837 N.W.2d 870
Neb. Ct. App.2013Background
- Stitch Ranch, LLC (Seller) and Double B.J. Farms, Inc. (DBJ, Purchaser) executed a real estate contract for Nebraska property that included: “Seller agrees to obtain a feedlot permit on Dawson County property and to assign permit to Purchaser by January 1, 2011.” Closing did not occur.
- The Dawson County parcel historically had various DEQ permits: a 1973 construction/operating permit (Sarnes & Son) and an expired 1993 pollution (NPDES) permit (R&J Cattle). DEQ rules require an existing permit to be transferable via Form D; Form C is an applicant disclosure.
- Stitch (through an environmental consultant) submitted forms and correspondence proposing transfers (sometimes naming an intermediate Triple 7, sometimes R&J), and repeatedly asked DBJ to sign Form C/Form D transfer paperwork. The forms were incomplete or did not identify a current permit date.
- DBJ repeatedly requested clarification which permit was meant (operating, pollution, or both); DBJ declined to sign and refused to close without a presently effective transferable permit in Seller’s name. Stitch asserted it had satisfied the obligation by tendering the transfer forms and later obtained a construction/operating permit for Triple 7.
- Stitch sued for breach and declaratory relief (and alternatively rescission); DBJ counterclaimed for specific performance. The district court found the parties attached materially different meanings to “feedlot permit,” concluded the parties’ minds never met as to that essential term, and cancelled/rescinded the contract. This appeal affirms that judgment.
Issues
| Issue | Stitch (Plaintiff) Argument | DBJ (Defendant) Argument | Held |
|---|---|---|---|
| Whether the contract’s "feedlot permit" term had a definite mutual meaning enabling enforcement | "Feedlot permit" meant a construction and operating permit; Stitch tendered the required transfer forms and acted to obtain/transfer such permit | Term included the pollution (NPDES) permit (or at least required clarification); Stitch never produced a presently effective transferable permit in Seller’s name, so no performance | No meeting of the minds; term was indefinite as to whether it required operating permit, pollution permit, or both; contract unenforceable on that ground |
| Whether the facts show a mutual mistake or other basis to rescind | Alternatively, if ambiguous, rescission unwarranted because Stitch satisfied obligations and DBJ refused to sign forms | Rescission warranted because parties had materially different understandings and enforcement would be unconscionable | Court treated the situation as lack of meeting of minds (fundamental mistake/unilateral mistake standard applied) and affirmed cancellation |
| Whether specific performance or declaratory relief was available | Specific performance or declaratory judgment should be issued because Stitch performed by procuring forms and obtaining Triple 7 permit | Specific performance impossible because essential term indefinite and no present transferable permit existed | Court refused specific performance or declaratory relief due to indefiniteness and inability to determine obligations |
| Whether earnest money should be retained by Stitch | Stitch argued DBJ abandoned purchase and earned-forfeiture of earnest money | DBJ sought return of earnest money | Court ordered contract voided ab initio and returned earnest money to DBJ |
Key Cases Cited
- City of Scottsbluff v. Waste Connections of Neb., 282 Neb. 848 (discusses meeting of the minds and when conduct can supply missing terms)
- Peters v. Halligan, 182 Neb. 51 (states requirement that parties agree on essential terms for enforceable contract)
- MBH, Inc. v. John Otte Oil & Propane, 15 Neb. App. 341 (rule that agreements must be definite and certain as to essential commitments)
- R & B Farms v. Cedar Valley Acres, 281 Neb. 706 (definition and treatment of mutual mistake)
- Turbines Ltd. v. Transupport, Inc., 19 Neb. App. 485 (rescission or cancellation may be appropriate where minds never met and enforcement would be unconscionable)
- In re Estate of Potthoff, 6 Neb. App. 418 (equitable cancellation of an instrument where parties’ minds did not meet as to essential elements)