Shear v. National Rifle Ass'n of America

• Citation: 606 F.2d 1251,196 U.S.App.D.C. 344
• Decision Date: 22 August 1979
• Docket Number: No. 78-1108,78-1108
• Parties: Richard W. SHEAR, Appellant, v. The NATIONAL RIFLE ASSOCIATION OF AMERICA, a New York Corporation, et al.
• Court: U.S. Court of Appeals — District of Columbia Circuit

Page 1251

606 F.2d 1251

196 U.S.App.D.C. 344

Richard W. SHEAR, Appellant, v. The NATIONAL RIFLE ASSOCIATION OF AMERICA, a New York Corporation, et al.

No. 78-1108.

United States Court of Appeals District of Columbia Circuit.

Argued Dec. 1, 1978.

Decided Aug. 15, 1979.

As Amended Aug. 22, 1979.

Richard W. Shear, pro se.

Joseph A. Artabane, Washington, D. C., with whom Stephen N. Shulman and Valerie G. Schulte, Washington, D. C., were on the brief, for appellees.

Before TAMM and MacKINNON, Circuit Judges, and JOHN H. PRATT, ^* United States District Court Judge for the District of Columbia.

Opinion for the Court filed by Circuit Judge MacKINNON.

MacKINNON, Circuit Judge:

Plaintiff Shear is a real estate agent who arranged to sell the Washington headquarters building of the National Rifle Association (NRA). He was to be paid a commission when the sale was "fully consummated." ¹ When the sale fell through and Shear was not paid his commission, he sued the NRA seeking damages for: (1) breach of contract; (2) fraud and misrepresentation; and (3) rescission. ² Without opinion, the District Court dismissed Shear's complaint for failure to state a claim upon which relief can be granted. ³ This appeal followed. We reverse and remand for a trial on the merits.

I

Since this is an appeal from a dismissal for failure to state a claim under Rule 12(b)(6), "we may look only at the pleadings, with all of 'the well-pleaded material facts alleged in the complaint . . . taken as admitted,' Gumer v. Shearson, Hammill & Co., 516 F.2d 283, 286 (2d Cir. 1974) . . ." George C. Frey Ready-Mixed Concrete, Inc. v. Pine Hill Concrete Mix Corp., 554 F.2d 551, 553 (2d Cir. 1977). "The complaint must be construed liberally, with all factual allegations deemed to be true and with doubts to be resolved in favor of the pleader." Parr v. Great Lakes Express Co., 484 F.2d 767, 769-770 (7th Cir. 1973). ⁴ The following statement of facts, therefore, is derived from Shear's complaint. ⁵

The NRA decided to move its national headquarters from Washington, D.C. to Colorado Springs. Land was purchased and a ground breaking ceremony was held in November of 1976. ⁶ Also in November, 1976, the NRA, through its Treasurer (Binswanger), instructed Shear to solicit purchase offers for the old headquarters building located in Washington, D.C. ⁷ Shear's efforts were successful: he found two prospective purchasers. ⁸

On April 1, 1977, the NRA's Management Committee established a sealed bid procedure for choosing a purchaser of the Washington headquarters building. In addition, the Committee decided that "the winning bid would . . . be unanimously recommended by the Management Committee to the Board of Directors at its meeting on May 23, 1977." ⁹ The Management Committee's recommendation to the Board was very important because "Board approval (was) necessary to consummate a sale of the property." ¹⁰

On April 29, 1977, the Management Committee unanimously selected the highest bid, which had been procured by Shear. Subsequently, the winning bidder and the President of the NRA signed a purchase contract, "subject to the approval of the Board of Directors of the NRA." ¹¹ "The NRA, by the terms of its contract with (the winning bidder), and otherwise, was obligated to present the . . . contract to its Board of Directors for approval." ¹²

On May 6, 1977, Shear and the NRA (by its executive vice president) entered into a brokerage commission agreement in which the NRA agreed to pay a $150,000 commission (in lieu of 4% Of the sales price) "contingent on settlement." ¹³

Later in May, 1977, at the NRA's Annual Meeting, dissident members and officers were successful in a takeover of the NRA. ¹⁴ The new controlling group, which was opposed to the proposed move to Colorado Springs, enacted "a by-law change prohibiting removal of NRA headquarters from its Washington, D.C., site. . . ." ¹⁵ In addition, the by-laws were changed to "strip the Board of Directors of its power to approve the sale of NRA real property. . . ." ¹⁶

After these by-law changes were made, the proposed contract was presented to the Board of Directors for a "vote" notwithstanding that the Board had no authority to approve the contract. The Management Committee voted to not recommend approval of the proposed contract, ¹⁷ and the Board did not approve it. Since Shear's contractual right to a commission is "contingent on settlement," the NRA refused to pay him and he was not paid.

II

Shear's primary claim is breach of contract. He asserts that under the contract he has a right to the $150,000 commission. The District Court held, however, that since the sale of the Washington headquarters building was never consummated, a "condition precedent" was never met, and Shear has no right to the commission. ¹⁸ Shear concedes that the contract he signed contains a condition settlement that was not met. Shear argues that his failure to meet the condition should be excused because the NRA Prevented it from occurring. We hold that Shear's complaint alleges facts sufficient to establish a claim that the NRA engaged in prevention, and therefore that the District Court erred when it dismissed the complaint before trial.

A

Generally, one is not bound by a conditional contract until the condition occurs. The doctrine of prevention is an exception to this general rule. ¹⁹ This doctrine provides that when a promisor wrongfully prevents a condition from occurring that condition is excused.

The prevention doctrine has been stated in various ways. According to Corbin:

One who unjustly prevents the performance or the happening of a condition of his own promissory duty thereby eliminates it as such a condition. He will not be permitted to take advantage of his own wrong, and to escape from liability for not rendering his promised performance by preventing the happening of the condition on which it was promised.

3A Corbin on Contracts § 767 at 540 (1961). Williston states: "It is a principle of fundamental justice that if a promisor is himself the cause of the failure of performance, either of an obligation due him or of a condition upon which his own liability depends, he cannot take advantage of the failure." 5 Williston on Contracts § 677 at 224 (W. Jaeger, ed., 3d ed. 1961). The prevention doctrine is incorporated in the 1932 Restatement of Contracts ²⁰ and it is retained in the more recent draft of the Restatement which provides that "(w)here a party's breach by non-performance substantially contributes to the non-occurrence of a condition of one of his duties, the non-occurrence is excused." Restatement (Second) of Contracts § 269 (Tent. Draft No. 8, 1973).

As Williston notes, cases illustrating the prevention principle "are legion." ²¹ One example, quoted by Williston, is Gulf Oil Corp. v. American Louisiana Pipe Line Co., 282 F.2d 401, 404 (6th Cir. 1960), in which the court stated: "Where liability under a contract depends upon a condition precedent one cannot avoid his liability by making the performance of the condition precedent impossible, or by preventing it." Accord: Amies v. Wesnofske, 255 N.Y. 156, 174 N.E. 436, 438 (1931), Omaha Public Power District v. Employers Fire Insurance Co., 327 F.2d 912, 916 (8th Cir. 1964), Foster v. Colorado Radio Corp., 381 F.2d 222, 224 (10th Cir. 1967), Spanos v. Skouras Theatres Corp., 364 F.2d 161, 169 (2d Cir.), Cert. denied 385 U.S. 987, 87 S.Ct. 597, 17 L.Ed.2d 448 (1966). Prevention, therefore, can negate a requirement to satisfy a condition precedent.

B

The NRA maintains, however, that plaintiff's prevention argument is undercut by Dixon v. Bernstein, 86 U.S.App.D.C. 336, 182 F.2d 104 (D.C.Cir. 1950). In Dixon, a real estate broker agreed that the seller would have "no liability (for the commission) if the sale is not settled." ²² The sale was not settled, and the broker sued for his commission. He alleged that the seller had an obligation to act in good faith; that the seller withdrew from the deal in bad faith; and therefore that he (the broker) was entitled to a commission despite the contract. The court rejected this argument, holding that good faith was irrelevant. Judge Bazelon wrote:

We hold . . . that the issue of good faith under the sales contract is irrelevant here. . . . Since no sale took place, there was no liability for a commission.

. . . Within such a professionalized context, it seems reasonable to suppose that if the parties had intended to make their contract dependent upon conditions other than consummation of sale, they would have done so. ²³

In short, the broker in Dixon assumed the risk that the seller would frustrate the sale, and he had no right to complain about prevention when that risk materialized.

Dixon is not inconsistent with the prevention doctrine. On the contrary, it is an example of a well recognized exception: the prevention doctrine does not apply when the contract, in effect, authorizes prevention. This exception has been recognized by the commentators. Williston wrote: "An exception to this principle must be made where the hindrance is due to some action of the promisor which under the terms of the contract . . . was permitted . . . ." 5 Williston on Contracts § 377A at 235. Similarly, Corbin stated: "The phrase 'unjustly preventing' was purposely used in (the definition of prevention) . . . for the reason that there are some cases in which some sort of prevention or interference is contemplated by the parties as quite proper and within the privileges of the promisor." 3A Corbin on Contracts § 767 at 545.

Actually, it is somewhat inaccurate to call the assumption of risk rule discussed above an "exception" to the prevention doctrine. The Restatement defines prevention as a "breach by non-performance." Corbin defines it as "unjust." ²⁴ The gist of these definitions is that prevention is a breach of contract. A corollary of this definition is that there is no prevention when the contract authorizes a party to...