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Knorr v. Norberg

Supreme Court of North Dakota

April 9, 2014

Robert D. Knorr and Cheri Knorr, Plaintiffs and Appellees
v.
Jon Norberg and Alonna Norberg, Defendants Jon Norberg, Appellant

As Amended April 9, 2014.

Appeal from the District Court of McLean County, South Central Judicial District, the Honorable Thomas J. Schneider, Judge.

Sheldon A. Smith (argued) and David J. Smith (on brief), Bismarck, N.D., for plaintiffs and appellees.

James R. Bullis (argued) and Michael S. Montgomery (on brief), Fargo, N.D., for appellant.

Carol Ronning Kapsner, Daniel J. Crothers, Dale V. Sandstrom, David W. Nelson, D.J., Gerald W. VandeWalle, C.J. The Honorable David W. Nelson, D.J., sitting in place of McEvers, J., disqualified.

OPINION

Page 920

Kapsner, Justice.

[¶1] Jon Norberg appeals from a judgment allowing Robert and Cheri Knorr to buy back certain McLean County real property under an oral agreement. We conclude the district court erred in holding partial performance of an oral lease agreement with an alleged option to purchase removed the oral agreement from the statute of frauds. We reverse and remand for the court to consider the Knorrs' alternative theories of recovery based on equitable principles of promissory estoppel and constructive trust.

I

[¶2] In 2004, Robert and Cheri Knorr bought a lot and built a home on Lake Audubon. They intended to live at the lake home after retirement and had it built handicapped accessible to accommodate Cheri Knorr's worsening Parkinson's disease. Because of the Knorrs' successful farming operations and real estate investments in North Dakota and Arizona, they owned the lake home debt free.

[¶3] When the national real estate market soured in the late 2000s, the Knorrs had to mortgage the lake property and other property to satisfy loan commitments. Their financial difficulties continued, however, and they were unable to make the mortgage loan payments on the property, so they turned to family members for assistance. According to the Knorrs, family members agreed to help

Page 921

them by purchasing their homes in Arizona and North Dakota and leasing them to the Knorrs with an option to repurchase the homes. The Knorrs' eldest daughter and her husband purchased the Arizona home and leased the property to the Knorrs with an option to repurchase. The Knorrs' daughter, Alonna, and her husband, Jon Norberg, allegedly agreed in late 2010 to purchase the North Dakota lake home and lease it to the Knorrs with an option to repurchase.

[¶4] In February 2011, a lease agreement containing an option to purchase the lake home was executed by the Knorrs and sent to the Norbergs for their signatures. Alonna Norberg signed the agreement and claimed Jon Norberg did so as well, but that document has not been found. Jon Norberg claimed the lake home was leased to the Knorrs but no option to buy back the home was included in the transaction. After transferring the lake home to the Norbergs, the Knorrs continued to live in the home, made monthly payments to Jon Norberg for an amount equal to the Norbergs' mortgage payments, paid all real estate taxes on the property, maintained the property, and paid all utilities and other expenses associated with the property. In December 2011, the Knorrs gave notice to the Norbergs, who were then experiencing marital difficulties, that they were exercising the option to purchase the lake property. Jon Norberg refused to recognize the option.

[¶5] The Knorrs sued the Norbergs seeking an order that they comply with the option agreement or that they are entitled to buy back the property under equitable principles of promissory estoppel and constructive trust. Alonna Norberg answered and filed a cross-claim against Jon Norberg for reimbursement and indemnity should the Knorrs recover against her. Jon Norberg claimed in his answer that the alleged oral option agreement was barred by the statute of frauds.

[¶6] Following a bench trial, the district court ruled " there is clear and unequivocal evidence of an oral option agreement and of partial performance under that agreement to remove the contract from the Statute of Frauds and compel specific performance of the option agreement." The court ordered that the Knorrs be allowed to buy back the lake home " in accordance with the oral terms of their agreement." The court dismissed the cross-claim and did not address the equitable theories of recovery advanced by the Knorrs.

II

[¶7] Jon Norberg argues the district court erred in ruling the alleged oral option agreement is enforceable under ...


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