Powers, Inc. v. Wayside, Inc. of Falmouth

• Decision Date: 01 March 1962
• Citation: 343 Mass. 686,180 N.E.2d 677
• Parties: POWERS, INC. v. The WAYSIDE, INC. OF FALMOUTH et al.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

Page 677

180 N.E.2d 677

343 Mass. 686

POWERS, INC. v. The WAYSIDE, INC. OF FALMOUTH et al.

Supreme Judicial Court of Massachusetts, Middlesex.

Argued Oct. 6, 1961.

Decided March 1, 1962.

Arthur J. Travers, Cambridge, for defendants.

Louis Karp, Boston (Arthur L. Murray, Medford, with him), for plaintiff.

Before WILKINS, C. J., and SPALDING, CUTTER, KIRK and SPIEGEL, JJ.

KIRK, Justice.

This is an appeal from a decree granting to the plaintiff Powers, Inc. (Powers), specific performance of certain provisions of a written agreement made between it and the defendant The Wayside, Inc. of Falmouth (Wayside).

We summarize the facts found in the confirmed report of the master. On December 24, 1958, Wayside conveyed to Powers by quitclaim deed certain premises in Falmouth which were operated as a summer restaurant with an alcoholic beverage license.

The purchase price was $25,000 paid in the form of (a) $8,000 in cash, (b) $3,798.77 by the assumption of the balance due on a first mortgage note held by a bank, and (c) $13,201.23 by a promissory note from Powers payable to Wayside and secured by a second mortgage on the premises. Simultaneously with the conveyance, the parties executed a written contract which incorporated by reference the deed and mortgage, recited that Wayside acknowledged that the title was defective because of the absence of a signature by a predecessor in title, and made further provisions, the pertinent parts of which, as fairly condensed by the master, we set out comprehensively. ¹

Powers has made the payments on the first mortgage note to the bank. It made interest payments on the note held by Wayside through May 24, 1959, but made no payments of interest or principal thereafter on that note, because up to June 24, 1959, and thereafter Wayside had 'failed to perform its obligation to remedy the title defect or file a petition for land registration in the Land Court under the terms of the contract.' On August 13, 1959, Wayside, pursuant to the acceleration clause in the note, made demand on Powers for payment in full. Upon Powers's failure to comply, Wayside commenced foreclosure proceedings and a decree authorizing foreclosure was entered on March 16, 1960. The foreclosure was enjoined after the commencement of this suit on May 4, 1960.

On April 22, 1960, Powers notified Wayside that it was exercising its 'option to rescind the contract' and demanded of Wayside a discharge of the mortgage, cancellation of the mortgage note, and reimbursement of all payments of principal and interest on both first and second mortgages, and of all sums expended by Powers in the acquisition of the property or for improvements made on it. Wayside refused this demand and refused a formal tender of a quitclaim deed to the premises. Thereupon followed this bill in equity against Wayside and Lima, its treasurer, who had guaranteed Wayside's obligations under the contract.

The decree entered by the judge ordered Wayside and Lima to comply with the demands of Powers for payment, enjoined the transfer of the note and mortgage, enjoined foreclosure proceedings under them, and declared the note and mortgage null and void. Provision was made for the appointment of a commissioner to carry out the terms of the decree if the defendants should not comply.

The decree cannot stand in its present terms. The interpretation of the written contract, including the option contained in it, is a question of law for the court. Shayeb v. Holland, 321 Mass. 429, 431, 73 N.E.2d 731, and cases cited. See Tri-City Concrete Co. Inc. v. A. L. A. Constr. Co. Mass., 179 N.E.2d 319. ^a Notwithstanding the language of the contract that under certain conditions Powers 'may, at its option * * * elect to rescind the [transaction],' we think that under a proper construction of the contract the parties had agreed in substance that if the named conditions continued to exist at the time specified there would arise in favor of Powers an option to resell to Wayside the property interest it had received from Wayside at a price equivalent to the original purchase price paid by Powers to Wayside, plus whatever amounts, up to the time of the exercise of the option, Powers had expended in connection with the acquisition of the premises or for improvements. Viewing the option in this light, the question arises as to its duration, i. e., the time within which Powers, by exercising the option, could create an executory contract binding itself to reconvey, and Wayside to repurchase, the premises. The contract did not prescribe a specific time within which the option could be exercised. Wayside contends that a correct construction of the contract requires that Powers exercise the option not later than six months and seven days after the date of the execution of the contract. We do not agree. In that contract, Wayside agreed to remedy the title defect within six months, i. e., by June 24, 1959. It also agreed that, if by that time it had not remedied the defect, it would 'immediately' file a petition in the Land Court for registration of the land. It did neither. Wayside thereby committed a breach of its contract, thus entitling Powers to pursue the ordinary remedies for such a breach. Under the terms of the contract, however, Powers's option did not arise until seven days after the six months' period. See New England Trust Co. v. Spaulding, 310 Mass. 424, 430, 38 N.E.2d 672. Therefore, acceptance of Wayside's contention as to the duration of the option would mean that the option expired at the same time that it arose. Such a contention refutes itself and we reject it. ² See Shayeb v. Holland, 321 Mass. 429, 432, 73 N.E.2d 731.

It is our view that Powers's right to exercise the option continued for a reasonable time after the expiration of the six months' and seven days' period following the date of the original contract. Starkweather v. Gleason, 221 Mass. 552, 553, 109 N.E. 635. See Loring v. City of Boston, 7 Metc. 409, 412-413; Anno. 88 A.L.R. 842, 843; Restatement: Contracts, § 40(1). 'Where the evidence is in dispute and open to different inferences, the question whether an act has been done within a reasonable time after the happening of a certain event is ordinarily a question of fact, but where [as here] the facts are not in dispute the question becomes one of law.' Bruns v. Jordan Marsh Co. 305 Mass. 437, 445, 26 N.E.2d 368, 373, and cases cited. See Starkweather v. Gleason, 221 Mass. 552, 553, 109 N.E. 635.

What is a reasonable time depends on all the circumstances of the case. When the offer is one of sale or purchase, the subject matter of the offer is sometimes the major factor. See Starkweather v. Gleason, 221 Mass. 552, 553, 109 N.E. 635 (stock fluctuating in value). See also Park v. Whitney, 148 Mass. 278, 19 N.E. 161. Where, however, such an offer is made in the context of a contract of which it is merely one part and to whose other provisions it is inextricably bound, such other provisions may be of a significance at least equal to that of the subject matter in determining what is a reasonable time for the offer to be outstanding. We hold that in the light of the provisions of the original contract, the circumstances under which it was executed, and the nature of the property which was its subject, the exercise of the option by Powers on April 22, 1960, almost ten months after it arose, was, as a matter of law, too late and that in legal consequence the purported exercise of the option on that date created no contract binding upon either Powers or Wayside.

We reach this conclusion for the following reasons: Powers apparently desired the property for use as a summer restaurant and in fact did use it for this purpose in 1959. The expiration of the time during which Wayside was obliged to remedy the title defect or file a petition for registration in the Land Court coincided approximately with the beginning of the summer season. The option to resell was to arise in seven days after June 24, 1959, if Wayside had not performed its obligation. It would seem, therefore, clearly inferable that it was the intention of the parties that Powers should be in a position to decide at the end of the stated period or shortly thereafter whether it would keep the property and operate it as a summer restaurant despite the title defect, or call off the entire transaction and recover whatever it had paid by way of purchase price and had expended for improvements in anticipation of its planned operation.

We think, furthermore, that it would be quite unreasonable to attribute to the parties the intent that, Wayside having failed to perform, Powers could use the premises to operate its business through the summer and then, several months thereafter, compel Wayside to repurchase the property at the full purchase price plus expenditures made by Powers without allowance by way of reduction of the purchase price for the value of the use and enjoyment of the property by Powers.

Accordingly, we hold that on April 22, 1960, the offer by Wayside to repurchase, embodied in the option, had expired and that in consequence Powers's attempted acceptance of it on that date created no contract. There being no contract, there can be no specific performance. It follows that the decree entered by the judge cannot stand.

We think, nevertheless, that Powers is entitled to relief on the facts found. The question presented is what form the relief is to take in the light of the pleadings and the findings. As stated at the outset of this opinion, Powers's option as described in the contract was an option to 'rescind' the transaction. The use of this term is the apparent cause of some confusion in the manner in which the case has been successively pleaded, tried, argued, and disposed of. The decree is based upon a prayer for specific performance of a contract to...