EEE, Inc. v. HansonEEE, Inc. v. Hanson
- Reporters:
- ,
- Before:
- Vande Walle
Alph J. Overby, Cooperstown, and Kenneth L. Dalsted, of Gilje, Greenwood & Dalsted, Jamestown, for Anneus Meester; argued by Dalsted.
Nancy S. Fay, of Fay & Griffeth, West Fargo, for defendant and appellant in No. 10046.
In January of 1980, Anneus Meester filed suit against Esther Hanson seeking specific performance of an earnest-money agreement to convey 300 acres of Griggs County farmland. In January of 1981, E. E. E., Inc., sued Hanson and Meester1 seeking
I. MEESTER v. HANSON
Shortly after acquiring the farmland through an estate settlement, Hanson listed it for sale with a real estate broker, Gladys Johnson. The earnest-money agreement between Hanson and Meester was prepared by Johnson. The pertinent provisions of the agreement are as follows:
All parties agree that the first earnest-money payment of $1,000 was timely made. The controversy on appeal centers on the fact that the second earnest-money payment of $10,000 was not made until August 31, 1979.2 In granting Meester specific performance, the trial court, in effect, determined that payment on August 31 was acceptable, despite the contractual language denominating August 10 as the date on which payment was due and specifying that “Time is of essence.” The trial court made these relevant findings of fact:
“3. The contract refers to acts to be completed on August 10, 1979, and September 10, 1979, and the Court finds that under the same or similar circumstances 30 days has been held to be an acceptable time for a party to act.
. . . . .
“5. That the plaintiff, purchaser, complied with the terms of the contract in making payments of $1,000.00 and $10,000.00 within the time required to the seller, or her agents, or as directed by the agents of the seller.”
What are the legal consequences of Meester\‘s failure to tender the $10,000 earnest-money payment on the exact day specified in the contract?
“[T]he parties may by their agreement make time of the essence thereof; ... in such a case failure to comply with the terms of the contract, at the time named therein for performance, will debar the person in default from claiming any rights thereunder, even in a court of equity.”
And see Horgan v. Russell, 24 N.D. 490, 140 N.W. 99, 104 (1913); Sunshine Cloak & Suit Co. v. Roquette Bros., 30 N.D. 143, 152 N.W. 359 (1915). Although Hanson and Meester, by both handwritten and printed specifications, made “time of the essence” of their agreement, Meester did not tender payment of the $10,000 earnest money until 21 days after the specified date. Under these circumstances, we hold that Meester\‘s failure to perform on the precise day specified in the agreement should have precluded the granting of specific performance.
The trial court\‘s reason for ordering specific performance, in spite of Meester\‘s delay, was its finding that a 30-day period “has been held to be an acceptable time for a party to act.” In assailing this finding, Hanson has urged us to review it as a “conclusion of law” rather than determining if the finding is “clearly erroneous” under
This determination, by whatever label it wears, directly contradicts the well-established legal meaning of the “time is of the essence” clause.
Normally, parties to a contract are allowed to write the terms of the contract themselves. State Farm Fire, Etc. v. St. Paul Fire, Etc., 268 N.W.2d 147 (S.D.1978). A court may be called upon to interpret a contract written by the parties thereto but the court\‘s authority to interpret a contract does not give a court the authority to modify it. Johnson v. Johnson, 291 N.W.2d 776 (S.D.1980). Here, the parties took special pains to assure that the contract reflected their intent that time was of the essence. In addition to the printed provision specifying that time was of the essence, the parties inserted a handwritten statement to that effect. There can be no doubt of their intent and we cannot ignore it under the
“The owner of the land, having other business interests, may foresee that he will need or can use to great advantage the money at a particular time, and that if he can have the money on the very day named he can afford to sell on the terms specified. But he may be unwilling to sell on such terms if the payment is to be deferred. The profit to him may not be in the sale of the land, but in the use to which he can put the money, provided he can have it on the very day on which the vendee agrees to pay it.” 73 N.W. at 208.
These reasons are as sound today as they were when first propounded in 1897. Hanson was entitled to rely on the terms of the contract.
Meester, in opposing this conclusion, points to the legal principle which excuses delay in performance if the delay is caused by the other party. See McWithy v. Heart River School Dist. No. 22, 75 N.D. 744, 32 N.W.2d 886 (1948). Relying on the written terms of the contract, Meester argues that the earnest-money contract requires additional earnest money of $10,000 to be paid on delivery (1) of evidence of title and (2) of deed. He says that the delivery of the abstract by the seller was a condition precedent to his obligation to tender the $10,000 earnest money. Meester cites the trial court\‘s finding that “the seller... failed to provide [the abstract]” and contends that his delay in performance is excused.4
We do not agree. A condition precedent is a condition which is to be performed before some right dependent thereon accrues or some act dependent thereon is performed.
Meester\‘s failure to pay the second installment on time, when time is of the essence of the contract, discharged Hanson from further duties under the contract. The judgment ordering specific performance
II. E. E. E., INC. v. HANSON
In late 1978, Hanson entered into an agreement with E. E. E., Inc., for the construction of a laundromat in Aneta, North Dakota. Ole Erickson, the president and principal owner of E. E. E., Inc., negotiated with Hanson. As a downpayment, Hanson tendered Erickson a check for $5,000. The check was dishonored. On Hanson\‘s assurances “that the check was going to be good” and that she was going to obtain a loan, the “structural work” on the laundromat was completed. From February through December 1979, work ceased while the parties waited “to see what happened with the loan.” In December of 1979, Hanson signed a promissory note for the total amount of $66,233.5 By March 1980, the laundromat was completed. On February 4, 1980, Hanson executed two mortgages designating E. E. E., Inc., as the mortgagee. One mortgage covered the laundromat; the other mortgage—the one at issue in this appeal—pledged the Griggs County farmland discussed above. The mortgages were assigned to the Page State Bank. After a title opinion revealed that the farmland had been mortgaged previously to the Hanson heirs for $83,200,6 the bank declined to make the loan. The mortgages were reassigned to E. E. E., Inc. Erickson testified that the mortgages were executed in order to obtain a loan for Hanson, not to secure the promissory note. Hanson testified that she originally intended to mortgage only the laundromat but that the banker required the additional mortgage on the farmland.
The trial judge declared the mortgage on the farmland a nullity for several reasons. He deemed the mortgage invalid because the note did not contain an “unconditional promise,” as defined in
The mortgage identifies the debt it secures as a “note of February 4, 1980.” No note executed on that date was introduced into evidence and the trial court relied on the “lack of [a] subsisting note dated the 4th day of February, 1980,” as an additional reason for invalidating the mortgage. E.E.E., in opposing this conclusion, relies on the general rule that errors or inaccuracies in the description of the note secured by the mortgage will not invalidate the mortgage if the intention of the parties is apparent, or the note can be otherwise identified. 59 C.J.S. Mortgages § 112d. There is no question that the note covered by the mortgage is the $66,233 note signed by Hanson on December 23, 1979; no one has disputed this fact. Under the circumstances of this case, where no innocent third parties are involved, the misdescription of the underlying note is not fatal to the mortgage. Cf. Security Building & Loan Assn. v. Costello, 66 N.D. 179, 263 N.W. 712 (1935) [mortgage, even though it contained no sufficient description of the mortgaged premises,
Failure of consideration for the mortgage is another ground advanced by the trial court to invalidate the mortgage. The court found that the mortgage was executed in “conjunction with attempts by the parties to obtain bank financing for the laundromat . . . and was not intended as a direct execution of further security, enforceable by foreclosure, to [E. E. E., Inc.] for payment of the [$66,233] debt.”7 Because the bank refused Hanson\‘s request for a loan, the court concluded that the intended consideration for the mortgage failed. Assuming, arguendo, that the trial court properly admitted parol evidence to establish the failure of consideration [see Verry v. Murphy, 163 N.W.2d 721 (N.D. 1968); Grebe v. Swords, 28 N.D. 330, 149 N.W. 126 (1914)], we have determined that the decision nullifying the mortgage was erroneous. Generally, if there are several considerations and some fail, if the others are good and sufficient the good will sustain the promise. See Butterfield v. Reynolds, 196 Mich. 157, 163 N.W. 86 (1917). It has long been established that a pre-existing debt may be consideration for a mortgage. Sargent v. Cooley, 12 N.D. 1, 94 N.W. 576 (1902).
While the primary consideration for the mortgage may have been the procurement of a loan, it is undisputed that Hanson owed E. E. E., Inc., $66,233 and executed the mortgage for the ultimate purpose of repaying her debt to E. E. E., Inc. Under these circumstances, we have no hesitation in applying the general rule that a pre-existing debt may be consideration for a mortgage [Sargent, supra] and sustaining the mortgage on this ground.8
Turtle Mountain Supply Co. v. Krieg, 72 N.D. 338, 7 N.W.2d 432 (1943), relied on by Meester, does not require a different result. Krieg held that the trial court\‘s findings, that the promissory note and real estate mortgage were delivered conditionally, and never became effective or binding obligations of the makers, were in accord with the weight of the evidence. The question of evidentiary support for the trial court\‘s findings was the only legal issue addressed by the court.9 For this reason we do not find Turtle Mountain persuasive.
The judgment decreeing the mortgage invalid and dismissing the foreclosure action is reversed.
ERICKSTAD, C. J., and PEDERSON, PAULSON and SAND, JJ., concur.
Notes
“To whom it may concern
“Promissary note to E.E.E. Inc.
“I Esther Hanson promise to pay E.E.E. Inc a sum of $60,000.00 (dollars) by January 15, 1980 or shortly there after, not to exceed January 31, 1980 for work done on a laundry mat at Aneta, North Dakota. The balance to be paid within 30 days after completion of all work, also to pay $5500.00 (dollars) that Ole advanced you to help you get your loans and the $733.00 (dollars) that paid the realestate taxes on laumdromat.
“I Esther Hanson personally guarantee this statement.
“Signed ESTHER HANSON “Dated December 23, 1979.”