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Stitch Ranch, LLC v. Double B.J. Farms, Inc.

Court of Appeals of Nebraska

October 1, 2013

STITCH RANCH, LLC, APPELLEE AND CROSS-APPELLANT,
v.
DOUBLE B.J. FARMS, INC., APPELLANT AND CROSS-APPELLEE.

1. Contracts: Parties: Intent. To create a contract, there must be both an offer and an acceptance; there must also be a meeting of the minds or a binding mutual understanding between the parties to the contract.

2. ___: ___: ___. A fundamental and indispensable basis of any enforceable agreement is that there be a meeting of the minds of the parties as to the essential terms and conditions of the proposed contract.

3. ___: ___: ___. A binding mutual understanding or meeting of the minds sufficient to establish a contract requires no precise formality or express utterance from the parties about the details of the proposed agreement; it may be implied from the parties' conduct and the surrounding circumstances.

4. Contracts: Parties. In limited circumstances, the parties' failure to specify an essential term does not prevent the formation of a contract.

5. ___: ___. The actions of the parties may show conclusively that they have intended to conclude a binding agreement, even though one or more terms are missing or are left to be agreed upon.

6. ___:___. Sometimes, a court can ascertain the meaning of a party's promise by referring to the parties' course of dealing with each other, or a general reasonableness standard.

7. Breach of Contract: Parties: Intent. The circumstances must show that the parties manifested an intent to be bound by a contract. Their manifestations are usually too indefinite to form a contract if the essential terms are left open or are so indefinite that a court could not determine whether a breach had occurred or provide a remedy.

8. Contracts. It is a fundamental rule that in order to be binding, an agreement must be definite and certain as to the terms and requirements. It must identify the subject matter and spell out the essential commitments and agreements with respect thereto.

9. Contracts: Intent: Words and Phrases. A mutual mistake is a belief shared by the parties, which is not in accord with the facts.

10. ___: ___: ___. A mutual mistake is one common to both parties in reference to the instrument, with each party laboring under the same misconception about the instrument.

[21 Neb.App. 329] 11. ___: ___: ___. A mutual mistake exists where there has been a meeting of the minds of the parties and an agreement actually entered into, but the agreement in its written form does not express what was really intended by the parties.

12. Rescission. Relief by way of rescission of a contract may be warranted on the basis of a unilateral mistake when the mistake is of so fundamental a nature that it can be said that the minds of the parties never met and that the enforcement of the contract as made would be unconscionable.

13. ___. An instrument may be canceled on the ground of a mistake of fact where the parties entered into a contract evidenced by a writing, but owing to a mistake their minds did not meet as to all essential elements of the transaction.

Appeal from the District Court for Dawson County: James E. Doyle IV, Judge.

Patrick J. Nelson, of Law Office of Patrick J. Nelson, L.L.C, for appellant.

Stephen D. Mossman and Joshua E. Dethlefsen, of Mattson, Ricketts, Davies, Stewart & Calkins, for appellee.

Inbody, Chief Judge, and Irwin and Moore, Judges.

Irwin, Judge.

I. INTRODUCTION

Stitch Ranch, LLC (Stitch), and Double B.J. Farms, Inc. (DBJ), entered into a contract for the transfer of real property in Dawson County, Nebraska. The contract included a provision requiring Stitch to obtain a "feedlot permit" on the property and to assign the permit to DBJ. A dispute arose between the parties concerning what was required to satisfy the "feedlot permit" provision, and the parties never completed closing. Stitch eventually brought suit, alleging breach of contract and seeking monetary damages, a declaratory judgment, and/ or rescission or cancellation of the contract. The district court ultimately concluded that each party had attached reasonable but materially different meanings to the term "feedlot permit, " characterized the issue as one of "mistake, " and ordered the contract canceled.

DBJ now appeals, asserting, among other things, that the district court erred in finding that the parties attached different meanings to the term "feedlot permit, " in finding that there was a "mistake, " and in canceling the contract. We find that [21 Neb.App. 330] the evidence adduced by the parties demonstrates that there was never any meeting of the minds about the term "feed-lot permit, " and we affirm the district court's cancellation of the contract.

II. BACKGROUND

1. Relevant Parties and Individuals

(a) Stitch and Triple 7, Inc.

Stitch is a Texas limited liability company. Its members are Ashley C. Maloley, individually, and Ashley C. Maloley, as custodian for Grace E. Maloley. Ashley's husband, Phil Maloley, is not a member of Stitch.

Triple 7, Inc., is a Nebraska corporation. Phil is the president of Triple 7. Ashley holds "one or more offices" in Triple 7.

Phil testified at trial concerning the relationship between Stitch and Triple 7. He testified that Stitch owns property, while Triple 7 owns and runs cattle on Stitch property. He testified that "all the bills go through" Triple 7. Phil testified that he and Ashley jointly make all decisions concerning both Stitch and Triple 7.

(b) DBJ

DBJ is a corporation. Brian Johnson is the president of DBJ. Brian and his wife, along with his brother Blake Johnson and Blake's wife, are the shareholders in the corporation. Brian testified that all four of them jointly make decisions for DBJ.

2. Real Estate Sale Contract

In October 2010, Stitch and DBJ executed a real estate sale contract concerning real property in Dawson County and Phelps County, Nebraska. Pursuant to the contract, DBJ agreed to pay $1, 200, 000, including an earnest money deposit of $50, 000. DBJ agreed to deliver the balance of the purchase price at closing, upon delivery of a warranty deed and all other documents needed to properly transfer title. The contract provided that closing "shall occur on or about December 15, 2010."

The Dawson County property included farm ground and land that had previously been operated as a feedlot. The real estate sale contract included a provision that "Seller agrees [21 Neb.App. 331] to obtain a feedlot permit on Dawson County property and to assign permit to Purchaser by January 1, 2011." Testimony adduced at trial indicated that this language concerning a "feedlot permit" was included by Blake and the real estate broker; the real estate broker testified that he and Blake came up with the language "jointly."

3. Permit Transfer Forms and Correspondence

(a) Nebraska's Department of Environmental Quality Forms

The record includes information about the relevant forms from Nebraska's Department of Environmental Quality (hereinafter DEQ) necessary for an entity to obtain and/or transfer a permit relative to operation of a feedlot in Nebraska. The district court received a copy of title 130 of the Nebraska Administrative Code, implementing Nebraska's Livestock Waste Management Act. See Neb. Rev. Stat. § 54-2416 et seq. (Reissue 2010 & Cum. Supp. 2012). See, also, Neb. Rev. Stat. § 81-1501 et seq. (Reissue 2008 & Cum. Supp. 2012). The court noted that title 130 identifies several permits which have application to feedlots, including a "construction and operating permit" and a "National Pollutant Discharge Elimination System" permit (pollution permit).

Applicants for permits are required to complete a form C applicant disclosure (Form C applicant disclosure) document. See, 130 Neb. Admin. Code, ch. 4, § 001.03 (2008); Neb. Admin. Code, ch. 5, § 003.03 (2008). A party possessing a DEQ permit may apply to have that permit transferred to another party by submitting a completed form D transfer request (Form D transfer request) document. See 130 Neb. Admin. Code, ch. 6, § 003.01 (2008).

(b) Forms Sent to DBJ From Stitch

Phil testified that after the real estate sale contract was executed, he began taking steps to deal with the "feedlot permit" provision of the contract. Stitch hired an environmental consultant to assist in obtaining and transferring the necessary permit. The evidence adduced at trial indicates that a variety [21 Neb.App. 332] of proposed transfers, "demands" for completion of transfer forms, and other correspondence were exchanged between the parties.

(i) Proposed Transfer to Daron Huyser

Phil testified that he understood that DBJ intended to immediately resell the Dawson County property to another party, Daron Huyser. Phil testified that he understood that DBJ wanted the permit transferred in Huyser's name.

On December 23, 2010, the real estate broker e-mailed DBJ's counsel and forwarded a Form D transfer request, indicating a proposal to transfer a permit from Triple 7 to Huyser. On the form, the box next to "Construction and Operating Permit" was checked, the current owner or operator was listed as Triple 7, and the name of the proposed owner or operator was listed as "Huyser Cattle Co." Huyser declined to sign any such form.

(ii) First "Demand" by Stitch

On January 5, 2011, Stitch's counsel sent a letter, a Form C applicant disclosure, and a Form D transfer request to DBJ's counsel. In the letter, Stitch's counsel requested that DBJ sign the forms and return them by January 10. The Form C applicant disclosure listed the name of the animal feeding operation applying for a DEQ permit as DBJ. On the Form D transfer request, the box next to "Construction and Operating Permit" was checked, the current owner or operator was listed as Triple 7, and the name of the proposed owner or operator was listed as DBJ. The form included a line for the date of the "[c]urrent" permit to be transferred, but that line was left blank. The Form D transfer request also included the certification that the applicant (DBJ) had "personally examined and [was] familiar with the permit(s) or construction approval for [the] animal feeding operation." DBJ did not sign and return the forms.

Blake testified that DBJ did not sign the Form D transfer request for a variety of reasons. He testified that the real estate sale contract was with Stitch, not with Triple 7, but that the [21 Neb.App. 333] Form D transfer request was from Triple 7. He testified that the form also did not indicate any date of a current permit to be transferred, "so [DBJ] had no idea which permit it was or if [Stitch] even had a permit." Finally, the form was not signed by the purported transferor. He also testified that the certification on the form required him ...


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