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Walters v. Sporer

Supreme Court of Nebraska

December 29, 2017

John D. Walters, appellant,
Melanie Griffith Sporer and Jay A. Sporer, Trustees of the Revocable Inter Vivos Trust of Melanie Griffith dated December 5, 2000, and Douglas M. Lau and Debra L. Lau, HUSBAND AND WIFE, APPELLEES.

         1. Specific Performance: Equity: Appeal and Error. An action for specific performance sounds in equity, and on appeal, an appellate court tries factual questions de novo on the record and, as to questions of both fact and law, is obligated to reach a conclusion independent from the conclusion reached by the trial court.

         2. Deeds. The construction of language in a deed is a question of law.

         3. Statutes. Statutory interpretation presents a question of law.

         4. Appeal and Error. On a question of law, an appellate court reaches a conclusion independently of the court below.

         5. Summary Judgment. Summary judgment is proper when the pleadings and evidence admitted at the hearing disclose no genuine issue regarding any material fact or the ultimate inferences that may be drawn from those facts and that the moving party is entitled to judgment as a matter of law.

         6. Summary Judgment: Appeal and Error. In reviewing a summary judgment, an appellate court views the evidence in the light most favorable to the party against whom the judgment is granted and gives such party the benefit of all reasonable inferences deducible from the evidence.

         7. Property: Options to Buy or Sell: Words and Phrases. Generally, a right of first refusal, or a preemptive right, is a right to elect to take specified property at the same price and on the same terms and conditions as those contained in a good faith offer by a third person if the owner manifests a willingness to accept the offer; essentially a dormant option, a right of first refusal is merely contingent until the condition [298 Neb. 537]precedent is met, at which point the preemptive right ripens into a full option.

         8. Property: Options to Buy or Sell. While a right of first refusal has no binding effect before it has ripened, upon doing so, it legally constrains an owner's right to sell his property by compelling him to offer it first to the party who holds the right of first refusal.

         9. Options to Buy or Sell: Specific Performance: Proof. A right of first refusal may be enforced by specific performance where it can be proved that the condition triggering the right has occurred and the option holder was ready, able, and willing to buy during the period.

         10. Property: Options to Buy or Sell. A right of first refusal is a nonvested property interest.

         11. Property: Conveyances: Words and Phrases. The purpose of a reservation is to reserve to the grantor something new out of that which is conveyed and which did not exist before as an independent right.

         12. ___: ___: ___. A reservation is always something taken back out of that which is demised; accordingly, a reservation is a regranting of an interest in the property from the grantee to the grantor.

         13. ___: ___: ___. Whether a provision is a reservation or an exception does not depend upon the use of a particular word, but upon the character and effect of the provision itself.

         14. Deeds. The grantor of a deed may reserve any nonpossessory interest in the land that he could not have held separate from his ownership interest.

         15. Property: Conveyances: Fraud. A reservation is subject to the statute of frauds.

         16. Deeds: Parties. The general rule is that the grantee of a deed accepted by him is a party to the deed, even though he does not sign it, and that he is concluded by recitals in the deed and by reservations contained therein in favor of the grantor.

         17. Fraud: Equity. The statute of frauds is based on principles of equity, in particular, recognition that the purpose of the statute of frauds is to prevent frauds, not to enable a party to perpetrate a fraud by using the statute as a sword rather than a shield.

         18. Deeds. The acceptance of a deed operates to satisfy the requirement, under Neb. Rev. Stat. § 36-103 (Reissue 2016), that a contract creating an interest in land be signed by the party to be charged therewith.

         19. Deeds: Fraud. In the absence of fraud, one who fails to read a deed cannot avoid the effect of accepting it.

         20. Appeal and Error. An appellate court will not consider an issue on appeal that was not presented to or passed upon by the trial court.

         21. ___. An appellate court is not obligated to engage in an analysis that is not necessary to adjudicate the case and controversy before it.

         [298 Neb. 538] Appeal from the District Court for Hitchcock County: David Urbom, Judge. Reversed and remanded for further proceedings.

          George G. Vinton for appellant.

          John D. Stalnaker, of Stalnaker, Becker & Buresh, P.C., for appellees Melanie Griffith Sporer and Jay A. Sporer.

          Randy C. Fair, of Dudden & Fair, P.C., L.L.O., for appellees Douglas M. Lau and Debra L. Lau.

          Wright, Miller-Lerman, Cassel, Kelch, and Funke, JJ.

          FUNKE, J.

         This is an action by appellant John D. Walters (John) to enforce a right of first refusal set forth in a 1998 warranty deed, by which he and his then-spouse (the Walterses) conveyed real property to appellees Douglas M. Lau and Debra L. Lau. The Laus later sold the property to appellees Jay A. Sporer and Melanie Griffith Sporer by a warranty deed, in 2013, without giving John notice of the Sporers' offer.

         The court granted summary judgment for the Laus and the Sporers against John because it ruled that the language in the deed did not satisfy the statute of frauds, Neb. Rev. Stat. § 36-105 (Reissue 2016), and there was no other written agreement signed by the Laus. We hold that a right of first refusal in a deed is an enforceable agreement under the statute of frauds upon the acceptance of the deed. Therefore, we reverse the judgment and remand the cause for further proceedings consistent with this opinion.

         I. BACKGROUND

         In 1998, the Laus began looking for a wooded acreage to establish a home. Eventually, the Laus entered into negotiations with John to purchase approximately 8 acres of land and for the Walterses to finance the purchase. Subsequently, John and the Laus met with an attorney, chosen by John, to draft the sale documents.

         [298 Neb. 539] John testified that the attorney represented both him and the Laus because he never spoke with the attorney alone, only with the Laus. The Laus stated that they agreed to use John's attorney because Debra Lau knew him but that the attorney did not represent them. The attorney testified that John had been a client of his prior to the transaction, and he stated that he had no documents indicating that the Laus were his clients or that he jointly represented those parties.

         John stated that he and the Laus met with the attorney three times: The first time, the attorney gave them general instructions; the second time, they discussed the terms; and the third time was the closing.

         In addition, John stated that he and the Laus had discussed and orally agreed to the right of first refusal before meeting with the attorney and that it was brought up at the second meeting with the attorney. John testified that he remembered asking at the meeting if they needed the right of first refusal in a separate document but that the attorney said it could just be included in the deed.

         John stated that he wanted the right of first refusal for several reasons, including the following: He was not trying to sell the property at that time, but was willing to sell it to the Laus because they were friends; he could have extended a pivot on his abutting property to the east to irrigate a portion of the land; he had an oil well abutting the property; and there was a road on the land that he used to access his adjacent land. He testified that he would not have sold the property without the right of first refusal.

         Debra Lau also believed the parties met three times. She stated she recalled that during the first two meetings, the discussion included the price per acre, the interest rate for the deed of trust, how payments would be made, an option for the Laus to purchase an additional 5.7 acres, and the paperwork needed for the sale. She admitted that it would be difficult to remember everything from the meetings, however. She stated that during closing, she read only the documents that she signed.

         [298 Neb. 540] Douglas Lau remembered the Laus' having met with the attorney only once before closing. He stated that they told the attorney everything they wanted at the first meeting. He said that the Laus had few requests and accepted John's first offer for price because they needed the land and were not in a position to barter. He testified that he did not remember discussing a right of first refusal with John. However, he testified that he would have had no objection to granting John a right of first refusal.

         The Laus both testified that they believed paragraph 11 of the deed of trust was a right of first refusal and that it was the exclusive statement on the issue. Paragraph 11 of the deed of trust effectively contains a "due on sale" clause: "Should Trustors desire to sell or encumber the subject premises or any part thereof, they shall forthwith obtain the consent of Beneficiary to such sale or encumbrance while any sums remain due on the Note secured by this Trust Deed." If the Laus violated this provision, the Walterses had the right to demand immediate payment of the balance owed and pursue any remedies provided under the deed.

         The Laus both stated that they believed their right of first refusal obligation ended once the deed of trust was paid. Debra Lau also stated that this was discussed at the second meeting with the attorney and that she remembered saying that as long as they owed John money on the property, it was not an unreasonable request.

         The attorney stated that he did meet with the parties and had discussions with them but that he had no recollection of the specific contents of any conversations he had with the Laus, including whether or not he discussed the right of first refusal with them. He believed that he purposefully included the right of first refusal in the deed, because it was the only time he could recall including such a right in a deed. The attorney also testified that it would have been routine for him to discuss all of the documents in a real estate transaction with the parties, as well as any nonstandard provisions. He believed the absence of a separate document for the right [298 Neb. 541] of first refusal was probably a result of the parties' desire to save expenses.

         On September 15, 1998, the Walterses conveyed the 8-acre tract of land to the Laus by a joint tenancy warranty deed. At closing, the parties also executed a promissory note and trust deed for the Walterses to finance the Laus purchase of the property; a grant of a right of use, providing the Laus an easement over other property owned by the Walterses for ingress and egress; an option contract for a 5.7-acre section of land, which was surrounded on three sides by the 8-acre section the Laus had purchased; and other documents related to the transaction. John testified that the Laus also granted him an oral easement to use their driveway to access his adjacent land to the east.

         The warranty deed included a reservation of mineral rights, as well as, the right of first refusal. In regard to the right of first refusal, the deed contained the following provision: "No sale of the above-described premises shall be consummated without giving at least 30 days written notice of the terms to Grantor. Grantor shall have the right to buy the lot on the same terms.''

         The day after closing, Debra Lau, at the attorney's direction, went to the courthouse to sign the "Form 521" "Real Estate Transfer Statement." A Form 521 transfer statement sets forth information regarding the parties to the transaction, the type of property transferred, and the consideration paid.[1]Nebraska law requires that a deed will not be recorded unless the transfer statement is signed by the grantee and filed with the deed.[2]

         Debra Lau testified that she was not sure if the attorney told her why she needed to sign the transfer statement but that he might have said it was to get the deed recorded. She also testified that she did not recall discussing the form at closing.

         [298 Neb. 542] The attorney sent the Laus and the Walterses letters, dated 3 days after the closing, in which he enclosed all of the documents involved in the transaction-including copies of the joint tenancy warranty deed. He could not recall ever hearing from the Laus again after sending the letters.

         Douglas Lau stated that he read the deed when he received it in the mail a couple of weeks after closing. He stated that he believed the right of first refusal in the warranty deed was between the Walterses and had nothing to do with the Laus. He explained that he believed it was an attempt by John to protect himself in future divorce proceedings. He testified that this was his own belief and not based on any representations made by John.

         Debra Lau testified that she remembered receiving the documents in the mail after closing but did not feel the need to read any of them because she had just signed them. She stated that she did not read the deed until she received notice of this litigation.

         In 2003, the Laus exercised their option to purchase the 5.7-acre tract, which John conveyed to them by a joint tenancy warranty deed. In 2007, the Laus finished paying John on the promissory note, and, upon their request, the Walterses executed a deed of reconveyance to them.

         Around 2013, the Laus decided to sell the approximately 13-acre tract of land with their trailer home. In order to do so, Debra Lau contacted a real estate agent and showed him the Laus' transaction documents for the property, including the warranty deed.

         When the Laus listed their property, they did not inform the Walterses, but their agent told them that he would mention the listing to John. John testified that the agent told him that the Laus had listed the property and their trailer home for $75, 000. John told the agent that he was interested in the land, but not the trailer home. Later, the agent told John that the Laus might be interested in selling just the property. On both occasions, John told the agent to keep him informed but [298 Neb. 543] did not mention his right of first refusal. John said he did not call the Laus about the property listing because they were not speaking.

         The Sporers owned an adjacent acreage west of the Laus:property, and Douglas Lau called Jay Sporer to see if he was interested in purchasing the Laus' property. Douglas Lau did not mention the Walterses' right of first refusal. The Laus entered a purchase agreement with Jay Sporer but neither the purchase agreement nor the Laus' affidavit regarding debts, liens, and adverse claims to the property mentioned the Walterses' right of first refusal. In 2013, the Laus conveyed the property to the Sporers, as trustees of Melanie Griffith's revocable inter vivos trust, by warranty deed, which was recorded that year.

         In 2014, John's then-spouse assigned her entire interest in the right of first refusal to John, which he recorded.

         John filed suit in February 2014, alleging that he had reserved a right of first refusal in the warranty deed. He claimed that each acre of land conveyed from the Laus to the Sporers is of equal value; accordingly, because the total price of the approximately 13 acres was about $27, 000, he valued the 8 acres of land from the 1998 transaction at $16, 615.36. He prayed for an order that (1) required the Sporers to convey the property to him after he paid them that amount and (2) quieted title to the property in him.

         In their amended answer, the Sporers denied that (1) the warranty deed reflected the Laus' agreement with John, (2) the Laus had agreed to grant the Walterses an indefinite and unlimited right of first refusal, (3) John had any right of first refusal, (4) the Laus were required to give John notice of the 2013 sale to the Sporers, and (5) the 8 acres all had equal value. They alleged that the right of first refusal, to the extent it existed, had expired under the terms of the trust deed. Alternatively, they alleged that there was no meeting of the minds between the Laus and the Walterses regarding the alleged right or that a mistake had been made in drafting the [298 Neb. 544] warranty deed to include this right when the parties had not agreed to it.

         For an affirmative defense, the Sporers alleged that John's "[c]omplaint should be barred, in full or in part, due to its failure to comply with Neb. Rev. Stat. §76-301, et seq., providing for the reimbursement of an occupant for improvements made and taxes paid." Finally, they alleged that John's complaint was barred, in whole or in part, by the doctrines of unclean hands, unjust enrichment, estoppel, waiver, or laches.

         In April 2015, the Sporers filed a cross-claim against the Laus. They sought an order that the Laus had breached the 2013 warranty deed that conveyed the property to the ...

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