Title: Highlands Plaza, Inc. v. Viking Inv. Corp.

State: washington

Issuer: Washington Supreme Court

Document:

72 Wn.2d 865 (1967) 435 P.2d 669 HIGHLANDS PLAZA, INC., Appellant, v. VIKING INVESTMENT CORP., Respondent.[*] No. 39184. The Supreme Court of Washington, Department Two. December 22, 1967. Karr, Tuttle, Campbell, Koch & Granberg, by Carl G. Koch and Floyd L. Newland, for appellant. Hulbert S. Murray, for respondent. DONWORTH, J. Appellant instituted this action for a decree of specific performance of a contract for the purchase and sale of real property, or, in the alternative, for damages. Appellant has withdrawn its prayer relating to specific *866 performance and now seeks only damages. At the close of appellant's case, the trial court granted respondent's motion for dismissal, and this appeal is from judgment entered dismissing appellant's case with prejudice and with costs to respondent. June 9, 1965, appellant executed an earnest-money receipt[1] and agreement for the purchase of certain vacant real property known as the "Bitter Lake property." The agreement provided, in part, that the purchase price of $200,000 was: The agreement also contained a "time is of the essence" clause. July 12, 1965, respondent executed the earnest-money receipt and agreement, but interlineated the following handwritten language: This counteroffer was accepted by appellant on July 12, 1965. *867 A Mr. Carl Olson and his wife held a vendor's interest in an undivided one-quarter of the subject property under a contract for the sale of the land to respondent. It was clear, therefore, that respondent would need to obtain a release from Mr. Olson of his interest in the property before it could convey clear title to appellant. July 13, 1965, Mr. Olson wrote a letter to respondent which provided that: The testimony of appellant's officers indicated that they were never informed of the existence of this letter or of its contents. September 30, 1965, an extension agreement was executed by the parties amending the earnest-money receipt and agreement. The extension agreement provided, in part, that: *868 (The portion in italics was handwritten in ink, while the remainder was typewritten.) October 1, 1965, the first preliminary title report was issued by Washington Title Insurance Company, indicating 15 defects in title, including the interest of Mr. Olson. Then, on October 22, 1965, a second extension agreement was executed by the parties amending the original earnest-money receipt and agreement. This second agreement, entirely typewritten except for the signatures, provided, in part, that: Mr. Olson testified that although the agreements were shown to him, he was never given the agreements to sign, nor was he asked to approve the agreements. He testified that he might have signed them had he been asked. On November 4, 1965, Mr. Olson wrote to appellant as follows, in part: A copy of this letter was forwarded by Mr. Wilson, president of Highlands Plaza, Inc., to Washington Title Insurance Company as escrow holder. Also, on November 4, 1965, Mr. Olson wrote a second letter to Highlands Plaza, Inc., in which he stated: December 17, 1965, respondent Viking wrote to appellant, outlining the terms of the original earnest-money agreement and receipt, and noting that: The letter further stated that at all times from and after October 1, 1965, respondent was able to clear all exceptions, except the covenants running with the land. (However, there is no evidence whatsoever that any action was taken by respondent toward clearing the defects, and particularly Mr. Olson's one-fourth interest in the Bitter Lake property.) The letter concluded: Appellant received the above letter from Viking on December 20, 1965. Then, on December 23, 1965, appellant received from Securities Mortgage Company a letter which stated that: Also, on December 23, 1965, appellant deposited with the escrow agent the remaining $70,000 of the down payment; escrow instructions; a promissory note for $125,000 calling for monthly payments of $700 per month for 2 years and thereafter installments of $1,500 per month; and a statutory mortgage.[4] The following Tuesday, a representative of respondent advised the escrow agent that respondent was not going through with the transaction, stating several objections to the documents deposited by appellant. Appellant thereafter commenced this action for specific performance, or, in the alternative, for damages. As stated, the claim for specific performance has been abandoned, and only damages are sought at this time. The trial court's findings of fact, in part, provided as follows: The court's conclusions of law read, in part, as follows: Although appellant makes 14 assignments of error, many of which are based on portions of the above-quoted findings and conclusions, its position depends upon certain pivotal contentions which are summarized in appellant's brief as follows: We first consider the intent and effect of the extension agreements, for, as pointed out by appellant, respondent's arguments stand or fall upon the determination of whether there was or was not an existing contract on December 17, 1965. In its oral decision, the trial court stated that: The trial court, thus concluding that Mr. Olson's approval was required for the extension of the closing date as contemplated by the second extension agreement, held that, since no such approval was obtained at least for any extension of time beyond December 15, the agreement expired on that date and the subsequent dealings of the parties were merely offers and counteroffers in an unsuccessful attempt to form a new contract. However, we view the matter differently. We agree with the trial court that Mr. Olson's approval was not needed for the first extension of time, but was a condition only to the reduction of payments. Such an interpretation is warranted both by the circumstances of the parties and by the form in which the agreement was drawn. See supra p. 867. The second agreement differs from the first only in the dates involved and in the fact that the second agreement is entirely typewritten. In addition, we find no change of circumstances by the time the second agreement was made on October 22, 1965, which would warrant a different interpretation of the second extension agreement than was given the first. Therefore, we disagree with the trial court's conclusion that the second extension agreement was ineffective because it lacked Mr. Olson's approval. We conclude that at the time the second extension agreement was signed on October 22, 1965, Mr. Olson's approval *875 was intended to condition only the reduction of payments, not the extension of time. Further, even if it could be established that it was the intent of the parties to the second extension agreement that Mr. Olson's approval would be required for the extension of time, we would have to conclude that that requirement was excused by the actions of respondent seller, with the effect that the parties were bound by the agreement for the extension of the acceptance date notwithstanding the fact that Mr. Olson's approval was not specifically given for such extension. It must be kept in mind that respondent seller contracted to convey property. It was its duty, under the original agreement, to procure clear title. In order to do so it was necessary that it obtain a release from Mr. Olson of his undivided one-fourth interest in the property. Again, we stress that this was the obligation of the seller, respondent, and not the buyer, appellant. Appellant did attempt to assist in obtaining the release from Mr. Olson, but did so only at the request of respondent. Thereafter, respondent's agent instructed the real-estate agent to inform appellant that the corporation should not negotiate with or deal with Mr. Olson any further. The testimony of Mr. Sanwick, president of respondent corporation was that: *876 Mr. Sanwick further testified that such statements by him were made in October or November, 1965. Mr. Mooremeier testified that: Mr. Olson testified that: [1] In 5 S. Williston, Contracts § 677 (3d ed.), it is said: The rule is set forth in Restatement of Contracts, § 295, as follows: It should be pointed out that we find neither of the exceptions (a) or (b) above, to be present in this case. We are aware that appellant received a letter from Mr. Olson on November 4, 1965, which indicated that Olson had, at that time, apparently misunderstood the terms of the extension agreements or had not agreed to the terms of the agreements. However, Olson's approval to the second extension agreement was not required until November 25, 1965. Respondent seller had instructed appellant not to deal with Olson directly, and at least impliedly promised that it, respondent, would take care of Mr. Olson. Appellant could justifiably assume that respondent was aware of whether or not Olson's approval had been obtained to the agreements. Nothing was required of appellant as a result of the letter of November 4, 1965, from Mr. Olson. Consequently, we find nothing in appellant's failure to act in response to that letter, which would change our conclusion. That conclusion is that the extension agreements were effective as to the extension of time notwithstanding the lack of Olson's approval, either because the parties intended such a result, or because the conduct of respondent *878 seller, in failing to seek Olson's approval as it had impliedly promised to do, excused such condition to the effectiveness of the extension of time agreements. Under such extension agreements, appellant was not required to perform until the expiration of 60 days from the acceptance date of November 25, 1965, i.e. January 24, 1967. The demand by respondent, which was sent December 17, 1965, was well ahead of the date on which appellant's performance was due. In Casey v, Murphy, 143 Wash. 17, 18, 253 Pac. 1078 (1927), we said: See, also, McFerran v. Herroux, 44 Wn.2d 631, 269 P.2d 815 (1954), and Restatement of Contracts, § 318. It is further the rule that, where such a breach occurs, no tender of performance by the promisee (appellant) is necessary to his right to recovery against the promisor who has breached the contract. See 5 S. Williston, Contracts § 699 (3d ed.). Therefore, appellant's defective tender of performance (if, in fact, it was defective, a question we do not reach on this appeal) is of no consequence. [2] In summary, on the basis of the evidence in the record, we conclude that appellant and respondent mutually agreed to the extension of time modification to their original earnest-money agreement. Such modification agreement was effective (either because it was unconditionally so from the start or because respondent's conduct excused any condition to its effectiveness) to extend the time for performance on the part of appellant to January 24, 1966. Respondent's demand, made on December 17, 1965, therefore, was premature and constituted a repudiation of the contract. Such repudiation constitutes a breach of contract for which appellant may recover damages. However, since the case was dismissed below at the conclusion of appellant's case, we do not intend to limit the evidence which may be presented on retrial to the issue of *879 damages. Respondent is entitled to present whatever evidence it may have, if any, bearing on the question of liability. The decision of the trial court, dismissing appellant's case with prejudice, is reversed and the cause is remanded to the trial court for retrial. If liability is found, consistent with the views expressed in this opinion, the court shall then determine the damages, if any, to which appellant may be entitled. FINLEY, C.J., HILL, HUNTER, and NEILL, JJ., concur. [*] Reported in 435 P.2d 669. [1] The evidence indicates that it was appellant's intention to build a large apartment building on the property, for which it was to secure financing on the property, such financing to be secured by a first mortgage. [2] The offer of a second mortgage on the Highlands Plaza Medical Center was made by appellant in an attempt to assist respondent in procuring Mr. Olson's release of his interest in the property. [3] The provision for interest on Viking's contract with Olson was the basis for respondent Viking's refusal to consent to the substitution. There is some testimony to the effect that appellant was never, before the receipt of the December 17th letter, informed that the mortgage on the medical center would not be satisfactory. [4] The mortgage contained a provision reading, in part, as follows: "... mortgagor promises and agrees ... to keep all improvements on said described premises insured against loss or damage by fire in the sum of None Vacant Land." This is one of the matters respondent contended was unsatisfactory, it being his contention that appellant was to guarantee to insure the building which was to be built on the land. Mr. Medema, manager of escrow department at Pioneer National Title Company, indicated that the insertion of the clause omitting insurance was his own doing, not that of appellant.