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Humble v. Wyant

Supreme Court of South Dakota

February 5, 2014

Edward L. HUMBLE, Plaintiff and Appellant,
Russ WYANT, Defendant and Appellee.

Considered On Briefs on Nov. 4, 2013.

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John W. Burke of Thomas, Braun, Bernard & Burke, LLP, Rapid City, SD, Attorneys for plaintiff and appellant.

Richard E. Huffman, Michael V. Wheeler of DeMersseman Jensen Tellinghuisen & Huffman, LLP, Rapid City, SD, Attorneys for defendant and appellee.

ZINTER, Justice.

[¶ 1.] Edward L. Humble (Humble) sued Russ Wyant (Wyant) for specific performance of Humble's option to purchase a ranch owned by Wyant. Wyant counterclaimed for rent. The circuit court denied specific performance, finding that Humble failed to satisfy certain option conditions before the option expired. The court also

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found for Wyant on his counterclaim for rent. Humble appeals both decisions. We reverse the judgment on the counterclaim and remand for further findings on specific performance.

Facts and Procedural History

[¶ 2.] This case involves a dispute between family members over ownership of a 4,820 acre ranch in Perkins County. A lengthy recitation of the facts is necessary to understand the parties' relative fault with regard to the failure of the conditions of the option to purchase.

[¶ 3.] The property, owned by Wyant since 2005, is known as Humble Ranch. Prior to Wyant's ownership, the ranch was owned by Edward F. Humble and Bessie Humble. Edward F. and Bessie had five children: Karen, Donnalee, Bruce, Galen, and Edward L. Humble (the plaintiff and appellant). Wyant is Karen's son and the nephew of appellant Humble. Wyant worked on the ranch during the summers when he was in high school. Wyant now lives in Wyoming and operates construction companies there and in Montana.

[¶ 4.] Edward F. Humble died in 1992. Bruce, who had been living on and operating the ranch since the early 1980s, acquired a half interest in the ranch. The remaining half interest was owned by Bruce's mother, Bessie. Bruce continued to operate the ranch after Edward F. Humble's death.

[¶ 5.] Under Bruce's management, the ranch began to struggle financially. In 2001, in response to a bank foreclosure, the Humble family held a meeting. Humble and Wyant both attended. As a result of the meeting, Wyant agreed to loan Bruce $190,500 to pay the bank note that was in default and bring other financial obligations current. In return for the loan, Wyant received a promissory note from Bruce. The note required annual payments of $25,000. Bruce made only one payment of $22,184.

[¶ 6.] In 2005, Humble contacted Wyant about the continuing financial difficulties with the ranch. Humble feared the ranch could be lost. He also felt Bruce should no longer operate the ranch. After another family meeting, it was agreed that Wyant would purchase both Bruce's and Bessie's interests and give Humble an option to purchase the ranch. Wyant subsequently acquired both interests and gave Humble a two-year option to purchase.

[¶ 7.] After Wyant acquired Bessie's and Bruce's interests, Humble's son Casey moved onto and began operating the ranch pursuant to an agreement among Wyant, Humble, Casey, and other family members. Casey testified that prior to moving onto the ranch, he and Wyant discussed whether to enter into a contract or other writing regarding Casey's occupancy. Wyant declined, indicating: " Until we get something closed, run it like it's your own." After 2005, Casey maintained the buildings, corrals, fences, and the house on the ranch. He also made improvements. Casey indicated that he did not pay rent to Wyant because Wyant never requested it. Casey did, however, testify that he made " exchanges" with Humble, including " some cash, some not, not— not nothing that said ‘ rent’ on a check." Casey testified that he assumed once Humble exercised the option, rent payments would belong to Humble.

[¶ 8.] The two-year option period commenced when Wyant provided Humble with a statement of Wyant's investment in the ranch, which would be used to establish the purchase price. Wyant provided the statement on January 10, 2006, two months later than required by the option. Humble did not dispute the statement amount or object to its untimeliness. Consequently,

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the option agreement would expire on January 10, 2008.

[¶ 9.] After receiving the investment statement, Humble or Casey contacted Wyant and orally advised him that Humble was exercising the option. In April 2006, the parties then met at Pioneer Bank and Trust (the bank). Humble, Wyant, Casey, Clay Birkeland of the bank, and Scott Nielson of the Farm Service Agency (FSA) were present. The purpose of the meeting was to discuss commercial financing terms that Humble could obtain to purchase the ranch.

[¶ 10.] The financing terms discussed consisted of a $200,000 FSA loan payable over 40 years at 5.625% interest. The balance of the purchase price (approximately $530,000) would be financed by the bank over 30 years at 7.5% interest. However, the FSA would not commit to participation because it wanted to further investigate whether the title to the ranch was clouded.

[¶ 11.] After the meeting, Wyant, Humble, and Casey met outside the bank and further discussed financing. Humble and Casey testified that Wyant promised to notify them within twenty-four hours whether he would exercise his right under the option to match the proposed commercial financing. Wyant testified he was " not sure" if he had agreed to provide that notice. There is no dispute that Wyant did not contact Humble or Casey the next day with a financing decision. Wyant's attorney, Richard Huffman, did, however, procure a title insurance commitment in the amount of $750,000 naming Humble as a new purchaser of the property.

[¶ 12.] There was no communication between Humble and Wyant for several weeks following the meeting at the bank. Humble testified that during that time, he reread the option agreement and noticed that exercise of the option was required to be in writing. Therefore, Humble prepared a written notice exercising the option to purchase. He sent it to Wyant on June 30, 2006, and Wyant acknowledged its receipt.

[¶ 13.] The option agreement was subject to conditions that are central to this dispute. The first provided that following exercise of the option, " Russ Wyant and Edward Humble shall enter into a Purchase Agreement within thirty days." The second provided that " if the option [was] exercised, the Seller [had] the option of matching Buyer['s] proposed financing on the same terms and conditions and thereafter the Seller shall be come [sic] the lender." The option further provided: " Closing shall take place within six (6) months following the execution of the Purchase Agreement following the exercise of the option however closing must take place prior to the end of the option period." None of these conditions were satisfied before the option agreement expired. The parties' efforts to satisfy the conditions are reflected in the following facts and circumstances.

[¶ 14.] The record reflects that by early August 2006, slightly more than thirty days after Humble exercised the option, no purchase agreement had been executed as required. Humble subsequently hired attorney Jeff Collins to complete the purchase. On October 4, 2006, Collins sent a letter to Wyant summarizing the progression of the events since the meeting at the bank. Collins also claimed that Wyant was in default for failing to enter into a purchase agreement. Collins indicated that he would draft a purchase agreement and send it the following week; however, he did not send an agreement. Wyant's attorney, Huffman, responded to Collins's letter. Huffman indicated that Wyant intended to convey the land pursuant to the option agreement. Huffman also asked

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Collins to provide information regarding the financing terms ...

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