Opinion
Case No. 118,381
05-12-2020
Thomas Marcum, BURRAGE LAW FIRM, PLLC, Durant, Oklahoma, for Plaintiffs/Appellants Michael K. Avery, MCAFEE & TAFT, A PROFESSIONAL CORPORATION, Oklahoma City, Oklahoma, for Defendant/Appellee
Thomas Marcum, BURRAGE LAW FIRM, PLLC, Durant, Oklahoma, for Plaintiffs/Appellants
Michael K. Avery, MCAFEE & TAFT, A PROFESSIONAL CORPORATION, Oklahoma City, Oklahoma, for Defendant/Appellee
OPINION BY DEBORAH B. BARNES, PRESIDING JUDGE:
¶1 In this breach of contract action, Larry Davidson and Jane Davidson appeal from the trial court's grant of summary judgment to Pointe Vista Development, LLC. Based on our review of the summary judgment record and applicable law, we affirm.
BACKGROUND
¶2 The parties are largely in agreement about the material facts. The Davidsons lease certain property (subject lease) from the State of Oklahoma located in the Lake Texoma State Park area and upon which they previously operated a fun park. The record indicates the Davidsons' subject lease expires with Oklahoma on October 17, 2021. Pointe Vista contracted to purchase property owned by the State of Oklahoma through the Department of Tourism (Tourism) as part of a planned resort development and, as part of that planned development, agreed to purchase or contract to purchase certain leases owned by vendors, including the subject lease owned by the Davidsons. The property Pointe Vista sought to purchase from Tourism is referenced by the parties as the Leased Premises. In April 2008, Pointe Vista and the Davidsons and Tourism executed an "Agreement Concerning Concessionaire Agreement" (2008 Agreement) in which Pointe Vista agreed to purchase the subject lease from the Davidsons and the fun park and its assets (lease assets) under certain conditions. Paragraph (C)(1) of the 2008 Agreement states, in part, as follows:
Agreement to Assign the Lease and Transfer the Assets; Non Assumption of Liabilities. In exchange for a cash payment by [Pointe Vista] of $800,000 plus $2800.00 per month from Effective Date (as defined in Section 15 of this Agreement ) to Closing (the "Purchase Price") of which upon the Effective Date (a) subject to the provisions of paragraph 5, [Pointe Vista] will pay the
Paragraph (C)(15) provides: "Effective Date. The ‘Effective Date’ for purposes of this Agreement shall be the date on which the Tourism Agreement has been fully executed." Pursuant to paragraph B, the Tourism Agreement is an agreement entered into by Pointe Vista and the State "pursuant to which, among other things, [Pointe Vista] contracted to purchase the Leased Premises under the Lease." The Tourism Agreement was apparently executed the same day as the 2008 Agreement.
Paragraph (C)(5), entitled Default, provides:
If [Pointe Vista] or the Davidsons fail to perform any of their obligations under this Agreement owed to the other party, the nondefaulting party shall have all rights and remedies provided for in equity or law provided that such nondefaulting party shall give the defaulting party ten days notice and opportunity to cure such failure. If the Davidsons default, the Advance Payment of $40,000 and Earnest Money paid under paragraph [(C)(1)] as a nonrefundable advance payment will be converted into a refundable advance and immediately returned to [Pointe Vista].
Davidsons $40,000 which amount shall be a nonrefundable advance payment of a portion of the Purchase Price (the "Advance Payment"), and (b) [Pointe Vista] will place in escrow $40,000 (5% of the initial purchase price of $800,000 which is referred herein, as the "Earnest Money") .... At the Closing, the Davidsons shall upon payment of full purchase price ($800,000, less the Advance Payment and the Earnest Money, plus $2,800.00 per month from Effective Date to the Closing) assign all of their right, title and interest in and to the [subject lease and lease assets] ....
¶3 "Closing" is defined in the 2008 Agreement as follows:
The closing date of this contract (the "Closing Date") shall be prior to or in conjunction with the closing of the purchase of the land from Tourism by [Pointe Vista] as set out in paragraph B above. The parties acknowledge and agree that [Pointe Vista] may, in its sole discretion, elect to accelerate the purchase and sale contemplated hereby prior to the acquisition of the Leased Premises, in which case the [subject lease] shall be assigned and [the subject assets] transferred. Despite any representations to the contrary, the parties intend that this contract shall close on or before December 31, 2009. In the event [Pointe Vista] shall wrongfully fail to close on or before December 31, 2009, the parties agree that the Davidsons shall be entitled to terminate the contract and retain the Advance Payment and the Earnest Money as full and complete liquidated damages, not as a penalty. In the event, however, the closing under this contract has not occurred by December 31, 2009 as the closing on the acquisition of the Leased Premises contemplated by paragraph B above has not occurred by such date, other than on account of a wrongful refusal to close by [Pointe Vista], the parties agree that [Pointe Vista] may, at that time, elect to terminate this contract (in which event the Earnest Money shall be returned to [Pointe Vista] but the Davidsons may retain the Advance Payment as that payment is nonrefundable), or extend the Closing Date to a date not later than December 31, 2010. In the event of a failure of closure on or before December 31, 2010, the Davidsons shall be entitled to terminate this contract and retain the Advance Payment and the Earnest Money as full and complete liquidated damages, not as a penalty. At the Closing, the parties shall take such actions and deliver such documents as may be reasonabl[y] necessary to close the purchase and sale ....
¶4 Paragraph (C)(8) of the 2008 Agreement, entitled Notices, states: "All notices or other communications required or contemplated under [the 2008] Agreement shall be in writing and shall be deemed to have been given when" hand delivered, delivered by mail, or delivered by recognized overnight delivery service within designated periods.
¶5 Pointe Vista's acquisition of the Leased Premises took longer than contemplated. Thus, in August 2010, the parties executed an amendment (First Amendment) to the 2008 Agreement "to accommodate for such delays and to memorialize the parties' agreement with respect to certain payments to be made by [Pointe Vista] to the Davidsons in connection with this First Amendment and to otherwise amend the [2008] Agreement in certain other respects." In paragraph 1, entitled Consideration for Execution of the First Amendment; Termination by [Pointe Vista], the First Amendment provides:
In exchange for the execution of the First Amendment, (a) [Pointe Vista] authorizes the release of the Earnest Money from escrow, and (b) agrees to pay the Davidsons $2,800 per month commencing in January 2011, which payments shall continue so long as the [2008] Agreement, as amended by this First Amendment, remains in effect and shall be made on or before the tenth (10th) day of every month (collectively, the "Monthly Cash Payments"). At any time after December 31, 2010, [Pointe Vista] may elect to terminate the [2008] Agreement, as amended by this First Amendment, by giving notice of such election to the Davidsons, at which time
neither party shall have any further rights or obligations under the [2008] Agreement, as amended by the First Amendment, and the Davidsons shall be entitled to retain the Advance Payment, the Earnest Money and any Monthly Cash Payments made by [Pointe Vista] through the date of such termination.
¶6 In addition to other amendments of the 2008 Agreement, the First Amendment further provides that "[f]or purposes of this Agreement, the ‘Purchase Price’ shall be equal to $800,000 plus $85,243 (which represents $2,800 per month from June 18, 2008 through December 31, 2010) plus the sum of the Monthly Cash Payments payable though the Closing." The First Amendment further provides the amount of the Purchase Price at Closing would be equal to the Purchase Price less the Advance Payment of $40,000, the Earnest Money and Monthly Cash Payments made through Closing.
¶7 The First Amendment also amended "Closing" as follows: "[The Closing Date] shall be prior to or in conjunction with the closing of the purchase by [Pointe Vista] of the Leased Premises from Tourism as set out in paragraph B above. The Closing shall occur on any day designated by [Pointe Vista] on or after December 31, 2010 but prior to December 31, 2013 provided that [Pointe Vista] gives the Davidsons at least thirty (30) days advance notice of such Closing Date. ..." The First Amendment stipulated that except for the amendments made by the First Amendment, the "[2008] Agreement is in full force and effect according to its terms and conditions."
¶8 In January 2014, the parties executed another amendment (Second Amendment) to the 2008 Agreement as amended by the First Amendment, and the parties again expressly acknowledged their
desire to move back the Closing Date reflected in the [2008 Agreement as amended by the First Amendment] to accommodate for [delays in Pointe Vista's acquiring of title to the Leased Premises] and to memorialize the parties' agreement with respect to certain payments to be made by [Pointe Vista] to the Davidsons in connection with this Second Amendment and to otherwise amend the [2008 Agreement as amended by the First Amendment] in certain other respects.
The Second Amendment states that in consideration for execution of the Second Amendment Pointe Vista agrees to pay the Davidsons $2,800 per month beginning in January 2014 "which payments shall continue so long as the [2008 Agreement as amended by the First Amendment], as amended by this Second Amendment, remains in effect ... (which payments shall be ‘Monthly Cash Payments’ as defined in the First Amendment)." Similar to the consideration paragraph in the First Amendment, the Second Amendment provides:
At any time after the Second Amendment Effective Date, [Pointe Vista] may elect to terminate the [2008 Agreement as amended by the First Amendment], as amended by this Second Amendment, by giving notice of such election to the Davidsons, at which time neither party shall have any further rights or obligations under the [2008 Agreement as amended by the First Amendment] as amended by the Second Amendment, and the Davidsons shall be entitled to retain the Advance Payment, the Earnest Money and any Monthly Cash Payments made by [Pointe Vista] through the date of such termination.
¶9 As to Closing, the Second Amendment provides:
[The Closing Date] shall be prior to or in conjunction with the closing of the purchase by [Pointe Vista] of the Leased Premises from Tourism as set out in paragraph B above. The Closing shall occur on any day designated by [Pointe Vista] on or after December 31, 2013 but prior to December 31, 2016 provided that [Pointe Vista] gives the Davidsons at least thirty (30) days advance notice of such Closing Date. ...
The Second Amendment stipulated that except for the amendments made by the Second Amendment, the "[2008 Agreement as amended by the First Amendment] is in full force and effect according to its terms and conditions."
¶10 No amendment to the Notice provision of the 2008 Agreement was made in either the First Amendment or the Second Amendment and each contain the statement that except as amended, "the [2008] Agreement is in full force and effect according to its terms."
¶11 On September 5, 2018, the Davidsons filed their petition alleging Pointe Vista breached the terms of the 2008 Agreement as amended. The Davidsons allege Pointe Vista failed to close on or by December 31, 2016, pursuant to the Second Amendment, claim they have been damaged and request specific performance of the 2008 Agreement or, in the alternative, a judgment in an amount equal to the damages they sustained as a result of Pointe Vista's failure to close.
¶12 In its answer, Pointe Vista, among other denials, denies it is in breach of the contract because it did not close by December 31, 2016, and denies the Davidsons have suffered any damages. Among its alleged defenses, Pointe Vista alleges the 2008 Agreement as amended was "terminable at will by Pointe Vista and this precludes a judgment in favor of the Davidsons."
¶13 Pointe Vista moved for summary judgment. As to specific performance, Pointe Vista argues it is a well-established rule that equity will not require a party who has the absolute right to terminate a contract to specifically perform that contract: "Because Pointe Vista had the right to terminate the Agreement, the Davidsons ‘enjoy[ed] no legally enforceable right to performance’ by Pointe Vista." As to the Davidsons' alternative theory of recovery for damages for breach of contract, Pointe Vista argues that, again, this argument is unavailing because there can be no breach of contract where one has an absolute right to terminate the contract. Pointe Vista argues it can demonstrate it terminated the contract but it is not required to do so and whether it can demonstrate it terminated the contract does not change the analysis for purposes of summary judgment. It relies on the following reasoning:
According to the parties, Pointe Vista had previously filed a motion to dismiss, but the trial court denied the motion and gave the Davidsons an opportunity to conduct discovery. The only evidentiary materials attached to the summary judgment motion and the Davidsons' response, however, are the 2008 Agreement and the First Amendment and Second Amendment attached to Pointe Vista's motion.
We understand Pointe Vista to be referencing the 2008 Agreement as amended. The 2008 Agreement gave Pointe Vista the right to accelerate, but the right to terminate was qualified as stated in paragraph 4 (Closing). That section provides, in part, that Pointe Vista could terminate if it had not closed on the Leased Premises with Tourism, by the Closing Date of December 31, 2009, and if Pointe Vista had not wrongfully refused to close on the Leased Premises.
It is the settled rule that damages for the refusal to perform a contract which is terminable on specified conditions are limited to the amount which the defendant would have been required to pay upon an election to terminate. Since the contract here was terminable by either party without compensation to the other, the damage sustained by the plaintiff on account of the defendant's refusal to perform the contract amounted to nothing at all.
Chatham Plan, Inc. v. Clinton Trust Co. , 246 A.D. 498, 500, 286 N.Y.S. 179 (N.Y. App. Div. 1936) (citations omitted).
¶14 While Pointe Vista relies on its right to terminate and its ability, if needed, to show it did terminate the 2008 Agreement, the Davidsons argue Pointe Vista does not address the stipulation in the First Amendment and Second Amendment that it was required to give "notice of [its] election" to terminate. They further argue the default provision of the 2008 Agreement states that in the event either party "fail[s] to perform any of their obligations under this Agreement owed to the other party, the nondefaulting party shall have all rights and remedies provided for in equity or law ...."
The First Amendment made a change to the 2008 Agreement default provision, but not to the provision upon which the Davidsons rely.
¶15 The Davidsons rely on Osborn v. Commanche Cattle Industries, Inc. , 1975 OK CIV APP 67, 545 P.2d 827, in which the service contract between the parties "unquestionably permitted either party to terminate at any time ‘by giving thirty (30) days advance notice.’ " Id. ¶ 7. In that case, it was uncontroverted that formal notice had never been given by the defendant to the plaintiff, but the defendant argued notice was given because the plaintiff at some point acquired actual notice of termination. In holding "the trial court correctly concluded that the option to terminate was never exercised and that [the plaintiff] had a cause of action for total breach of contract," the Osborn Court reasoned:
When businessmen bargain for an option to terminate their contractual relationship, each is entitled to expect that the other will either perform or terminate exactly as agreed. They are entitled also to expect that they will be compensated for the breach of such a contractual obligation. Accordingly, the weight of authority is clearly to the effect that notice to terminate a contract must be in accordance with the contract's express terms. No particular form of notice is prescribed by the contract in the instant case but it clearly requires thirty days advance notice. At no time after the execution of the contract did [the defendant] give such advance notice.
Osborn , ¶ 8 (citation omitted). The Davidsons argue that in this case while no period of notice is provided, the failure to give that notice was a total breach of the 2008 Agreement and amendments and thus they are entitled to "all rights and remedies provided for in equity or law[.]"
¶16 A hearing on the motion was held at the conclusion of which the court announced its decision to grant summary judgment to Pointe Vista because "as a matter of law [the Davidsons] can't get anything greater than the contract would provide. And under the terms of the contract this Court finds that they can't force closing."
¶17 From the trial court's entry of its order granting summary judgment in favor of Pointe Vista, the Davidsons appeal.
STANDARD OF REVIEW
The appellate standard of review of a summary judgment is de novo. The evidentiary materials will be examined to determine what facts are material and whether there is a substantial controversy as to any material fact. All inferences and conclusions to be drawn from the materials must be viewed in a light most favorable to the nonmoving party. Even when the facts are not controverted, if reasonable persons may draw different conclusions from the facts summary judgment must be denied. Summary judgment is proper only if the record reveals uncontroverted material facts failing to support any legitimate inference in favor of the nonmoving party.
Tiger v. Verdigris Valley Elec. Coop. , 2016 OK 74, ¶ 13, 410 P.3d 1007 (citations omitted).
ANALYSIS
¶18 During the hearing on the motion, the parties more fully explained the basis of their legal arguments, particularly with respect to the Osborn Court's reasoning and its applicability to this case. The parties agree that the Osborn Court determined the defendant in that case was in breach of the parties' contract because while the contract was terminable at will, it required notice of termination and no such notice was given. The Court further held, however, that the plaintiff was only entitled to the damages he incurred during the thirty-day notice period, not the full three-year contract term because the contract was terminable at will.
¶19 The Osborn Court explained:
The courts of other jurisdictions are virtually unanimous in holding that breach of a contract terminable at any time upon notice entitles the aggrieved party to recover only those net profits which he could have earned during the notice period; he may not recover profits for the entire term of the contract.
The courts have advanced different reasons for so narrowly circumscribing the period of recovery. ... [Some] rely on the more persuasive reasoning ... that the plaintiff should not "by reason of the defendant's breach, acquire rights greater than those which the contract gave it." ... [T]he concern has been that a party to a contract terminable by either party upon notice is never assured of performance for any time longer than the period of notice for which he bargained.
The law of damages permits recovery of lost profits to protect the injured promisee's "expectation interest," his prospect of net gain from the contract. This interest is given legal protection to achieve the paramount objective of putting the promisee injured by the breach in the position in which he would have been had the contract been performed. But the protection of the promisee's expectation interest extends no further; he may not recover more than the
amount he might have gained by full performance. We think that the only legally protectable expectation interest in the party to a contract terminable by either party upon notice is the prospect of profit over the length of the notice period. Since his assurance of performance never extends beyond the length of the notice period neither does his prospect of net gain. And allowing him under such circumstances to recover the profit he purportedly could have gained over the maximum life of the contract would be contrary to the whole purpose of permitting recovery of lost profits.
1975 OK CIV APP 67, ¶¶ 11-13, 545 P.2d 827 (citations omitted).
¶20 As explained by the Oklahoma Supreme Court in Florafax International, Inc. v. GTE Market Resources Inc. , 1997 OK 7, 933 P.2d 282, the "sound" rule applied in Osborn was essentially the rule codified in 23 O.S. 1991 [now 2011] § 96 that "no person can recover a greater amount in damages for the breach of an obligation, than he could have gained by the full performance thereof on both sides[.]" 1997 OK 7, ¶¶ 34, 36, 933 P.2d 282. The Oklahoma Supreme Court explained the rule applied in Osborn
because full or complete performance under the contract could have been supplied by defendant simply giving the agreed-to notice and, therefore, plaintiff's expectation interest could have been no greater than the prospect of profit over the length of the notice period. In that plaintiff was never assured of performance by the breaching party beyond the length of the notice period his prospect of net gain, likewise, could never extend beyond this period of time. Plaintiff could not recover more than thirty (30) days lost profits because he could not recover more in profits than he might have made from full performance. In other words, in Osborn it was absolutely certain plaintiff could not establish lost profits for any greater period of time because the defendant had an absolute right to terminate the contract upon giving the agreed notice and exercise of this right would have provided full performance on the defendant's part.
Florafax , ¶ 36 (citation omitted).
¶21 Pointe Vista argues it did terminate the 2008 Agreement as amended but it offers no proof of what it did to terminate because, it argues, what it did to terminate is irrelevant; as a matter of law, it has the right to terminate at any time. Pointe Vista's argument is that it terminated the 2008 Agreement and that even if it did not give notice to the Davidsons of termination as required by the First Amendment and Second Amendment, it had an absolute right to terminate at any time. Thus, it argues, it is not in breach. It further argues, in effect, that even if it is in breach because it did not give notice of its intent to terminate, if it fully complied — that is, gave notice of its intent to terminate — the Davidsons have no expectation interest, no damages.
¶22 The Davidsons, on the other hand, argue the breach was Pointe Vista's failure to close on December 31, 2016, without having given them notice of its election to terminate the 2008 Agreement as amended. Thus on that date, when no closing occurred and no notice was given by Pointe Vista that it elected to terminate, they argue their full expectation interest of specific performance accrued and Pointe Vista's right to terminate ended. The Davidsons, thus, appear to argue that "termination" is something other than or different from "closing."
¶23 While the Davidsons' argument appears tenable, it overlooks another provision of the 2008 Agreement as amended that defeats their argument. For purposes of the summary judgment record, we must assume Pointe Vista did not give the Davidsons notice of its intention to elect to terminate and it did not close the purchase on December 31, 2016. We are, however, also provided no evidentiary materials from the Davidsons that they gave the required 10-day notice to Pointe Vista and "opportunity to cure" its "fail[ure] to perform any of [its] obligations under this Agreement[.]" They do not allege or argue that they gave such notice. Thus, contrary to the Davidsons' argument that their full expectation interest accrued once closing arrived and Pointe Vista did not close, that full expectation interest did not accrue until notice of the failed obligation and opportunity to cure occurred pursuant to the terms of the 2008 Agreement as amended. By the terms of the 2008 Agreement, Pointe Vista's right to terminate at any time was not automatically extinguished upon the occurrence of a failure to perform an obligation it owed to the Davidsons. By the terms of the 2008 Agreement, when Pointe Vista failed to give notice and the closing date arrived and Pointe Vista failed to close, the Davidsons had all the rights and remedies provided for in equity or law "provided" something else occurred.
2008 Agreement ¶ 5 (emphasis added).
We are not here concerned with the failure to give Pointe Vista notice as evidence of a breach of contract by the Davidsons; thus, we are not deciding a question of whether their breach is excused by Pointe Vista's breach. See, e.g., Anderson v. Pickering , 1975 OK CIV APP 42, ¶ 19, 541 P.2d 1361 ("The plaintiffs, having failed to perform the condition in the contract cannot now complain that the defendants breached. A party to a contract cannot put the other party in default by his own failure to perform. Padberg v. Rigney , [1950 OK 169, 204 Okla. 131] 227 P.2d 661."). The question is whether the 2008 Agreement as amended was still in effect on the date of closing and Pointe Vista's right to terminate and right to cure any failure of obligations it owed to the Davidsons were still in effect on that date.
¶24 Summary judgment was properly granted to Pointe Vista because the record reveals uncontroverted material facts that fail to support any legitimate inference in favor of the Davidsons. Tiger v. Verdigris Valley Elec. Coop. , 2016 OK 74, ¶ 13, 410 P.3d 1007. In our view, it would be unreasonable to infer the Davidsons were unaware of what Pointe Vista would do if it had been given such notice and the opportunity to cure. If the breach was Pointe Vista's failure to give notice of the intent to elect to terminate, it is unreasonable to infer it would not have cured the failure within its contract period to cure the failure by giving that notice. If the breach was its failure to close on a date certain without having given that notice of its election to terminate, as urged by the Davidsons, it is unreasonable to infer Pointe Vista would not have cured that failure within its contract period to cure the failure by exercising its right to give notice of its intent to terminate and thus not close. The 2008 Agreement as amended gave Pointe Vista the right to terminate "at any time"; nothing in the parties' agreement excludes the date of closing as coming within that time frame.
We also note and agree with the Davidsons' observation that Pointe Vista's failure to give notice of its election to terminate is factually distinguishable from the circumstances in Chatham , 246 A.D. 498, 286 N.Y.S. 179, a case upon which Pointe Vista relies. However, that factual difference leads to no different result. In Chatham , as quoted by Pointe Vista, the court reasoned:
The realist must at once feel, even if he does not see, that there is something wrong in such a paradox [the plaintiff's claim that the contract was repudiated and not terminated so rules governing terminable at will contracts did not apply], especially when it is considered that the consequences to the plaintiff of a refusal to recognize the contract were exactly the same as an election to terminate. The reasons for the defendant's refusal to perform are not important. What is important is that the defendant gave notice to the plaintiff that it would not undertake to act as trustee and that concededly it had that right. It is the settled rule that damages for the refusal to perform a contract which is terminable on specified conditions are limited to the amount which the defendant would have been required to pay upon an election to terminate . Since the contract here was terminable by either party without compensation to the other, the damage sustained by the plaintiff on account of the defendant's refusal to perform the contract amounted to nothing at all.
246 A.D. at 500, 286 N.Y.S. 179 (emphasis added) (citations omitted). "Where a contract is terminable at any time on notice and it is terminated without notice, the damages that the aggrieved party may recover are limited to the notice period." 25 C.J.S. Damages § 124 (footnotes omitted). Here, Pointe Vista's right to give notice to elect to terminate "at any time" continued through the closing date and its ability to fully perform — to give notice of the election — was not extinguished on the closing date.
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¶25 We are led to conclude that whether Pointe Vista failed to give notice to terminate or failed to close without having given notice to terminate, that as of the date of closing, Pointe Vista retained its right to terminate and the Davidsons' contract right was not enlarged to extinguish that right. As of that date, the Davidsons were not entitled to specific performance of the agreement or money damages for Pointe Vista's failure to close. Consequently, we conclude the trial court properly granted summary judgment to Pointe Vista.
CONCLUSION
¶26 For the reasons discussed herein, we conclude the trial court correctly determined that Pointe Vista was entitled to judgment as a matter of law because its right to terminate the contract at any time was not extinguished on the date of closing and while Pointe Vista did not give notice of termination, the Davidsons were not entitled to a right greater than that which the contract gave them had Pointe Vista given that notice. Accordingly, we affirm.
¶27 AFFIRMED .
RAPP, J., and FISCHER, J., concur.