Prochazka v. Bee-Three Development, LLC

Bee-Three Development, LLC (BTD) (defendant) entered into a written contract to purchase a commercial lot from Robert and Donna Prochazka (plaintiffs). BTD planned to purchase the lot, develop it, and then lease it out to a commercial tenant. Article 4 of the contract was titled “Inspection of Property.” Article 4.1 gave BTD the right to conduct various inspections and inquiries, such as environmental studies and permitting inquiries, to determine whether the commercial lot was generally suitable for BTD’s intended use. Article 4.3 stated that BTD could terminate the contract during the inspection period if “in [BTD’s] sole and absolute discretion” the commercial lot was unsuitable for BTD’s intended use. If BTD timely terminated the contract, then BTD was entitled to a full refund of any earnest money paid. BTD terminated the contract during the inspection period after the tenant BTD had secured for the property backed out. BTD sued the Prochazkas to recover its earnest money. The Prochazkas counterclaimed for breach of contract, arguing that BTD’s right to terminate under Article 4.3 was limited by Article 4.1, meaning that BTD could terminate the contract only if the property failed one of the suitability inspections outlined in Article 4.1. BTD countered, arguing that Article 4.3 gave BTD an unlimited right to terminate the contract for any reason during the inspection period. The trial court granted BTD summary judgment. The Prochazkas appealed, arguing that summary judgment was inappropriate because Article 4.3 was ambiguous, and that ambiguity created a material issue of fact regarding BTD’s right to terminate the contract.