Smith v. Osborn

• Decision Date: 20 December 1974
• Docket Number: No. 260,260
• Citation: 66 Wis.2d 264,223 N.W.2d 913
• Parties: Roger K. SMITH et al., Appellants, v. D. H. OSBORN et al., co-partners d/b/a Rock Vale, Respondents.
• Court: Wisconsin Supreme Court

Page 913

223 N.W.2d 913

66 Wis.2d 264

Roger K. SMITH et al., Appellants, v. D. H. OSBORN et al., co-partners d/b/a Rock Vale, Respondents.

No. 260.

Supreme Court of Wisconsin.

Dec. 20, 1974.

This is an appeal by Roger K. Smith and Lucille P. Smith, appellants and vendors in a land contract providing for the transfer of certain real estate to D. H. Osborn and F. L. Klobucar, copartners, d/b/a Rock Vale, respondents. Respondents contend the acreage was substantially less than that described in the land contract. The appellants commenced action seeking a declaratory judgment determining that the land contract was for the sale of land as a parcel rather than by the acre. Judgment was entered on respondents' counterclaim for reformation of the land contract and also determining that the land contract was subsequently modified by agreement of the parties.

T. P. Bidwell, Janesville, for appellants.

Grutzner, Jaeckle & Byron, S.C., Gerald W. Jaeckle, Beloit, for respondents.

CONNOR T. HANSEN, Justice.

The land in question was part of a farm located in Rock township, Rock county, Wisconsin, purchased in 1961, by the appellants from the Edward Cunninghams. The land had been represented by the Cunninghams to contain 97 acres. The Smiths sold two small parcels, leaving 90 of the original 97 acres in their possession.

Osborn, one of the respondents, who had contacted Smith with regard to another matter, became interested in the land as a possible mobile home site. Negotiations took place in the winter of 1970, between Smith, a real estate broker since 1964, and Osborn, a land developer of more than 15 years' experience. Smith represented that he would sell the 90 acres for $180,000. Osborn testified he was only interested in 70 acres for which Smith quoted a price of $2,000 per acre, or $140,000.

The negotiations culminated in the execution of an offer to purchase on April 27, 1970, by Roger K. and Lucille P. Smith, as vendors, and Osborn and Klobucar, as purchasers. The description of the property in the offer to purchase incorporated by reference an attached map indicating the property in red. The offer further noted that the property contained '70 acres more or less.'

A second amendment to the offer to purchase also dated April 27, 1970, contained the following provision:

'2. Clarification of Paragraph No. 2 In Addendum: Paragraph No. 2 of the Addendum shall be deemed rewritten in its entirety to provide as follows:

'Provided the installment payments required by the land contract are then current, Buyer shall be entitled to receive a Warranty Deed from Sellers to a parcel or parcels selected by Buyer to a parcel Buyer prepays the contract in an amount equal to $2,000.00 per acre selected; provided further, however, that the land fronting on U.S. Highway 51 to a depth of 300 feet shall be conveyed to Buyer only upon a payment equal to $75.00 per running foot.

'All payments made under this paragraph shall be applied to reduce the balance owned on contract price.'

The land contract was executed by the four parties on October 20, 1970. The acreage was described in the land contract as being 'approximately 70 acres.' The contract called for a purchase price of $140,000, with a down payment of $29,500, the balance to be paid in four equal annual installments. Each payment carried with it the obligation on the part of the vendors to transfer by warranty deeds a proportionate part of the parcel under the following provision:

'8. Warranty Deeds During Contract: The parties agree that upon request by purchaser vendor agrees to convey by warranty, deed parcels selected by purchaser, during the term of the land contract, as follows:

'A. 20% of the total 70 acres when the down payment is made.

'B. 20% of the total 70 acres as each annual payment is made after the down payment is made, provided, however, that the land fronting on U.S. Highway 51 to a depth of 300 feet shall be conveyed by vendor to purchaser only upon a prepayment upon the land contract, said prepayment computed at the rate of $75.00 per running foot.* . . .

'. . ..

'*If Highway 51 frontage is selected, the amount computed at $75.00 per running foot under Paragraph 8 shall be reduced by the acreage within said frontage land multiplied by $2,000.00 per acre. All payments under Paragraph 8 shall be credited upon the original purchase price. . . .'

The initial payment was made and a parcel selected by the vendees containing 15.37 acres was deeded to them by the vendors. About the time of the due date for the October, 1971, payment, it was determined by survey that the parcel contained only 53.59 acres instead of 70 acres, for a discrepancy of 23.4 percent. Negotiations between Smith and Osborn ensued.

It is undisputed that Smith made several proposals for modifying the agreement both at a meeting with Osborn in late October, 1971, and at a subsequent meeting with Osborn and his attorney, Roger D. O'Neal, on November 18, 1971. The proposals made were summarized in letters from Smith to Osborn dated November 17, 1971, and November 23, 1971, and in a written memorandum prepared by Smith and used by him at the November 18, 1971, meeting. One plan called for a reduction of the final principal payment and a reduction of the interest payments based on a lower principal amount due. The lower principal amount due was computed by Smith by multiplying 53.59 acres by $2,000 per acre. The second proposal involved the same reduction of principal due, but reduced the 1971 payment so that, combined with the down payment, it would equal approximately 40 percent of the reduced purchase price. Under this plan, the 1971 payment would include principal sufficient to cover a conveyance of 6.23 acres at $2,000 per acre plus interest based on the principal amount which was reduced because of the acreage shortage. Subsequent payments were also reduced so as to equal 20 percent of the reduced purchase price each.

Smith testified that these proposals were made upon the condition of his getting a comparable adjustment of his land contract with his vendor, Mrs. Cunningham. Osborn, Roger D. O'Neal and Jersome Elliott, Mrs. Cunningham's lawyer at the time, denied that this condition was ever imposed.

On November 26, 1971, Osborn and Klobucar tendered a payment of $18,426 which included $12,600 as principal for 6.3 acres and interest of $5,826, which represented interest due on the balance of the purchase price calculated at the reduced acreage price. This payment was accepted by the appellants, and on January 28, 1972, they deeded 6.3 acres to Osborn and Klobucar.

It was undisputed that Mrs. Smith took no part in the negotiations either for the original sale or for the alleged modification of the land contract. It was also undisputed that she signed all of the documents as necessary, including the deed for 6.3 acres, which was tendered on January 28, 1972. Moreover, it was conceded that Mrs. Smith, who worked as her husband's secretary, typed the letters from him to Osborn dated November 17, 1971, and November 23, 1971, which included the outline of the modification proposals.

Based on this and other evidence, the trial court found that the land contract was for the purchase of land by the acre and ordered a reformation of the contract to reflect the lower acreage based on mutual mistake of fact. The trial court also found that the contract had been modified by agreement of the parties, and that Smith had acted as the agent for his wife in negotiating the modification.

The following issues are dispositive of this appeal:

1. Did the trial court err in granting a reformation of the land contract?

2. Was the land contract subsequently modified by agreement of the parties?

REFORMATION.

The first question to be decided in determining whether the instant land contract was subject to reformation is whether the sale was in gross or by the acre.

In Docter v. Furch (1890), 76 Wis. 153, 169, 170, 44 N.W. 648, 652, 44 N.W. 826, this court stated that there were four classifications of contracts where the land description and purchase price ostensibly were based on the entire parcel:

'An able judge, after an analysis of several adjudged cases, classified them thus: 'Sales in gross may be subdivided into various subordinate classifications: (1) Sales strictly and essentially by the tract, without reference in the negotiation or in the consideration to any estimated or designated quantity of acres; (2) sales of the like kind in which, though a supposed quantity by estimation is mentioned or referred to in the contract, the reference was made only for the purpose of description, and under such circumstances or in such a manner, as to show that the parties intended to risk the contingency of quantity, whatever it might be, or how much soever it might exceed or fall short of that which was mentioned in the contract; (3) sales in which it is evident, from extraneous circumstances of locality, value, price, time, and the conduct and conversations of the parties, that they did not contemplate or intend to risk more than the usual rates of excess or deficit in similar cases, or than such as might be reasonably calculated on as within the range of ordinary contingency; (4) sales which, though technically deemed and denominated 'sales in gross,' are in fact sales by the acre, and so understood by the parties. . . ."

Thus, the question of whether a land contract is a sale in gross or a sale by the acre is a matter of the intention of the parties. H. & R. Truck Leasing Corp. v. Allen (1965), 26 Wis.2d 158, 131 N.W.2d 912; Pereles v. Milwaukee County (1916), 164 Wis. 208, 159 N.W. 719.

In determining the intention of the parties, this court has held that it is proper to consider the conduct of the parties and the negotiations which took place, both before and after the execution of the documents, and to consider all related documents of the parties. H. & R. Truck Leasing Corp. v. Allen, su...