McCord v. Foster

Cite as 2016 Ark. App. 500
ARKANSAS COURT OF APPEALS
DIVISION II
No. CV-15-805
RONNIE MCCORD, CLINT Opinion Delivered: October 26, 2016
MCCORD, MCCORD FARMS, LLC,
AND DITCH 56 FARMS, LLC APPEAL FROM THE CRAIGHEAD
APPELLANTS COUNTY CIRCUIT COURT,
EASTERN DISTRICT
V. [NO. 16LCV-2012-0001]
HONORABLE LEE FERGUS, JUDGE
STANLEY FOSTER, JUDY FOSTER,
LINDA ALDEN, AND DANNY REVERSED AND REMANDED
BRANDON
APPELLEES
RITA W. GRUBER, Judge
This case involves two separate appeals concerning the Craighead County Circuit
Court’s granting of summary judgment in favor of appellees Judy and Stanley Foster that
ordered the specific performance of a contract where the Fosters were to purchase certain real
property from appellees Linda Alden and Danny Brandon.1 Ronnie McCord, Clint McCord,
and McCord Farms, LLC (collectively, the McCord defendants), appeal because they had the
property under lease and the circuit court’s grant of summary judgment extinguished their
right of prior refusal to purchase the land. Ditch 56 Farms, LLC, appeals from the circuit
court’s denial of its motion to intervene because it had a contract to purchase the property
1
We dismissed an earlier appeal for lack of a final order. Ditch 56 Farms, LLC v. Foster,
2013 Ark. App. 505.
Cite as 2016 Ark. App. 500
from the McCord defendants. We reverse the summary judgment and the denial of the
motion to intervene and remand for further proceedings in conformity with this opinion.
Background
In June 2008, Sylvester Brandon leased 160 acres of farmland to Ronnie and Clint
McCord for ten years. The lease provided that it was to be binding on the parties and their
heirs, personal representatives, and assigns. The McCords could not assign or sublease any part
of the premises without Brandon’s prior written approval. If Brandon were to sell the
property, it was to be subject to the lease. The lease also included a provision for a right of
first refusal for Sylvester’s children, Linda Alden and Danny Brandon, if Sylvester decided to
sell the property during the term of the lease. If neither Alden nor Danny Brandon wanted
to buy the property, a right of second refusal was given to the McCords.
Sylvester Brandon died in April 2010, having never offered to sell the land. His will
left one tract of eighty acres to Brandon and another eighty acres to Alden, and his estate
executed distribution deeds to them. The McCords continued to farm the land in accordance
with their lease.
In November 2011, the Fosters contracted to purchase all 160 acres from Danny
Brandon for $528,000. Alden did not sign the contract but both Brandon and Alden cashed
earnest-money checks from the Fosters. Three weeks later, Brandon and Alden signed
separate but similar contracts honoring the McCords’ right of refusal at the same price as
offered by the Fosters. The next day, the McCords executed an offer and sale contract
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whereby they would convey the property to Ditch 56 Farms for the same price offered by the
Fosters.2
The Fosters filed suit seeking a preliminary injunction and specific performance of the
sales contract or, in the alternative, damages for breach of contract against Brandon and Alden.
The Fosters sought declaratory relief as to the validity of Ronnie and Clint McCord’s right
of refusal and their contract to purchase the property from Brandon and Alden.3
The circuit court granted the Fosters’ request for an ex parte temporary restraining
order. The McCord defendants, Brandon, and Alden were enjoined and restrained from
closing the sale for the purchase of the property until further orders of the court. The parties
later entered into a consent injunction whereby all parties were restrained from closing on the
sale of the property until the court finally determined the matter.
Brandon and Alden responded that the complaint should be dismissed and pled unclean
hands and estoppel to all claims. The McCords answered, denying the material allegations of
the complaint. Their answer also included a counterclaim against the Fosters and a cross-claim
against Brandon and Alden for intentional interference with a contractual relationship.
Ditch 56 Farms filed a motion to intervene, and its proposed complaint sought
declaratory judgment, specific performance, and breach of contract and damages against
Alden, Brandon, and the McCord defendants.
2
The circuit court would later find that Ditch 56 Farms had entered into a contract on
December 14, 2011, where it would sell the property to another party.
3
The Fosters amended their complaint twice; however, the amendments are not
germane to this appeal.
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The Fosters moved for summary judgment, asserting that Alden and Brandon had
breached the sales contract and requesting that they be granted judgment against Brandon and
Alden. They also sought a declaration that the McCords’ contract to purchase the property
was unenforceable. In an accompanying brief, the Fosters argued that the McCords’ right of
refusal was never triggered because the decedent never offered the property for sale, which,
according to the Fosters, was a condition precedent for the right of refusal for the McCord
defendants.
After hearing arguments on the motion, the court granted summary judgment to the
Fosters and ordered Brandon and Alden to specifically perform their contract with the Fosters.
The court found that the decedent had never offered the property for sale during his lifetime
and that the right of refusal held by Brandon and Alden merged into the fee title and was
extinguished when they inherited the property from their father. It also held that the
conveyance to the Fosters would be subject to the remaining terms of the McCords’ lease,
with the exception of the right of refusal provision. Because of the manner in which Brandon
and Alden acquired the property (i.e., inheritance), the court concluded that the McCords’
secondary right of refusal was never triggered. As a result, the court determined that Ditch 56
Farms’ intervention motion was moot. The court ended its order by stating “all issues
between the parties are disposed by this Order, and the case will be removed from the
docket.”4
4
The circuit court later awarded the Fosters attorney’s fees and costs against Brandon
and Alden. That award is not at issue on appeal.
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After both the McCords and Ditch 56 Farms filed their notices of appeal, the McCord
defendants also filed a motion seeking a stay of the judgment until the appeal could be heard.
The court denied the motion to reconsider. It also refused to consider granting a stay until the
McCords posted a bond in the amount of $574,700.32.
We dismissed appeals by the McCords and Ditch 56 Farms without prejudice because
the order they appealed from was not final. Ditch 56 Farms, supra. Specifically, we held that
the summary judgment did not decide the McCords’ counterclaim for damages against the
Fosters or their cross-claim for damages against Alden and Brandon. We also found that
Ditch 56 Farms’ motion to interevene was neither denied nor dismissed but found moot
because of the summary judgment granted to the Fosters and never expressly disposed of.
On remand, the Fosters filed a motion to clarify the order granting summary judgment
and to determine whether the McCords’ counterclaim or cross-claims remained viable after
the grant of summary judgment based on our statement in Ditch 56 Farms, supra, that those
claims had not been expressly disposed of. The McCords responded, arguing that their claims
remained viable.
The court entered an order dismissing with prejudice any remaining cross-claims or
counterclaims brought by the McCords, and denying Ditch 56 Farms’ motion to intervene.
The McCords and Ditch 56 Farms now appeal.
The McCords’ Appeal
Although the McCords argue four points, the dispositive point is the circuit court’s
interpretation of the McCord defendants’ separate right of refusal under the lease. At issue are
the following provisions:
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9. Successors and Assigns. This Agreement shall be binding on the parties,
their heirs, personal representatives or assigns.
....
19. Right of First and Second Right of Refusal. During the term of this
Agreement, LINDA ALDEN and DANNY BRANDON shall have the right of first
refusal to purchase the Premises. In the event neither Ms. Alden nor Mr. Brandon
desire to purchase the Premises, MCCORD shall have a right of second refusal to
purchase the Premises on the same terms offered by or to any third party.
BRANDON will deliver written notice of any such proposed sale to MCCORD.
MCCORD will have thirty (30) days from the receipt of the notice to notify
BRANDON, in writing, of their willingness to purchase the Premises on those terms.
If MCCORD decides not to so purchase or fails to responds within the thirty (30) day
period, BRANDON is entitled to proceed with the third party sale.
In general terms, a “right of first refusal” is the generic label commonly used to
describe a contractual right to preempt another. 3 Arthur L.Corbin, Corbin on Contracts § 11.3,
at 469 (Joseph M. Perillo ed., rev. ed. West 1996). The conventional right of first refusal “is
subject to an agreed condition precedent, typically the owner’s receipt of an offer from a third
party and the owner’s good-faith decision to accept it.” Id. at 470. At that point, the right of
first refusal “ripens” into an option, and the preemptive right holder may exercise his
preemptive right to create a contract based on the same terms that the owner is willing to
accept from the third party. See id. at 470–71. A right of first refusal is distinguished from an
absolute option in that the former does not entitle the lessee to compel an unwilling owner
to sell. Instead, it requires the owner, when and if he decides to sell, to offer the property first
to the person entitled to the right of first refusal. Estate of Johnson v. Carr, 288 Ark. 461, 706
S.W.2d 388 (1986) (Carr II).
Also, generally, the death of the owner prior to any sale extinguishes any preemptive
right. Mercer v. Lemmens, 40 Cal. Rptr. 803 (Cal. App. 1964); Bloomer v. Phillips, 562
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N.Y.S.2d 840 (N.Y. App. Div. 1990). This is but a corollary to the prevailing rule that rights
of first refusal are not assignable unless the instrument indicates otherwise:
[R]ights of first refusal are presumed to be personal and are not ordinarily
construed as transferable or assignable unless the particular clause granting the right
refers to successors or assigns or the instrument otherwise clearly shows that the right
was intended to be transferable or assignable.
Park Station Ltd. P’ship, LLLP v. Bosse, 835 A.2d 646, 655 (Md. 2003) (citing other
jurisdictions); accord Masterson v. Sine, 436 P.2d 561, 566 (Cal. 1968); Ryan v. Lawyers Title Ins.
Corp., 959 N.E.2d 870, 876 (Ind. App. 2011); Dahl v Zabriskie, 88 N.W.2d 66, 67 (Iowa
1958); Jones v. Stahr, 746 N.W.2d 394, 399 (Neb. App. 2008); Sweeney v. Lilly, 479 S.E.2d
863, 866 (W. Va. 1996); Corbin, Corbin on Contracts § 11.15, at 587; Jonathan F. Mitchell, Can
a Right of First Refusal be Assigned? 68 U. Chi. L. Rev. 985, 993 ( 2001). However, the lease
in the present case may indicate otherwise by the inclusion of Paragraph 9.
We apply the well-established law of contract interpretation. The court’s duty is to
construe the meaning of the writing in accordance with the plain language employed. Po-Boy
Land Co. v. Mullins, 2011 Ark. App. 381, 384 S.W.3d 555. When a contract is free of
ambiguity, its construction and legal effect are questions of law for the court to determine. Id.
But, if there is doubt or uncertainty as to the meaning of the writing and it is fairly susceptible
to more than one equally reasonable interpretation, it is ambiguous. Id. The meaning of an
ambiguous writing is a question of fact, and the fact-finder may use parol evidence to aid in
interpreting the writing. Id.; see also First Nat’l Bank v. Griffin, 310 Ark. 164, 832 S.W.2d 816
(1992).
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In the case at bar, our object is to ascertain the intention of the parties, not from
particular words or phrases, but from the entire context of the agreement. See Byme, Inc. v.
Ivy, 367 Ark. 451, 241 S.W.3d 229 (2006). It is well settled that a contract should be
construed so that all of its parts are in harmony, if that is possible. Id. When a contract
contains general and specific provisions relating to the same subject, the specific provision
controls over more general terms. Taylor v. Hinkle, 360 Ark. 121, 200 S.W.3d 387 (2004).
Here, the parties presented the court with more than one equally reasonable
interpretation of the lease between Sylvester Brandon and the McCords. The McCords argue
that their preemptive right continued even after Brandon and Alden acquired the fee title to
the property because Paragraph 9 of the lease made the lease binding on the parties’ “heirs,
personal representatives or assigns.” The Fosters, on the other hand, argue that the McCords’
preemptive right of refusal never ripened because the decedent never offered the property for
sale during his lifetime. They further argue that the preemptive rights held by Brandon and
Alden were extinguished when they inherited the property from their father. However, the
Fosters do not discuss the effect of Paragraph 9 on the McCords’ right of refusal.
Summary judgment should be granted only when it is clear that there are no genuine
issues of material fact to be litigated, and the moving party is entitled to judgment as a matter
of law. White v. Shepard, 2015 Ark. App. 223, 459 S.W.3d 333. Here, there is clearly a factual
dispute as to the intention of the parties regarding the relationship between Paragraphs 9 and
19. In other words, the relevant issue is whether the original parties to the lease intended that
Brandon and Alden would be required to offer the property to the McCords in the event that
they acquired the property from the decedent and desired to sell during the term of the
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McCords’ lease. The determination of the intent of contracting parties is largely a factual one.
Perry v. Baptist Health, 358 Ark. 238, 189 S.W.3d 54 (2004); Deltic Timber Corp. v. Newland,
2010 Ark. App. 276, 374 S.W.3d 261. Such factual findings are not within the realm of a
summary judgment. See Lee v. Mansour, 104 Ark. App. 91, 289 S.W.3d 170 (2008). The
purpose of a summary judgment is not to try the issues but to determine whether there are
any issues to be tried. Po-Boy Land Co., supra.
We therefore reverse the summary judgment and remand for further proceedings in
conformity with this opinion.
Ditch 56 Farms’ Appeal
For its appeal, Ditch 56 Farms argues that the circuit court erred in denying its
intervention petition. When the denial of an Ark. R. Civ. P. 24(a)(2) motion to intervene by
right is based on a failure by the appellant to meet the requirements of the rule, our review
is de novo. Certain Underwriters at Lloyd’s, London v. Bass, 2015 Ark. 178, 461 S.W.3d 317.
Arkansas Rule of Civil Procedure 24 governs intervention in a civil cause of action and
provides for both intervention as a matter of right and permissive intervention. To intervene
as a matter of right when there is no statute expressly permitting it, Rule 24(a)(2) requires the
applicant to show that (1) he has a recognized interest in the subject matter of the litigation,
(2) the interest might be impaired by the disposition of the action, and (3) the interest is not
adequately protected by any of the existing parties to the action. Pearson v. First Nat’l Bank,
325 Ark. 127, 924 S.W.2d 460 (1996). Thus, if a party meets all three factors under Rule
24(a)(2), intervention as a matter of right cannot be denied. Bass, 2015 Ark. 178, at 14, 461
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S.W.3d at 326; see also Schacht v. Garner, 281 Ark. 45, 46, 661 S.W.2d 361, 362 (1983);
Midland Dev., Inc. v. Pine Truss, Inc., 24 Ark. App. 132, 750 S.W.2d 62 (1988).
In the present case, Ditch 56 Farms sought to intervene because it has a contract5 with
the McCord defendants to purchase the property from them once the McCord defendants
exercised their preemptive right of refusal. Its proposed complaint sought declaratory
judgment, specific performance, and a claim for damages for breach of contract against Alden,
Brandon, and the McCord defendants. However, the circuit court did not conduct a Rule
24 analysis. Instead, the court simply denied the motion to intervene as moot once it
determined that the McCords’ right of refusal had been extinguished. As we hold that the
circuit court erred in granting summary judgment to the Fosters on that basis, we reverse the
denial of Ditch 56 Farms’ motion and remand the case to the circuit court to properly
consider the motion to intervene. Generally, such a motion should be considered prior to
consideration of the merits of the underlying claims. See Christian v. McVesting, LLC, 2014
Ark. App. 509, 443 S.W.3d 578.
Reversed and remanded.
KINARD and VAUGHT, JJ., agree.
Mixon & Worsham PLC, by: Donn Mixon, for appellants Ronnie McCord, Clint
McCord, and McCord Farms, LLC.
Law Office of Wendell L. Hoskins II, by: Wendell L. Hoskins II and Mary K. Walker, for
appellant Ditch 56 Farms, LLC.
5
In its brief, Ditch 56 Farms elected to call its contract with the McCords an
“assignment.” We express no opinion as to the nature and effect of the document.
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Hayes, Alford, Johnson & Conley, PLLC, by: Christopher B. Conley, for appellees Linda
Alden and Danny Brandon.
Waddell, Cole & Jones, PLLC, by: Ralph W. Waddell and Justin E. Parkey, for appellees
Stanley E. Foster and Judy Foster.
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