Summary
In Lien, the defendants were held liable for damages for breach of a contract, an offer to purchase, they later claimed did not reflect their intent.
Summary of this case from Olfe v. GordonOpinion
No. 44.
Argued January 7, 1970. —
Decided March 3, 1970.
APPEAL from a judgment and an order of the circuit court for Milwaukee county: MAX RASKIN, Circuit Judge. Affirmed.
For the appellants there were briefs and oral argument by Byron J. Hays of Milwaukee.
For the plaintiffs-respondents there was a brief and oral argument by David W. Lers of West Allis.
For the defendants-respondents there was a brief and oral argument by Gregory Gramling, Jr., of Milwaukee.
The action arises from a contract to purchase real estate.
The plaintiffs-respondents, Llewellyn and Lynn Lien, in late summer of 1966, wanted to sell their home and lot in the Muskego area of Waukesha county. They listed this property for sale with the O'Malley Realty Company, Inc., of Milwaukee.
The defendant, Elijah Pitts, a professional football player for the Green Bay Packers, had an off-season job with Pabst Brewing Company in the Chicago area. Pabst wanted Pitts to work for it in and around Milwaukee and requested that he move to the Milwaukee area.
The O'Malley agency, through their sales people Walter Winston and Grace Mayer, arranged to show the Lien house to Elijah Pitts and Ruth Pitts, his wife, on September 19, 1966, and drove them to the property for that purpose. Those present were Mr. and Mrs. Pitts and their child, Walter Winston and Grace Mayer, and Mrs. Lien and her children. (Mr. Lien was in West Virginia as required by his employment.)
The Pittses indicated they liked the house and wanted to buy it. Winston and Mayer asked Mrs. Lien to excuse herself so that they might discuss it with the Pittses. The list price was $32,900. The Pittses offered $32,000. Winston then in longhand prepared an offer to purchase on a form approved by the Wisconsin Real Estate Commission. The offer was made subject to the following contingency:
"This offer is contingent upon the buyer, or O'Malley Realty Company, in the buyer's behalf, obtaining a first mortgage loan commitment in the amount $29,000 (Twenty-nine thousand dollars) with interest not to exceed 7 1/4% (seven and one quarter) percent per annum and for a term not to exceed 25 (twenty-five) years. Buyer agrees to cooperate fully in fulfilling the above contingency. Buyer will put down an additional $2,000 (Two thousand dollars) upon closing."
The real estate agents then called Mrs. Lien back and presented the offer to her. It was acceptable and she signed it. A telephone call was made to her husband and he accepted and affirmed the acceptance by telegram.
The Pittses insist that the entire transaction was contingent upon their obtaining their loan from the First National Bank of Glendale and that Winston and Mayer discussed this with them at least several times before they signed the purchase agreement. They were also assured several times that if they could not obtain the financing the $1,000 down payment would be returned. The Pittses claim that only after they had these assurances did they sign the offer and make out the check for $1,000.
After the signing of the offer to purchase, but contemporaneous therewith, Mr. Pitts signed a document referred to as an information sheet; on it were noted credit references, his salary, employers, and the following items respecting the loan to be obtained:
"Amount of Loan Required: $29,000 Type: conv.
"O'Malley Realty to assist in securing loan: Yes No
"Type of Loan Preference: Bank of Glendale — Rocko Bennio
"Comments Regarding Loan: will seek own loan"
Rocko Bennio referred to in the statement was a vice-president of Pabst and Mr. Pitts' supervisor or boss. Mr. Bennio was also a director of the Glendale bank and had suggested to Pitts that if he needed a loan to obtain it there.
No further contact was had between the parties until the date of closing, October 17, 1966. Prior to closing, application for a mortgage loan was made by the Pittses to the First National Bank of Glendale. On the closing date the bank informed the Pittses the loan would not be made because of potential flooding and percolation problems in the area in which the house was located, presenting a hazard to the functioning of the septic tank system and private well. No closing was then ever held.
Subsequent to October 17, 1966, correspondence was exchanged between the parties and their attorneys attempting to resolve the matter. In a letter dated October 21, 1966, Attorney Henry V. Kane wrote in behalf of the Pittses to O'Malley Realty advising of the financing failure and requesting the return of the down payment. That letter was followed by another from Attorney Kane enclosing a copy of the bank's rejection and reiterating his request for return of the down payment.
In a letter drafted by Attorney David Lers, dated November 10, 1966, the plaintiffs offered to extend a mortgage loan to the Pittses on the terms set forth in the purchase contract. In response to this offer to finance, the co-counsel for Mr. Pitts, Attorney Byron Hays, forwarded a mortgage note for $29,000 bearing interest at the rate of seven and one-quarter percent per annum to Attorney Lers in an attempt to comply with the purchase contract provisions. The note provided that the interest was payable annually and the principal in a lump sum at the end of the twenty-five year term. Attorney Lers responded December 2, 1966, on behalf of the plaintiffs, indicating that only a mortgage note amortized over twenty-five years would be acceptable to the sellers and that defendants' offered note must be rejected.
The $1,000 down payment was returned to Pitts. He subsequently bought a home in the Brown Deer area and obtained his financing from the Glendale bank.
A few months later the Liens sold the house and lot to another purchaser for $28,500 (again through the O'Malley agency).
The Liens, as plaintiffs, commenced this action against Elijah and Ruth Pitts for damages consisting of the difference in sale price, real estate commissions and other expenses.
The Pittses, as defendants, answered denying the claim of the Liens and counterclaimed for a reformation of the contract to show the Glendale bank loan contingency and dismissal of the action. The Pittses also, as third-party plaintiffs, cross-complained against the O'Malley agency and Walter Winston and Grace Mayer individually upon the ground of a fraudulent or negligent representation as to the offer-to-purchase contingency and demanded that they, the Pittses, be reimbursed for any judgment the Liens might obtain.
The matter was submitted to a jury. The jury found that the contract did not provide that the Pittses could obtain financing only from the First National Bank of Glendale, and further found that the Liens' offer to finance the Pittses met the terms of the contract and that the damages to the plaintiffs because of the Pittses' failure to purchase were $3,735.
Before submission to the jury all parties had moved for directed verdicts and the trial court considered the verdict advisory only and decided the case itself under sec. 270.26, Stats.
The trial court found there was no fraud or negligence on the part of Winston or Mayer insofar as the Pittses were concerned and dismissed the action as to all third-party defendants.
The trial court, for reasons hereinafter discussed, ordered a new trial in the interest of justice between the Liens and the Pittses.
The defendants, Elijah and Ruth Pitts, appeal from the judgment and the order.
The plaintiffs, Llewellyn and Lynn Lien, filed a notice of review as to the, order.
The overriding issues are: (1) Whether the trial court abused its discretion in granting a new trial in the interest of justice in the action between the sellers and the buyers, and (2) whether it was error to dismiss the action against the third-party real estate broker and its sales people.
"The general rule is that an order for a new trial in the interest of justice will be reversed only where the trial court abused its discretion. The rule does not apply, however, where the court proceeded upon an erroneous view of the law.
"Sec. 270.49(2), Stats., provides:
"`. . . No order granting a new trial in the interest of justice shall be valid or effective, unless the reasons that prompted the court to make such order are set forth in detail therein or the memorandum decision setting forth such reasons is incorporated by reference in such order. . . .'
"It follows that in reviewing such order, we are to examine the reasons stated, in the light of the record, in order to determine whether the order is based on an error of law or is an abuse of discretion. The question is not, of course, whether our reading of the record would lead us to order a new trial, and we recognize and give full weight to the opportunity of the trial court to observe the trial and evaluate the evidence.
"The order now before us referred to the reasons set forth in the decision, which consists of a transcription of the court's remarks after hearing argument. We therefore turn to the context of the decision." Felkl v. Classified Risk Ins. Corp. (1964), 24 Wis.2d 595, 597, 598, 129 N.W.2d 222.
Thus in analyzing this record it will be necessary to determine on what basis Judge RASKIN granted the new trial. In his oral decision on motions after verdict the trial judge stated:
" The court: Third party complaint with costs. And I'm going to grant a new trial in the interests of justice and the controversy between the plaintiff Liens and the defendant Pitts. I believe that the case has to be retried because there were a number of very important manifestations that were omitted, not by way of strategy, as I see it, but simply a different — by following a different theory, presumably, that what the law calls for in a case of this kind. I don't think that I ought comment any further on it, because I have granted the parties or the defendants principally a new trial in the interest of justice, and I hope that if the case is to be tried, that some of the comments that the Court had made with respect to the missing testimony, missing exhibits, will become available and be brought into court, and a fuller and a more explicit hearing be given to all of the parties as to just what was really intended. I feel that it was so necessary to go into the application of the bank so necessary to have a clear understanding of what conventional — as to whether this was to be a conventional loan and what conventional loan really means. There is some evidence here, some, what amortization means, whether it means taxes and insurance as well as principal and interest."
The order, as drafted by Attorney Hays at the direction of the trial court, provided:
"The new trial in the interests of justice is ordered on the following grounds:
"1. That the facts did not warrant a trial on the basis of reformation of the contract.
"2. For the reason that a new trial should follow a different theory than that of the original trial.
"3. Because a number of very important items of proof were omitted."
From these matters it is apparent the new trial was granted out of a sense of fairness on the record, not because the trial court felt error had occurred at the first trial.
We agree that the trial court did not grant the new trial in the interest of justice upon an erroneous view the law. Thus before either party can obtain a reversal of that order an abuse of discretion must be demonstrated.
The defendants-appellants, the Pittses, insist upon this appeal, as they did at the trial, that they are entitled to a reformation of the contract so as to provide the Pittses' obligation to perform was contingent upon their obtaining the financing from one source only, the First National Bank of Glendale.
Even if it could be said the evidence was conclusive that the Pittses thought this provision appeared or was a part of the contract, it does not follow that they are entitled to reformation unless it can be shown that there was a mutual mistake, namely, that the Liens thought this provision was in the contract or that it was omitted because of the fraud of the Liens or their agents.
See Langer v. Stegerwald Lumber Co. (1952), 262 Wis. 383, 55 N.W.2d 389, 56 N.W.2d 512, and Holton State Bank v. Greater Milwaukee Food Merchants Asso. (1960), 9 Wis.2d 95, 100 N.W.2d 322.
Both the jury and the trial court, as a factual matter, found there was no fraud or mistake on the part of either the Liens or the third-party defendants, the real estate agents Winston and Mayer. The court's finding (the jury verdict was only advisory) is not against the great weight of the credible evidence and must be sustained. The trial court's conclusion that the Pittses had not proven a cause of action for reformation is approved.
The Liens, as sellers, contend that the financing provision was complied with by the sellers when they offered to take a mortgage back payable upon an amortized basis. The Pittses, on the other hand, contend that the financing provision was so indefinite as to result in a failure of an agreement (a lack of the meeting of the minds), or that their offer of a note and mortgage pursuant to the literal terms of the financing clause rejected by the Liens was a breach on the part of the Liens, justifying nonperformance by the Pittses.
It is apparent that the trial court believed the case was not tried upon the theory of the indefiniteness of the contract. The trial court was of the apparent belief `that evidence is available and should be presented as to the reason the bank turned down the Pittses' application and testimony as to the prevailing conventional loan arrangements and practices in the community.
The general rule is that: "Courts are not inclined to strike down such a contract for uncertainty if the deficiency can be supplied consistent with reasonableness in the interest of preserving the contract which parties thought they made. A contract is certain which may be made certain from the surrounding circumstances."
See Gerruth Realty Co. v. Pire (1962), 17 Wis.2d 89, 91, 92, 115 N.W.2d 557; Kovarik v. Vesely (1958), 3 Wis.2d 573, 89 N.W.2d 279.
The trial court here was convinced that competent and persuasive evidence: of the surrounding circumstances was not introduced into evidence and that the action was tried on the wrong theory.
The policy decision facing the court was succinctly stated by Professor Raushenbush in an article on contingent financing conditions as follows:
"If the court is to have a manageable task, and at the same time respect what the parties intended, it must not construe financing conditions to give too broad a discretion to buyer, for that is not what the parties intend. Nor must it attempt to write details into financing conditions that have almost no detail. I suggest that it should be ready to throw out badly drafted or vague contracts as void for indefiniteness, following the Gerruth Case. Such an approach will eventually force the drafters of purchase contracts to use adequate detail. For contracts which do contain adequately detailed financing conditions, the court must somehow judge the materiality of the details and the good faith of the buyer, hard as that task is. Such an approach would be consistent with the Kovarik and Boulevard Builders cases, and with the probable intentions of the parties."
Raushenbush, Problems and Practices With Financing Conditions in Real Estate Purchase Contracts, 1963 Wis. L. Rev. 566, 621.
It is clear that the trial court clearly believed the case was tried upon the wrong theory — that the pertinent evidence had not been introduced and that in the interest of obtaining justice a new trial should be had between the sellers and the buyers. These reasons are sufficient to warrant a new trial in the interest of justice and from our review of the record we find no abuse of discretion on the part of the trial court in ordering a new trial in the interest of justice between the sellers and buyers.
The trial court further found, in effect, that there was no evidence of fraud or negligence on the part of Winston and Mayer in the negotiations leading to the terms and the signing of the offer to purchase, nor in their conduct thereafter and entered judgment dismissing the third-party complaint. These findings of fact can be upset by this court only if they are against the great weight and clear preponderance of the evidence.
The Pittses were both college graduates. Mr. Pitts, by virtue of his professional football activities over a period of five years, had some general experience and familiarity with contracts and he stated that he knew Winston and Mayer were agents of the Liens. The disputed provisions of the contract were inserted in longhand in the presence of the Pittses; they had ample opportunity to read the contract before signing it. Both Winston and Mayer denied that the purchase was contingent upon obtaining the loan from one specific lending agency, the Glendale bank, and that it was discussed and understood by the Pittses that the mortgage would have to be paid on a monthly basis.
It is true that the third-party defendants were, as acknowledged by Mr. Pitts, primarily the agents of the Liens. However, counsel for the Pittses correctly points out that because the third-party defendants were licensed real estate brokers and agents they have a special duty not to deceive or mislead purchasers. However,
Rusch v. Wald (1930), 202 Wis. 462, 232 N.W. 875; Krzysko v. Gaudynski (1932), 207 Wis. 608, 242 N.W. 186.
"It is a rule of long standing that the signing of an instrument raises a strong presumption that its contents are understood by the signer, and such presumption is not overcome by his statements that he did not understand the nature of the instrument which he signed. [Case cited.]" Stockinger v. Central National Ins. Co. (1964), 24 Wis.2d 245, 252, 128 N.W.2d 433.
The credibility of the witnesses and the weight of the evidence is for the trier of the fact. We cannot now say the findings of the trial court are against the great weight and clear preponderance of the evidence. There is substantial evidence that supports its finding on this issue and the judgment dismissing the third-party complaint should be affirmed.
By the Court. — Judgment dismissing the third-party complaint is affirmed and third-party defendants to tax costs against appellants. The order granting a new trial is affirmed without costs.