Couch v. McCoy

138 F. 696, 1905 U.S. App. LEXIS 4628

• Court: U.S. Circuit Court for the District of West Virginia
• Decided: June 21, 1905
• Status: Published

Opinion

KELEER, District Judge

(after making foregoing statement). This case is now before me upon demurrer to the bill, and, as a matter of course, all the facts well pleaded in the bill are, for the purposes of the demurrer, to be taken as literally true; and I think these facts, relieved of certain minor contradictions appearing in the bill itself, are substantially set forth in the foregoing statement.

It is well at the outset to distinguish between an offer of an option and an offer of sale. It is indisputable that had a 60-day option, upon the terms set forth in the telegram exhibited with the bill, been offered by Mr. McCoy without consideration, it might have been withdrawn by him at any time, provided such withdrawal had been communicated to the plaintiff prior to his acceptance of the same; and by this I mean the acceptance of the proffer to sell,, for until such acceptance there is no contract, as the proposed vendee is not in any way bound, and unless both are bound, so that an action could be maintained against either for a breach, neither is bound. Mr. Bishop, in his work on Contracts, § 325, says:

“Since an offer is not a contract, the party making it may withdraw it at any time before acceptance. Even though it is in writing, and by its terms is to stand open for a specified period, the result is the same. With no money consideration, and no corresponding promise from the person to whom it is made, the promise not to withdraw it has no binding force. If a consideration for the undertaking to leave the offer open is given and accepted, this of itself constitutes a contract, and the offer cannot be withdrawn.”

It is then manifest that an offer of an option, until accepted according to its terms, is no more binding than an offer of sale without consideration, and may be withdrawn unless prior to such withdrawal it be so accepted. There are then two elements in every option contract: First, the offer to sell, which does not become a

contract unless and until accepted according to its terms; and, second, the completed contract to leave the offer open for a specified time, and this, as will be shown, in order to become a completed contract, must be for some consideration deemed valuable in law. The very existence of option contracts arose because of the liability of the withdrawal of offers to sell before they were formally accepted, and it thus becomes manifest that an offer of an option, until it is turned into a completed option contract by acceptance in accordance with its terms, and the payment or tender of the consideration therefor, is entirely subject to the same rules in regard to withdrawal as the plain offer to sell. It therefore becomes important in the case at bar to determine whether there was a valid and binding (that is, a completed) contract of option existing between the plaintiff and the defendant W. J. McCoy.

In the argument before me, considerable time was spent in discussing the question whether Mr. Couch, in his telegram of March 9th, and his letter of March 14th, had duly and properly accepted the offer to sell, in accordance with the terms of said offer. In the view I take of this case, I do not consider that point as material, and prefer now to examine the question as to whether there was in •fact a valid option contract subsisting between the parties to hold the offer open for 60 days, because, if there was not, it is quite evident that the offer to sell was withdrawn before its acceptance by Mr. Couch, and the withdrawal was promptly communicated to him.

In England it has been held that there is neither principle nor authority for the proposition that there must be an express and actual withdrawal of the offer, but that the two minds must be at one at the same moment of time; that is, that there must be an offer continuing up to the moment of acceptance, and that if in fact the offer did not continue up to such moment the acceptance cannot make a binding contract. Dickenson v. Dodds, L. R. 2 Ch. Div. 463. In this country, on the contrary, it has been held that, to constitute a valid retraction, it must be communicated to the other party before he has accepted. Weaver v. Burr, 31 W. Va. 736, 8 S. E. 743, 3 L. R. A. 94. A failure to distinguish and recognize the independent character of the contract to leave the offer open, and the attempt to treat the offer to sell and the time option contract as one transaction, has resulted in much confusion of thought. The relief usually sought is a specific enforcement of the offer to buy or sell, and, so far as the reported cases decreeing specific performance show, the offers have universally been accepted before their formal withdrawal, and therefore have become completed contracts which could be enforced. The language of the courts must therefore be read in the light of that fact, and be regarded as surplusage in so far as it tends to hold that, if the offer was formally withdrawn before acceptance, the contract would still be specifically enforceable.

In an editorial note to the case of Litz v. Goosling (Ky.) 19 S. W. 527, 21 L. R. A. 127, it is suggested that even in the case where a completed time-option contract existed, and the offer therein contained was withdrawn before acceptance, there would ordinarily be no equitable ground for specific performance, although there would be a breach of the completed option contract. The author says:

“All attempts of the vendor to withdraw after being notified of acceptance are merely breaches of an existing contract which may be specifically enforced. But if before receiving such notice the vendor notifies the vendee of his withdrawal of the offer, it is difficult to see how there can be a specific performance of the contract, which has never been completed. Not withstanding the existence of a valid contract not to withdraw, if there is a with■drawal, the court, before enforcing the contract to sell, would have to either make a contract to enforce, or compel the vendor to make it. This might be done if there were distinct grounds for equitable jurisdiction, and no adequate remedy at law, by reason of the vendor’s insolvency or some other cause. ■Otherwise it is hardly within equity jurisdiction. But the language of the ■opinions is broad enough to suggest the enforcement of a contract which has never been made.”

I cannot go so far as the author of this note, because, in the case of a valid option contract, complete and sufficient in its terms to warrant specific enforcement if accepted before its withdrawal, and for which a valid consideration has been paid by the vendee, the very essence of the agreement is violated, and a time option becomes a farce, if we say that the vendee’s only remedy for such a breach as a withdrawal by the vendor before the expiration of the time limited is a suit for damages for the breach. The contract in such a ease is made, as to all its essential terms, in the unilateral option contract, which, it is true, is only binding upon the one party until accepted by the other, but which acceptance, if made within the time and according to the terms limited in the option contract, ■changes what was before a unilateral contract into a mutual one; and for this right of election, it is to be remembered, the party possessing it has paid what was deemed by the other a sufficient consideration for the right. It is evident that in large transactions, involving many tracts of land, failure to secure one upon which an option has been obtained may be, and often is, fatal to the whole enterprise, and damages for the breach of the option contract would be but a poor and feeble remedy, and one not at all adequate in the premises. Watts v. Kellar, 56 Fed. 1, 5 C. C. A. 394; Hall v. Center, 40 Cal. 65; and many others. But while I believe this to be the law as well established by well-considered decisions of many courts, it is nevertheless true that, before an option contract can be enforced by the person holding it, it must itself be complete and certain as to its terms, so that the court can see what contract the parties made. Brown v. Brown, 33 N. J. Eq. 650; Nichols v. Williams, 22 N. J. Eq. 63; Hennessey v. Woolworth, 128 U. S. 438, 9 Sup. Ct. 109, 32 L. Ed. 500; Dalzell v. Dueber Mfg. Co., 149 U. S. , 13 Sup. Ct. 886, 37 L. Ed. 749; Colson v. Thompson, 2 Wheat. 336, 4 L. Ed. 253; Diamond State Iron Co. v. Todd (Del.) 14 Atl 27; and numerous other cases to the same effect. And such option contract must not only be certain and complete, but must be accepted in accordance with its terms. Any acceptance not in accord s anee with its terms is equivalent to a rejection. Weaver v. Burr, 31 W. Va. 736, 8 S. E. 743, 3 L. R. A. 94; Wilkin Mfg. Co. v. Lumber Co. (Mich.) 53 N. W. 1045; Potts v. Whitehead, 23 N. J. Eq. 512.

In the case last cited the following language was used by the court:

“An acceptance, to be good, must, of course, be sucb as to conclude an agree • ment or contract between the parties; and, to do this, it must in every respect meet and correspond with the offer, neither falling within nor going beyond, the terms proposed, but exactly meeting them at all points, and closing with them just as they stand.”

Tested in the light of these authorities, let us see whether in fact there was ever a valid option contract existing between these parties. Counsel, in the argument before me, have spent a good deal of time in discussing the question whether the telegram of March 9th, and the letter of March 14th, from Mr. Couch, contained a proper acceptance of the terms of the option offered by Mr. McCoy. In my view of the case, that question is entirely unnecessary to be considered. If I was forced to consider it, I should be inclined to hold that it was a sufficient notification to Mr. McCoy that Mr. Couch elected to take the land upon the terms proposed by Mr. McCoy; and, taking the view I do as to the enforceability of a valid option contract, accepted before the time limited for its expiration,. I should be strongly inclined to hold that equity could take jurisdiction to enforce the contract. But the question here is not, as I view it, whether there was a sufficient acceptance by Mr. Couch of a valid option to purchase these lands, but whether there ever was in existence such a valid option contract.

Earlier in this opinion I called attention to the distinction between the option contract and the subsequent contract of» sale. If there never was a valid, completed option contract between the parties, there never could be a valid agreement of sale founded upon it, for manifestly the only right Mr. Couch would have for time for election must grow out of such a valid contract for such time. Let us see what the offer of Mr. McCoy was, and whether it ever was accepted, so as to become a valid option contract for 60 days’ time. Mr. McCoy’s offer was couched in the following language: “For fifty dollars will give sixty day option at twenty-five thousand dollars.” It will at once be observed that this was not an option, but an offer to give one in consideration of $50. Before any obligation rested upon Mr. McCoy to execute and tender the option contract thus referred to, the obligation rested upon Mr. Couch to accept the terms offered, and to pay or tender the consideration money. There can be no contention on the part of either party to this litigation .that a formal contract was not contemplated. Mr. Couch, in his telegram of March 3d, says, “Forward sixty day option to-day First National Bank, Ronceverte.” And again, in his letter of the same date he says, “As I have but a few days in which to make my decision I decided to wire you to forward option at the price named and as soon as said paper arrives I will make investigation of your property and write you immediately on my return to Ronceverte.” This language conclusively disposes of any possible contention that a formal option contract was not contemplated, for it will be observed that Mr. Couch, in his letter, proposes that “as soon as said paper arrives” he will make investigation of the property, etc. Under this state of affairs, and the information afforded by this letter, Mr. McCoy could be under no apprehension that Mr. Couch would place himself at any disadvantage by expending any money in the examination of this property or the purchase of contiguous property until he received the paper referred to in his letter. It will be observed that Mr. McCoy never offered to send this option agreement to Ronceverte or elsewhere, or to deliver it elsewhere than at the usual and ordinary place of delivery of such contracts, or until the consideration therefor had been paid. The vendor’s domicile, residence, or place of business is, in law, the proper place for payment for and delivery of a contract or deed; and an acceptance by a proposed purchaser, payable or deliverable elsewhere, is not the unconditional acceptance required to make a binding contract. Such acceptance amounts to an alteration of the proposal, and is equivalent to a rejection; and, unless the alteration so made is thereafter expressly assented to by the proposer by word or act, it cannot convert the original offer into a completed contract.

In Sawyer v. Brossart, 67 Iowa, 678, 25 N. W. 876, 56 Am. Rep. 371, the offer was as follows: “Yours at hand. You can have that building for $3500 and the two for $5000. Let me hear from you at once.” Plaintiff replied by telegraph: “Accept your offer for two buildings at $5000. Money at your order at First National Bank here. Telegraph me immediately when to expect deed.” Sawyer lived in Iowa, and Brossart in California. Held, that the acceptance by Sawyer was not an acceptance of the offer as made, the court saying (page 680 of 67 Iowa, page 877 of 25 N. W. [56 Am. Rep. 371]), “When Brossart learned that he had offered the property at less than its value, or in any state of the case, it was his right to stand upon a strict acceptance of his offer;” emphasizing the point that it matters not what the motive may be influencing the defendant. To the same effect are Robinson v. Weller, 81 Ga. 704, 8 S. E. 447; Langellier v. Schaefer (Minn.) 31 N. W. 690; Greenawalt v. Este, 40 Kan. 418, 19 Pac. 803; Gilbert v. Baxter, 71z

This last case was one for specific performance, in which the offer was couched in the following language: “Will give warranty deed as title now stands as $8 per acre net to me.” Plaintiff replied: “We accept your offer without qualification. * * * Notify us when and where to send money. * * *” The court below sustained a demurrer to the petition, and on appeal the court said: “The offer expressed nothing as to time or place of payment, and, had the acceptance been without expression on that subject, the law would fix the time and place; but the acceptance is upon condition that the defendant would ‘notify us when and where to send the money.’” See, also, Maynard v. Taylor, 53 Me. 511; Esmay v. Gorton, 18 Ill. 483; Dejonge v. Hunt (Mich.) 61 N. W. 341; Eliason v. Henshaw, 4 Wheat. 225, 4 L. Ed. 556.

These authorities, collated from such varying sources, abundantly show the uniform doctrine of the courts as to the necessity for an unqualified acceptance of an offer in order to convert said offer into an agreement.

It is manifest that under ordinary circumstances the telegram and letter of Mr. Couch would impose no obligation whatever upon Mr. McCoy to execute and send to the First National Bank of Ronceverte the paper in question. The pleader who prepared the bill in the case recognized this fact, and attempted to bridge the "difficulty by an allegation that before this time he had arranged with the officers of said bank that, should an option for these lands be there received, at a price which was at all reasonable, they should pay to Mr. McCoy $50 for the same out of funds deposited there by the plaintiff, and that he had written to Mr. McCoy, informing him of this arrangement. This might all be true, but it imposed no obligation upon Mr. McCoy to assent to any such arrangement, and there is no allegation in the bill that he did assent to it, or ever agreed to deliver any contract until paid for it. The pleader further states in the bill that Mr. Couch’s letter of March 3d, asking that the option be forwarded, contains a statement “informing said McCoy that said sum ($50) was deposited at said bank, and would be forwarded by it on receipt of option.” An examination of the letter itself, a copy of which is exhibited with the bill, discloses that the pleader was in error as to this, for no such statement is contained in the letter, nor is any reference whatever made to any arrangements for payment for the option. But even if such statement had been made in the letter, could it change the rights of the parties? Undoubtedly not. Mr. McCoy was entitled to payment for his option at the time and place of its delivery, which latter, in the absence of clear agreement to the contrary, would be at his residence, at Clinton, in the state of Iowa. If an acceptance of an offer to sell, qualified by making the consideration payable or deliverable elsewhere than at the residence or place of business of the vendor, is not a good acceptance, and may be treated as a rejection of the offer, how much more true is this of an offer of an option, which requires a consideration paid to support it, and which, all the authorities concede, may be withdrawn at any time, even though complete in form and signed by the vendor, unless a consideration has been paid for it, or the agreement be under seal, which imports a consideration. Hawralty v. Warren, 18 N. J. Eq. 124, 90 Am. Dec. ’613; Borst v. Simpson, 90 Ala. 373, 7 South. 814; Sutherland v. Par-kins, 75 Ill. 338; Connex v. Renneker, 25 S. C. 514. And even in the latter case, upon a suit for specific performance, the want of consideration may be shown notwithstanding the seal. 1 Pom. Eq. § 383; 3 Pom. Eq. § 1293; Graybill et al. v. Brugh (Va.) 17 S. E. 558, 21 L. R. A. 133, 37 Am. St. Rep. 894.

The United States Supreme Court has frequently held that, exercising the discretion vested in courts of equity in cases for specific performance, it will not be decreed “if it be doubtful whether an agreement has been concluded or is a mere negotiation,” or “unless the proof is clear and satisfactory both as to the existence of the agreement and as to its terms.” Dalzell v. Dueber Watch Co., 149 U. S. 315, 13 Sup. Ct. 886, 37 L. Ed. 749; Carr v. Duval, 14 Pet. 79, 10 L. Ed. 362; Nickerson v. Nickerson, 127 U. S. 668, 8 Sup. Ct. 1355, 32 L. Ed. 314; Plennessey v. Woolworth, 128 U. S. 438, 9 Sup. Ct. 109, 32 L. Ed. 500.

'In Mississippi, etc., S. S. Co. v. Swift, 29 Atl. 1063, 41 Am. St. Rep. 545, 86 Me. 248, it was held that when parties enter into a general contract, and the understanding is that it is to be reduced to writing, or, if it be already in a written form, that it is to be signed before it is to be acted upon or to take effect, it is not binding until' it is so written or signed, and that the burden of proof is on the party claiming the completion of the contract before the written draft is signed. In the case at bar it is perfectly clear that a formal option was contemplated by both parties, and in his letter of March 3d Mr. Couch says, “And as soon as said paper [the option] arrives I will make investigation of your property and write you immediately on my return to Ronceverte”; showing clearly that he was not relying on any existing option contract, but was looking to a formal option to be yet executed. It is also evident from Mr. McCoy’s letter of March 3d that he had in mind the preparation of a formal option, and did not intend to be bound until such a paper was executed. In one of his letters of March 3d he says, “If the option on that basis is desired please inform me to that effect.” To these letters explanatory of his telegram he never had any reply until after he had withdrawn his offer on March 8th.

In the case of Mississippi, etc., S. S. Co. v. Swift, supra, it was further held that:

“When correspondence indicates that a formal draft of a contract was in the minds of the parties, or at least in the mind of the party songht to be charged, as the only authoritative evidence of a contract, and that he did not have or signify any intention to be bound until the written draft had been made and signed, he is not bound until such draft is duly made and signed.”

And in Wardell v. Williams, 62 Mich. 50, 28 N. W. 796, 4 Am. St. Rep. 814, it was held that:

“Either party has the right to withdraw from pending negotiations for the sale of real property, where no consideration has passed, no rights intervened, and the conditions of the parties have not changed.”

From all of these considerations I conclude that, from the facts shown in the bill, it is not sufficiently shown that a valid option contract was entered into between the parties.

I conclude that the demurrer must be sustained, and the bill dismissed. A decree may be prepared in accordance with this opinion.