Bakken Residential, LLC v. Cahoon Enterprises, LLC (154 F. Supp. 3d 812, 2015)

FINDINGS OF FACT, CONCLUSIONS OF LAW, AND ORDER FOR JUDGMENT

Charles S. Miller, Jr., Magistrate Judge, United States District Court

Plaintiff 'Bakken Residential, LLC (“Bakken”) commenced this action on October 19, 2012, against Cahoon Enterprises, LLC, (“Cahoon”), several weeks after Cahoon declared that it considered a real estate purchase agreement between the parties to have terminated because of Bakkeris failure to close on the property. Bakken had entered into an agreement ■with Cahoon to purchase 42.74 acres of land in the small community of Ray, North Dakota, during the height of the Bakken oil boom hoping to develop a large mobile home park on the western half of the property and make available for sale developed commercial lots in the eastern half. Bakkeris complaint asserts claims for breach of the purchase contract, unjust enrichment, and quantum meruit.

Initially, the major thrust of Bakkeris action was to obtain specific performance with its requests for damages being secondary. This is because Bakken continued with its development efforts after the action was filed, including spending money on final engineering and an updated appraisal for its lender. And, in an attempt to prevent the sale of the property to someone else in the interim, Bakken filed a lis pendens. It was not until 2015, when the demand for oilfield workforce housing was collapsing with the falling oil prices that Bakken abandoned its request for specific performance and focused instead on its arguments for damages.

At trial, Bakkeris primary focus was upon its claim for unjust enrichment, believing this would result in the largest dollar recovery. Essentially, Bakkeris argument is that all of the work it did on its proposed development in terms of planning, engineering, obtaining preliminary governmental approvals, and insuring that the site had adequate utilities (what it refers to collectively as “entitlements”) substantially benefited Cahoon by making the property more valuable than what it was without all of these things, ie., as “unentitled” property. Bakken contends that the court should enter an award against Cahoon for this increased value notwithstanding its own inability to capitalize on what, by its estimates, amounted to more than a doubling of the value of property.

In the alternative, Bakken seeks to recover the amount that it spent on its development as well as for a return of the earnest money deposited as part of the purchase agreement, Bakken contends that these amounts are recoverable at law because of Cahooris alleged breaches of the purchase agreement or, alternatively, in equity based upon on a claim for quantum meruit.

Cahoon moved at trial for dismissal of the action, contending that North Dakota law prohibits a foreign limited liability company from maintaining any action, suit, or proceeding in any court of this state until it possess a certificate of authority and that Bakken had let its certificate authority lapse prior to initiating this action and did not have one at the time of trial. This was the first time Cahoon raised this issue. Apart from that, Cahoon denies it breached the purchase agreement or that any breach was a proximate cause of the damages being claimed by Bakken. Cahoon also contends that equitable relief is not appropriate.

The case was tried to the court on June 2-3, 2015. Thereafter the court allowed time for the parties to submit post-trial briefs.

EVIDENTIARY RULINGS

In each instance in which the court reserved ruling on the relevancy of a particular exhibit or 'item of testimony, the court has overruled the objections and given the evidence the weight it deserves under the circumstances.

FINDINGS OF FACT

What happened

1.Bakken is a Colorado limited liability company. Its members are Todd Oltmans and Michael Wilson, both of whom are from Colorado. Oltmans is a real estate developer and Wilson a dealer of manufactured homes and an investor in mobile home parks;

In 2011, Oltmans and Wilson began exploring the possibility of developing real estate in thé Bakken oilfields in northwestern North Dakota because housing was then in short supply and the region one of the top-ten rental markets in the country. Given Oltmans’ and Wilson’s particular expertise, they were looking for an opportunity to develop a mobile home park for housing oilfield workers. They explored several - possibilities and one that they eventually decided upon was a 42,74 acre tract located in Ray, North Dakota, that was listed for sale by Cahoon.

Oltmans and ‘Wilson soon brought on another individual, Brian Robinson, to assist in obtaining the permits and approvals for the development of the property and then later to oversee the construction. Robinson is also from Colorado. He has an engineering degree and substantial prior experience in real estate .dévelopment. Robinson is described as being a partner in the development of the property although not a member of Bakken.

2. Ray is small community. According to a market analysis obtained by Bakken, Ray had less than 700 persons going into 2012, which was up from a population of a little over 500 just before the Bakken boom. Ray is located along U.S. Highway 2 north and east of Williston, North Dakota, about 35 miles away by vehicle. The 42.74 acre tract owned by Cahoon abuts the south side of Highway 2 in an undeveloped area south and east of the developed area of Ray, which is primarily on the north side of Highway 2.

3. Cahoon is a Montana, limited liability company with Mark Cahoon as its only member. Mark Cahoon arranged for the purchase of the 42.74 acre in 2010 from Paul Weyrich. for $22,000 with the assistance of his mother! Title to the property was initially put in his mother’s name and then later transferred to Cahoon, the limited liability company.,

Following the purchase of the property, Cahoon obtained a state license for a mobile home park on the site for up to ninety units. And, while the record is somewhat unclear, it appears he also obtained a more limited initial approval from the City of Ray for a phase I development of 18 units. Eventually, Cahoon decided to abandon his effort to develop the mobile home park because he lacked the resources to put in the paved streets that the City was requiring. He then put the property up for sale.

,4. Bakken began negotiating the terms of a purchase agreement with Cahoon’s listing agent, Ryan Visser, in the latter part of December 2011. The list price for the 42.74 acre .tract,, was $4.8 million. On January 23, 2012, Bakken executed a written offer to purchase the property for $3.4 million that was accepted by Cahoon on January 30, 2012.

The initial purchase agreement was a two-page document. The first page was a standard offer-to-purchase form used by Visser. The second page, labeled Addendum #1, set forth a number' of additional terms and conditions that were specifically negotiated by' Bakken. The negotiations leading up to the execution of the initial purchase agreement were between Bakken and Visser. Bakken’s members did not actually meet Mark Cahoon until after the initial agreement was signed.

5. The initial purchase agreement provided that the closing on the purchase would take place on or before. April 3Q, 2012, with Bakken’s obligation to purchase the property being subject to a number of conditions that are discussed in more detail below, including a 60-day period to conduct “due diligence.” The agreement required the deposit of $20,000 in earnest money that would be refundable under certain circumstances, including the inability of Cahoon to furnish'marketable title and the election of Bakken to terminate the agreement prior to the expiration of the 60-day due diligence period.

6. Soon after execution of the purchase agreement, Bakken retained Interstate Engineering to do a preliminary design for its proposed development of the property, which it named “Ray Crossing.” The preliminary layout provided for subdividing the western half of the tract into 102 individual lots along with city streets. Bakken planned on placing mobile homes on each of the lots that it would retain ownership of and rent out on a bedroom basis with no restriction upon the individuals living within the mobile homes having to be a single family or otherwise related. This was because the target market for renters was primarily oilfield workers. The preliminary design further provided for the eastern half of the 42.74 acre tract to be divided into seven lots of various sizes for commercial development, including possibly a truck stop, one or more motels and restaurants, storage units, possible retail, etc.

From the outset, Bakken’s proposed development was a highly speculative venture. Bakken itself did" not have’substantial money to invest in the project. Also, it had no binding commitments from any entity for the purchase of its commercial lots. Essentially, Bakken required 100% financing and, for that, it had turned to Momentum Funding, LLC (“Momentum Funding”), a private capital group. According to Oltmans, Bakken chose Momentum Funding because it had financed mobile home parks in other parts of the country. Also, Oltmans had a prior relationship with the firm.

According to the testimony of Bakken’s principals, Momentum Funding needed to do its own evaluation of the viability of the Ray Crossing project (what Oltmans referred to in his testimony variously as Momentum Funding doing its. own “due diligence” or “underwriting”) before it would advance even the amount required for the purchase of the property. Based on this testimony as well as various' exhibits, the assurances that Momentum Funding needed before advancing money - for the purchase of the property, and for which it intended to take a mortgage to secure its loan, included: (1) evidence that Bakken had acquired, or would be able to acquire, the necessary permits and approvals; (2) there being sufficient Utilities in place to serve the proposed development; (3) an appraisal/market analysis demonstrating the project’s economic viability and supporting the purchase pricé; and (4) assurances of Bakken obtaining good title, including title insurance that would extend to it as a mortgagee.

‘ One of the consequences of Bakken lacking substantial resources of its own was its inability to complete the purchase of the property within the time frames required by the purchase agreement when certain problems arose that prevented it from being able to timely satisfy one or more of Momentum Funding’s conditions precedent for funding. In other words, Bakken was not able to complete the purchase of the land, work out any problems in terms of developing the property later, and then resell the property if things did not work out. This put Bakken in conflict with Ca-hoon, which was concerned about delaying the closing too long. Cahoon’s fear was that Bakken might not be able to complete the purchase given its lack of financial resources and, in the meantime, it might have lost out on a potential sale to another purchaser in what obviously was a frothy market, given Cahoon’s ability to acquire the property for $22,000 and then turn around and enter into a sales agreement for $3.4 million not too long later.

7. While still within the 60-day due diligence period, it soon became obvious that Bakken faced at least two obstacles that likely would prevent it from obtaining the money to complete the purchase by the originally scheduled closing date of April 30, 2012. Probably the most significant was Interstate Engineering advising Bakken that the City of Ray lacked sufficient sewage treatment capacity for Ray Crossing. This was a problem that could not readily be addressed to the satisfaction of Momentum Funding in a short time frame..

The second obstacle was acquiring the necessary local approvals. The zoning for the 42.74 acre tract at the time of purchase was “highway commercial.” In order to develop the portion of the tract for a mobile home park, the City advised Bakken that it needed to obtain a zoning change to some form of residential zoning for that portion. Also, the property was not platted in the way that Bakken wanted to develop the property. This necessitated Bakken having to go through the platting process. Finally, given the size and nature of Bakken’s proposed development, the City was going to require that Bakken obtain the equivalent of a conditional use permit, a process that allowed the City to attach conditions to its approval of the project, which, as discussed later, were going to substantially add to its cost. It soon became obvious that the process of getting the necessary permits and approvals (or least sufficient assurance that they could be obtained upon terms satisfactory to Momentum Funding) was not going to be completed prior to Bakken having to ante up for the purchase of the property by April 30, 2012.

In recognition of these problems, Olt-mans emailed Visser on March 13, 2012, requesting that the closing date be extended to July 15, 2012. The reasons given in the email essentially were (1) the unlikelihood of Bakken obtaining the necessary approvals and permits to insure it could proceed with its project by April 30, given that it had to start from scratch after determining that Cahoon’s mobile home park permit was not enough and the fact that the City would not be receiving word until June on whether its grant application to cover part of the cost of expanding it sewage treatment capacity would be approved,- and (2) the need to investigate other issues that had arisen, including the possibility of having to bring in a substantial amount of fill for the site. Bakken stated that it remained confident, however, that a July 15 date for closing could be met if not sooner.

8. While Bakken was not in a position to close on the purchase at the end of April, Cahoon also had a problem. The initial purchase agreement required that Cahoon provide a preliminary commitment from a title insurance company within 30. days of execution • of the initial purchase agreement, which would have been on or before March 1, 2012, and then a title insurance policy at closing. By March, Cahoon had missed the date for providing the initial title commitment and was in danger of not being able to provide it before April 30 as well as the actual title policy on that date. In fact, as it turned out, Cahoon was not able to provide the initial title commitment until July 19,2012.

To make matters even more confusing, Bakken decided that it needed an updated abstract for its own purposes and soon began making demands for one, contending that Cahoon was required under the purchase agreement to have provided an updated abstract within five days of execution of the agreement. However, the agreement clearly said nothing of the sort. The earliest Cahoon would have been required to provide an updated abstract under the purchase agreement would have been at closing and a fair, reading of all of the provisions together is that even this was not required since ‘the parties had agreed upon title insurance.

'■In ordér to understand the reasons for the delay in'the providing of the title commitment; 'some understanding of the process that the title company employed by Cahoon (and also it appears by Bakken) to provide the title insurance required by the purchase agreement (and separately by Momentum Funding) is necessary. The process that the title company followed in giving an initial title commitment was to: (1) first prepare an abstract for the property or update an old one; (2) have an attorney review the updated abstract and prepare a title opinion; and (3) issue a title commitment irom a third-party title insurer based on the title opinion. Later, at the time of closing and probably after a quick check of the public records for any last minute filings, the title company would issue an actual title policy from a third-party title insurer for which it was an agent.

There is some indication in the record that a month or so may have passed fob-lowing the execution of the purchase agreement before Visser delivered Ca-hoon’s old abstract to the title company. Whether this initial delay was the result of an oversight on Visser’s part or whether there was some .initial confusion with respect to who would be following through on getting the title commitments is not clear. Notably, Oltmans contacted the title company on February 8, 2012, to ask for a title commitment — probably because it had already been advised by Momentum Funding that it was requiring its own mortgagee title policy. This contact is documented by a followup 'email 'that Oltmans sent to the title company the same day confirming his request for a “title commitment.” Bakken later points to this-email-as evidence that it started asking for an abstract fop the property back in February. However, the email makes no mention of an abstract and the credible evidence is that Oltmans, who had previously not done work in a state where abstracts are used, initially focused only, upon obtaining the title insurance. It was not until later in April that Bakken’s engineer asked to see an abstract to obtain information with respect to the utility easements on the property. And then, sometime after Bakken retained an attorney in May to help with the purchase of the property and the permitting, the attorney advised Bakken that it should obtain its own title opinion and that an abstract would be needed for him to prepare one.

The first documented .request for an abstract by pitmans was on April 18, 2012, when he emailed Visser asking him to forward the abstract because both the engineer and the title company needed it as soon' as possible. There are two things of note with respect to this communication. First, it appears that Oltmans had been in contact again with the title company inquiring about the status of the title commitment. Second is the fact that no mention was made at that time about a need for an abstract so that Bakken could conducts its own title examination. Visser responded to this email, in part, by stating that he had delivered the abstract to the title company a week earlier, that the updating of the abstract was underway, and that it likely would take 2-4 weeks before the update would be completed.

It appears the updating of the abstract may have been completed on April 20, 2012, since that is the date of the last certification by the abstractor in the abstract. Bakken contends that Cahoon acted in bad faith by not making it available at that time. However, as alluded to earlier and will be addressed later, Cahoon was under no' obligation to provide one, either as a matter of good faith or otherwise. Further, Bakken ignores the rest of the process for completion of the title commitment that Bakken expressly negotiated for, which was that the abstract (or at least the one Cahoon had updated) needed to be given to an attorney for the preparation of the opinion that would then be used by the title company to issue the preliminary title commitment. The evidence is that this process was not fully completed until July 19, 2012, when the title company provided Visser with the title commitment that was based upon an opinion- it had received from its attorney dated July 9, 2012, along with the updated abstract. Then, and not to get too far ahead of what otherwise was happening in mid-April, Vis-ser emailed the title commitment to Bakken on July 19, 2012, which the same day he received it. He then hung on to the abstract in anticipation that he would'be meeting with Bakken’s principals in Willi-ston for a meeting that was planned for July 24, 2012, five days in advance of the extended closing date of July' 31, 2012.

What is notably absent from the evidence presented is whether Bakken, if it really needed an abstract because it was the only thing standing in the way of it being able to close (as opposed to it initially being simply one of several items on the critical path, and not the primary one, and later, perhaps, a convenient excuse for its inability to close) made any effort to check with the abstract company to see if it could purchase its own abstract or have permission to use a copy of the one that the title company or its attorney was using. Later, after Bakken obtained counsel, there is an email from the attorney where he instructs Oltmans on what he would need to do to get an updated abstract.

9. In early April 2012, because of the delays making it improbable that either party would be ready to close by April 30, the parties revised the purchase agreement by executing a one-page document entitled “Addendum.” This document was signed by Cahoon on April 2, 2012, and by Bakken the next day. While this was the “second addendum,” it was the first amendment to the purchase agreement since the initial purchase agreement had an addendum.

The first amendmenf/second addendum, as typewritten, contains six provisions. The first required the payment of an additional $30,000 in earnest money bringing the total amount on deposit to $50,000. The second and third provisions stated, respectively, that $20,000 of the earnest money would become nonrefundable upon preliminary plat approval and the remaining $30,000 would be nonrefundable upon final plat approval. The fourth provision extended the closing date to 30 days following final plat approval but, in any event, not later than July 15,2012. The fifth provision provided Cahoon with the right of first refusal to purchase all contract drawings and consultant reports developed by Bakken at cost -within fourteen days if Bakken did not perform. The sixth provision required Bakken to pay Cahoon monthly installments of $20,000 beginning June 1, 2012, which would not be credited to the purchase price. After the listing of these provisions, there is a statement that all other terms and conditions of the original contract were to remain in place.

Finally, on the copy of the first amendment/second addendum submitted as an exhibit, the typewritten number “15” for the closing date of “July 15” is crossed off and replaced with the number “31,” and this change was initialed by both parties. Also, in the version submitted to the court, the sixth provision requiring the payment of $20,00 per month is crossed out. It appears from other documents and record evidence that these changes were made later when it became clear that the July 15 date for the closing could not be achieved. But whether this is true or not is not critical to the outcome.

10. In May 2012, Oltmans sought assistance from Benjamin Johnson, a local-attorney from nearby Tioga, North Dakota, to assist in obtaining city approvals for Bakken’s project and helping to close on the real estate purchase, including handling any further negotiations with Ca-hoon. 11. The preliminary plat for Bakken’s project was approved by the City on May 14, 2012. But, even with that approval, a number of items remained open between Bakken and the City, some of which needed to be resolved before Bakken was willing or able (because of Momentum Funding’s requirements) to go forward. The primary issue was the City’s unwillingness to make any commitment as to when it would have sufficient sewage treatment capacity available. However, - there were others. There was the issue of what the sewer hookup fees would be. As noted ■ in a later email from Oltmans, the City was demanding upwards of $1 million in hookup fees for the entire project. Also, the City was demanding that Bakken fund improvements for a new city park on property adjacent to Bakken’s site to the tune of $60,000-$80,000. Further, the City had demanded that Bakken make available to it up to ten of its mobile home units for its use, and it is not clear from the record what the status of that was by the time of the preliminary plat approval. In short, there were a lot of unknowns in terms of potential costs and when revenue could start being generated given the uncertainty at the time as to when sufficient sewage treatment capacity would be available, if at all.

12.' On June 1, 2012, attorney Johnson submitted a proposed “addendum #3” to Visser that referenced the original agreement, including the first and second ad-dendums. The first provision in the proposed “addendum #3” eliminated the sixth provision from the second addendum requiring the additional monthly payments of $20,000 beginning June 1, 2012. The second provision called for reducing the sales price from $3.4 million to $2.9 million. The third provision provided for a return of all earnest money if the City of Ray did not (1) provide a “will serve” letter for sanitary sewer service indicating it would provide sufficient service to Bakken’s proposed development by December 1, 2012, or (2) approve a plan for private sanitary sewer-service until city capacity would-become available. This latter provision would have reversed the fact that, under the amended purchase agreement then in effect, $20,000 of the $50,0000 deposited as earnest money had become nonrefundable with the approval of the preliminary plat. Johnson’s June 1 proposed addendum #3 went nowhere.

13. Oltmans then submitted another version of a proposed “addendum 3,” a copy of which was not made a part of the record, to Visser by email on June 18, 2012. The email accompanying the proposed addendum went on to state:

Please see the attached revised Addendum #3 for you review.

We realize through the latest number of recent disappointments on the project including the denial of our proposed private sewer option and the ' statement from the city engineer declaring no sewer service will be available until 2013, that adjustments must be considered. Please review with Mark the specifics outlined below and respond promptly. We expect that communication lines will remain . open with the opportunity to freely discuss any questions.

HOW WE GOT HERE:

1. City’s ability to provide capacity- in 2012 for sewer — summer of 2013.

2. CITY TURNED DOWN PRIVATE SEWER OPTION. * * * *

3. INCREASED impact fees/ $408K for sanitary — $295,800 for Water = $703,800 / $6900 per lot vs $4K $2400 difference x 102 — NOW $7500 x 102 (Not INCLUDING Commercial) '= $765,000

4. $100K for city housing

5. $60K for Park.

6. $20K per month staring June 1

7. $60K to -relocate high voltage underground power line from NDU behind •substation which we just found out.

8. 25% of project income loss down to 3 bedrooms /101 Bedrooms = Cost $1250 month/ $126,250 month / $1,515,000 yr /$4,545,000 3 yrs

9. All Project Design has been on hold „ since Mid May

10. No Abstract title at this time.

Total additional cost and reduced revenue Year 1 = $2,921,000

Total Additional cost and lost revenue — 3 years = $5,951,800.

With the above said, we have worked to maintain the purchase price of the contract. As shown the costs are escalating. Obviously, there are several factors that are driving the contract, but the largest issue that needs to be determined is the sanitary sewer. We have worked to address the sanitary sewer in this Addendum. As we discussed, there are several avenues that we can work through. We need a solution determined and approved.

Lastly, when you get a chance, it would be very helpful to have the Title Abstract completed and forwarded to us asap.

This email made clear that Bakken was facing substantial problems in terms of it being able to complete the purchase of the property any time soon, much less by July 15, if Momentum Funding was demanding something more concrete, particularly with respect to the sewer capacity problem.

14. On June 21,'2012, Oltmans emailed Visser stating that Bakken was continuing to work on a sewer solution, but indicated that it needed to know where it stood, which probably was in reference to whether the closing date was going to get extended beyond July 15. Also, Oltmans stated that Bakken had reached a critical point in terms of the title work and that the engineer needed a copy of the abstract for the “ALTA” work.

15. Undoubtedly feeling the pressure of the upcoming July 15 closing, Oltmans emailed Visser again on June 28, 29, and July 2, 2012, requesting an updated abstract as soon as possible because it was needed by the engineer and for “underwriting.” During one or more of the emails, Oltmans referenced an updated addendum #3 that it was signing and updated Visser on the status of the sewer situation. In the July 2, 2012 email, Oltmans advised that the City’s grant for the expansion of it sewage treating facilities had been approved and that it was working with the City .to. obtain a “will-serve” commitment letter.

The next day Oltmans emailed Visser again, however, stating that he had learned the City would not commit to a date for when it would be able to provide the increased sewage treatment capacity nor would it guarantee that Ray Crossing would have first call on the increased capacity. According to Oltmans, the City’s reason for the latter was that it did not know when Bakken might actually complete its project, particularly the development of the commercial, portion. After learning this, Oltmans stated in part in his July. 3 email:

It is clear that the City will not commit to when there will be sewer capacity and service to the site.

This is certainly making it hard to move with the $11.2M capital requirement for phase I [the mobile home park] without having 1) a Will-Serve Letter that shows a date when service will be available 2) or allow Bakken Residential to service the site privately.

Lastly, as we are continuing to work through these issues, it is imperative to get the Title work completed. As it is now July 3, 2012, please let us know when the Title Abstract will be delivered.

Oltmans followed this up with another email following a conversation with Visser stating that they were in need of the “Title Abstract commitment” and were looking forward to receiving it on July 9, 2012.

16.On July 9, 2012, the title company forwarded to Visser a copy of the title opinion on Ray Crossing that had been prepared by the attorney it had retained^ The same day Visser emailed the opinion to Oltmans, stating he hoped the title commitment would soon be forthcoming. While the opinion from the attorney for the title company has not been made a part of the record, Oltmans acknowledged ■ during his testimony that it did not disclose any title problems and certainly not the issues raised later by attorney Johnson.

17. There is a further exchange of emails on July 12, 2012, in an attempt to finalize the terms of an “addendum #3.'” The new addendum #3 repeated the same six provisions as the previous typewritten addendum #2 except that the closing date of July 15'was changed to July 31 by writing in the new date, Also, the provision that called for the payment of an additional $20,000 each month beginning June 1 was crossed out. Finally, two new provisions were added. The new seventh provision acknowledged that Cahoon would have the right to do a section 1031 exchange in connection with the sale and the new eighth provision gave Cahoon sixty days to remove extra dirt that had been hauled onto the property.

The email from Oltmans' on July 12 to Visser also stated that they had worked out with the City a draft of a will-serve letter that would not have a hard will-serve date but might be firm enough to indicate that the' site, would have sewer service in the second quarter of 2013. Olt-mans indicated he hoped to obtain the letter at meeting that was going to be held on July 23. Oltmans did not indicate, however, that he had received assurances from Momentum Funding that the letter would be sufficient.

18. On July 19, 2012, Visser received the title commitment from- the title insurance company and forwarded it Oltmans the same -day by email. The title commitment has not been made a part of the record. However, attorney Johnson acknowledged it did not reflect any issues, including those he. raised later.

The updated abstract was returned to Visser at the same time he received the title commitment. Visser waited to provide it to Bakken when its principals traveled to Williston for a meeting with Cahoon and Visser on July 24, 2012,-which was five days prior to the closing scheduled for July 3i, 2012.

19.On July 24, 2012, attorney Johnson forwarded an email .to Oltmans stating that he had reviewed the title commitment and was advising against relying only upon title insurance. He recommended that Bakken obtain its own title opinion. The reason that he gave was that the title insurance would cover only the amount paid to purchase the property and not any improvements. Attorney Johnson said it would take’ 4-6 weeks to get an updated abstract and that it probably would cost around $1,200. ' ’

On July 26, 2012, attorney Johnson followed up with a second email, most likely after learning that an updated abstract had now been turned over to Bakken. He reiterated his advice about not relying upon, the title commitment and having him review the abstract to make sure that the title was good. He said fye would do what he. could, to speed the process up, - but suggested that Cahoon should be agreeable to a short extension given the amount of time it took for them to deliver an abstract.

. 20. On July 27, 2012, Oltmans forwarded to Visser the two emails he had received from Johnson and requested additional time for closing on the purchase so that Johnson could complete his examination of the abstract and for his title opinion to be forwarded to Bakken’s lender for “underwriting.” Oltmans suggested that Bakken be given until August 12, 2012 to complete this process and-that Bakken would be willing to consider an additional non-refundable earnest money amount after that point to resolve any issues beyond August 12, 2012 that may be raised by Johnson’s review.

The credible evidence, however, is that there were problems standing in the way of Bakken being able to close on July 31 other than its somewhat late decision that the title insurance it had previously bargained for was now insufficient for its purposes. As discussed in more detail later, Bakken had not yet commissioned the performance of an appraisal/market study that it acknowledged was a condition precedent > to any funding and that was not in any way title dependent. And, while that alone would have prevented it from obtaining the funds for closing, the testimony of Bakken’s principals suggests that Momentum Funding had other concerns. They specifically testified that Momentum Funding was concerned that the increased sewer capacity would not be available until well into the next year, assuming the City would be successful in getting the expansion completed. The court suspects that the lack of final plat approval along with resolution of the City’s conditions on the project, which carried with it sizeable financial consequences, were also problematic. Finally, it is apparent that Momentum Funding would have needed more time simply to put in place what it needed for closing (preparation of mortgage agreements, etc.) even if it had completed its review in terms of the project’s feasibility, which it obviously had pot given the lack of the appraisal.

21.Visser forwarded an email letter to Oltmans on July 30, 2012, stating that Cahoon preferred to close the next day but would be willing to extend the closing an additional two weeks in exchange for an extra $100,000 of non-refundable funds that would not be included in the purchase price. Visser stated that, if Bakken still wanted to move forward but did not want to close the next day, he would prepare.a form for Bakken to sign- acknowledging the conditions. , .

22. It appears Cahoon had arranged with the title company to perform’the closing on July 31, but Bakken did not show up.'

23. On August 7, 2012, attorney Johnson emailed Visser stating .that Bakken was unable to close on July 31 because of conditions beyond its control. The reason he gave was the fact the abstract was not provided until July 24, five days prior to closing, even though, according to Johnson, Bakken had been requesting the abstract since February 8, 2012, when Bakken was in, direct contact with the title company. Johnson wept on to state that “[n]o buyer with any understanding* of property law would close on development property without doing his own titte research and no investor. of any level of sophistication would back a project without assurance that title is good.” Johnson also went on .to imply that Bakken was delayed ■ because it had relied upon information provided by Cahoon and Visser that there were sufficient utilities serving the property and the site was otherwise fully functional for Bakken’s intended use, which, according to Johnson, turned out not to be the ease. These points will be returned to later.

With his email, Johnson proposed an “Addendum 4.” The new proposed addendum set forth three provisions. The first would give Bakken ;an, additional thirty days from July 24, 2012,. to review the title commitment and abstract furnished by Ca-hoon. The second would make the $50,000 of earnest money .on deposit refundable during a period of 30 days following execution of the new addendum if Bakken elected not to proceed with the project and nonrefundable 31 days after execution of the addendum. The third provision provided for a closing 45 days after execution of the addendum. (Ex. P4).

24. Visser responded to this email on August 8, 2012, stating that Cahoon was not willing to accept the proposed Addendum #4 but that he was willing to extend the closing date to August 23, 2012, which the email noted would be 30 days from when Bakken received the abstract of title. The abstract itself is not very long and likely could be examined in less than a day.

25. On August 10, 2012, attorney Johnson provided Bakken with a memorandum stating that he had conducted a preliminary review of the abstract and noted that it contained copies of a number of federal tax liens dating back to 2008, or before, along with a reference to a 2008 state-court judgment, all of which were filed during the time the property was owned by the person from whom Mark Cahoon’s mother had purchased the property. Johnson recommended that Visser contact Ca-hoon to see what its position was with respect to these items.

26 On August 14,2012, attorney Johnson wrote Visser a letter proposing a second version of a new “Addendum #4.” In the letter, Johnson claimed that a new addendum was necessary because of what he claimed were material breaches by Cahoon of the agreement. He also threatened a suit for specific performance and damages if the new addendum was not executed. Specifically, Johnson claimed that Cahoon had deliberately withheld the updated abstract, title commitment, and the attorney’s title commitment until very late, even though, according to Johnson, the abstract had been available earlier and was actually due under the contract on February 5, 2012. Johnson then went on to claim that there were significant issues with respect to the title because of the federal tax liens and the state-court judgment that had been included in the abstract — problems that he claimed could possibly have been resolved months ago if Cahoon had provided the updated abstract earlier. The new proposed Addendum #4 set forth two provisions. The first was that the buyer and seller would agree that review of the abstract was a due diligence provision that fell within the 60-day due diligence period as set forth in the original purchase agreement and that would start anew on the date the new Addendum #4 was executed. Notably, Johnson’s choice of language with respect to this provision is somewhat odd and appears to a reflect a concern about the fact that the original agreement did not require Cahoon to provide an updated abstract if title insurance was going to be used. The second provision called for a closing to take place 30 days from the expiration of the new 60-day due diligence period.

Essentially, this proposed addendum would provide for an additional 60 days for Bakken to consider its options and withdraw for any reason, including presumably getting back all of the earnest money paid since that was not addressed. Further, it would push back any closing for another 90 days.

27. Attorney Johnson provided Bakken with a formal title opinion dated August 15, 2012. In the opinion, Johnson concluded that Cahoon had title to the property but noted the previously referenced federal tax liens and the state-court judgment against one of Cahoon’s predecessors-in-title and stated as “requirements” that satisfactions or releases of these liens need to be filed not only with the appropriate county offices where they are normally filed but also recorded with the recorder’s office, notwithstanding the certifications in the abstract by the abstractor discussed later, which, essentially, were to the effect that there were no unsatisfied federal tax liens or state-court judgments.

28. Cahoon then retained attorney Peter Furseth to respond. Furseth was the attorney that the'title company had retained to provide it with the opinion of title, a copy of which had earlier been forwarded to Bakken. In a letter dated Augdst 27, 2012 to Johnson, Furseth stated that, although Johnson’s letter raised some reasonable issues, Bakken had failed to comply with the purchase agreement and its subsequent amendments. Furseth stated that Cahoon was willing to extend the closing date to 30 days from the date of the letter, which would have been on or before September 26, 2012.

29. Johnson responded to Furseth’s August 27 letter by sending a'letter dated September 9, 2012, rearguing who'was responsible for the current situation and contending that the matter had been at a standstill since July 15 because of Ca-hoon’s failure to timely respond and agree to the multiple addendums he had forwarded. He then went on to state that “there had been too many timeframes set by addendums that áre unattainable,” but without any explanation for why Bakken had signed them. He then proposed a new addendum containing a single provision that the closing would take place 90 days from when the last party executes the addendum but not later than December 5, 2012. 1

30. On or around September 9, 2012, Bakken engaged THK Associates, Inc. (“THK”) to perform an appraisal/market analysis for the Ray Crossing Project. The THK witness who testified at trial indicated that THK was told it had twenty days to complete the work and that it was on a “rush” basis.

Oltmans and Brian Robinson both acknowledged during their testimony that completion of an appraisal such as the one THK performed was a condition precedent of Momentum Funding making any decision on whether to advance funds for the purchase of the property. Neither had a good explanation for why Bakken had not engaged THK earlier. A fair inference is that Bakken simply' was not willing to incur the costs initially when the sewer capacity issue was more’ uncertain and had internally concluded that it would be able to delay the closing. THK completed its “preliminary”- appraisal/market analysis and issued a written report dated September 26, 2012.

31. At some point prior to September 26, 2012, Visser had made arrangements with the title company for' a ‘ closing to take place on that date and had apparently communicated that fact to Bakken. As noted earlier, this was the extended date for closing that- had been offered by Furseth in his August 27 letter. On- that same date and likely after Bakken did not show for the closing, Furseth' sent a letter to Johnson stating in response to his earlier letter of September 9 that Cahoon was not interr ested in further extending the closing date and stating: “At this, time, I think you should talk to your clients about putting together the money and finalizing the deal.”

32. Also on'September 26, 2012, Johnson sent a letter to Furseth, stating Bakken would not be closing on the purchase on that date and that it was unprofessional for Cahoon’s agent to have scheduled it for .that time without first checking the availability of Bakken’s principals. Johnson then went on.to reargue who was responsible for the delays, focusing in particular upon the updated abstract not being provided until July 24 and that Cahoon had not provided an explanation for the federal tax liens and the state court judgment he had raised as concerns. Johnson also stated that it was untrue that the reason for the delay in closing was due to an inability of Bakken to come up with money for the purchase price. As suggested proof, he attached an unsigned letter from Momentum Funding dated September 25, 2012, stating that it had given a preliminary loan approval for . the purchase on February 8, 2012, and then noting a list of conditions and documents that would be required before Momentum Funding could proceed forward to do its own review of the .matter. Johnson also attached a copy of Momentum Funding’s February 8, 2012, letter stating it would commit funds subject to its review and underwriting.

The reality, however, was that Bakken was not prepared to dose for reasons other’than the liéh questions raised by Johnson, 'which he and Bakken had more than enough time to resolve by that point as discussed later. The attached letter from Momeritum Funding made clear it would not be advancing funds until it had completed its own review of the project’s-feasibility and that this would take place only after it had been provided with a number of documents or other information, including the appraisal that was not completed until the.day after Momentum Funding’s letter. Further, although not critical to the court’s decision, Momentum Funding’s letter is somewhat curiously worded and a fair inference is that the recitation of some of the conditions was tailored to bolster Bakken’s arguments for why Cahoon was responsible for the delay.

Johnson enclosed a new proposed addendum with his September 26 letter that contained three provisions. The first was that Cahoon would have to provide a satisfaction of the state court judgment that Johnson referred to in his earlier correspondence... The second was that Cahoon would have to provide documentation regarding the previously referenced federal tax liens. The third was that, upon receipt of. this documentation, Bakken would have 15 business days to raise any objections, but, if the documentation was satisfáctory and no objections were raised, Bakken would close on the property within 45 days. ,

33. Furseth responded to Johnson’s September 26 letter , by an email dated September 27, 2012, stating that Cahoon was no longer willing to negotiate and. that he had been instructed to initiate a contract cancellation proceeding. Then, on October 1, 2012, Furseth forwarded a letter, to Johnson stating Cahoon was providing official notice of cancellation of the contract.

34. Johnson responded to Furseth’s September 26 .letter and his September 26 email with a letter dated October 3, 2012, that repeated the .same arguments about the lack of Bakken’s receipt of an, updated abstract.until five days prior to the July 31 closing and the failure of Cahoon to address the state court judgment and federal tax liens. The letter went on to state that Bakken was still willing to move forward to a closing that included an appropriate amount of time for underwriting and resolution of its lien concerns and that it wished to avoid costly litigation.

35. When a satisfactory response was not forthcoming, Bakken commenced this action on October 19, 2012, seeking, among other alternative relief, specific performance of the purchase agreement and attaching to the complaint as the agreement: (1) a copy of the initial purchase agreement and addendum, (2) the addendum executed by the parties during the first week of April, and (3) the addendum signed by Bakken on July 20, 2012, and countersigned by Cahoon on July 24, 2012, which extended the closing date to July 31, 2012. Bakken also filed a lis pendens against the property.

36. After the commencement of the litigation, the property in question remained available for sale and was unsold as of the time of the trial more than 2/6 years later. The credible evidence is that Cahoon would still have sold the property to Bakken if Bakken had been able to come up with the purchase price. And, in anticipation that this could still occur, but without any reliance upon an affirmative representation from Cahoon, Bakken, continued to spend money on the project. In particular, almost a year later in October 2013, Bakken had THK prepare an updated market appraisal. Then, in December 2013, Bakken Ventures (an LLC that Oltmans testified was affiliated with Bakken) engaged Jehn Engineering to do the final engineering for the project, including a final plat and updated survey, and eventually completed 95% of that work. Oltmans testified that the reason why Bakken Ventures engaged Jehn Engineering at that time and ran. up a $86,836.50 bill was so that they would not “lose the 2014 construction season.” Clearly, for a long time after Cahoon formally declared the purchase agreement to have terminated, Bakken believed that it would be able to complete á purchase if it could come up with the money by using the litigation as leverage.

By 2015, the demand for oilfield workforce housing had collapsed with the falling oil prices. At or shortly before; trial, Bakken abandoned its demand for specific performance.

Additional findings of fact relevant to the claims for relief

37. One of the questions raised by Bakken’s claims- is whether the old federal tax liens and the state-court judgment against Cahoon’s predecessor-in-title dating back to 2008 and before, which attorney Johnson suggested were of concern, were actually valid liens on the property in 2012 or thereafter. The court finds' based on the credible evidence that they were not.

The mere presence of copies of the federal tax liens in the abstract and its reference to the state-court judgment are not evidence that the liens were valid during the time period at issue. The only way to make that determination would be to check the public offices where the liens are filed and where ány releasés or satisfactions ’ similarly are either filed or noted. See 26 U.S.C. § 6323(f)(l)(A)(i) (federal tax lien); N.D.C.C. ch. 28-20 (judgments), § 35-29-02 (federal tax liens). And here, the abstractor certified (more than once) that the requisite checks had been made and that there were no unsatisfied federal tax liens or judgments against the relevant persons named in the abstract (including Cahoon’s predecessor in title against whom the liens were against) as of- the date of the certifications, which were after the filing of the federal tax liens and state-court judgment. noted earlier in the abstract, indicating that they had been subsequently released or satisfied.

38. Separate from the question of whether the federal tax liens and the state-court judgment had in fact been released or satisfied, is the question of whether Cahoon fulfilled its obligation under the purchase agreement in terms of-what it agreed to provide with respect to evidence of .title. As noted earlier, the purchase agreement required only that Cahoon provide a title commitment 30 days after the execution of the purchase agreement and then a title policy at closing. And, while Cahoon did not initially deliver the title commitment within 30 days of execution of the original purchase agreement,- it did provide the title. commitment on July 19, 2012, and the credible evidence is that the title company was prepared to issue the title policy at closing that would have insured Bakken against the consequences of its title being encumbered by any liens, including the old liens that attorney Johnson said still might be of concern. At least as of that point, Cahoon had substantially performed what it was required to provide in terms of title.

Bakken appears to argue that Ca-hoon never demonstrated that the title it would be conveying was marketable given attorney Johnson’s opinion, which “required” that Bakken obtain releases or satisfactions of the federal tax liens and the state court judgment, and that Cahoon never provided, them — at least not on a timely basis and not completely. Putting aside whether the mere existence of a lien necessarily renders a title unmarketable in contrast to an actual defect in title, the court concludes that Cahoon in fact provided what was reasonably required’by the purchase agreement in terms of marketability given the agreement of the parties to rely upon title insurance and the fact that the title insurance would provide protection against the consequences of the liens that attorney Johnson pointed to,’ keeping in mind that attorney Johnson never contended that the liens were still valid, only that he wanted moré evidence than the certification of the abstractor that the liens were not, and the fact that he had also concluded Cahoon had good title to convey. Under these circumstances, the court finds and concludes that, if Bakken wanted confirmatory evidence that the abstractor had not made a mistake, notwithstanding that it would be insured against that possibility, it was up to Bakken to satisfy itself that the old liens were not valid.

Further, this was something that Johnson could have accomplished relatively quickly. And, a fair inference here for why Bakken did not in August do what it took to get the issue resolved to insure it would not lose the property and with it the opportunity to cash in on its forecasted millions in future revenues was that it was not able to close for other reasons as discussed in a moment. Rather, the fair inference is that Bakken was content to argue that Cahoon needed to do the work to satisfy Bakken’s purported concerns over the old liens and argue that Cahoon’s failure to do so justified further extending the closing date.

Particularly telling as to what. in all probability was Bakken’s lack of actual concern over the abstract’s references to the old liens is the fact that, even though attorney Johnson had raised the lien issue in early August and rendered his title opinion on August 15, 2012, Bakken proceeded to incur the expense for the appraisal/market survey in September 2012. Also, much later it incurred the cost for updating the appraisal/market survey in October 2013 and then, through Bakken Ventures, ran up the huge bill for final engineering mentioned earlier.

39. The court finds that, even if Bakken should have been given a reasonable amount of time beginning in late July to examine the’ abstract and clear up the issues raised by attorney Johnson in the beginning of August, this all could have reasonably been completed by Bakken and its attorney by the end of August and this would still have allowed Bakken’s lender reasonable time to do its review prior to a September 26, 2012 closing. The court further finds that, if Bakken and its attorney had done this, Bakken still Would not have been able tó close before the end of September because the appraisal/market analysis had not been completed until September 26, 2012, arid, according to Bakken’s testimony, its lender needed' inore time than a day or two for “underwriting.” Further, the credible "evidence is that, even with the appraisal/market analysis, the lender would not have advanced the money for the purchase at that point, given the project’s other uncertainties, including the fact that sewer capacity would be not be available until well into the next year at the earliest and other unresolved issues with the City.

Finally, even if the court is wrong about the time period in' which ■ Bakken could have reasonably resolved attorney Johnson’s issues, there is no reason why Bakken could not have resolved them and offered a firm closing date by the end of 2012 or at any time during 2013 when it continued to expend money on the project in an apparent belief it would, still be able to purchase the property.

In short, the court concludes that, even if Cahoon breached the purchase agreement by not providing title information sooner, including an updated abstract, and even if attorney Johnson's concerns about the status of the federal tax liens and the state-court judgment initially were reasonable in terms of justifying some additional time for investigation, these matters were not the proximate, cause of Bakken not purchasing the property and thereby rendering for nought the costs and liabilities it incurred in anticipation of completing the purchase and going forward with its project.

40. Bakken’s principals suggested during their testimony that they were misled by Cahoon’s listing for the property as to the availability of sewer service, the zoning, and that the property was permitted for a mobile home park. It appears this testimony was offered primarily to engender sympathy for Bakken’s equitable claims since no claim for fraud' or misrepresentation has been made. In any event, the court is not persuaded.

For one thing, there was sewer and water service to the site and Cahoon did in fact have a state mobile home park license and a local conditional use permit to construct at least the first phase of a mobile home park. The court does not believe the few statements made in the listing agreement promised more than that or that a reasonable purchaser would have extrapolated from the statements (which, at most, appear to be typical sales puffery), that nothing more would be required for a project like the one that Bakken wanted to develop. ..

Bakken’s principals testified at length abciut their substantial experience in developing réal estate, including their familiarity with what it takes to get property entitled and “shovel-ready” and how difficult a process that it sometimes can be. While Bakken may not have known initially that Ray lacked sufficient sewage treating capacity. to handle the proposed development, it should not have come as a huge surprise given how small Ray is relative to the size of its project, which included a largé high-density residential area and lots for commercial uses, such as motels and restaurants, that obviously would place sizeable demands on available sewage treatment capacity. Likewise, the same is true for the zoning. It defies belief that the principals of Bakken, as savvy as they claimed to be, did not know the zoning on the tract was “highway commercial” before they signed the purchase agreement and did not appreciate the possibility that they might need a zoning change and/or their own conditional use permit to develop a tract as big as this one. More likely is that they anticipated that there could be problems and it was to deal with contingencies like these that Bakken negotiated a 60-day due diligence period and specific “outs” if the zoning and/or utilities were not sufficient as described in more detail in a moment. ■

Finally, any purported expectations on Bakken’s part as to the sufficiency of the zoning and utilities did not find their way into the purchase agreement in terms of Cahoon contractually guaranteeing what was available. The only provision in. the agreement addressing utilities was the following:-

1, UTILITIES: The purchase of the Property in [sic] contingent upon approved utilities (domestic water, sanitary sewer, electric and natural gas) capacity and feasible delivery- for the Property coinciding with the Buyer’s intended use and intended development time frame. Should a utility- issue occur, Buyer shall require an additional Thirty (30) days to achieve the desired utility approvals.

In terms of zoning, the purchase agreement similarly provided:

4. ZONING: The purchase of the Property in [sic] contingent upon the zoning of the Property coinciding with the Buyer’s intended use. Should a zoning issue occur, Buyer shall require an addit