## Facts

- On January 7, 2000, George Johnson and Johnson Ford Lincoln‑Mercury, Inc. agreed to sell their Ford dealership to Lawrence Coss through an Asset Purchase Agreement.
- The Agreement made closing expressly conditional on Ford Motor Company’s written approval of the franchise transfer to Coss, stating that if Ford’s consent was not obtained “this transaction in its entirety and this agreement in its entirety is null and void.”
- To pursue Ford’s approval, Coss worked with a professional advisor (attorney/CPA Steven Grodahl) and communicated with Ford about the transfer requirements.
- Ford required Coss to secure an on‑site dealer/manager acceptable to Ford, and Ford expected that manager to hold a substantial ownership interest.
- Coss identified Mark Goodrich to serve as the on‑site manager and proposed that Goodrich would own 50% of the dealership; Coss and Goodrich planned to jointly capitalize the dealership with \$1 million.
- Ford later advised that it would not approve the proposal unless there was a majority owner and the dealership was capitalized at \$1.476 million.
- Coss revised the arrangement to give himself a 50.1% ownership interest, but he was still unable to meet all of Ford’s conditions, including the higher capitalization.
- Grodahl averred that communications between Ford and Coss indicated Ford would not approve the sale of the dealership to Coss.
- After several months, Coss notified Johnson and Ford that the Agreement could not be completed because Coss could not meet Ford’s franchise transfer requirements, and he treated the Agreement as null and void.
- Johnson sued Coss for breach of contract and breach of the covenant of good faith and fair dealing, claiming Coss was responsible for the failure of the condition precedent and could not rely on that failure to avoid liability.
- The circuit court granted Johnson summary judgment, reasoning that Coss’s actions prevented Ford from approving the franchise transfer.

## Issues

1. Whether summary judgment for Johnson was proper on the theory that Coss prevented or caused the failure of Ford’s approval, an express condition precedent to closing.
2. Whether genuine issues of material fact existed as to why Ford did not approve the franchise transfer (Ford’s independent decision versus Coss’s conduct or lack of effort), making summary judgment improper.

## Decision

- The Supreme Court of South Dakota reversed the grant of summary judgment for Johnson and remanded for further proceedings.
- The court held that the record contained material disputes about the cause of the failed franchise transfer, including evidence (such as Grodahl’s affidavit) suggesting Ford would not approve the transaction to Coss even if Coss attempted to comply.
- Because competing inferences could be drawn on whether Coss’s conduct brought about the nonapproval, the case could not be resolved as a matter of law at the summary‑judgment stage.

## Legal Principles

- When a contract makes a third party’s approval an express condition precedent to closing and states the agreement becomes “null and void” if approval is not obtained, the condition’s nonoccurrence generally prevents closing on the contract’s stated terms.
- A party may not rely on the failure of a condition precedent if that party wrongfully prevents or causes the condition’s failure (prevention doctrine).
- Whether a party actually prevented a condition from occurring often depends on disputed facts, including what the third party required, what efforts were made, and whether the third party would have refused approval regardless.
- Summary judgment is improper when the evidence permits reasonable disagreement on material questions such as causation of a failed condition precedent and whether the defendant’s conduct was a cause of the failure.

## Conclusion

Johnson v. Coss holds that, although Ford’s approval was an express condition precedent and the Agreement stated it would be null and void without that approval, summary judgment for the seller was improper because the evidence created a fact dispute over whether Ford independently would not approve the transfer to Coss or whether Coss’s conduct caused the failure; the South Dakota Supreme Court therefore reversed and remanded for fact-finding.


Johnson v. Coss, 667 N.W.2d 701, 2003 SD 86 (2003)