1 /3 other crops to be transferred to buyer. Closing on or before August 1, 1985. It is clear that the parties never intended by this language to condition the sale on appellees’ obtaining financing. Read as a whole, this provision speaks not* only of appellees’ pledging certain lands as collateral for the purchase, but also of appellees’ receiving the benefit of crop rents on the land to be purchased. According to the plain language of the contract then, the obvious construction of the language inserted in the agreement is that it was simply intended to explain the terms of financing the purchase. Contracts for the sale and purchase of land frequently contain provisions referring to financing arrangements proposed to be made by the purchaser. Determination of the force and effect of such provisions involves the application of the usual rules for construction of contracts for the purchase and sale of land. Whether or not a provision in a contract for the sale of realty referring to the purchaser’s uncompleted arrangement for financing the balance of the purchase price creates a condition precedent to performance of the contract depends primarily upon the intention of the parties as deduced from the language of the contract, the surrounding circumstances at the time the contract was executed, and the purpose sought to be accomplished by the contract. 77 Am. Jur. 2d Vendor and Purchaser, § 66 (1975). Moreover, the court’s finding that the parties intended for a condition precedent to be included in the contract is clearly against the preponderance of the evidence. Appellee Hunter Williams, Jr., testified at trial that it was made perfectly clear to appellants’ broker that appellees had to obtain a loan in order to purchase the farm and, after these discussions, the purchase agreement was prepared. If appellees had intended that such a condition be a term of the contract, they could have clearly so provided. Nevertheless, appellees signed the agreement without such a condition being included. Appellee is a lawyer and presumably knows that a written contract merges and thereby extinguishes all prior and contemporaneous negotiations, understandings, and verbal agreements of the same subject matter. See Farmers Cooperative Ass’n, Inc. v. Garrison, 248 Ark. 948, 952, 454 S.W.2d 644, 646 (1970). Furthermore, appellees’ actions negate any inference that the purchase agreement was conditional. After the agreement was executed, appellees discovered there was an outstanding lease on the property and attempted to rescind the contract. In his letter notifying appellants of the intended rescission, appellee Hunter Williams, Jr., discussed his understanding of the parties’ agreement. He stated: 3. There was a mutual mistake between your agent, Kemp Whisenhunt, and my family as to the market value of farm land that my family owns in Tallahassee County, Mississippi. Your agent and my family were of the opinion that the market value of this land was between $900.00 and $1,000.00 an acre. In actuality, the land only enjoys a present market value of $600.00 per acre. The basis of any offer to purchase your land was to finance the purchase by selling the Mississippi land. In fact, an exchange of property along with the cash difference between the market value of the properties was being negotiated to avoid any payment of capital gains taxes. 4. In light of the present market value of the Mississippi land, and the age of my parents, it is highly doubtful that any lending institution would finance this purchase. Although in his letter he discussed the value of the collateral to be used in obtaining a loan, he never stated that appellees’ performance was conditioned on obtaining a loan. In response to this letter, appellants’ attorney replied: This firm, along with Oscar Fendler represents Ed and Peggy Stacy in connection with your family’s June 14, 1985 agreement to buy a 588 acre farm from the Stacys. Your July 3,1985 letter to Ed Stacy, stating your family’s unilateral attempt to rescind the agreement has been referred to Mr. Fendler and me for answer. It is Ed and Peggy Stacys’ position that a binding contract to purchase has been consummated and they are unwilling to rescind that contract. The majority infers from this statement that appellants were aware appellees needed financing in order to purchase the property. While this may be a correct inference, it is not evidence that the parties agreed that obtaining this financing would be condition precedent to the contract. Furthermore, on being notified that the problems regarding the outstanding lease had been cleared, appellee responded: I am in receipt of your letter of July 16, 1985. My family welcomes the news that Koehler Blankenship has agreed to vacate the Stacy farm prior to January 1,1986. With that news, most of the problems my family had with consummating this land purchase have been remedied. My family has always wanted to purchase the Stacy farm and have been working toward that goal since July 3, 1985. An appraisal of our Mississippi land was conducted and the value attached to the cultivable acres was between $900.00 and $1,000.00 an acre. Again, no mention is made of any existing condition which would relieve appellees from performing under the contract. Even the letter from appellees’ attorney, Graham Sudbury, advising appellants that appellees had been unable to obtain financing, does not state that the appellees were released from their obligation to purchase the farm because they were unable to obtain financing. In fact, it was not until appellees filed their counterclaim, almost a year after appellants had filed suit, that they first argued the agreement terminated because of the failure of a condition precedent. Although it may have been impossible for appellees to purchase the farm when they were unable to obtain the necessary loan, that impossibility does not relieve them of the obligation to do so. Subjective impossibility, except in cases where it is also objective, does not excuse non-performance of a contract. Insolvency or inability to obtain necessary funds is a perfect illustration of subjective impossibility. It absolutely precludes making a payment contracted for; but unless wrongfully caused by the creditor, insolvency is no excuse. And any impossibility arising from a promisor’s inadequate pecuniary resources will very rarely afford an excuse. 18 Samuel Williston, Contracts, § 1932 at 10-11 (3d ed. 1978). See also Christy v. Pilkington, 224 Ark. 407, 273 S.W.2d 533 (1954); Ingham Lumber Co. v. Ingersoll, 93 Ark. 447, 452, 125 S.W. 139, 142 (1910). It is the duty of the court to construe a contract according to its unambiguous language without enlarging or expanding its terms. Christmas v. Raley, 260 Ark. 150, 153, 539 S.W.2d 405, 407 (1976). It is not within the province of the court to add conditions in order to relieve a party from the harshness of the binding effect of a contract. Accord Rector-Phillips-Morse, Inc. v. Vroman, 253 Ark. 750, 753, 489 S.W.2d 1, 4 (1973). Here, there is no provision in the contract making appellees’ obligation to perform the contract contingent upon their ability to obtain a loan. In the absence of such a provision in the agreement, a condition cannot be read into the contract by the court. See Baugh v. Johnson, 6 Ark. App. 308, 315, 641 S.W.2d 730, 734 (1982). For the majority to look outside the four corners of this purchase agreement and add additional terms in order to allow appellees to escape the binding effect of their agreement renders thousands of contracts uncertain and will throw them into the courts. In sum, I do not regard the provision as being ambiguous, and I think it clear that this provision was included as merely a reference to the proposed financing arrangements but not as a condition precedent such that appellees’ inability to obtain a loan would relieve them of their obligations under the contract of sale. There is no language in this contract which states that the provision was intended as a condition precedent, and while it can be said that it was known that appellees needed a loan to purchase the property, the evidence introduced does not support a finding that the purchase was conditioned on their obtaining a loan. I think it an unwise course to expand the terms of the contract to create a condition precedent, thereby allowing the appellees, to escape the binding effect of their agreement to purchase the property. Contracts should not be so easily discarded, and I object to taking such wide latitude in interpreting contracts so as to alter the plain meaning of the language employed. The import of the decision by the majority goes far beyond this particular case. It places in jeopardy the custom and usage in the commercial world of offer and acceptance in real estate transactions. I would therefore reverse the decision of the chancellor but remand the case to him for a determination of appellants’ damages. Judge Cooper joins in this dissenting opinion.