Ragosta v. Wilder, 88-464

• Decision Date: 26 April 1991
• Docket Number: No. 88-464,88-464
• Citation: 592 A.2d 367,156 Vt. 390
• Court: Vermont Supreme Court
• Parties: Louis W. and Sylvia V. RAGOSTA v. Allen S. WILDER, Jr.

Page 367

592 A.2d 367

156 Vt. 390

Louis W. and Sylvia V. RAGOSTA v. Allen S. WILDER, Jr.

No. 88-464.

Supreme Court of Vermont.

April 26, 1991.

Richard I. Burstein and Michael J. Andrews, Law Clerk, Randolph, on the brief, for plaintiffs-appellees.

Peter J. Monte of Young, Monte & Lyford, Northfield, for defendant-appellant.

Before ALLEN, C.J., and PECK, GIBSON, DOOLEY and MORSE, JJ.

PECK, Justice.

Defendant appeals from a judgment ordering him to convey to plaintiffs a piece of real property known as "The Fork Shop." Defendant argues that the court improperly found that a binding contract existed and that it misapplied the doctrine of equitable estoppel. He also contends that the ruling cannot be upheld under promissory estoppel principles since the court failed to examine the extent to which enforcement of defendant's promise to sell was required to prevent injustice. Because the trial court's ruling cannot stand on contract or equitable estoppel grounds and because the court's analysis of promissory estoppel is inextricably bound in its contractual analysis, we reverse and remand the cause for further proceedings consistent with the principles expressed herein.

In 1985, plaintiffs became interested in purchasing "The Fork Shop" from defendant, but preliminary negotiations between the parties were fruitless. In 1987, plaintiffs learned that defendant was again considering selling the "The Fork Shop," mailed him a letter offering to purchase the property along with a check for $2,000 and began arrangements to obtain the necessary financing. By letter dated September 28, 1987, defendant returned the $2,000 check explaining that he had two properties "up for sale" and that he would not sign an acceptance to plaintiffs' offer because "that would tie up both these properties until [there was] a closing." In the letter, he also made the following counter-offer:

I will sell you The Fork Shop and its property as listed in book 35, at page 135 of the Brookfield Land Records on 17 April 1972, for $88,000.00- (Eighty-eight thousand dollars), at anytime up until the 1st of November 1987 that you appear with me at the Randolph National Bank with said sum. At which time they will give you a certified deed to this property or to your agent as directed, providing said property has not been sold.

On October 1st, the date plaintiffs received the letter, they called defendant. The court found that during the conversation plaintiffs told defendant that "the terms and conditions of his offer were acceptable and that they would in fact prepare to accept the offer." Defendant assured plaintiffs that there was no one else currently interested in purchasing "The Fork Shop."

On October 6th, plaintiffs informed defendant that they would not close the sale on October 8th as discussed previously but that they would come to Vermont on October 10th. On October 8th, defendant called plaintiffs and informed them that he was no longer willing to sell "The Fork Shop." The trial court found that, at that time, defendant was aware plaintiffs "had processed their loan application and were prepared to close." Plaintiffs informed defendant that they would be at the Randolph National Bank at 10:00 a.m. on October 15th with the $88,000 purchase price and in fact appeared. Defendant did not. Plaintiffs claim they incurred $7,499.23 in loan closing costs.

Plaintiffs sued for specific performance arguing that defendant had contracted to sell the property to them. They alleged moreover that defendant knew they would have to incur costs to obtain financing for the purchase but assured them that the sale would go through and that they relied on his assurances.

The trial court concluded that defendant "made an offer in writing which could only be accepted by performance prior to the deadline." It concluded further that defendant could not revoke his offer on October 8th because plaintiffs, relying on the offer, had already begun performance and that defendant should be estopped from revoking the offer on a theory of equitable estoppel. It ordered defendant to convey to plaintiffs "The Fork Shop" for $88,000. This appeal followed.

I.

Plaintiffs claim that defendant's letter of September 28, 1987 created a contract to sell "The Fork Shop" to them unless the property was sold to another buyer. Rather, defendant's letter contains an offer to sell the property for $88,000, which the trial court found could only be accepted "by performance prior to the deadline," and a promise to keep the offer open unless the property were sold to another buyer. Defendant received no consideration for either promise. In fact, defendant returned plaintiffs' check for $2,000 which would have constituted consideration for the promise to keep the offer open, presumably because he did not wish to make a firm offer. Thus, the promise to keep the offer to sell open was not enforceable and, absent the operation of equitable estoppel, defendant could revoke the offer to sell the property at any time before plaintiffs accepted it. See Buchannon v. Billings, 127 Vt. 69, 75, 238 A.2d 638, 642 (1968) ("An option is a continuing offer, and if supported by a consideration, it cannot be withdrawn before the time limit.") (emphasis added).

Plaintiffs argue that the actions they undertook to obtain financing, which were detrimental to them, could constitute consideration for the promise to keep the offer to sell open. Their argument is unconvincing. Although plaintiffs are correct in stating that a detriment may constitute consideration, they ignore the rule that "[t]o constitute consideration, a performance or a return promise must be bargained for." Restatement (Second) of Contracts § 71(1) (1981). "A performance or return promise is bargained for if it is sought by the promisor in exchange for his promise and is given by the promisee in exchange for that promise." Id. at § 71(2). Plaintiffs began to seek financing even before defendant made a definite offer to sell the property. Whatever detriment they suffered was not in exchange for defendant's promise to keep the offer to sell open.

The trial court ruled that the offer to sell "The Fork Shop" could only be accepted by performance but concluded that in obtaining financing plaintiffs began performance and that therefore defendant could not revoke the offer to sell once plaintiffs incurred the cost of obtaining financing. Section 45 of the Restatement (Second) of Contracts provides that "[w]here an offer invites an offeree to accept by rendering a performance and does not invite a promissory acceptance, an option contract is created when the offeree tenders or begins the invited performance or tenders a beginning of it." However, "[w]hat is begun or tendered must be part of the actual performance invited in order to preclude revocation under this Section." Id. at comment f.

Here, plaintiffs were merely engaged in preparation for performance. The court itself found only that "plaintiffs had changed their position in order to tender performance." At most, they obtained financing and assured defedant that they would pay; plaintiffs never tendered to defendant or even began to tender the $88,000 purchase price. Thus, they never accepted defendant's offer and no contract was ever created. See Multicare Medical Center v. State Social & Health Services, 114 Wash.2d 572, 584, 790 P.2d 124, 131 (1990) ("under a unilateral contract, an offer cannot be accepted by promising to perform; rather, the offeree must accept, if at all, by performance, and...