Opinion
June 6, 1960 —
June 28, 1960.
APPEAL from a judgment of the circuit court for Waukesha county: WILLIAM E. GRAMLING, Circuit Judge. Affirmed.
For the appellants there was a brief by Ray T. McCann and oral argument by Richard A. McDermott, both of Milwaukee.
For the respondents there was a brief and oral argument by Charles L. Goldberg, attorney, and Francis X. Krembs of counsel, both of Milwaukee.
Action by the plaintiffs Joseph J. Megal (hereinafter referred to as "Megal") and Belvina A. Megal, his wife, against the defendants Edwin Kohlhardt (hereinafter referred to as "Kohlhardt") and Viola Kohlhardt, his wife, for specific performance of an option to purchase 20 acres of land. The defendants counterclaim for judgment quieting title in themselves as to such 20 acres and also as to an additional 38 acres of land with respect to which the defendants had granted options to purchase to the plaintiffs, which options the defendants allege had expired.
The defendants Kohlhardt are owners of 58 acres of land in the town of Menomonee in Waukesha county. On March 17, 1956, after preliminary discussions, plaintiff Megal and his agent, one Fohl, met the defendants at their home. The defendants then entered into a written option agreement giving Megal the right to purchase the 58 acres of land at a price of $2,500 per acre, for which option Megal paid the defendants $1,000. Such option was dictated by Megal to the defendants' daughter, a legal secretary, who typed the document. This option was only intended as a temporary document to be replaced later by option agreements to be drafted in recordable form by an attorney. On March 21. 1956, the defendants met with Megal at the office of Adolph Mandelker, plaintiffs' attorney. Mandelker had drafted three separate option agreements. One covered the east 20 acres of the 58-acre tract; a second covered the middle 20 acres of such tract; and the third one covered the west 18 acres of such tract. While the original option had run to Megal, these newly drafted options ran to Mr. and Mrs. Megal.
The option covering the east 20 acres read as follows:
"For and in consideration of $1,000 Dollars, the receipt of which is hereby acknowledged, paid to the undersigned Edwin Kohlhardt Viola Kohlhardt, his wife, owners, by Joseph J. Megal and Belvina A. Megal, the option is hereby given to the said Joseph J. Megal and Belvina A. Megal to have the exclusive right to purchase within a term of (1) one year from the date hereof, the following property. viz: [the legal description of the 20-acre tract] for the sum of Fifty Thousand ($50,000) Dollars, upon the following terms: Nine Thousand ($9,000) sixty (60) days from date hereof; Fifteen Thousand ($15,000) ninety (90) days from date hereof; and the balance of Twenty Five Thousand ($25,000) one (1) year from date hereof. The said Edwin Kohlhardt Viola Kohlhardt, his wife, owners. agree to furnish a complete abstract showing merchantable title to date of sale and will convey title by warranty deed on said property when the balance of the purchase price is paid to the owners. In case the property is sold under this option, the sum paid for the option shall be credited upon the purchase price. If this option is not exercised. payment made herewith shall be forfeited and this option shall be canceled.
"In witness whereof, we have here unto set our hands and seals this 21st day of March, A.D., 1956.
"Signed and sealed in presence of "Adolph I. Mandelker "Isabel Williams
"Edwin Kohlhardt (Seal) "Viola Kohlhardt (Seal)" The option covering the middle 20 acres recited a payment of $2,000 as consideration for the option, called for a total payment of $50,000, and required $8,000 thereof to be paid sixty days from the date of the option, and the remaining $40,000 two years from the date of the option. The option covering the west 18 acres also recited a payment of $2,000 as consideration for the option, specified a total purchase price of $42,500, and required an additional $13,000 to be paid sixty days from the date of the option, and the remaining $27,500 three years from the date of the option. Except for the differences in terms of payment and legal descriptions of the property, the three options were otherwise identical in wording. These three options were recorded by Megal in the office of the register of deeds of Waukesha county.On May 3, 1956, while Kohlhardt was working about some hotbeds on the premises, Fohl stopped to see him and informed Kohlhardt that Megal was having some trouble in securing a rezoning of the property. Fohl then asked Kohlhardt if he would agree to extend the options and payments due thereon until the premises, which were then zoned for agricultural purposes, would have been rezoned for local business purposes. As a consideration for such extension, Fohl stated that Megal would pay interest at five per cent on the unpaid balance of the option payments to be deferred under such extension. Kohlhardt agreed to this. Later on the same date, Fohl returned to the premises with an extension agreement which had been personally drafted by Megal which read as follows:
"Payments due May 21st, 1956, on options numbered 435083, 435084, and 435085, recorded in the Waukesha county courthouse at Waukesha, Wisconsin, shall be extended to read as follows:
"Payments shall be due at the time of the rezoning of the agricultural lands mentioned, to local business. All delinquent payments shall bear interest at the rate of five per cent per annum and payable each month as they become due."
Kohlhardt signed the extension agreement which was also signed by Megal. The evidence is in dispute as to whether the document already bore Megal's signature when Fohl presented it to Kohlhardt for his signature, or whether Megal signed it some time later.
The purpose Megal had in mind for acquiring the 58 acres was for a shopping center. Kohlhardt testified that he had not been informed of this at the time of the signing of the options but it was discussed at the time the extension agreement was executed. On the other hand, both Megal and Fohl testified that the Kohlhardts had been informed that this was the purpose in the negotiations prior to the signing of the options. After the options had been signed, Fohl had approached the town clerk to have the tract rezoned from its existing classification which restricted the use to agricultural purposes. The town clerk told Fohl that there was under consideration a proposal to rezone other portions of the town for business purposes. He suggested that Megal wait until the General Use Map "came out," in order to see if the Kohlhardt tract was rezoned thereby for local business purposes, rather than attempting to secure separate rezoning action limited to the Kohlhardt property only. It was because of this suggestion of the town clerk that Fohl had approached Kohlhardt on May 3d and obtained the extension agreement.
An ordinance accomplishing a general rezoning of the town of Menomonee was adopted by the town board on February 14, 1957, and was approved by the county board of supervisors on March 12, 1957. Such tatter approval was necessary in order to make the ordinance effective. This ordinance rezoned the Kohlhardt 58-acre tract as a "Local Business District."
After the extension agreement of May 3, 1956, had been obtained, Megal had architects prepare several proposed plats for a shopping center to be located on the Kohlhardt premises and submitted the same to one Nelson, who was then the executive director of the Waukesha county parks and planning commission. The first of such plats bore date of May 25, 1956, and the last April 16, 1957. Nelson refused to approve any of such plats.
At the trial Nelson was asked this question and gave this answer thereto:
"Q. Does that ordinance as it now provides permit the erection of a shopping center on the site in question? A. By specific definition, may I elaborate, a shopping center, as it is maintained, has a group of buildings as an organized plan without individual buildings. On the present lots it could not be built under the ordinance. To create the unification of buildings and side yards to fit the uses it required some change."
However, Fohl testified at the trial that the types of business which Megal intended to place in the proposed shopping center were all included within the specified uses permitted under the new zoning ordinance in a local business district. Fohl further stated that the proposed plans for the shopping center complied with the setback, side-yard, and maximum-height limitations of the ordinance. A certified copy of the zoning ordinance was received into evidence and seems to support this testimony so given by Fohl. At no time did Megal or Fohl ever submit an application for a building permit to construct the proposed shopping center.
After the extension agreement of May 3, 1956, was entered into, Megal paid to the Kohlhardts by check each month the monthly interest of five per cent on those portions of the unpaid purchase prices under the three options, payment of which had been deferred, until Kohlhardt caused to be returned the check of $187.50 tendered on or about April 21, 1957. The prior check of March 20, 1957, covering the March interest was retained and cashed.
Kohlhardt consulted an attorney about the failure of Megal to make the payments of purchase price due under the extension agreement, after the rezoning ordinance had been adopted and approved. Such attorney in behalf of Kohlhardt on April 24, 1957, wrote to Megal as follows:
"Mr. Edwin Kohlhardt was in my office today regarding the delinquent payments that you owe on the options you have on his farm. These have been delinquent since the property was rezoned for business purposes last February and he is requesting that you arrange to pay these amounts at this time together with interest to date."
Following this letter, negotiations were had between the attorneys of the respective parties whereby the Megals sought a further extension of time, but no agreement was reached. Then on October 24, 1957, a document entitled, "Notice of Exercising Option," was signed by the Megals and served upon the Kohlhardts. Such notice stated that the Megals were exercising their option to purchase the east 20 acres and that this was being done "even though the contingency provided for in the agreement of May 3, 1956, pertaining to rezoning of the above-described premises, has not been accomplished." It further declared that the Megals were ready, willing, and able to purchase the east 20 acres of the tract upon the Kohlhardts' furnishing satisfactory evidence of title, either in the form of an abstract, or of a report preliminary to the issuance of a title insurance policy in the sum of $50,000. Such notice further said that the Megals would notify the Kohlhardts before the original expiration dates of the other two options as to whether they wished to "waive the contingency provided for in the supplemental agreement dated May 3, 1956."
Thereafter, the instant action for specific performance was begun and the defendants counterclaimed for the purpose of quieting title to the entire 58-acre tract. The action was tried to the court without a jury. The trial court by its memorandum decision, findings of fact, and conclusions of law, determined that the plaintiffs Megal had failed to make the payments required to be made by them after the premises had been rezoned for local business on March 12, 1957, and, therefore, the options ceased to be effective, and that the later-attempted exercise by the plaintiffs on October 24, 1957, of the option with respect to the east 20 acres was void. It was further held that the recording of the three options constituted a cloud on the defendants' title.
Judgment was accordingly entered November 13, 1959, dismissing the plaintiffs' complaint on the merits and, pursuant to the prayer of the counterclaim, barring all right, title, and interest of the plaintiffs in and to the 58 acres. From such judgment the plaintiffs have appealed.
The following issues are presented on this appeal:
(1) What effect did the rezoning of the 58-acre tract as a "Local Business District" by the town ordinance, which became effective March 12, 1957, have upon the options as amended by the extension agreement of May 3, 1956?
(2) Had all three options expired prior to the time that the plaintiffs served the notice of attempted exercise of option on October 24, 1957?
(3) Are the defendants estopped from claiming that the plaintiffs defaulted in making the payments required under the options as amended by the May 3, 1956, extension agreement?
(4) If the foregoing three questions are answered adversely to the plaintiffs, are they entitled to recover the moneys already paid by them to the defendants?
No contention has been advanced that the agreement of May 3, 1956, in itself constituted an election by the plaintiffs to exercise the options. The subsequent conduct of the parties was predicated on the assumption that such agreement of May 3, 1956, was only an extension of the options, and not an exercise of them.
Effect of the Rezoning.
The plaintiffs point to the fact that Kohlhardt knew when he signed the extension agreement that the plaintiffs desired to use the premises for a shopping center, and contend that the extension agreement of May 3, 1956, must therefore be construed as extending the time, in which the plaintiffs were to make any required payments of purchase price under the options, until the premises had been rezoned for use as a shopping center. In view of the testimony of Nelson, director of the Waukesha county park and planning commission, it is argued that the rezoning ordinance which became effective March 12, 1957, did not accomplish this result.
The plaintiff Megal was engaged in the business of developing land and, therefore, had considerable experience in zoning matters. He drafted the extension agreement of May 3, 1956, and, when he employed therein the expression "at the time of the rezoning . . . to Local Business," he must have been satisfied that such rezoning to a local business district did permit use of the premises for a shopping center. It is elementary that, if a contract is ambiguous, it must be construed most strongly against the party who prepared it. Ebenreiter v. Freeman (1956), 274 Wis. 290, 296, 79 N.W.2d 649.
We doubt, however, if the above-quoted words of the extension agreement are ambiguous. In order to read into them the meaning contended for by the plaintiffs it would be necessary to reform the instrument. Nowhere in the plaintiffs' complaint do they set forth a cause of action for reformation. Furthermore, we are satisfied under the wording of the rezoning ordinance, coupled with the testimony given by Fohl, that a shopping center could be erected on the premises as it is now zoned as a "Local Business District." Nelson in his testimony pointed out no specific provision of the ordinance which would bar such use.
Because such rezoning ordinance did comply with the terms of the extension agreement, certain payments then became due under all three options. With respect to the option covering the east 20 acres, $24,000 thus became due, and the remaining $25,000 became due March 21, 1957. With respect to the other two options, the payment of a total of $21,000 originally due sixty days after March 21, 1956, was postponed under the extension agreement until the rezoning had been accomplished, and then became due.
Expiration of the Options.
Ordinarily time is of the essence of an option, and acceptance must be made, and conditions performed, within the time limited by the option. 91 C.J.S., Vendor Purchaser, p. 859, sec. 11; 55 Am. Jur., Vendor and Purchaser, p. 509, sec. 40; and 8 Thompson, Real Property (perm. ed.), p. 516, sec. 4573. In accord with such rule, this court declared in Mueller v. Nortmann (1903), 116 Wis. 468, 470, 93 N.W. 538, that "a mere option does not ripen into a contract, and become a binding obligation upon the grantor, unless accepted by the holder within the time limited therein, and according to its terms, and that the rights under such an option expire on the date limited, without notice or declaration of forfeiture." See also Anderson v. Riegel (1938), 229 Wis. 200, 208, 281 N.W. 915.
Where an option by its terms is to be exercised upon the happening of an event instead of by a fixed date, the optionee is accorded a reasonable time after the occurrence of such event within which to exercise the option. Fleischman v. Zimmermann (1951), 258 Wis. 194, 45 N.W.2d 616, and Caughey v. Ames (1946), 315 Mich. 643, 24 N.W.2d 521. This is the situation in the instant case with respect to the payments to be made by the plaintiffs under the extension agreement of May 3, 1956. The specified event was the rezoning of the premises for local business use. Such event occurred March 12, 1957, and the plaintiffs were entitled to a reasonable time thereafter within which to make the required payments then due under the options as modified by the extension agreement. We have no difficulty in determining that such reasonable time had expired long before the plaintiffs served on October 24, 1957, their notice of election to exercise the option with respect to the east 20 acres. This is so even after taking into account that such reasonable time was extended as a result of the defendants' part in the negotiations for an extension. Therefore, all three options had already expired prior to the time of the service of such notice.
Estoppel.
The plaintiffs advance the further contention that the defendants are estopped by their conduct from claiming an expiration of the options prior to the time that the plaintiffs served on October 24, 1957, their notice of election to exercise the option with respect to the east 20 acres.
Such conduct consists of the fact that the defendants entertained negotiations prior to October 24, 1957, for a further extension of time within which the plaintiffs should make the payments which became due when the rezoning ordinance took effect on March 12, 1957. The record does disclose that on June 11, 1957, defendants' counsel did submit to plaintiffs' attorney a counterproposal whereby, if the plaintiffs would then pay $9,000 on the east 20 acres, $8,000 on the middle 20 acres, and $13,000 on the west 18 acres, the time for payment of the remaining $40,000 on the east 20 acres would be postponed until October 1, 1957. The plaintiffs did not accept such counterproposal.
We fail to perceive that such conduct of the defendants constituted an estoppel. Its only effect was to keep open the time within which the plaintiffs could make the payments that had fallen due. The plaintiffs would be entitled to a reasonable time after submission of such counterproposal within which to accept the same. After expiration thereof, or rejection of the counterproposal, the status of the plaintiffs with respect to the options reverted to what it was before such counteroffer was submitted. There was no duty on the part of the defendants to declare a forfeiture as a condition precedent to the options expiring. Mueller v. Nortmann, supra, and Anderson v. Riegel, supra.
There is a further reason why the plaintiffs are not entitled to prevail with respect to their argument grounded on estoppel. Ordinarily a party must plead the facts giving rise to the estoppel in order to raise such issue. Karlen v. Trickel (1926), 189 Wis. 148, 153, 207 N.W. 273. This the complaint of the plaintiffs and their reply to the counterclaim did not do.
Return of Plaintiffs' Payments.
The plaintiffs maintain that, even if all of the foregoing contentions are decided adversely to them, they are entitled to the return of the $5,000 paid to the defendants for the options together with the monthly interest payments paid from May, 1956, through March, 1957. In this connection they contend that it was error for the trial court to have excluded offered evidence that the value of the 58 acres had increased subsequent to entering into the options in March, 1956.
The claimed right to return of the moneys paid is grounded on unjust enrichment. As authority for such position, the plaintiffs cite Schwartz v. Syver (1953), 264 Wis. 526, 59 N.W.2d 489. However, the distinction between that case and this one is that in the Schwartz Case we were dealing with a contract for sale of realty and here we have options. It is stated in 8 Thompson, Real Property (perm. ed.), p. 505, sec. 4569:
"An option is not an actual or existing contract, . . . The option is not a sale. It is not even an agreement for a sale. . . . It is a continuing offer to sell which may or may not, within the time specified at the election of the optionee, be accepted. The owner parts with the right to sell to another for such time and gives to the optionee' the exclusive privilege to buy on the terms set forth in the option." (Emphasis supplied.)
In cases of an unexercised option there is no forfeiture in the sense that exists with respect to a contract for the sale of realty. The optionee merely pays a consideration for the optionor's not revoking his offer to sell and selling to another during the option period. If the optionee lets the option period expire without exercising the option, he nevertheless has had the benefit of the consideration that he paid for the option. Because this is so, there is no reason of policy why he should receive a refund of the money paid for the option. It is merely a fortuitous circumstance that the value of the optioned premises may have increased during the option period instead of having declined.
By the Court. — Judgment affirmed.
HALLOWS, J., took no part.