822 F.2d 1432 (6th Cir. 1987), 86-5500, 60 Ivy Street Corp. v. Alexander

Docket Nº:86-5500, 86-5517.
Citation:822 F.2d 1432
Party Name:Commercial Group, Inc., (86-5517), Plaintiffs-Appellants, v. R.C. ALEXANDER and Doris Alexander, Defendants-Appellees.
Case Date:July 13, 1987
Court:United States Courts of Appeals, Court of Appeals for the Sixth Circuit

Page 1432

822 F.2d 1432 (6th Cir. 1987)

Commercial Group, Inc., (86-5517), Plaintiffs-Appellants,

v.

R.C. ALEXANDER and Doris Alexander, Defendants-Appellees.

Nos. 86-5500, 86-5517.

United States Court of Appeals, Sixth Circuit

July 13, 1987

Argued March 9, 1987.

Rehearing Denied Aug. 17, 1987.

Walter H. Crouch (argued) Waller, Landsden, Dortch, Davis, and John B. Carlson, Nashville, Tenn., for plaintiffs-appellants.

Frank Gorrell (argued) Bass, Berry and Sims, John S. Bryant, Nashville, Tenn., for defendants-appellees.

Before LIVELY, Chief Judge; BOGGS, Circuit Judge; and CELEBREZZE, Senior Circuit Judge.

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BOGGS, Circuit Judge.

Plaintiff-Appellant 60 Ivy Street Corporation ("Ivy"), a Georgia corporation, sued the Alexanders for specific performance of a contract for sale of land in Tennessee, and Coldwell Banker Commercial Group, Inc. ("Coldwell"), Ivy's agent, sued for its broker's commission due under the contract. Federal jurisdiction is based on diversity of citizenship, and Tennessee law governs. The district court granted the Alexanders' motion for summary judgment, holding that Ivy had rejected the Alexanders' offer and no contract had been created. After reviewing the record, we believe a genuine dispute existed as to the parties' intentions that was material to the question of contract formation. The grant of summary judgment was therefore inappropriate, so we reverse and remand the case to the district court.

This case was one of many that arose out of the land speculation which took place immediately after the announcement that General Motors would locate its automobile factory in Spring Hill, Tennessee. Ivy retained Coldwell to locate land available for purchase in the area. Coldwell found 339 acres of farm land owned by the Alexanders in nearby Williamson County. Ivy presented the Alexanders a written offer to purchase the property for two million dollars plus the brokerage commission or a total of $2,127,660.

The Alexanders rejected that offer by making a counteroffer on July 26, 1985. Ivy was given until August 2, 1985, to accept or reject the counteroffer, after which the offer would expire of not accepted. The Alexanders made the counteroffer by returning Ivy's written offer with several changes and additions made on that document. The basic purchase price was acceptable, but the Alexanders wanted a payment of $1,127,660 cash at close of escrow rather than the $425,000 offered by Ivy. They asked that Ivy increase the earnest money held in escrow from $25,000 to $50,000 by August 2. They required Ivy to provide a corporate resolution acknowledging authority to enter into the contract, also by August 2. They excised language indicating that the closing was conditional upon obtaining zoning approval and water availability. They agreed to accept Ivy's promissory note for the balance of the purchase price secured by a first mortgage and deed of trust in the property, although they required payments in five annual installments, rather than the seven offered by Ivy.

The controversy in this litigation, however, centers around the change made by the Alexanders to the provision for release of land from the seller's lien upon partial payment of the promissory note. Ivy's offer had contained the following language regarding release of land from the lien at any time by payment of $6,700 per acre:

2) Release of Land From The Lien:

(i) At any time after closing, Purchaser may have land released from the lien of the First Mortgage and Deed of Trust by payment of a release price of $6,700 per acre. All release price payments shall be applied to the reduction of the principal amount of the promissory note.

(ii) Upon payment of each installment of the Promisory [sic] Note, Purchaser shall be entitled to have released from the lien of the First Mortgage and Deed of Trust one acre for each $6,700.00 of such payment allocated to the reduction of principal.

The Alexanders lined out subsection (i) and replaced it with the following provision requiring the parties to agree to a schedule of release which would protect the seller's interest by providing for subordination of the seller's lien to later mortgages rather than a fee simple release and by releasing the less valuable back acreage before parcels fronting on the highway:

(i) Sellers agree to an overall Schedule of Release which shall be based upon two underlying premises: (1) an agreement of partial subordination of the $1,000,000 vendor's lien to permit up to certain acreage and monetary levels encumbrance of the property through mortgage which will be prior to Sellers and (2) a release scheme of Sellers releasing to purchaser acreage from the rear of the property

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moving forward to the front (Columbia Hwy.) of the property accompanied by initial releases sufficient to permit extension of roads and utilities. Sellers attach hereto a proposed Schedule of Release which shall be construed consistent with (1) and (2) recited herein.

The parties agree that a general development plan and Schedule of Release must be agreed upon as part of this contract.

The clause was typewritten except for the last sentence which was handwritten. The counteroffer retained subsection (ii) setting the release price at $6,700 per acre but added a typewritten sentence stating, "but such must be consistent with the Schedule of Release, attached hereto and made a part hereof."

The Alexanders, however, did not attach a schedule of release to the counteroffer. Mr. Glasgow, the Alexanders' attorney, stated in his deposition that they did not have enough information about Ivy's development plans at the July 26 meeting to agree upon a schedule. He stated that it was agreed at this meeting that Mr. Martin, Coldwell's broker and Ivy's agent, would prepare a general development plan and schedule of release by August 2. He stated that it was understood by the parties that the schedule of release had to be agreed upon by August 2 which was evidenced by adding the handwritten sentence stating that "[t]he parties agree that a general development plan and Schedule of Release must be agreed upon as part of this contract."

Ivy disagrees. Martin concedes in his deposition that he agreed to prepare a proposed schedule of release by August 2, but states that it was understood by both parties that this was to be a general conceptual document for discussion purposes only, and not a final proposal. He stated that it was understood that as Ivy had no engineers working on the plan and no soil or topological studies, a week was too short a time to prepare the kind of detailed release schedule usually seen in development plans. Ivy now argues that the parties' intention was to agree upon a schedule of release prior to closing, but that the agreement did not have to be reached by August 2. In other words, Ivy argues that the agreement on the schedule of release was a condition subsequent and not a condition precedent to the formation of the contract, so that agreement upon the release schedule was not necessary for it to accept the Alexanders' offer and form a binding contract.

On August 2, Martin and Peter Blum, president of Ivy, met with Glasgow, the Alexanders' attorney, at Glasgow's office. Blum presented the required corporate resolution and the $50,000 earnest money check, although he had not yet signed the check. Martin presented a proposed schedule of release to Glasgow. Martin stated in his deposition that he made clear the schedule was a concept for discussion purposes only, and that Blum said he would accept any reasonable proposal from the Alexanders.

Martin's proposed release schedule divided the property into a front parcel of 139.3 acres, a back parcel consisting of a 91 acre tract and an 89 acre tract, and a reserve parcel of 18 acres. It provided for a release price of $8,200 per acre rather than the $6,700 stated in the original offer. The...

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