Opinion
October 1, 1964 —
October 27, 1964.
APPEAL from a judgment of the circuit court for Milwaukee county: RONOLD A. DRECHSLER, Circuit Judge. Reversed.
For the appellant there were briefs and oral argument by Bernard C. Westfahl of Milwaukee.
For the respondents there was a brief by Wickham, Borgelt, Skogstad Powell, attorneys, and Roger S. Bessey of counsel, all of Milwaukee, and oral argument by Mr. Bessey.
Action on a promissory note. Defense, that the note was given as part of the down payment on a contract for the sale of real estate between plaintiff vendor and defendants purchasers which was breached by plaintiff. Defendants counterclaimed for damages as a result of the alleged breach, for the return of a $500 cash down payment, and for the cancellation of the note.
Plaintiff, who is a licensed real-estate broker, was the owner of a house and lot in Whitefish Bay, which he held for sale on speculation. Leo Peters, a salesman employed by Milwaukee real-estate broker Harry J. Barrett, was aware that defendants were looking for a new home. He contacted plaintiff to secure permission to show plaintiff's house to defendants. It was agreed that if Peters was able to sell the house to defendants, Barrett Realty Company was to receive a commission.
On July 18, 1961, Peters was successful in obtaining an offer to purchase by defendants. He drafted the offer on the Milwaukee Board of Realtors Form No. 994. The offer provided for a purchase price of $32,500. Five hundred dollars cash was tendered with the offer, the balance to be made up of a $2,000 promissory note, "payable upon acceptance — due payable 9/1 61," and $30,000 cash to be paid on closing. It was also provided that the seller, by his acceptance, agreed to pay Barrett Realty Company a commission of $780 upon closing. The closing of the transaction was to be on or before September 1, 1961, or at such other time as might be designated by the parties in writing. Physical occupancy was to be given to the buyers on the date of closing. Evidence of title was to be furnished at least fifteen days prior to closing. On July 18th defendants executed a judgment note in favor of plaintiff in the principal amount of $2,000 payable September 1, 1961.
At the same time Peters induced defendants to enter into a listing contract with Barrett Realty Company for the sale of the house they presently owned. According to defendants he assured them that their house would be readily salable at $23,000. The listing contract provided for a purchase price of $22,900.
Defendants contacted a lending institution and arranged a loan for an undisclosed amount to finance the purchase of plaintiff's house. According to Mr. Zache, the lending institution required evidence of title for examination two weeks prior to the making of the loan.
Late in July defendants became concerned over the fact that they had received no offers to purchase their present house. Mr. Zache testified that he approached Peters about the possibility of extending the date of closing of the transaction with plaintiff because of the lack of offers. Peters allegedly replied that an extension of closing would involve a penalty, but that Zache should not worry because there would be a buyer for his house very shortly. Peters denied saying that extending the date of closing between plaintiff and defendants would involve a penalty.
On August 18th the broker, Barrett, contacted defendants to say that he had an offer to purchase their house for $21,000. He told them this was the best they would be able to do and advised them to accept the offer inasmuch as the closing with plaintiff was rapidly approaching. In response to the question why Mr. Peters had told defendants that their house should sell for $23,000, he allegedly replied that this was to be expected of a salesman who was trying to convince someone to sign a contract.
The persons offering to purchase defendants' house needed occupancy as soon as possible. Their purchase offer expired at 5 p. m. on August 18th. Defendants accepted it at 4:45 p. m. The offer called for closing on or before September 1, 1961. On August 30th the date of closing was amended to September 15th.
According to Mr. Barrett defendants contacted him on or about August 20th to get permission to install carpeting in plaintiff's house. Permission was granted.
On August 23d defendants retained an attorney who wrote a letter to plaintiff on August 24th purporting to rescind the offer to purchase plaintiff's house and asking plaintiff to return the $500 cash and promissory note because, among other things, he had not yet furnished evidence of title. On August 25th plaintiff's attorney wrote a letter of transmittal covering, among other things, an abstract of title extended to August 18, 1961. In subsequent correspondence defendants' attorney claimed to have received the letter and abstract on August 28th; plaintiff's attorney claimed to have delivered them personally on August 25th. Prior to August 24th defendants had not demanded evidence of title from plaintiff.
On August 30th defendants delivered possession of their house to its purchasers and moved in with Mr. Zache's stepfather. They temporarily enrolled their children in a nearby school. They offered to purchase another house in October of 1961. They moved into their new home on November 26, 1961. The deed to this property bears revenue stamps totaling $29.70. If the correct document tax was paid the purchase price of this house was $27,000. Defendants financed the transaction, at least in part, by a mortgage for $15,000.
The case was submitted to a jury which returned a special verdict finding that defendants did not breach the purchase-offer contract of July 18, 1961; that plaintiff did; and assessing defendants' damages at $300. The usual motions after verdict were made and denied. From a judgment accordingly, plaintiff appeals.
The determinative issue is whether time is of the essence of the contract.
In Rottman v. Endejan (1959), 6 Wis.2d 221, 225, 226, 94 N.W.2d 596, a case dealing with a contract for the purchase of land, the court stated:
"The law is well settled that time will not be regarded as of the essence unless it is made so by the terms of the contract or the conduct of the parties. Long Investment Co. v. O'Donnell (1958), 3 Wis.2d 291, 297, 88 N.W.2d 674, and Zuelke v. Gergo (1951), 258 Wis. 267, 271, 45 N.W.2d 690.
". . . This court in Buntrock v. Hoffman (1922), 178 Wis. 5, 13, 189 N.W. 572, held that `time will not be regarded as of the essence of the contract merely because a definite time for performance is stated therein, without any further provision as to the effect of nonperformance at the time stated.'"
The defendant purchasers claim the contract was breached by plaintiff seller because he had not furnished an abstract at least fifteen days before the date set for closing.
The pertinent contract provisions are:
". . . transaction is to be closed . . . on or before 9/1, 1961, or at such other time and place as may be designated in writing by the parties hereto. . . .
"The Seller shall furnish and deliver to the buyer for examination at least fifteen (15) days prior to the date set for closing, his choice of either:
"1. A complete abstract of title, made by an abstract company, extended to within twenty (20) days of the closing, said abstract to show the Seller's title to be marketable and in the condition called for by this agreement. The Buyer shall notify the Seller in writing of any valid objection to the title within ten (10) days after the receipt of said abstract and the Seller shall then have a reasonable time, but not exceeding ninety (90) days, within which to rectify the title (or furnish a title policy as hereinafter provided) and in such case the time of closing shall be accordingly extended; or
"2. An owner's policy of title insurance. . . ."
The default provisions are:
"Should the undersigned Buyer fail to carry out this agreement, all money paid hereunder shall, at the option of the Seller, be forfeited as liquidated damages, and shall be paid to or retained by the Seller, subject to deductions of broker's commission and disbursements, if any.
"Should the Seller be unable to carry out this agreement by reason of a valid or legal defect in title which the Buyer is unwilling to waive, all money paid hereunder shall be returned to the Buyer, and this contract shall be void."
The closing date was on or before September 1, 1961, or at such other time as the parties agreed upon. The abstract could not have been delivered before August 10th because of the provision that it must be continued to within twenty days of the closing. It was continued to August 18th — twelve days before the closing. The abstract was to have been delivered fifteen days before September 1st. It was delivered on August 25th and receipt acknowledged August 28th. The contract further provided that the buyer had ten days to raise objection to the title and the seller had an additional ninety days to rectify the title.
The default provisions contain no time limitations insofar as the seller's obligations are concerned. The default entitling the buyers to rescission would have to be a valid defect in the title. There is no claim of defect in the title. Clearly, time is not of the essence under the terms of the contract.
The defendant buyers contend that the conduct of the parties was such that time did become of the essence.
It appears without dispute that the defendants, Mr. and Mrs. Zache, wanted to purchase a larger home and had talked to the salesman, Peters, on several occasions about various houses before the plaintiff's property was considered. Peters knew the plaintiff's property was for sale and asked the plaintiff if he could show it and negotiate a sale. The plaintiff informed him he could and agreed to pay Barrett Realty Company, Peters' employer, $780 (two and one-half percent of the sale price) upon closing. Peters did all the negotiating with the Zaches and prepared the offer to purchase which the plaintiff accepted on July 18th.
To finance the purchase it was necessary for the Zaches to sell their home and to obtain a mortgage loan. Peters, without knowledge or participation by the plaintiff, obtained a listing agreement to sell Zaches' home at a list price of $22,900. The Zaches were able to obtain a mortgage loan conditioned upon a merchantable title to plaintiff's property. The loaning agency advised the Zaches that it would need two weeks to examine the abstract of title to complete the loan. Mr. Zache notified Peters of these negotiations but it does not appear that either Zache or Peters informed the plaintiff. As set forth in the statement of facts, late in July Mr. Zache asked Peters to obtain an extension of time on the closing transactions for plaintiff's property because the Zaches had not as yet received an offer to purchase. Mr. Zache claimed and Peters denied that Peters stated that could not be done without penalty. The Zaches did enter a contract for sale of their home on August 18th, with possession to be given September 1st, and later extended to September 15th.
On or about August 20th the Zaches requested permission to enter the property of the plaintiff to carpet the floors. Plaintiff gave permission. This request was five days after the date set forth in the contract for the delivery of the abstract.
The Zaches argue that they had to give up possession of their home on September 1st, that the loaning agency needed two weeks to pass upon the title of plaintiff's property and that these factors made time of the essence and nondelivery of the abstract a breach of the contract entitling them to cancellation. Again it does not appear that either the Zaches or Peters notified the plaintiff of these time elements or an intention to cancel the contract until August 23d.
Where the contract does not expressly provide that time is of the essence notice fixing a reasonable time for performance must be given.
"A course of action lay open to the purchasers whereby they could have reasonably protected themselves against the contingency of being unable to secure possession by July 1st. This was to have given the vendors notice early in May fixing July 1st as the last date for closing and effecting change of possession, and stating that they would consider the contract rescinded if the sellers failed to perform by such date. None of the letters written by counsel for the purchasers is susceptible of being construed as such a notice. Because the purchasers failed to give any notice fixing a reasonable time for performance subsequent to May 1, 1957, the contract never terminated. Peyer v. Jacobs (1957), 275 Wis. 364, 367, 82 N.W.2d 202, and Phillips v. Carver (1898), 99 Wis. 561, 575, 75 N.W. 432. If such a notice had been given, the sellers might have been spurred into such action as paying the tenant a sum to vacate, or using the notice as a ground for the circuit court taking more-prompt action to decide the unlawful-detainer appeal and issue the writ of restitution." Rottman v. Endejan, supra, page 227.
Applying this quotation to the facts herein, the Zaches were required to give the plaintiff notice fixing a reasonable time. Because of their failure to do so the contract did not terminate.
It is urged that Peters was the agent of the plaintiff and that notice to Peters was notice to the plaintiff. Under the facts of this case as to the crucial negotiations, Peters was the agent of the Zaches and not of the plaintiff. Peters knew the Zaches wanted to purchase a home and discussed it with them on several occasions before the plaintiff was ever contacted. The plaintiff did not seek out Peters nor the defendants Zaches. Peters contacted the plaintiff on behalf of the Zaches. The plaintiff had no part of nor even knowledge of the contract between the Zaches and Peters for the sale of their home. All of the terms, negotiations, and time elements of the sale of the Zache home were negotiated by the Zaches, Peters, and the purchaser. Under these facts the plaintiff cannot be bound by the knowledge of Peters.
Resolving all of the testimony conflicts in favor of the defendants Zaches, we conclude there is not sufficient credible evidence in the record nor reasonable inference therefrom to warrant a jury finding that the conduct of the parties made time of the essence of the contract or that the contract was breached by the plaintiff seller.
The plaintiff was ready, willing, and able to perform the contract within a reasonable time. The Zaches breached the contract by refusing to carry it out.
By the Court. — Judgment reversed, and cause remanded with directions to enter judgment for the plaintiff upon the promissory note of July 18, 1961.