Curley v. Mobil Oil Corp., 88-1295

• Decision Date: 12 September 1988
• Docket Number: No. 88-1295,88-1295
• Citation: 860 F.2d 1129
• Parties: Agnes B. CURLEY, Plaintiff, Appellee, v. MOBIL OIL CORPORATION, Defendant, Appellant. . Heard
• Court: U.S. Court of Appeals — First Circuit

Page 1129

860 F.2d 1129

Agnes B. CURLEY, Plaintiff, Appellee, v. MOBIL OIL CORPORATION, Defendant, Appellant.

No. 88-1295.

United States Court of Appeals First Circuit.

Heard Sept. 12, 1988.

Decided Nov. 8, 1988.

Robert M. Gault with whom John C. Plotkin, Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C., Boston, Mass., and Charles B. Straus, III, were on brief, for defendant, appellant.

Charles B. Swartwood, III with whom Dale R. Harger and Mountain, Dearborn & Whiting, Worcester, Mass., were on brief, for plaintiff, appellee.

Before CAMPBELL, Chief Judge, TORRUELLA, Circuit Judge, and ATKINS, ^* Senior District Judge.

LEVIN H. CAMPBELL, Chief Judge.

Mobil Oil Corporation ("Mobil") appeals from the district court's ruling after a bench trial that Mobil violated an agreement between the parties for the purchase and sale of land. Mobil also appeals from the district court's alternative ruling that, even if Mobil did not violate the agreement, it is not entitled to specific performance. We reverse both rulings.

I. FACTS AND PRIOR PROCEEDINGS

The relevant facts are not in dispute. Mobil owned a gas station in Leominster, Massachusetts (the "Mobil property"). In order to expand this gas station, in November 1970 Mobil leased from Agnes B. Curley ("Curley") a piece of land (the "Curley property") adjacent to the Mobil property. Mobil subsequently renovated the gas station on its own property, and made Curley's property part of the gas station by altering it in the following ways: 1) it tore down a house on the Curley property; 2) installed gasoline storage tanks underneath the Curley property; 3) paved part of the Curley property; 4) built a small portion of the gas pump islands on the Curley property; 5) built an entrance to the gas station on the Curley property; and 6) erected lights and a large Mobil sign on the Curley property. Mobil leased the entire gas station, including the sublease of Curley's property, to Barney Wood, the gas station proprietor.

The lease between Mobil and Curley, dated November 18, 1970, gave Mobil

the exclusive option, exercisable at the expiration of the fixed term of this lease or any renewal or extension thereof, to purchase the premises ... for the sum of seventy-five thousand Dollars ($75,000). This option may be exercised by the giving of written notice from [Mobil] to [Curley]. [Mobil] shall have sixty (60) days thereafter for examination of title and at 10:00 A.M. on the day following expiration of said sixty (60) day period [Curley] shall deliver to [Mobil] at North Worcester County Registry of Deeds, a good and valid full quit claim deed....

The form lease, prepared by Mobil, had initially called for a "full covenant warranty deed," but the parties changed this to require that Curley deliver a "full quit claim deed." While Curley warranted in another paragraph of the lease that "the leasehold is good and marketable, free and clear of all liens and encumbrances ...," Curley's ownership of a small portion of the lot was limited to an undivided one-fourth interest. However, the district court found that Mobil had known of, and acquiesced in, this defect in title to the entire leasehold.

The original lease had a term of ten years. It was extended for another five years in 1981, the new term to expire on November 30, 1986. Several months before November 30, 1986, Mobil asked Curley to extend the term again; Curley spurned this request. Instead, Curley offered to purchase the Mobil property. Mobil rejected this counterproposal.

Mobil decided to exercise its option to purchase the Curley property and then resell it to Barney Wood along with its own, adjacent property. In a letter dated November 11, 1986, Mobil exercised its option to purchase the Curley property:

Pursuant to the provisions of ... said lease, Mobil ... hereby notifies you that it has elected to and does hereby exercise its option to purchase the premises covered by said lease for the sum of seventy five thousand ($75,000) dollars.

As provided for in ... the lease, you will deliver a valid full covenant deed at 10:00 a.m. on the day following the expiration of a 60 day title examination period from the date of this notice. Accordingly, delivery of the deed by you will be at 10:00 a.m. January 11, 1987 at the North Worchester [sic] County Massachusetts, Registry of Deeds unless some other time and place is mutually agreed upon.

The letter incorrectly called for a "valid full covenant warranty deed" instead of the quitclaim deed specified in the lease agreement. In addition, January 11, 1987, the closing date set by the letter, fell on a Sunday.

January 11, 1987, came and went without any closing taking place or any communication between Mobil and Curley. This was due in part to Mobil's bureaucratic inertia, and in part to the financing arrangements of the parties involved. Mobil wanted to simultaneously close on its purchase of the Curley property and on its planned sale of both that property and its own property to Wood. By proceeding in this way, Mobil could finance its purchase of the Curley property with proceeds from the sale of the entire gas station to Wood. However, Wood apparently was unable to arrange financing by January 11. Curley neither objected to nor acknowledged the delay.

It was not until March 1987 that Mobil, apparently believing that Wood had arranged financing and that the time was ripe for a simultaneous closing, attempted once more to arrange for the closing. On March 3, 1987, Mobil sent a letter to its agent, Lawyers Title Insurance Company, directing it to arrange a simultaneous escrow closing of the Curley-Mobil transaction and the Mobil-Wood transaction. The letter indicated that the March 1987 rent Mobil owed Curley "should be prorated and deducted from the proceeds." The letter also stated, "Please contact all parties involved and arrange a closing at everyone's earliest convenience. Please forward the closing statement and net proceeds to my attention once closing has occurred."

Mobil sent Curley a copy of its March 3 letter. However, March and part of April went by without Curley hearing anything further concerning a closing date. Curley was concerned that Mobil, which had become a month-to-month tenant under the terms of the lease when it exercised its option to purchase on November 11, 1986, had not paid the March or April rent. Curley, who had never wanted to sell her land, consulted with her grandson and attorney, John Curley. On April 17, 1987, John Curley wrote Mobil to repudiate Curley's agreement in the lease to sell her property to Mobil. The letter cited as reasons for this repudiation the fact that Mobil's November 11 letter set a closing date on a Sunday and also erroneously demanded a warranty deed rather than the quitclaim deed specified in the lease. The letter also noted that Curley had not received "any notice of any date, time or place when closing would occur" after receiving a copy of Mobil's March 3 letter. Because of these actions and its failure to tender the purchase price "within the time limit contained in [the lease]," Mobil "forfeited any right to purchase the property under the terms" of the lease.

Upon receiving this letter, Mobil immediately tendered the rent it owed Curley. It also insisted that Curley had no right to repudiate the agreement arising out of the purchase option in the lease and threatened litigation to enforce the agreement. In a letter dated June 16, 1987, Mobil tried to arrange a closing in June 1987. The letter also referred to a title search that revealed that "Mrs. Curley only owns a one-quarter ( 1/4) interest in the subject property, which is contrary to her warranty in the lease," and asked Curley to "clarify the extent of [her] ownership ... immediately." This concern about Curley's title to her property had arisen earlier in a letter John Curley received from Steven Bik, a local attorney retained by Mobil. In this letter, dated April 17, 1987 (received just after Curley had repudiated the agreement), Bik stated that Barney Wood's attorney would accept Curley's "title provided you give us your assurance that you will cooperate in any Land Court action that may be initiated to clear up this defect."

On June 25, 1987, Curley brought this action against Mobil in Worcester County Superior Court, seeking a declaratory judgment establishing that the terms of the lease had expired on November 30, 1986, that Mobil's option to purchase the Curley property had terminated and was unenforceable, and that Curley had no responsibility to remove an alleged defect of title. Mobil removed the action to the district court, and counterclaimed that, among other things, Curley had violated her agreement in the lease to sell her land. Mobil sought specific performance of the agreement.

The case was tried without a jury. The district court ruled that Mobil's March 3 letter had made "time of the essence" and consequently Mobil had committed a breach of the contract by subsequently "failing to proceed to close the transaction within a reasonable period of time." Given this, the district court ruled that Curley was justified in repudiating the agreement in her April 17 letter. The district court also held in the alternative that "should it be held on appeal that Mobil ... proceeded in a timely fashion, specific performance is denied...." Mobil appeals from these rulings. ¹

II. WHO BREACHED THE AGREEMENT?

The district court's ruling that Mobil's March 3 letter made time of the essence, and that Mobil thereafter committed a breach of the purchase and sale agreement by not arranging a closing within a reasonable time, is a mixed question of law and fact. We consequently review the district court's decision under the clearly erroneous standard of Fed.R.Civ.P. 52(a). See Fortin v. Commissioner of Massachusetts Department of Public Welfare, 692 F.2d 790, 794 (1st Cir.1982); Sweeney v. Board of Trustees of Keene State College, 604...