Opinion
September 8, 1953 —
October 6, 1953.
APPEAL from a judgment of the circuit court for Winnebago county: HELMUTH F. ARPS, Circuit Judge. Affirmed.
For the appellants there was a brief by Dougherty, Arnold Waters of Milwaukee, and oral argument by Suel O. Arnold.
For the respondent there was a brief by Thompson, Gruenewald McCarthy of Oshkosh, and oral argument by Marvin L. McCarthy and Robert R. Thompson.
For some years prior to 1950 plaintiffs were the owners of a large estate situated on the south shore of Lake Geneva in Walworth county. They engaged the impleaded defendant, Clem A. Bohr, doing business as Bohr Sales Company, to conduct an auction sale of the property. As agents for plaintiffs, Bohr prepared and caused to be distributed a brochure which described the property and set forth the conditions of sale. There was nothing in the brochure indicating that the property could be used for residence purposes only; on the contrary, it contained the statement: "Don't forget the Unlimited Possibilities of this Property such as Private Club, Exclusive Eating Place, Private School, Church Assembly, and Resort," and other similar representations.
The property was in fact incumbered by two restrictive covenants entered into by the prior owners of the property and of adjoining property, and a county zoning ordinance, all of which restricted the use of the property to residence purposes only, and all of which were matters of public record.
The trial court found upon sufficient testimony that at the opening of the sale Bohr announced that the brochure contained an error in its references to the possible and permitted use of the property, and that it could be used for residence purposes only. The court found also, and upon sufficient testimony, that defendant, the successful bidder, did not hear the announcement. The property was first offered in parcels and then as a whole. Defendant bid $87,000 for the whole and the premises were knocked down to him.
Immediately after the sale a memorandum was prepared and signed by Bohr as agent for the plaintiff s and by the defendant. It contained these provisions:
"It is mutually agreed between the parties hereto that the said first party will furnish the said second party with an abstract of title completed to date by a reputable abstract company showing good merchantable title to the same to be owned in the name of the party of the first part free and clear of all liens or incumbrances except: . . .
"Said second party will have at least thirty days in which to have the abstract examined by an attorney of his own selection.
"It is mutually agreed between the parties hereto that should the abstract upon examination prove unmerchantable, the first party will have at least thirty days in which to correct such defects. In the event, however, the defects cannot be corrected in the time above allowed and the parties cannot agree on a further extension of time in which to correct the same, then the said first part- agree to refund any of the down payment made and return any papers executed in accordance with the terms and conditions of this contract.
"Should the second party refuse to comply with the terms and conditions of this contract, then the first party may retain the down payment as liquidated damage and declare the contract void, or the first party may at his option sue for specific performance of the contract."
It provided that $20,000 should be paid down, "balance of settlement when abstract of title to your satisfaction."
A check for $20,000 was given to Bohr, but he was asked to hold it until the next day. On the next day defendant and Bohr met at Antioch, Illinois, where defendant paid Bohr $20,000 in cash and received in return the check.
On the day of the sale or the following day another memorandum was prepared. In his memorandum opinion the trial judge states that the evidence is not clear as to the day upon which it was prepared and executed (but it appears rather clearly that it was made after the one first above referred to). This memorandum is not signed by the defendant. It bears the signatures of "Clem A. Bohr, auctioneer," and "Earl A. Espeseth, real-estate broker," the latter an associate of the former. Its provisions are as follows:,
"Memorandum of Real Estate Sold at Auction.
"The undersigned auctioneer certifies that Jos. Patrovsky was the highest bidder on and purchaser of the real estate owned by Lasker Boiler Engineering Company described in the sales agreement hereto attached, the entire contents of which are incorporated herein by reference as if here fully set forth; and that attached hereto, signed by said purchaser, is a written confirmation of such purchase setting forth the price and terms, designated `Bid on Real Estate at Auction,' which in its entirety is hereby incorporated herein by reference.
"The intent and purpose hereof is to bind both the named seller(s) and the named purchaser(s) in the sale of the real estate described by reference at the price and according to the terms set forth by reference.
"The undersigned real-estate broker joins in the execution of this memorandum made on the date of said sale contemporaneously with this sale."
Attached to the memorandum is the following:
" The property listed in this brochure will be sold subject to the following terms and conditions:
"1 — The word `company' wherever used in these conditions of sale means the Bohr Sales Company as clerks.
"2 — The company has exercised reasonable care to catalogue and describe correctly the property to be sold, but they do not warrant the correctness of description of property.
"3 — The highest bidder accepted by the auctioneer shall be the buyer. In the event of any dispute between bidders, the auctioneer may, in his discretion, determine who is the successful bidder and his decision shall be final; or the auctioneer may reoffer and resell the article in dispute.
"4 — Terms on Sale of Real Estate: 25 per cent down of purchase price, balance within thirty days. If you desire terms on balance of purchase price take up the matter with representatives of the company. Liberal terms can be arranged.
"5 — Each accepted purchaser of real estate will be required to sign a written contract in a form which is open for inspection.
"6 — Possession of real estate will be given on or before April 1, 1950.
"7 — Should the purchaser refuse to comply with the terms and conditions of the sale, the company may retain the down payment as liquidated damage and declare the contract void or the seller may, upon his option, sue for specific performance of the contract.
"8 — Sales will not be invalidated by errors or misdescription of the size of the parcel of land sold or of the improvements which may be thereon, and the purchaser hereby waives any claim or right he might otherwise have by reason of any such error or misdescription and agrees that, if the property sold can be identified by the description as given or any part thereof, he will accept same at the full price bid in complete satisfaction and fulfilment by the seller and the auctioneers of all their and each of their obligations.
"9 — The company are acting as agents only and are not responsible for the acts of their principals. The name and address of the person placing any property for sale will be given to the purchaser thereof upon request.
"10 — The sale is subject to and with the benefit of all rights, obligations, undertakings, easements, restrictions, and reservations appearing of record, or referred to in any instrument of record so far as now in force and applicable thereto; subject to 1950 general real-estate taxes and special assessments, if any, and subject to the right of the county of Walworth, state of Wisconsin.
"11 — Any sale may be adjourned or continued by the seller or the auctioneers or the company prior to the property being struck off without any liability to anyone on the part of either the seller or the auctioneers or company. If so adjourned or continued, no further notice shall be necessary.
"12 — The foregoing terms of sale may be changed by announcement made prior to the property being struck off and the purchaser shall be bound by any announcement so made."
The attached instrument is signed by "Bohr Sales Co., clerks" "Joe Sherven, auctioneer" and "Frank Brady, Earl Espeseth, real-estate brokers." It is not signed by the defendant. He denied that he had ever seen either paper, as did his wife who testified that she was with him at the sale.
Upon discovery of the provisions of the zoning ordinance and those of the restrictive covenants defendant refused to pay the balance of the purchase price. Plaintiffs brought this action against defendant for judgment declaring that the down payment had been forfeited as liquidated damages. Defendant counterclaimed for recovery of the down payment and demanded that Bohr be interpleaded. Bohr was impleaded and required by an order to deposit the $20,000 with the clerk of the court subject to the court's further order. He deposited only $5,000. As to the balance, $15,000, the trial judge said:
"The court must assume — in the absence of any proof to the contrary — that the remaining balance of $15,000 thereof has never been accounted for by Mr. Bohr to any of the parties to this action aside from himself."
On July 14, 1952, judgment was entered dismissing the complaint, and granting defendant recovery against the plaintiffs and Bohr of $20,000 and costs. The clerk was directed to pay to the defendant the $5,000 escrow, that amount to be credited as a part payment on the defendant's judgment. Plaintiff s appeal.
Plaintiff s contend that defendant was bound by the auctioneer's oral announcement at the sale that the premises could be used only for residence purposes, and that the representations made in the advertisement of sale fall out of the case. They are right, and unless the execution of the first memorandum made after the premises were knocked down requires the application of rules defeating them, they should prevail. In Keske v. Boeder, 168 Wis. 369, 170 N.W. 247, it was held that auction sales are subject to conditions announced by the auctioneer upon the opening of the sale, and that the conditions announced bind all bidders whether they in fact hear them or not. To the same effect see Clarke v. Maisch, 171 Wis. 225, 177 N.W. 11.
No Wisconsin case has been called to our attention, nor have we been able to find one, in which was considered the question whether such oral announcement of conditions supersedes those contained in an advertisement or notice of the sale. We may assume, without deciding the point, that they do. See Kennell v. Boyer, 144 Iowa, 303, 122 N.W. 941; Ashcom v. Smith, 2 Penr. W. (Pa.) 211, 21 Am. Dec. 437.
What is the effect of the memorandum made immediately after the premises were knocked down to the defendant? By its terms plaintiffs were required to furnish "good merchantable title . . . free and clear of all liens or incumbrances." It is the generally accepted rule that in the absence of fraud or mistake a written contract merges and incorporates all prior and contemporaneous negotiation in reference to the subject, and that it represents the whole bargain of the parties and the extent of their respective engagements., Derbeck v. Albright, 186 Wis. 515, 203 N.W. 337. No mistake or fraud is charged. The rule requires that we hold that the memorandum which is not attacked as being ambiguous in any of its terms takes precedence over all negotiations had before or contemporaneously with its execution, and that it represents the entire agreement of the parties. It requires that title free and clear of all incumbrances be furnished. Incumbrances do exist, and plaintiffs were unable to perform.
Plaintiffs cite Clarke v. Maisch, 171 Wis. 225, 177 N.W. 11, as authority for their contention that the announcement made by the auctioneer constitutes a part of the contract. The case is not authority for their contention. At the opening of a public sale of lots it was announced by the auctioneer that an abstract of title was at a bank for the use of bidders. The court said that the implication of the announcement was that no other abstract was to be furnished. A memorandum of sale was executed. It was silent as to abstract. Defendant's demand for a separate abstract was denied and upon that ground he refused to perform. The question, really the only one, was whether upon the sale of real estate there is upon the vendor an implied obligation to furnish the vendee an abstract. The court held that there is not.
It is suggested that Bohr was not authorized to execute the first memorandum on behalf of plaintiffs; that he exceeded his authority in so doing. See Kelly v. Holbrook, 191 Mass. 565, 77 N.E. 1037. The answer to that is in the following:
The plaintiff, Seymour Lasker, appears to have been present at the sale representing all of them. He was accompanied by his attorney, a Mr. Berns. Bohr testified that "everything pertaining to the auction sale of the Lasker estate was in the hands of Mr. Lasker and his attorney, Mr. Berns." Defendant testified that there were present at its execution, among others, Bohr, Lasker, and Berns; that both Lasker and Berns assured him that he could use the property for any purpose. The presence of Lasker and Berns is not denied by either of them, but each denied that he or either had given the assurance claimed by defendant. There is quoted a question put to the attorney and his reply:
"Q. Isn't it a fact, Mr. Berns, that Mr. Patrovsky asked you, just prior to signing the contract, whether as a friend you would advise him to go ahead with it or whether he was getting into any trouble by signing the contract? A. Well, that was more or less the substance of what he had in mind and he tried to express, and I told him that inasmuch as he bought it at the sale I would advise him to sign the contract and put up the earnest money."
The mere presence of Lasker and his attorney at the execution of the memorandum in addition to the fact that they, or at least the attorney in Lasker's presence, not only discussed it but urged defendant to sign it, certainly constitutes a ratification of Bohr's act in preparing it. It was really more than ratification — it was participation.
The plaintiffs contend, however, that we must give effect to what we have designated as the second memorandum which, by reference to its attached paper, provides that the sale "is subject to . . . all restrictions and reservations appearing of record. . . ."
The court found upon satisfactory evidence that the conditions of sale attached to the second memorandum were not attached to the first, and that defendant did not know of its existence.
Plaintiffs urge that the second memorandum is binding upon the defendant although not signed by him personally. It is true, as they contend, that for some limited purposes an auctioneer is deemed to be the agent for both parties at a public sale, particularly for the purpose of signing the contract. Bamber v. Savage, 52 Wis. 110, 113, 8 N.W. 609. It is said, however, in the Bamber Case that "the memorandum of the auctioneer, to bind the purchaser, must be contemporaneous with the sale." The first memorandum was signed by the defendant. It closed the transaction and terminated the proceedings. There was no occasion for the auctioneer to act on defendant's behalf thereafter. He had lost his status as defendant's agent. Consequently, the second memorandum has no binding effect upon the defendant.
It is contended by plaintiffs that the title offered is not unmerchantable; that the zoning ordinance and the restrictive agreements do not constitute incumbrances upon the land. As to the zoning ordinance they are correct. Miller v. Milwaukee Odd Fellows Temple, 206 Wis. 547, 240 N.W. 193; Kend v. Herbert Finance Co. 210 Wis. 239, 246 N.W. 311; 55 Am. Jur., Vendor and Purchaser, p. 705, sec. 250. The contrary is true, however, as to the restrictions as to the use of real estate placed thereon by agreement, and which impose more onerous burdens than those imposed by law. 55 Am.Jur., idem, p. 702, sec. 246.
The restrictions contained in the agreements here involved exceed those contained in the ordinance. They prohibit occupancy for any hospital or charitable use; the ordinance permits "philanthropic or eleemosynary institutions." They prohibit "clubs;" the ordinance permits private clubs and fraternities. They prohibit public amusement parks or grounds; the ordinance permits public parks and golf courses. They prohibit railway termini; the ordinance permits railroad stations.
The provision in the agreements prohibiting any use inconsistent with the maintenance and preservation of the area as first-class residence property would prohibit use for cemeteries, churches, colleges, schools, gardening, farming, libraries, museums, nurseries, greenhouses, telephone and telegraph offices, all of which are expressly permitted by the ordinance. Some, if not all, of these uses permitted by the zoning ordinance would violate the provision of the agreements that the property shall be used only for first-class residence purposes. See Anno. 175 A.L.R. 1191.
The restrictions imposed by the agreements are incumbrances and prevent plaintiffs from giving a deed as is contemplated by the memorandum. Consequently, defendant was justified in refusing payment of the purchase price and is entitled to recover the down payment. Neff v. Rubin, 161 Wis. 511, 154 N.W. 976; Genske v. Jensen, 188 Wis. 17, 205 N.W. 548; Goodman v. Kortsch, 196 Wis. 70, 219 N.W. 354.
Plaintiffs contend that the court erred in entering judgment of $15,000 against them. They urge that Bohr when he received the $20,000 from the defendant acted as agent for both the owners and the. buyer, and that since the former did not receive the $15,000 which apparently Bohr retained, they should not be required to make good to defendant. The contention is without merit. It cannot be successfully contended that Bohr was without authority to receive the payment on behalf of the plaintiffs, 5 Am. Jur., Auctions, p. 452, sec. 9, nor do we find any authority to sustain any claim that an auctioneer, when he accepts payment, holds the money for the bidder.
By the Court. — Judgment affirmed.