Locke v. Bort

• Decision Date: 07 June 1960
• Citation: 103 N.W.2d 555,10 Wis.2d 585,81 A.L.R.2d 1331
• Parties: , 81 A.L.R.2d 1331 James LOCKE, d/b/a Colby, Locke & Co., et al., Respondents, v. Holden P. BORT, Appellant.
• Court: Wisconsin Supreme Court

Page 555

103 N.W.2d 555

10 Wis.2d 585, 81 A.L.R.2d 1331

James LOCKE, d/b/a Colby, Locke & Co., et al., Respondents, v. Holden P. BORT, Appellant.

Supreme Court of Wisconsin.

June 7, 1960.

Crosby H. Summers, Janesville, for appellant.

Arnold, Caskey & Collins, Beloit, Geffs, Geffs, Block & Geffs, Janesville, for respondents.

CURRIE, Justice.

The issue presented by this appeal is whether the wording, 'when * * * terms terms of financing balance of purchase price agreeable to purchaser have been arranged not to exceed thirty days from date of this agreement,' constitutes a condition precedent or a mere method of fixing time for payment of the balance of the purchase price.

Restatement, 1 Contracts, p. 359, sec. 250(a) recognizes conditions precedent in contract law, and states that, when such a condition is provided, the fact upon which the condition is based must occur 'before a duty of immediate performance of a promise arises,' unless the same has been excused. The insertion of a condition precedent in a contract does not render the same void but only delays the enforcibility of the contract until the condition precedent has taken place. Biggs v. Bernard, 1954, 98 Ohio App. 451, 130 N.E.2d 152, 156.

In determining whether the instant clause constitutes a condition precedent to Bort's obligation to pay the purchase price 'the essential thing is for the court to look at the contract from the standpoint of the parties at the time they executed it, and the purpose they had in view in doing so.' Hawkins & Chamberlain v. Mathews, 1932, 242 Ky. 732, 47 S.W.2d 547, 548. 3 Williston, Contracts (Rev. ed.), pp. 2246, 2247, sec. 799, states such principle as follows:

'In each case, the intention of the parties to make the debt contingent or otherwise, must be gathered from the language used, the situation of the parties, and the subject-matter of the contract, as presented by the evidence.'

It is sometimes stated that there is a presumption against a contract clause being construed as a condition precedent. However, 3 Corbin, Contracts, p. 531, sec. 635, states that such presumption will not often be decisive, and declares:

'Such a presumption does not relieve the court of the necessity of interpretation; and the process of interpretation will usually be decisive without making use of this presumption.'

The fact that clauses similar to the one before us fail to employ the usual words denoting a condition such as 'subject to' or 'if' is not controlling. The clauses before the courts in Hawkins & Chamberlain v. Mathews, supra, and Biggs v. Bernard, supra, did not contain such words of condition, but nevertheless were held to state a condition precedent.

The clause in Hawkins & Chamberlain v. Mathews, supra, specified a $9,000 purchase price payable as follows: 'At least $1500.00 plus an amount of not less than $6,000, obtained on loan in a building association secured by a first mortgage, to be paid in cash; balance evidenced by notes bearing interest at 6% per annum, payable within two years, $600.00 or more of which is to be payable within one year.' The purchasers were unable to obtain a mortgage from a building association, and the Kentucky court permitted the purchasers to recover their $500 down payment on the theory that the obtaining of the loan was a condition precedent.

In Biggs v. Bernard, supra, the contract for the sale of real estate contained this clause [98 Ohio App. 451, 130 N.E.2d 156]: 'This sale to be consummated as soon as purchasers complete the sale of their property at 749 So. Westwood Avenue.' The plaintiffs in that case were real estate brokers who sued the defendant seller for their real estate brokers' commission. The court held that the clause constituted a condition precedent, but that nevertheless the plaintiffs might still be entitled to their commission. Therefore, a judgment on the pleadings in favor of the defendant was reversed and the cause remanded for a trial to determine what the facts were.

A case in which the financing clause was held not to state a condition precedent is Noord v. Downs, 1958, 51 Wash.2d 611, 320 P.2d 632, 633. In that case the earnest-money agreement imposed an unconditional liability upon the purchaser to pay the balance of the purchase price with the penalty for nonperformance being the forfeiture of the earnest-money payment. Such earnest-money payment was a $1,000 note signed by the purchasers, which was payable on demand 'on approval of loan to Mortgagor by Lincoln Federal Sav. for purchase of home at 3037-29th Avenue, W., Seattle, Wn.' The sellers brought action on the note and the purchasers defended on the ground that their obligation to pay it was conditional. The purchasers had been unable to secure the mortgage loan although, at the time of signing the note and agreement, they had assured the sellers that there was no question but that such financing would be forthcoming. The court held that the terms of the note as contrasted with the unconditional agreement to purchase created at least an ambiguity which justified an inquiry into the surrounding circumstances. Stress was laid upon the purchasers' assurances that the mortgage loan was sure to be forthcoming as indicating that they did not consider there was anything contingent about the purchase. The trial court's finding, that the quoted clause in the note was intended merely to fix a convenient time of payment, was upheld. The court quoted with approval from an opinion of one of the California courts of appeal [Bank of America Nat....