Larson v. Burton Constr., Inc.
421 P.3d 538 (2018)
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Rule of Law:
In contracts for the sale of goods governed by the Uniform Commercial Code (UCC), sellers are held to a 'perfect tender' rule, requiring them to deliver goods that conform in all respects to the contract, and buyers may reject a non-conforming tender unless acting in bad faith.
Facts:
- In December 2015, Ken Burton, on behalf of Burton Construction, Inc., and Justin James Larson entered into a written contract for Larson to purchase a 2015 Skyline mobile home for $43,000.
- Larson's agent completed the form contract, which was designed for a used mobile home sale, despite both parties intending to convey a new mobile home; Larson signed it and delivered it with $500 earnest money.
- The Contract unambiguously required Burton, as the 'Owner,' to execute and deliver a Wyoming title at closing and stated that Larson 'shall be responsible for sales tax, if any.'
- Burton, a reseller, did not customarily take title himself for new mobile homes; instead, the manufacturer provided a Manufacturer's Certificate of Origin (MCO), which Burton's lender held as collateral.
- Burton never intended to deliver a Wyoming title at closing because doing so would require him to pay sales tax on his purchase from the manufacturer and would arguably void the manufacturer's warranty for Larson.
- Burton's realtor, unaware of the distinction, confirmed to the escrow officer that Burton would deliver a Wyoming title, leading the escrow officer to prepare settlement statements indicating no sales tax was due from Larson.
- Shortly before the accelerated closing date, Burton instructed his realtor to pick up the MCO; at closing, Larson's agent discovered Burton provided an MCO, which added $1,806 in sales tax to Larson's purchase obligation.
- Larson, contacted outside the building, refused to complete the sale, canceled the closing, and sent a letter to Burton declaring the contract null and void due to Burton's failure to deliver a Wyoming title.
Procedural Posture:
- Burton Construction, Inc. (Burton) sued Justin James Larson (Larson) in circuit court (trial court) for breach of contract, seeking specific performance or damages, as well as attorney fees and costs.
- The circuit court, after a bench trial, found that the parties made a mutual mistake, cancelled the Contract, and ordered Burton to return Mr. Larson's earnest money.
- Burton appealed the circuit court's decision to the district court (intermediate appellate court).
- The district court reversed the circuit court's decision, ruling that the circuit court erroneously applied the doctrine of mutual mistake, that it was 'factually unknown' whether Burton delivered a Wyoming title at closing, and that Mr. Larson breached the Contract.
- Mr. Larson filed a petition for a writ of review, which the Wyoming Supreme Court granted.
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Issue:
1. Does a mutual mistake exist when a contract for a new mobile home sale ambiguously requires the seller to deliver a Wyoming title at closing, a term that conflicts with customary commercial practice and statutory requirements, thereby creating an unexpected sales tax burden for the buyer? 2. Did Burton Construction, Inc. breach its contract to sell a mobile home by failing to deliver a Wyoming title at closing, thereby excusing Justin James Larson's performance, given that the transaction was governed by the UCC's perfect tender rule?
Opinions:
Majority - Justice Fox
No, a mutual mistake did not occur, and yes, Burton Construction, Inc. breached the contract, excusing Justin James Larson's performance. The court first affirmed the district court's conclusion that the circuit court erred in finding a mutual mistake because there was no clear and convincing evidence of a prior agreement on the specific details of the mobile home's title transfer or sales tax payment that the written contract purportedly failed to reflect. The purported mistake was about the transaction process, not the nature of the mobile home itself, and without a prior agreement on these specific details, the elements for mutual mistake were not met. Regarding the breach, the court held that the contract unambiguously required Burton to deliver a 'Wyoming title' at closing. While the contract also stated Larson was responsible for 'sales tax, if any,' interpreting the contract as a whole revealed that if Burton provided a Wyoming title (making him the first owner), he would be subject to sales tax, and Larson, as the second titleholder, would not owe any. The sale of the mobile home was deemed a 'good' governed by Article 2 of the Uniform Commercial Code (UCC) in Wyoming. The UCC's 'perfect tender' rule (Wyo. Stat. Ann. § 34.1-2-601) mandates that a seller must tender goods that conform 'in all respects' to the contract. Delivering an MCO, which requires further steps to obtain a Wyoming title after closing and imposed an additional $1,806 sales tax burden on Larson, was not a 'perfect tender' as required by the contract's plain language. The court found Larson's rejection was not a bad-faith pretext because the added sales tax constituted a significant non-conformity. Burton's clear intention to deliver an MCO instead of a Wyoming title constituted an anticipatory repudiation of his contractual obligation (Wyo. Stat. Ann. § 34.1-2-610), justifying Larson's refusal to proceed with the sale.
Dissenting - Justice Kautz
No, the contract was ambiguous regarding the required transfer documents, and Burton Construction, Inc. did not breach the contract. The dissenting justice concurred with the majority that there was no mutual mistake regarding the basic agreement. However, the dissent argued that the contract contained a 'latent ambiguity' concerning the transfer documents. While the words 'Wyoming title' seemed plain, it was impossible and contrary to Wyoming law (Wyo. Stat. Ann. § 31-2-502) for a dealer to provide an official certificate of title for a new mobile home before its first registration. The evidence unequivocally showed the parties intended to transfer a new mobile home with a new warranty, and using an MCO was the statutorily recognized and commercially reasonable method for a dealer to transfer a new mobile home (Wyo. Stat. Ann. § 31-2-503). The dissent contended that the contract should be interpreted according to this obvious intent. Furthermore, the clause stating Larson 'will be responsible for sales tax, if any,' was unambiguous and obligated Larson to pay sales tax. The dissent also highlighted other UCC provisions (Wyo. Stat. Ann. §§ 34.1-2-508, 34.1-2-504, and 34.1-2-614), arguing that if the literal delivery of a Wyoming title was commercially impracticable or impossible, Burton should have been given an opportunity to 'cure' the defect or 'substitute' with a commercially reasonable method, such as the MCO. Under the UCC, such a substitute 'must be tendered and accepted' by the buyer. Therefore, Larson's refusal to accept the MCO and pay sales tax constituted his breach of contract.
Analysis:
This case highlights the critical importance of precise contract drafting, especially in regulated industries, and the interplay between explicit contract terms and customary commercial practice or statutory mandates. It demonstrates that courts will prioritize the plain meaning of unambiguous contract language over a party's subjective intent or industry custom, particularly when the UCC's 'perfect tender' rule governs the transaction. The ruling reinforces a buyer's robust right to reject a non-conforming tender under the UCC, though constrained by the implied covenant of good faith. It also illustrates how a seller's failure to meet a clear contractual obligation, even if burdensome or commercially inconvenient, can constitute an anticipatory repudiation, excusing the buyer's performance.
