Koets, Inc. v. Benveniste

• Decision Date: 05 December 1983
• Docket Number: No. 66344,66344
• Citation: 169 Ga.App. 352,312 S.E.2d 846
• Parties: KOETS, INC. v. BENVENISTE et al.
• Court: Georgia Court of Appeals

Page 846

312 S.E.2d 846

169 Ga.App. 352

KOETS, INC. v. BENVENISTE et al.

No. 66344.

Court of Appeals of Georgia.

Dec. 5, 1983.

Rehearing Denied Dec. 20, 1983.

Certiorari Granted Jan. 26, 1984.

Timothy J. Sweeney, Perry A. Phillips, Atlanta, for appellant.

George S. Stern, Shiel G. Edlin, Atlanta, for appellees.

SOGNIER, Judge.

Morris and Marilyn Benveniste, purchasers, sued Koets, Inc. (Koets), vendor, to recover $15,000 earnest money paid at the time the parties entered into a real estate sales contract for the purchase of a house and lot. Koets counterclaimed for damages resulting from the Benvenistes' alleged breach of the contract. The contract, executed on May 25, 1981, provided: "Purchaser shall have until June 15, 1981 to arrange a swing and/or permanent financing. Should such financing not materialize all earnest money shall be refunded to Purchaser." The contract further provided that the sale was to be closed on or before July 15, 1981, and specified that time was of the essence. On July 5, 1981, the Benvenistes informed Koets that the sale would not close. In the interim, Koets had performed certain customizing work on the house pursuant to contract specifications after the Benvenistes allegedly informed Koets that financing was no problem and the work should proceed. Both parties moved for summary judgment. The trial court granted summary judgment in favor of the Benvenistes as to the principal amount of $15,000, reserving for jury determination issues of punitive damages, attorney fees, and interest. Koets appeals.

1. Appellant contends that the trial court erred by granting summary judgment in favor of appellees on the main action and on appellant's counterclaim. Appellees contend that they were entitled to summary judgment because the contract was void for vagueness, lacked mutuality, and was therefore unenforceable. Appellees base their contention upon the contract contingency provision as to financing. However, our Supreme Court held in Brack v. Brownlee, 246 Ga. 818, 273 S.E.2d 390 (1980), that a discretionary contingency provision placed in a real estate sales contract for the purchaser's protection does not render the contract unenforceable for lack of mutuality where the purchaser has provided consideration for the contract by paying earnest money. Inasmuch as all clauses impose a discretionary contingency upon performance of the contract, we find nothing to distinguish the contingency financing clause in the contract in the instant case from similar clauses interpreted in Brack, Potts v. Smith, 134 Ga.App. 737, 215 S.E.2d 697 (1975), and Alodex Corp. v. Brawner, 134 Ga.App. 630, 215 S.E.2d 527 (1975), the latter two cases having been expressly overruled by Brack. As sufficient consideration was provided by appellees' payment of earnest money, the contract in the instant case was not rendered void by the discretionary financing contingency provision. Brack, supra 246 Ga. at 819, 273 S.E.2d 390.

Insofar as Harrington v. Norris B. Strickland & Assoc., 161 Ga.App. 518, 289 S.E.2d 17 (1982) is contrary to the opinion rendered in Brack, supra, it is overruled. While Harrington might have been decided on a different premise--that the purchaser is entitled to a refund of earnest money because the condition precedent of obtaining the loan was not fulfilled despite his good faith efforts (see Brack, supra, 246 Ga. at 822, 273 S.E.2d 390)--it was not. Instead, the holding announced that: "There being no mutuality, there was no contract and thus no obligation to purchase." Harrington, supra, 161 Ga.App. at 519, 289 S.E.2d 17. This holding is contrary to the principle underlying Brack: "[M]utuality is not required where there is consideration for a contract other than merely mutual promises...." Brack, supra, 246 Ga. at 820, 273 S.E.2d 390. The facts in Harrington, supra, disclose that as in Brack and in the instant case, payment of earnest money provided the necessary consideration to support the contract. See Brack, supra 246 Ga. at 819, 273 S.E.2d 390.

We feel that the language of the Harrington decision, which refers several times to the purchaser's ability to procure the loan as the contingency depriving the contract of mutuality, belies the reliance of the dissent upon any factual distinction between "ability to procure" versus "procurement" clauses. We do note, also that while the Brack court did not expressly overrule F & C Investment Co. v. Jones, 210 Ga. 635, 81 S.E.2d 828 (1954), the Alodex decision, which Brack did overrule, relied directly upon Jones for its authority. See Alodex, supra, 134 Ga.App. at 631, 215 S.E.2d 527. It is our conclusion that Brack holds that a discretionary financing clause, whether contingent upon "procurement" or "ability to procure," does not vitiate the entire contract for lack of mutuality. Brack, supra, 246 Ga. at 821, 273 S.E.2d 390.

2. Appellant contends that a question of fact remains as to whether appellees exercised diligence and good faith in seeking to obtain financing. "[T]he purchaser has an implied duty 'to diligently seek to have (the financing) contingency take place.' [Cit.] This implied duty must be exercised in good faith. [Cit.]" Brack, supra at 819, 273 S.E.2d 390. In an affidavit in support of the motion for summary judgment, appellee Morris Benveniste described his unsuccessful efforts to obtain swing loans or permanent financing from three lending institutions. This evidence was uncontroverted. OCGA § 9-11-56(e) (Code Ann. § 81A-156) provides: "When a motion for summary judgment is made and supported as provided in this Code section, an adverse party may not rest upon the mere allegations or denials of his pleading, but his response, by affidavits or as otherwise provided in this Code section, must set forth specific facts showing that there is a genuine issue for trial." In the absence of any evidence showing a lack of diligence and good faith on appellees' part, the trial court did not err in finding that no fact questions remain on this issue. Cf. Johnson v. C. & S. Bank, 144 Ga.App. 515, 516-517, 241 S.E.2d 625 (1978).

3. Appellant contends that issues of fact remain as to whether appellees waived the financing condition of the contract and whether appellees are estopped from asserting that the contract is void due to nonfulfillment of the financing condition. We agree.

Appellant's president testified by affidavit that on June 16, 1983 Morris Benveniste assured him that financing was no problem and that appellant should proceed with the customizing of the house, which appellant did in reliance on Benveniste's statements. Benveniste's affidavit denied that appellant was so informed.

a. A financing condition, which is included in a real estate contract for the purchaser's protection, may be waived by the purchaser. Brack, supra, 246 Ga. at 820, 273 S.E.2d 390. See Blower v. Jones, 226 Ga. 847, 848(2), 178 S.E.2d 172 (1970); Whitley v. Patrick, 226 Ga. 87, 89(3), 172 S.E.2d 692 (1970). See also Blanton v. Williams, 209 Ga. 16, 17(a), 70 S.E.2d 461 (1952). Appellees argue that no waiver occurred in the instant case because the condition precedent for financing failed on June 15, and since time was of the essence, the contract automatically terminated on June 15, 1981, prior to the date of the purported waiver. However, even though the contract stated that time was of the essence this provision could be waived, and conduct either before or after the deadline for obtaining financing could show waiver. "Timely performance may be waived orally when acted on by one or both of the parties." Edwards v. McTyre, 246 Ga. 302, 303(3), 271 S.E.2d 205 (1980). See also Smothers v. Nelson, 246 Ga. 216, 218, 271 S.E.2d 137 (1980); Perry Dev. Corp. v. Colonial Contr. Co., 231 Ga. 666, 668(4), 203 S.E.2d 475 (1974). Thus, issues of fact remain as to whether appellees waived the financing contingency provision either before or after the date specified.

b. The contract provided that no modification of it was binding except by written agreement signed by the parties. Hence, appellees argue that the deadline for procurement of financing could not have been extended without compliance with the contract provision for modification. However, this provision would not preclude the waiver of the financing contingency or of its timely expiration by the conduct of appellees--the parties for whose benefit the contingency was included. Bolton v. Barber, 233 Ga. 646, 648, 212 S.E.2d 766 (1975). See also Perry Dev. Corp., supra; J.E.M. Enterprises v. Taco Pronto, 145 Ga.App. 573(1), 244 S.E.2d 253 (1978).

c. "The doctrine of estoppel is predicated upon a change of position to the hurt of one of the parties acting on the representations or conduct of the other." Morgan v. Maddox, 216 Ga. 816(1)(d), 120 S.E.2d 183 (1961). "[I]n order for an equitable estoppel to arise, the party seeking such an estoppel must have been 'misled to his injury.' " McFarland v. Beardsly, 148 Ga.App. 645, 646(2), 252 S.E.2d 72 (1979). In his affidavit appellant's president stated that he had "intentionally waited for the financing OK before doing the customizing work"; that much of the work had been completed by July 5, 1981, when appellees informed him the sale would not close; and that much of the customization had to be changed to prepare the house for later sale. Estoppel is usually an issue of fact, Hall v. Rogers, 225 Ga. 57, 58, 165 S.E.2d 829 (1969), and issues of material fact remain in the instant case as to whether appellees are estopped to rely on the expiration of the financing contingency as a basis for denying the validity of the contract.

d. Since appellant's claim for damages arises from either the asserted waiver or estoppel, or both, a question of fact likewise remains on the issue of damages. See Dozier v. Matthews, 136 Ga.App. 375, 221 S.E.2d 236 (1975). Thus, the trial court erred in granting summary judgment in favor of appellees.

Judgment...