Summary
stating that where a stipulated time is mentioned in an option contract, it becomes the essence of the contract, which must be performed within the time mentioned
Summary of this case from Metro Dev. Group v. 3D-C C, Inc.Opinion
February 3, 1950. Rehearing Denied February 28, 1950.
Appeal from the Circuit Court for Dade County, Charles A. Carroll, J.
Murrell, Fleming Flowers and Ward Ward, Miami, for appellant.
Robineau, Budd, Levenson Van Devere and Daniel Sepler, Miami, for appellee.
The appellant here, who was plaintiff below, The C.W. Kistler Company sued Hotel Martinique, Inc., appellee here, for breach of a commission agreement employing Kistler "to negotiate, secure and/or procure a loan on a hotel proposed to be built" by Martinique. The present appeal is from a final judgment on demurrer to plaintiff's second amended declaration and an additional count thereto. For clarity, the parties will be referred to as they appeared below, as plaintiff and defendant.
The agreement sued upon was as follows:
"Commission Agreement "Miami, Florida
"I, or we, hereby employ The C.W. Kistler Company a Florida corporation, to negotiate, secure and/or procure a loan of $525,000.00, or such sum as I, or we, approve and accept, on the following real estate together with the furniture, furnishings, fixtures, equipment and personal property in the buildings thereon, to-wit:
"(will be) 6423 Collins Avenue (Lots 28 29, "Blk 1, Second "Ocean Front Amended "Plan (28/28).
"located in the City of Miami Beach, County of Dade, State of Florida, and agree to pay the said The C.W. Kistler Company an amount equal to 1% of the loan agreed upon as commission for its services in negotiating, securing and/or procuring said loan, or 2% thereof as liquidated damages should I, or we, refuse to accept the loan negotiated, secured and/or procured. I, or we, agree to pay all costs and expenses incident to the said loan, including title insurance, attorney's fees, survey and photograph.
"This agreement shall be performed by the said The C.W. Kistler Company obtaining a firm commitment in writing from a responsible person, firm or corporation, on or before the 4 day of April, 1946, to make me, or us the said loan upon a mortgage upon the said property and any such firm commitment addressed by any responsible person, firm or corporation to the said The C.W. Kistler Company shall constitute the fulfillment of the performance by The C.W. Kistler Company and its duties on my or our behalf under this contract and the requirements on the part of such responsible person, firm or corporation for the proper preparation of the papers, execution of same and closing of the loan, including the customary requirements of mortgage lenders for closing loans, shall not be considered as qualifying or amended the validity of the meaning of the words `firm commitment'.
"In witness whereof, I, or we, have hereunto set my hand and seal this 12th day of March, A.D. 1946.
"Hotel Martinique, Inc. "By (s) Chas. Cohen Pres.
"Witness: "? Zarlt"
The second amended declaration was five typewritten pages long, so we will conserve space by stating the substance of its allegations. Substantially, plaintiff alleged that though a loan of $525,000 had been discussed, the defendant agreed that any loan in and about the neighborhood of $500,000 would be satisfactory; that plaintiff was correspondent for Acacia Mutual Life Insurance Company (hereinafter referred to as Acacia) and immediately entered into its duties, procured appraisals, drafted statistics and continued to negotiate on defendant's behalf with Acacia; that the negotiations continued after April 4, 1946, with defendant's knowledge, approval and consent, "so that the defendant waived the requirement of the employment contract * * * that a firm commitment in writing * * * was required to be produced by the plaintiff on or before April 4th, 1946;" that appraisals were procured at an expense to plaintiff of $700, and plaintiff incurred other expenses, including large telephone bills; that constant conferences between the parties were held and on April 15, 1946, plaintiff furnished to Acacia credit reports procured and submitted by defendant; that as a result of plaintiff's negotiations, Acacia agreed by wires of April 17 and April 24, 1946, to make a loan of $500,000 at 4 1/2 per cent interest subject to completion in accordance with the plans and specifications, provided Charles Cohen (President of defendant) personally endorsed the loan, and that a satisfactory second appraisal could be secured; that the defendant, and Cohen, individually and as defendant's president, agreed to Cohen's endorsement of the mortgage note provided he would be relieved of his endorsement when the loan was reduced to $400,000; and that defendant agreed to furnish and did furnish the second appraisal on April 29, 1946; that the second appraisal was not requested and in order until after the defendant had approved of the $500,000 commitment, and the defendant had asked plaintiff, as broker, to proceed; that thereafter on May 17, 1946 Acacia wrote plaintiff approving the loan and committing Acacia to make the loan (for $500,000, at 4 1/2%, with Cohen's endorsement, Cohen to be relieved therefrom when the loan was reduced to $400,000); that on May 20, 1946 plaintiff wrote defendant the commitment had been obtained, enclosing copy of Acacia's letter of May 17, 1946; that on May 28, 1946, after the formal commitments were issued and plaintiff's work had been consummated, the defendant enclosed a letter to the plaintiff signed by Charles Cohen, President, in typewriting, in which defendant was furnishing financial statements in consummation of the loan.
The plaintiff further alleged that its services were fully performed under the employment contract, that defendant, through no fault on plaintiff's part, refused to consummate the Acacia loan, but procured a new first mortgage elsewhere without notice to the plaintiff; plaintiff sued for 2% of $500,000 ($10,000) plus $700 expenses, plus interest on these sums from January 16, 1947, at which time defendant notified defendant it would not consummate the Acacia loan. Copies of (a) the commission agreement, (b) the Acacia wires of April 17, 1946 and April 24, 1946; (c) the Acacia letter of May 17, 1946 to plaintiff, (d) plaintiff's letter to defendant of May 20, 1946, and (e) defendant's letter to plaintiff of May 28, 1946 were all attached to and made a part of plaintiff's declaration.
The additional count filed to its second amended declaration by plaintiff realleged all matters of the declaration except the paragraph alleging damages, and in addition alleged it had done all things necessary to be entitled to 2% of $500,000, plus $700 expenses; and further, that in addition to 1% commission for the consummated loan ($5,000) it would have been entitled yearly to receive a sum equal to 1/2 of 1% of the unpaid principal of the loan under its contract and agreement with the lending agency, Acacia, and claimed $5,000 plus these sums as the measure of its damage.
One further comment on the exhibits is necessary. Plaintiff's letter to defendant of May 20, 1946 closed with this sentence: "Please sign copy of this commitment, accepting the terms as set out herein for our files". It was endorsed at the top:
"This Commitment is Accepted This ____ Day of May A.D. 1946.
"Hotel Martinique, Inc. "By ___________ President"
It clearly appeared from the declaration that this acceptance was never signed by defendant and returned to the plaintiff.
In his order sustaining the defendant's demurrer to the second amended declaration and to the additional count thereto the able Circuit Judge stated:
"The declaration under examination, with its exhibits, shows a contract between a land owner and a mortgage loan broker, to pay a stated commission to the broker for obtaining a commitment for a loan within a fixed period, or to pay certain liquidated damages if, after performance thereunder by the broker, the owner should refuse to close the loan; that the broker did not perform on or before the date specified; that he did perform later (by obtaining commitment) doing work and expending costs after the set date with knowledge, consent and encouragement on the part of the owner; that the owner refused to take the loan. There is an allegation that the owners `waived' the time element, but that allegation is construed by this court as plaintiff's legal conclusion of the effect of the alleged actions of the owner mentioned just above, and no agreement expressly extending the date for performance or fixing another later date for the performance is alleged or shown.
"Under the circumstances, the broker's right to compensation for obtaining a loan commitment after the time fixed in the contract, was dependent under the law upon the loan transaction being consummated (which was not done)."
Examination and consideration of the transcript and briefs leaves us in full accord with the views expressed by the Circuit Judge.
It seems clear that the agreement sued upon bound only the defendant. The plaintiff was bound to nothing. The defendant was bound to accept a loan commitment if the same should be offered within the time specified, and authorized the plaintiff to secure such a commitment. The defendant agreed to pay plaintiff a definite sum as commission, and a larger sum as liquidated damages if plaintiff secured the loan commitment within the agreed time and defendant failed to consummate the loan. Either way, in order to earn the commission, the plaintiff had to perform a certain act by a certain time. Says American Jurisprudence, Vol. 12, page 506, "Contracts", Sec. 8: "The term `unilateral' has also been used to describe what is sometimes denominated a contract, but which is in reality merely an offer to contract, as, for example, a promise to pay one for services if he should perform them, the latter being under no obligation to perform them. * * * Still another illustration is an agreement signed by an owner of property to pay a broker commissions in the event the broker finds a purchaser for the property, or in the event of a sale by either the owner or the broker. After the act upon which the promise is based is performed, a valid contract comes into existence."
In the case at bar, performance during the time period indicated (on or before April 4, 1946) was of the essence of the agreement.
"In case of unilateral contracts, * * * as the obligation is, before acceptance, on one side only, the proposer being bound to comply with his proposal, while the other party is under no obligation, and under no peril until acceptance, the provision of the offer as to time of acceptance is viewed with strictness. * * In such contracts the doctrine, often stated, that time is not of the essence of the contract, does not apply; that doctrine applied to contracts when made, but not to offers to make them. In case of proposals, time is of the essence as to acceptance." (Italics supplied.) Dyer v. Duffy, 39 W. Va. 148, 19 S.E. 540, 543, 24 L.R.A. 339. And where a stipulated time is mentioned it becomes the essence of the contract, which must be performed by the broker within the period mentioned. Watson v. Brooks, 11 Or. 271, 273, 3 P. 679.
An option to purchase property given upon a contemporaneous consideration other than a promise is a unilateral contract in this sense, and is analogous to the commission agreement executed by this defendant. The governing principle is the same.
This Court, in Acheson v. Smith's, Inc., 110 Fla. 240, 148 So. 576, 577, quoted with approval from Vol. 3, Words and Phrases, 2d Series, page 754: "An `option' is a continuing offer upon the part of the optioner to sell, and when limited to a certain time it is essential that it should be accepted within such time by a compliance with its terms upon the part of the optionee, and if not accepted within such time, the right to do so is lost. An `option' is not an executory contract, but is an executed one, giving a right to the optionee, by complying with the provisions of the option, to convert it into a valid and binding executory contract." Also 30 Words Phrases, Perm.Ed., p. 17.
In the present case, the plaintiff failed to perform within the time specified, and, therefore the commission agreement never became an executory contract, but failed by its own terms and fell of its own weight.
The declaration under attack nowhere alleges any express agreement to extend or enlarge the time allowed to the plaintiff to procure the loan commitment. Absent such an allegation, the acts of the defendant after April 4, 1946, which the declaration alleges "waived" the time provision, acts which show the defendant encouraged and acquiesced in plaintiff's efforts to secure from Acacia a commitment acceptable to defendant, could not change or modify, or bring to life, the expired offer to contract.
Before April 4, 1946, production of a loan commitment by the plaintiff would have subjected defendant to liability under the commission agreement. After that date, only the production of a loan commitment by the plaintiff plus acceptance thereof by the defendant, would have rendered defendant liable for a commission to plaintiff. The declaration, with its exhibits, clearly shows this never transpired. It seems clear that after April 4, 1946, defendant was free to seek a loan from any source likely to produce one, including the plaintiff. If one procured by the plaintiff was satisfactory, and was accepted, a commission would be owed to plaintiff. If one was procured elsewhere (the case made by this declaration), nothing was owed to the plaintiff.
There is another fatal defect in this declaration entirely aside from the time feature of the commission agreement.
The loan commitment proposal set out in Acacia's letter to plaintiff of May 17, and plaintiff's letter to defendant of May 20, 1946, in addition to being for a lesser amount, required additional security (Cohen's endorsement of the note). This proposal can only be considered as a counter proposal, which was never accepted, and by which no one became bound. The defendant was at liberty to reject such a counter-offer without incurring any liability for a commission.
See the statement of this Court in Taylor v. Dorsey, 155 Fla. 305, 19 So.2d 876, 878, which was a suit by a broker to recover a commission for production of a purchaser. The opinion of this Court, written by Mr. Justice Thomas says: "Before proceeding with an analysis of the letters which followed it is well to pause and examine the authorities which have dealt with situations where a broker employed to procure a purchaser ready, willing, and able to buy secured one who made a counteroffer which was eventually accepted by the seller. It seems that in such circumstances the owner is privileged to reject the counteroffer and escape liability for compensation, but if he accepts it he must pay the broker for his services. Swift v. Hale Covington Real Estate Co., 196 Ky. 446, 244 S.W. 867. If the broker has brought the parties together and a sale is effected as a result of continuous negotiations inaugurated by him, he will not be defeated in his effort to recover compensation simply because of a variation between the original terms stated by the owner and those finally accepted. Dancy, et al. v. Baker, 206 Ala. 236, 89 So. 590; 8 Am.Jur., Brokers, Page 1092."
We fail to find error in the record and the judgment of the Circuit Court is accordingly affirmed.
TERRELL, Acting Chief Justice, and CHAPMAN and HOBSON, JJ., concur.