Childress v. Cook, 16360.

Decision Date18 June 1957
Docket NumberNo. 16360.,16360.
Citation245 F.2d 798
PartiesL. N. CHILDRESS and Roger W. CRAMPTON, Appellants, v. E. A. COOK, Jr., Appellee.
CourtU.S. Court of Appeals — Fifth Circuit

COPYRIGHT MATERIAL OMITTED

Curtis E. Hill, E. L. Markham, Jr., Dallas, Tex., for appellant, L. N. Childress.

Brannan & Brannan, Wichita Falls, Tex., for appellant, Roger W. Crampton.

Kearby Peery, Peery & Wilson and Tom D. Glazner, Wichita Falls, Tex., for Appellee, E. A. Cook, Jr.

Before HUTCHESON, Chief Judge, and TUTTLE and JONES, Circuit Judges.

TUTTLE, Circuit Judge.

These are cross-appeals by both defendants from a judgment of the district court sitting without a jury, in which appellant Childress appeals from the entire judgment entered against him in favor of the plaintiff-appellee Cook and from as much of the judgment on a cross-claim as was entered against him in favor of Crampton, while appellant Crampton, defendant and cross-claimant below, appeals from only so much of the judgment as denies part of his cross-claim against Childress.

On August 1, 1955, Crampton entered into an agreement with certain owners of vacant real estate in downtown Wichita Falls, Texas, whereby he received an option to purchase the property for $415,000, provided he deposited $10,000 in earnest money in escrow with the First National Bank of Wichita Falls by 10:00 A.M. on August 3rd, this sum to be applied as part of the purchase price to be paid in whole on or before October 1st, or to be forfeited to the sellers if the transaction was not consummated by that time. Crampton thereupon executed a promissory note for $10,000 to the bank, on which he obtained the endorsement of his father-in-law, Cook, as surety, which note was to be used to obtain the sum required to be placed in escrow when the bank received further instructions from Crampton. He then entered into several lease agreements with three potential tenants of the building he planned to erect, who agreed to pay monthly rentals totalling at least $3,685 for a term of 15 years. At that point he was informed by a real estate agent that the latter had heard of a tentative offer of $10,000 for the entire deal as thus far developed.

On the morning of August 3rd Crampton visited Childress and entered into a written contract with him whereby the latter agreed to secure the necessary financing for the purchase of the property and the erection of the building, and to relieve Cook of any liability in connection with the above note, in return for a three-fourths interest in the property. The agreement in pertinent part reads as follows:

"That L. N. Childress will secure the necessary financing to erect a building on the premises suitable to satisfy the terms of the above leases, and particularly L. N. Childress will, within forty (40) days from this day, relieve E. A. Cook, Jr. from any and all liability on a certain note for Ten Thousand ($10,000.) Dollars held by the First National Bank of Wichita Falls, Texas, as security for an escrow deposit on the above contract sale, provided that the above described leases are executed by financially sound Lessees as represented by Roger W. Crampton."

Crampton thereupon instructed the bank to conclude the escrow arrangements in accordance with the agreement between him and the owners of the property. Childress suggested certain changes in the proposed building plans submitted to him by Crampton, which the latter completed by about August 17th, at the cost of $800 in architect's fees.

Childress never took any steps to relieve Cook from his liability on the $10,000 note, as the contract required him to do before September 13th, and he never secured the necessary financing to enable Crampton to comply with the terms of the purchase agreement, and consequently on October 1, 1955, the $10,000 earnest money was forfeited. Crampton being unable to honor the note, it was paid by Cook.

Cook, a citizen of Nebraska, thereupon brought a diversity suit in the court below against Crampton and Childress, both citizens of Texas, for recovery of the $10,000. Crampton filed a cross-claim against his codefendant in which he alleged the latter's breach of the contract between them, and prayed that he should be required to pay (1) the entire amount of Cook's claim, as well as (2) damages to Crampton: $10,000 for the loss of the value of the leases, $800 for the architect's fees incurred in modifying the plans in accordance with Childress' demands, and lesser amounts for other incidental expenditures.

The court, after a trial without a jury, entered findings of fact that Childress had breached his contract with Crampton and that Crampton had breached his earlier agreement to indemnify Cook, in that neither had reimbursed the latter for the $10,000 he had been required to pay; that Childress had wrongfully breached his contract with Crampton without any fault on the latter's part; that the leases had a "reasonable cash market value" of $10,000 when the contract was entered into but that they became worthless when Crampton was unable to purchase the property; and that the $800 expense for the architect had been incurred at the instance of Childress who knew that if he breached his agreement Crampton would have to forfeit the $10,000 earnest money, lose the value of the leases, and lose the amount of the architect's fees. Judgment was entered for $10,000 with interest in favor of Cook against both defendants, with a proviso that Crampton should recover from Childress any part of the judgment that he paid to Cook, as well as $800 with interest. No reference is made either in the Conclusions of Law or in the judgment to the $10,000 Crampton claimed for the value of the leases.

On this appeal Childress' principal contention is that he never became liable to either Cook or Crampton on his contract with the latter, for there was no evidence of fulfillment of the alleged condition precedent:

"* * * provided that the above described leases are executed by financially sound Lessees as represented by Roger W. Crampton."

or at least that plaintiff did not carry his burden of proving the fulfillment of that condition and that the court erred in failing to admit and to consider parol testimony with respect to the meaning of the proviso. He also complains that the court erred in not finding that Crampton's delay in revising the building plans prevented the accrual of any obligation Childress had under the contract, for by the time the plans were ready it was too late for him to obtain the necessary financing from outsiders to whom the revised plans would have to be shown.

Considering first the latter objection it appears from Childress' testimony itself that at no time either before or after Crampton submitted, after some delay, the proposed building plans and brochures (all were certainly ready by September 1st) did Childress indicate that the delay in doing so made him unwilling or unable to proceed with his obligation under the agreement. As a matter of fact all indications were that he did intend to proceed with it, and thus he waived any possible breach on the part of Crampton and estopped himself from later rescinding the contract because of the alleged delay, for a timely disclaimer of Childress' rights and obligations under the contract might have enabled Crampton to make alternative arrangements to finance or sell the deal during the month of September or October, upon payment of an additional $1,000 to extend the option one month. The trial court found specifically that:

"The contract of August 3, 1955, between Childress and Crampton was wrongfully breached by Childress without any fault on the part of Crampton."

This finding is amply supported in the record and is certainly not "clearly erroneous," rule 52(a), Fed.Rules Civ. Proc., 28 U.S.C.A.

The first contention presents greater difficulties, for the trial court made no findings specifically relevant to this point, except perhaps for the conclusionary finding quoted above, nor did it indicate in what manner it construed the proviso. The evidence shows that as to the three leases there was testimony that the $2,600 per month agreement was made with a party said to be worth in excess of $300,000 who operated several other parking establishments; the $825 per month agreement was made with the Renfro Drug Company which operated a chain of apparently solvent drug stores; the $260 per month lease was made with a party who owned two other shoe stores in town, had cash assets of about $67,000, an approximate net worth of about $30,000, a Dun & Bradstreet rating of E-2, and who testified that he considered himself financially able to carry out the terms of the lease. The court in informally summarizing the contentions of the parties as to this point said:

"* * * the evidence here makes a fairly strong case for the view that these leases were good leases, and certainly one or two of them appear to be very solid leases, backed up by much business experience and strong assets and good business reputation.
"I don\'t really see how there could be convincing contention that these leases were flimsy and unstable as far as financial reliance is concerned."

The record would thus certainly support an implied finding that the leases were executed by "financially sound lessees." Childress, however, contends that the words "as represented by Roger W. Crampton" modify the phrase to mean a much higher standard of financial responsibility than would ordinarily be implied by it. Childress testified that Crampton had told him that all these were "blue chip leases"; Crampton testified that he had not made any such guarantee and that the modifying phrase had been included at his insistence only to show that he had indicated to Childress that he had made no thorough investigation of the lessees' credit standing and would therefore be unable to guarantee that they were in fact responsible, but only that he had not misrepresented their...

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