Herman Kauk, Jr. and Christy Kauk, Plaintiffs and Appellees
Herman Kauk, Sr. and Cletis Kauk, Defendants and Appellants
from the District Court of McIntosh County, Southeast
Judicial District, the Honorable Daniel D. Narum, Judge.
E. DePuydt, Wishek, ND, for plaintiffs and appellees.
T. Ottmar, Jamestown, ND, for defendants and appellants.
1] Herman Kauk, Sr. and Cletis Kauk appeal from a district
court order granting Herman Kauk, Jr. and Christy Kauk
declaratory relief and declaring the issue of reformation not
res judicata. Herman Kauk, Sr. and Cletis Kauk also appeal
from a district court order to clarify the purchase price.
Concluding the district court abused its discretion by
granting declaratory relief, we reverse the district
court's orders and remand for entry of an order of
2] Herman Kauk, Sr. and Cletis Kauk ("Sellers")
contracted to sell land in McIntosh County to Herman Kauk,
Jr. and Christy Kauk ("Buyers") on August 22, 2013.
This agreement ("Contract 1") provided the Buyers
would pay the Sellers a purchase price of $240, 000.00 on or
before December 15, 2013. The property sold is known to the
parties as "Walter's Quarter." Contract 1
contained this paragraph:
5. Option to Purchase Additional Land. For and in
consideration of love and affection and the buyers purchasing
the above described real property, sellers hereby grant unto
buyers, from and after, January 1, 2015, a first option to
purchase the Northeast Quarter (NE1/4) of Section
Twenty-eight (28), Township One Hundred Thirty-three (133)
North, Range Seventy (70), West of the 5th P.M. in McIntosh
County, North Dakota, during the life time of Herman Kauk Sr.
at a purchase price as may be mutually agreed upon by sellers
and buyers, and if said option should not be exercised during
the life time of Herman Kauk, Sr., sellers grant unto buyers
a first option to purchase said real property at its
appraised market value which option may be exercised by
buyers at any time for one year following Herman Kauk
property in the option is known to the parties as
"Katie's Quarter." All the parties signed this
document. After executing this contract, the Buyers realized
they would be unable to obtain financing for the purchase
before the closing date of December 15, 2013. The Buyers
informed the Sellers of this. The parties met and the Buyers
presented the Sellers with a document entitled "Amended
Purchase Agreement With Option to Purchase Additional
Land." This document ("Amended Agreement")
contained all the same terms, but had a new closing date of
November 15, 2014. This document and Contract 1 were drafted
by an attorney hired by the Buyers. According to testimony,
the Sellers refused to sign the Amended Agreement because
they did not want the paragraph containing the option in the
3] The Buyers had their attorney draft a new version. This
version was entitled "Extension of Purchase
Agreement" and specified the new closing date of
November 15, 2014 in paragraph 1, and removed a paragraph
which in Contract 1and in the Amended Agreement had contained
the language granting an option. The parties signed this
final contract ("Contract 2") on December 12, 2013.
The Buyers eventually closed on "Walter's
Quarter" June 26, 2014. The Sellers subsequently sent
the Buyers a letter entitled "Notice of Cancellation of
Option to Purchase Additional Land" on August 28, 2014.
The Sellers executed a Notice of Contract for Deed with the
county recorder naming a third party as grantee of the option
property. The Notice of Contract for Deed was recorded and is
dated June 26, 2015.
4] The Buyers filed a complaint on August 10, 2015 requesting
a declaratory judgment that the option to purchase
"Katie's Quarter" was still valid. The Sellers
answered, pleading affirmative defenses which included:
Contract 1 has an option to purchase land which is not owned
by the Sellers; Contract 2 amended and removed the option
from Contract 1; alternatively, if the district court were to
find Contract 2 was an "extension" of Contract 1,
the option was not supported by valid consideration. The
district court held a bench trial on February 23, 2016. Both
Buyers and Sellers testified at trial. At trial, both parties
acknowledged Contract 1 contained the incorrect legal
description for the land in the option paragraph,
"Katie's Quarter." The "Notice of
Cancellation of Option to Purchase Additional Land"
letter contained the same legal description appearing in
Contract 1. However, the Notice of Contract for Deed
contained the apparently correct legal description for
"Katie's Quarter." The district court took the
matter under advisement and asked the parties to file written
closing arguments. The parties filed final arguments and
5] The district court entered an order on March 31, 2016. The
district court found the option was enforceable because it
was supported by adequate consideration and nothing in
Contract 2 revoked the option appearing in Contract 1. The
court indicated it was clear "Katie's Quarter"
was incorrectly identified in the contract. The court
When, as here, there is a mutual mistake between the parties
and the "written contract does not truly express the
intention of the parties, it may be revised on the
application of a party aggrieved so as to express that
intention so far as it can be done without prejudice to
rights acquired by third persons in good faith and for
value." N.D.C.C. § 32-04-17.
court noted neither party plead reformation of the agreement.
The court stated evidence presented at trial indicated the
"correct quarter of land is now subject to a contract
for deed." The court also noted no evidence was
presented to enable the court to make a determination on
"whether the non-party [grantee] acquired an interest in
the real property in good faith for value." The court
refused to rule on the issue and declared the issue "not
res judicata for future action." On April 12, 2016, the
Buyers filed a request for clarification with the district
court asking for clarification on the purchase price of the
option land. The district court entered an order to clarify
on May 18, 2016 stating the ...