Highland Inns Corp. v. American Landmark Corp.

• Decision Date: 12 April 1983
• Docket Number: No. WD,WD
• Parties: HIGHLAND INNS CORPORATION, Respondent, v. AMERICAN LANDMARK CORPORATION, and Overton Realty, Inc., Appellants. 33117.
• Court: Missouri Court of Appeals

Page 667

650 S.W.2d 667

HIGHLAND INNS CORPORATION, Respondent, v. AMERICAN LANDMARK CORPORATION, and Overton Realty, Inc., Appellants.

No. WD 33117.

Missouri Court of Appeals,

Western District.

April 12, 1983.

Gary G. Sprick, Fayette, for Landmark Corp.

Daniel Ochstein, Holts Summit, for Overton Realty.

Walter H. Bley, Jr., Sapp, Woods, Orr & Bley, Columbia, for respondent.

Before SHANGLER, P.J., and PRITCHARD and DIXON, JJ.

SHANGLER, Presiding Judge.

The appeal involves obligations under a contract to purchase real estate. The subject of the transaction was a Master Host Inn and grounds in the city of Columbia. Highland Inns was the seller, American Landmark was the buyer, and Overton Realty, Inc. was broker and agent for the seller. The contract provided, among other terms:

Buyer to pay seller $950,000 on closing. Subject to buyer obtaining a one year first mortgage in the amount of $1,300,000.00. If buyer has not obtained and delivered to seller a long term mortgage commitment in the amount of $1,300,000.00 on or before August 19, 1978, this contract is null and void.

A separate term of the contract required the buyer to deposit $10,000 as earnest money, with the proviso:

"Said deposit to be applied on the purchase price upon closing. If the Buyer fails to fulfill his obligations hereunder, the aforementioned deposit shall become the property of the Seller and his agent, not as a penalty, but as liquidated damages."

The buyer made the deposit, but was unable to obtain the long-term mortgage commitment within the date specified in the contract, or for some time thereafter. The seller sued for the $10,000 deposit and joined the escrow agent as well as the buyer as defendants. The defendant American Landmark counterclaimed that the Highland Inns was without right or interest in the $10,000 deposit and cross-claimed that agent Overton Realty, escrow stakeholder, was obligated to pay the deposit over to American Landmark, and sought adjudication of ownership to the money.

The court found the evidence was that agent Overton dissipated the escrow funds, and denied the counterclaim for commission. The court entered judgment for seller Highland Inns against the buyer American Landmark and the agent Overton. The defendant Overton does not appeal, either from the denial of the counterclaim for commission or from the judgment for $10,000 in favor of the plaintiff Highland Inns. The defendant American Landmark, buyer under the contract, appeals from the judgment in favor of the seller plaintiff Highland Inns. ¹

The contract for the motel purchase was executed by the principals on August 12, 1978. The purchase price of $950,000 was not due until closing. The sale transaction was subject to delivery by the buyer to the seller of a long-term mortgage commitment in the amount of $1,300,000 on or before August 19, 1978, otherwise the agreement became "null and void." The evidence was that upon the execution of the contract, the seller Highland Inns removed the property from the market. Two days after the contract was signed, on August 14, 1978, Waugh, Highland Inns president [and signatory] refused an offer from another buyer for an amount $200,000 in excess of the price American Landmark agreed to pay. There was another offer in the interim, and also refused for the reason that Highland Inns was already bound to American Landmark.

The first communication between the parties after the contract was executed on August 12th, was on August 18th, just one day before the long-term commitment was due for delivery to the seller Highland Inns under the contract. Smith, president of American Landmark, placed a telephone call for Waugh, Highland Inns president, but received by the secretary in his absence, to inform him that Smith had obtained a long-term commitment. Waugh returned the call that same day and was informed by Smith to the same effect. Smith added that the loan for the commitment was consummated with an eastern bank and would be "ready for closing the following week." Smith asked that the time to close the transaction be extended a "week or so." [The version by Smith was that he told both the secretary and Waugh only that "I thought I had a deal to get the mortgage commitment." Two Overton Realty agents also testified that Smith informed them he had obtained the commitment.] Smith also requested copies of the plans and specifications of the Master Host building and property as well as other details. Waugh agreed to the extension. No issue is made as to the specifications and other documents, so we assume that aspect of the transaction went uneventfully. From that August 18th agreement to extend performance for the long-term mortgage commitment until about the middle of September, Smith and the Overton agents continued to assure Waugh, some thirty or forty times over, that the mortgage commitment was in hand. It never came.

Highland Inns ultimately contracted on September 21, 1978, to sell the motel to Hakimi Enterprises for $900,000 and closed the transaction on October 2, 1978. Highland Inns then sued for the $10,000 as liquidated damages under the contract with American Landmark.

The court ordered escrow agent Overton to pay over the sum of $10,000 to the plaintiff Highland Inns, denied the claim of Overton for commission, and rested judgment against the defendant American Landmark on the express grounds: "that said sum is liquidated damages and that Defendant American Landmark is estopped on basis of representation made as to having secured financing." The defendant American Landmark construes the judgment as based on equitable estoppel and impugns the efficacy of that doctrine to give a litigant affirmative remedy. He cites authority that equitable estoppel may preclude a claim, but does not engender a right--it is a matter of defense, not remedy. ² The plaintiff Highland Inns joins the argument to sustain the validity of equitable estoppel as a cause of action, and thus to justify the judgment.

We do not undertake to construe whether the judgment rests on estoppel, or to decide between the contentions that the doctrine, in law, does or does not allow the remedy the court gives. The parties all claim and defend under a written contract, and the contentions are adjudicable under the usual principles of contract law: offer, acceptance, consideration, and performance, Staples v. O'Reilly, 288 S.W.2d 670, 673[1-3] (Mo.App.1956). The petition pleads a breach of contract, the American Landmark counterclaim against the plaintiff Highland Inns and crossclaim against agent Overton seeks restoration of the $10,000 sum from breach of the contract by plaintiff, and the evidence sustains the judgment for the plaintiff for breach of contract. Thus we conclude the trial court judgment came to the correct result, whatever the validity of the equitable estoppel ground [if so it be] expressed as the theory of adjudication. Lancaster v. Simmons, 621 S.W.2d 935, 942 (Mo.App.1981).

It is the entire sense of the American Landmark contention that the real estate contract "[did] not [become] operative until the mortgage commitment ha[d] been obtained," that absent that condition met, "the obligations and rights of the parties d[id] not become absolute." In a word, the defendant buyer contends that the delivery of a mortgage commitment in the sum of $1,300,000 to the seller by August 19th was the condition upon which any obligation between them arose. This argument confuses contract obligation with contract performance.

A contract transaction consists of a series of operative facts [3A Corbin on Contracts § 741, p. 446 (1960) ]:

First, there is an offer, stating the terms, the conditions, and the promises that are to be agreed upon. Next comes acceptance by the offeree. It is useful to say that the offer created a power in the offeree. The acceptance is the exercise of this power. After acceptance, the new situation of the parties is that neither can withdraw. It is useful to say that they are under obligation, that rights and duties have been created; but usually still other facts and events must occur before actual performance is due. These facts and events, although occurring subsequently to the acceptance of the offer and to the primary obligation created thereby, are conditions precedent to the duty of immediate performance and to any right of action for breach. [emphasis supplied]

The flaw in the thesis the buyer American Landmark proposes then is to assume that the signatures on the contract by the buyer and seller--offer and acceptance--created no obligation upon either of them until the mortgage funds were delivered on or before August 19th. The contract was one of bilateral terms, mutual promises for mutual performances. Middleton v. Holecroft, 270 S.W.2d 90, 92[1-3] (Mo.App.1954). The seller agreed to convey the motel premises to the buyer by warranty deed upon payment of $950,000 upon condition that the buyer obtain the $1,300,000 mortgage by August 19th--seven days hence. The buyer made the concurrent promise to--and did--deposit $10,000 in escrow "as a guarantee that the terms and conditions of this contract shall be fulfilled by the buyer." The seller promised to convey to the buyer, to the exclusion of anyone else, in exchange for the promises of the buyer to purchase the motel property for $950,000 on condition of delivery to the seller of a mortgage commitment by August 19th and the deposit of $10,000 to ensure that performance. Thus, the seller promised two performances: to remove the motel property from the market, and to convey upon a mortgage commitment and payment of a $940,000 purchase price balance. These were both deferred performances. The purchaser promised three performances: to pay a deposit of $10,000, to obtain a mortgage commitment, and to pay the $940,000 purchase price balance. One was intended as immediate performance--the $10,000 deposit--the other two were deferred. A...