Opinion
No. COA03-352
Filed April 20, 2004 This case not for publication
Appeal by defendant from judgment entered 22 October 2002 by Judge Monica M. Bousman in District Court, Wake County. Heard in the Court of Appeals 14 January 2004.
Smith Debnam Narron Wyche Saintsing Myers, LLP, by W. Thurston Debnam, Jr., for plaintiff-appellee. Murchison, Taylor Gibson, PLLC, by Andrew K. McVey, for defendant-appellant.
Wake County No. 02 CVD 5893.
Jagat R. Parikh (plaintiff) and Entrepreneur, Inc. (defendant) entered into an Agreement for Purchase of Assets (Agreement) on or about 28 June 2001. The Agreement, drafted by counsel for defendant, concerned the sale by defendant and purchase by plaintiff of certain real property and associated assets located in Wake County, North Carolina. Pursuant to paragraph 2(a) of the Agreement, plaintiff paid defendant an earnest money deposit of $10,000 (deposit). Paragraph 14 of the Agreement stipulates that if plaintiff were to default in [his] obligations hereunder or otherwise fail or refuse to take title to the Assets as required by this Agreement except as permitted hereunder, Sellers shall be entitled to retain as liquidated damages the Deposit and shall also be entitled to pursue any other rights or remedies available to Sellers for such breach.
However, paragraph 9(a) of the Agreement, titled "Condition to Buyers' Performance," provides that the obligation of the buyer to purchase is "expressly subject to the satisfaction" of the condition that prior to or at closing
(a) [plaintiff] shall have obtained a binding commitment for financing of the purchase of the Assets in the amount of $380,000.00 on terms and conditions reasonably acceptable to [plaintiff] (the "Financing Commitment"). [Plaintiff] agree[s] to use good faith, diligent efforts to obtain the Financing Commitment in a timely manner. Notwithstanding anything herein to the contrary, in the event [plaintiff] ha[s] not notified Sellers of [plaintiff's] failure to satisfy the condition described in this Paragraph 9(a) prior to July 20, 2001, then [plaintiff] shall be deemed to have waived such condition and shall be obligated to close on the purchase of the Assets notwithstanding any failure to obtain the Financing Commitment.
Plaintiff obtained two letters from Crescent State Bank (Crescent), the first dated 29 June 2001, and the second, 10 July 2001, in which Crescent stated its intent to loan plaintiff the funds necessary for the purpose of purchasing the property subject to the Agreement. In each letter, Crescent expressly conditioned its commitment on the plaintiff's ability to obtain a satisfactory "comprehensive Phase I environmental survey assessing the presence of hazardous or toxic wastes or substances, PCBs or storage tanks on the Property, and other material environmental matters[.]" The determination as to whether the survey was satisfactory was left to the discretion of Crescent. Plaintiff notified defendant of the commitment letters and furnished defendant with a copy of the letter dated 29 June 2001. Plaintiff did not deliver a copy of the letter dated 10 July 2001 to the defendant because it was more detailed as to the terms of the loan agreement and plaintiff did not wish to disclose that "his house was being taken and what rate he was getting and things like that[.]"
Both plaintiff and defendant were aware of the potential presence of environmental contamination on the property. Defendant agreed to indemnify plaintiff to an extent stipulated in paragraph thirteen of the Agreement and in a supplemental Indemnity Agreement.
The Phase I environmental survey (survey) of the real property, performed on 20 July 2001, stated that there were "recognized environmental concerns" relating to petroleum products stored on the property. The indication was that petroleum products had impacted the soil and groundwater of the real property as well as adjacent property and that at least one release of petroleum products had occurred during defendant's ownership. As a result of the survey, Crescent declined to loan plaintiff the necessary funds to complete the transaction. After Crescent's refusal, plaintiff pursued financing from Paragon National Bank (Paragon). Paragon also refused to close the loan due to the results of the survey.
Plaintiff was unable to obtain financing for the purchase of the real property and thereafter requested that defendant return plaintiff's earnest money deposit. Defendant denied plaintiff's request, maintaining that defendant was entitled to keep the funds as liquidated damages due to plaintiff's failure to comply with paragraph 9(a). In response, plaintiff filed suit in order to recover the earnest money deposit. In a judgment filed on 22 October 2002, the trial court ordered defendant to pay plaintiff $10,000 plus interest from 6 May 2002 at a rate of eight percent per annum until paid in full. In addition, defendant was taxed with costs in the action. Defendant appeals.
We note that defendant has failed to comply with the North Carolina Rules of Appellate Procedure. "The Rules of Appellate Procedure are mandatory and failure to follow the rules subjects an appeal to dismissal." Wiseman v. Wiseman, 68 N.C. App. 252, 255, 314 S.E.2d 566, 567-68 (1984). Defendant failed to cite to any assignment of error in the argument portion of its brief in violation of N.C.R. App. P. 28(b)(6). In addition, defendant did not include in its brief a statement of the grounds for appellate review as required by N.C.R. App. P. 28(b)(4). Nonetheless, pursuant to N.C.R. App. P. 2, this Court, in its discretion, will review the merits of defendant's argument.
Defendant contends that the trial court's findings of fact were not supported by sufficient evidence. The appellate standard of review in a case where a trial court sits without a jury is "whether competent evidence exists to support its findings of fact and whether the conclusions reached were proper in light of the findings." Walker v. First Federal Savings and Loan, 93 N.C. App. 528, 532, 378 S.E.2d 583, 585, disc. review denied, 325 N.C. 230, 381 S.E.2d 791 (1989). Defendant generally argues that the trial court's judgment was inconsistent with the intentions of defendant and plaintiff as expressed in the Agreement. Defendant contends the Agreement did not require plaintiff to provide defendant with notice that plaintiff had obtained a commitment letter regarding financing, but rather that plaintiff was obliged to notify defendant by 20 July 2001 of his inability to obtain such a commitment letter and should plaintiff fail to do so, he would be deemed to have waived the condition and would be bound to close on the purchase of the real property. Defendant also maintains that obtaining financing was not a condition of the Agreement.
In an action involving a contract, this Court has held that
the intention of the parties to the contract must be determined from the language of the contract, the purpose and subject matter of the contract and the situation of the parties. When the language of the contract is clear and unambiguous, construction of the agreement is a matter of law for the court.
Piedmont Bank Trust Co. v. Stevenson, 79 N.C. App. 236, 240, 339 S.E.2d 49, 52, aff'd, 317 N.C. 330, 344 S.E.2d 788 (1986). General rules of construction direct that words be given their usual and ordinary meaning and a contract is "to be construed against the party drafting the agreement." Id. at 242, 339 S.E.2d at 52. Furthermore, "[i]t is the province of the courts to construe and not to make contracts for the parties." Taylor v. Gibbs, 268 N.C. 363, 365, 150 S.E.2d 506, 507 (1966).
The dispute in this case deals with the meaning of paragraph 9(a) and whether plaintiff failed to comply with his obligation under that provision, entitling defendant to retain the earnest money for plaintiff's default, as provided in paragraph 14. Paragraph 9(a) is titled "Condition to Buyers' Performance" and states that plaintiff is required to obtain a "binding commitment" for financing . . . on terms and conditions reasonably acceptable" to plaintiff. Paragraph 9(a) also indicates that should plaintiff fail to notify defendant by 20 July 2001 of plaintiff's inability to obtain a "binding commitment," plaintiff will be "obligated to close on the purchase of the Assets notwithstanding any failure to obtain the Financing Commitment."
Plaintiff submitted Crescent's commitment letter dated 29 June 2001 to defendant before 20 July 2001 in order to show defendant that plaintiff had established a commitment for financing. Furthermore, plaintiff obtained the more detailed second commitment letter, dated 10 July 2001, prior to 20 July 2001. The second commitment letter set forth the material terms of the loan, including the amount to be loaned, interest rate and repayment terms. Crescent ultimately refused to proceed with financing due to the results of the survey, which were not known until after 20 July 2001. If the survey had been satisfactory to Crescent, it would have been obligated to proceed with the financing if all other conditions set forth in the commitment letters had been met. This Court focuses particularly on the phrasing of paragraph 9(a) and after a careful reading of the provision, we conclude that plaintiff did not default and therefore is entitled to the return of his earnest money. Defendant asserts that plaintiff's ability to obtain financing was simply not a condition provided for by the Agreement. That statement is contradicted by the inclusion of paragraph 9(a) in the Agreement, which was drafted by defendant. If defendant was correct in its assertion, then paragraph 9(a) would be rendered meaningless.
According to our reading of paragraph 9(a), plaintiff would have been in default under the Agreement if he failed to notify defendant by 20 July 2001 of his inability to obtain a binding commitment letter. Contrary to defendant's interpretation of the provision, the letters from Crescent were sufficient to meet plaintiff's obligation under paragraph 9(a) despite the inclusion of the condition regarding the environmental survey and thus, plaintiff met the condition explicit in paragraph 9(a) by obtaining the letters from Crescent by the specified date. In Crescent's 10 July 2001 letter to plaintiff, Crescent explicitly denotes that it is "pleased to make available . . . this commitment for a loan in the amount of Four Hundred Thirty Thousand Dollars ($430,000.00) . . . for [the] purpose of [the] purchase of [the property located at 421 East Chatham Street]." (emphasis added). By all indications, Crescent would have been required to make the loan to plaintiff had the outcome of the environmental survey not presented an insurmountable hurdle.
Defendant also argues that the parties bargained for paragraph 13 in which defendant agreed to indemnify plaintiff regarding certain environmental matters relating to the property and therefore it was not reasonable for plaintiff to accept financing conditioned on a satisfactory survey. However, paragraph 13 is not relevant to our review of whether plaintiff defaulted pursuant to paragraph 9(a). As drafted by defendant, paragraph 9(a) provides that the commitment letter obtained by plaintiff may be subject to terms and conditions reasonably acceptable to plaintiff. The environmental survey required by Crescent was reasonably acceptable to plaintiff since plaintiff could not acquire financing without accepting such a provision.
The trial court found that plaintiff notified defendant of the first commitment letter from Crescent on or about 29 June 2001 and that ultimately Crescent refused to fund the loan due to the results of the survey. The trial court concluded that plaintiff had complied with his obligation under paragraph 9(a) and he was entitled to the return of his deposit. We affirm the judgment of the trial court.
Affirmed.
Judges HUNTER and GEER concur.