Goodwin, Inc. v. Coe

• Decision Date: 01 November 1973
• Docket Number: No. 2,2
• Citation: 392 Mich. 195,220 N.W.2d 664
• Parties: GOODWIN, INC., a Michigan corporation, Plaintiff-Counter-Defendant-Appellee, v. Orson E. COE and Orson E. Goe, Pontiac, Inc., a Michigan corporation, Defendants-Counter-Plaintiffs-Appellants. ,
• Court: Michigan Supreme Court

Page 664

220 N.W.2d 664

392 Mich. 195

GOODWIN, INC., a Michigan corporation Plaintiff-Counter-Defendant-Appellee, v. Orson E. COE and Orson E. Goe, Pontiac, Inc., a Michigan corporation, Defendants-Counter-Plaintiffs-Appellants.

No. 2, Nov. Term, 1973.

Supreme Court of Michigan.

Aug. 2, 1974.

Warner, Norcross & Judd, Grand Rapids (William K. Holmes and William H. Heritage, Jr., Grand Rapids, of counsel), for plaintiff-counter-defendant-appellee.

Cholette, Perkins & Buchanan, Grand Rapids (Edward D. Wells, Grand Rapids, of counsel), for defendants-counter-plaintiffs-appellants.

Before the Entire Bench.

WILLIAMS, Justice.

This case forcefully demonstrates the costly consequences of formally contracting to buy and sell realty without describing it precisely in metes and bounds. The written contract of the parties refers to the realty conveyed merely as:

'. . . property owned by Seller on 28th Street, Grand Rapids, Michigan, approximately across from Berger, Chevrolet, . . .'

As the facts of this case illustrate, such a description was sorely deficient.

Two issues are raised for our consideration:

First, did the trial court properly receive parol evidence of the negotiations of the seller and buyer prior to the execution of their written contract, in order to determine the meaning of the term 'property owned by Seller' in that contract?

Second, can the seller be heard on this appeal to object to the admission of parol evidence of prior negotiations when he raised no objection at trial?

We answer both questions in the affirmative. Accordingly, the Court of Appeals is reversed and the trial court affirmed.

I--TRANSACTION FACTS

The parties commenced negotiations in the fall of 1966 for the sale of the sole Pontiac dealership in Grand Rapids, owned by Goodwin, Inc., to Mr. Coe. Their negotiations were conducted largely at informal meetings at restaurants.

On February 8, 1967, the parties with their attorneys executed multi-faceted buy-sell contract. The terms of that written agreement pertinent to the sale of the Pontiac dealership provided that seller (Goodwin) sell its assets, equipment, and inventory to buyer (Coe), assign the lease of its Madison Avenue premises to buyer for temporary use:

'. . . pay for the construction of a building and improvements, including used car layout, drives, and parking areas, On property owned by Seller on 28th Street, Grand Rapids, Michigan, approximately across from Berger, Chevrolet, . . .' (Emphasis added.) ¹

and lease that building and property to buyer.

The buyer, Coe, purchased Goodwin's equipment and inventory, temporarily took possession of the Madison Avenue premises, and commenced operating the Grand Rapids Pontiac dealership.

On January 5, 1968, however, the date found by the trial court to be the date for performance of the contract, the buyer refused to execute the lease for 'property owned by Seller on 28th Street' because it did not encompass three acres at the southwest corner that buyer had understood the contract of sale to include (T 115, 226). See Appendix A for map showing configuration of property. The seller did not in fact own this acreage, but the buyer contends that he was induced to believe seller owned it by the seller's oral and written representations made prior to the execution of their 1967 written agreement.

The seller, Goodwin, sued the buyer for breach of contract. The buyer, Coe, defended by alleging material misrepresentation by seller of the size and shape of the 28th Street property, and counterclaimed for breach of contract for the seller's failure to lease him 'all' the property on 28th Street, including the disputed three-acre parcel.

The buyer testified at trial that the seller had orally represented that the two parcels comprising the 28th Street property constituted 15 acres (T 15, 16). Seller contended, however, that it had described its property as consisting of 13 acres only (Seller's Deposition, p. 14; T. 388). Furthermore, it is the buyer's claim that the seller either misrepresented or inadvertently misdescribed the 28th Street property and diagrammed it as having a straight western boundary.

The buyer testified that prior to the signing of their written agreement, the seller's President diagrammed the 28th Street property, at a luncheon meeting, on a bar napkin (which was lost and not introduced at trial) as follows:

'. . . he told me it was approximately 450 or 500 feet of frontage, and going from the northwest corner of the property, Back straight to the railroad tracks, which run diagonally to the southeast, farther than 450 feet; then, a line straight north, back.' (Emphasis added.) (T 14--15).

The seller's President, however, testified in his deposition, portions of which were introduced into evidence at trial (T 388, 389), that he did not recall ever telling the buyer the western boundary was straight; that he only represented that the property extended back to the railroad tracks. (Deposition, p. 15).

In fact, the front parcel, which is basically rectangular, has 450 feet of frontage on its northern boundary bordering on 28th Street, and 550 feet of depth. The back parcel, however, conjoins only 245 feet (instead of 450 feet) of the southern boundary of the front parcel, as it is offset 205 feet to the east of that parcel. The back parcel, which is oddly shaped on its eastern border, is approximately 600 feet in depth going back to the railroad tracks. (Appendix A.)

Therefore, buyer contends that only after signing the February, 1967, contract but before executing the lease, did he discover that the back parcel was offset to the east of the front parcel, causing a three-acrejog in the western boundary and a bottleneck of 245 feet where the two parcels adjoined. Buyer contends that this rendered the 28th Street property totally unsatisfactory for construction of Grand Rapids' sole Pontiac dealership showroom and facilities since automobiles are best displayed on basically rectangular premises. Also, buyer testified that only after execution of the contract did he discover that seller's title to the 28th Street property was clouded--by an easement across the property, and by the reservation of dirt removal rights by the land contract vendors which if exercised would result in a dropoff of approximately 16 feet between the two parcels. ²

II--TRIAL AND APPELLATE FACTS

The case was tried before the court without a jury. There was no objection to the receipt of parol evidence at trial regarding the property intended to be sold.

Each of the parties introduced extrinsic evidence of prior negotiations to prove his case. Goodwin, the seller, called Coe, the buyer, as its first witness to cross-examine him, under the opposite party statute M.C.L.A. § 600.2161; M.S.A. § 27A.2161, as to his recollection of their prior conversations regarding the 28th Street property, and of the sketch diagram of the property the seller had drawn on the bar napkin. Seller sought to show by extrinsic evidence that the parties had made a fully integrated contract and that the words 'property owned by Seller's were unambiguous.

The buyer, Coe, also called the seller's President under the opposite party statute to establish that the seller's recollection of their prior negotiations was comparatively vague, and to elicit extrinsic evidence probative that 'property owned by Seller on 28th Street' was ambiguous, or that the contract was not a fully integrated agreement, or that the agreement was induced by the seller's misrepresentations.

During the trial, the court did not rule on whether the parol evidence was admissible, but in his 'findings of fact and conclusions of law' the trial judge found there was ambiguity in the term 'property owned by Seller.' The Court further found that the parties had agreed upon the sale and purchase of a larger piece of property than the Seller in fact owned:

'. . . there was a meeting of the minds between Mr. Goodwin (seller's President) . . . and (Mr. Coe, buyer) on the configuration of the property to be used as a site for the proposed construction on 28th Street, which meeting of the minds encompassed a property boundary on the west which was straight and without 'the jog' of which we have heard so much . . . The meetings (sic) of minds occurred as a result of a mistake on the part of Mr. Goodwin (seller's President). This mistake may be categorized as a misrepresentation; it may have been on purpose; it may have been sincere or it may have been simply the result of carelessness, indifference or inattention. I don't think the Court really has to determine the reason for the mistake. But the Court does find that Mr. Coe's (buyer's) description of what happened during the negotiations prior to execution of the written contract on February 8, 1967, were (sic) correct--that the west boundary was to be a straight one. The Court bases this conclusion to a good extent on the demeanor of the parties on the witness stand. Mr. Coe was very certain in his recollection of these negotiations and the explanation by Mr. Goodwin of the configuration of the property. Mr. Goodwin, on the other hand, was somewhat vague both during trial and during prior deposition testimony.' (244a).

Applying the principle that he who commits the first substantial breach of contract cannot recover from the other for subsequent failure to perform, Jones v. Berkey, 181 Mich. 472, 480, 148 N.W. 375 (1914), the trial judge found that the seller, Goodwin, having first materially breached by failing to enter into a lease of 'all' the 28th Street propertyIncluding the disputed 3-acre parcel that he had represented he owned (and which he could have purchased), was not entitled to damages from the buyer.

The court awarded the buyer, Coe, $181,000 in damages on his counterclaim for breach of contract by the seller.

The Court of Appeals reversed, finding that the words in the written contract 'owned by' had

'. . . a clear...