Galpin Entertainment owned and operated The Pier Bar & Grill. Cantina Holdings delivered an offer letter to purchase The Pier for $4.5 million, obligating Galpin to provide seller-financing through a contract for deed structure.
The letter required Cantina to deposit $100,000 with a title company as earnest money. The funds were non-refundable after expiration of due diligence. Otherwise, if Cantina terminated the purchase within the inspection period, then Cantina could receive the full return of the $100k earnest money deposit.
Cantina did not terminate the deal prior to due diligence expiration.
After that date passed, the parties entered into a formal contract for the purchase and sale of The Pier. The contract incorporated the letter agreement and also extended Buyer’s inspection period for a few more weeks.
Also, the contract included a provision to the effect that if seller-financing fails, earnest monies will be returned to Buyer. The inconsistency about earnest money disbursement, as between the contract and letter provisions, was not addressed.
Buyer did not terminate the contract within the extended inspection period. Instead, the parties continued negotiating towards Closing, including Buyer’s preparation of a contract for deed.
Galpin required various edits to the contract for deed and personal guarantees from Buyer’s owners. Despite continued negotiations regarding seller-financing issues, the parties did not close and ultimately Galpin sold The Pier to another purchaser several months later.
Galpin asserted litigation for the earnest monies, claiming that despite the ambiguity between the two as well as the sequential timing of preparation and execution, the letter agreement superseded the contract. The district court agreed and awarded Galpin $100,000.
Buyer appealed.
On appeal, Cantina claimed that the purchase and sale agreement created a financing contingency that served as a condition precedent to the obligation to close. That the purchase and sale contract control over the incorporated confidential letter. And, as a consequence of the failed financing contingency, Buyer is entitled to the full return of all earnest monies.
Further, Cantina cited Supreme Court precedence that the later-in-time purchase and sale agreement should control the resolution of these conflicting provisions. Financing failed. Cantina is entitled to the return of all earnest monies.
The Supreme Court started by stating that contractual language must be interpreted “most strongly against the party who caused the uncertainty to exist.” Buyer apparently prepared both the letter agreement as well as the purchase and sale agreement. Having drafted both contracts with conflicting provisions, Buyer is prohibited from benefiting from the uncertainty they caused.
Specially drafted provisions control over standard form language. Although the purchase and sale agreement was a preprinted, standard form, the letter agreement was not – it was a highly customized, unique document.
The “later-in-time” theory likewise fails, because in this case the purchase and sale agreement expressly incorporated the confidential letter. Through the legal fiction of incorporation, there was no timing distinction between the two.
Judgment is affirmed; the letter agreement is upheld. Cantina failed to terminate within the time afforded by the letter agreement, as later extended. Buyer’s right to receive the return of earnest monies due to the failure of the parties to conclude seller-financing negotiations will not allow Buyer the right to recover its deposit, although the purchase and sale agreement states otherwise.
See Galpin v Cantina Holdings; Case No. 2026ND54; North Dakota Supreme Court; February 26, 2026: https://www.ndcourts.gov/supreme-court/opinions/205387.
Questions:
- Is this really what the parties intended, that Buyer sacrifice the full earnest money deposit when seller demanded personal debt guarantees and Buyer refused? Did the parties intend that the letter control the disposition of earnest monies? What if seller could not deliver good and indefeasible title? What if the property was deed restricted in a manner that prohibited Buyer’s use? What if Buyer determined that the property has previously been used as a toxic dump site – is the letter supposed to control all earnest money disposition, when none of those issues were contemplated in the letter, but presumably all of this (and more) was addressed in the purchase and sale agreement?
- Guessing that the purchase and sale agreement did not contain the standard verbiage to the effect that the party drafting the agreement is not charged with conflicts and ambiguities, as both parties had an equal opportunity to either prepare or amend. Would that type of provision have influenced this Supreme Court?
- Is this some strange North Dakota anomaly – would your State handle this dispute differently?
Stuart A. Lautin, Esq.*
* Board Certified, Commercial and Residential Real Estate Law, Texas Board of Legal Specialization
Licensed in the States of Texas and New York