Goldstine v. Tolman

147 N.W. 7, 157 Wis. 141, 1914 Wisc. LEXIS 176

Opinion

Barfes, J.

The plaintiffs in their complaint set forth the preliminary agreements and alleged that on the 5th of November, 1909, they tendered the defendant Tolman a lease in full performance of and in compliance with such agreements and demanded execution thereof, and that thereafter considerable correspondence and negotiations took place between the parties, and that again on April 16, 1910, they tendered a second lease in full performance of and in compliance with the terms of said agreements and demanded execution thereof, and that defendant Tolman refused and still refuses to execute and deliver the lease which he agreed to enter into, and that plaintiffs fully performed the terms and conditions of the preliminary agreements and were willing to' accept a lease of the premises conformable with and correctly expressing the agreement of the parties. The relief demanded was that the contract be specifically enforced and that plaintiffs refcover the damages sustained by reason of the delay, which were placed at $351,666.10.

It was stipulated that the action should proceed to trial, reserving proof as to the amount and assessment of damages, for a compulsory reference, or trial by tbe court, if sucb should prove to be necessary, and that on tbe trial bad tbe case should proceed to judgment, which judgment should determine all of the issues except the amount and assessment of damages reserved as stated.

The trial court held that the forms of lease submitted by the defendant Tolman to the plaintiffs on October 28, 1909, and on February 28, 1910, did not conform to the requirements of the contract for a lease. The court also held that the same was true of the forms of lease which the plaintiffs submitted to Tolman under dates of November 5, 1909, and April 16, 1910. The court further held in a decision rendered on the question of costs that the forms submitted by Tolman conformed more closely to the lease to which the-plaintiffs were entitled than did the forms proposed by the plaintiffs.

The trial court apparently proceeded on the theory that the preliminary agreements constituted a definite contract upon the terms of which the minds of the parties met, and that the first lease submitted by Tolman correctly embodied the agreement of the parties, except as to matters wherein it was in conflict with the specific provisions of the two preliminary agreements. The lease prepared by the court was framed on this basis. Evidently the court was also of the opinion that the duty rested upon the defendant Tolman to prepare such a lease as it was found that the parties agreed upon, and that, having defaulted in this duty, it was proper for the court to ascertain what the contract in fact was and give relief by way of specific performance.

We are unable to reach the same conclusion as did the trial court as to the effect that should be given to the two preliminary agreements. We do not think they evidenced a contract upon the terms of which the minds of the parties met as to all essential details and covenants, and we think it is very evident that the parties did not so regard those tentative agreements. It is obvious that these contracts were entered into in good faitb by both parties and with the expectation that a satisfactory lease could be agreed upon. Some of the main provisions \Vere definitely provided for, snch as the duration of the lease, the rental to be paid, the amount to be invested in a new building, the time when it was to be completed, the ownership of it at the end of the term, and the amount of money which Tolman was to advance to aid in its construction, as well as some other matters. But there were a great many provisions which were not covered by the tentative agreements, except by the very general and what would seem to be indefinite recital that the lease was to be made “on the usual terms as applied to a ninety-nine year lease.” These preliminary agreements take up about three pages of the printed case. The lease prepared by the court covers twenty-five pages and contains about twenty covenants that are not mentioned in the writings signed by the parties, .except as they are covered by the clause referring to the usual terms contained in ninety-nine year leases. All matters mentioned in the tentative agreements were not definitely settled and provided for therein.

We regard these contracts as amounting to an agreement of the parties on such of the points as were specifically covered and an agreement to agree, if possible, on those which were not. They made a starting point for negotiations and treaty on those matters which were not agreed upon, instead of definitely settling the rights of the parties on all material questions. This conclusion can be quite satisfactorily reached from the provisions of the preliminary agreements. It is also apparent from the construction which the parties themselves placed upon these contracts. Not only was there a disagreement upon the matters which were left indefinite, but both parties endeavored to secure modifications of certain provisions of the agreements which were definite. Such conduct was consistent only with the belief that a lease had not been agreed upon and that either party was at liberty to-make the best trade he could during the negotiations.

It is clear that the two agreements referred to were not intended to constitute the lease which the parties were to make, because they provided for another one which would specifically cover the mutual obligations to be assumed by the parties. While the same subjects may be quite generally covered by ninety-nine year leases, it would be remarkable if there was a general uniformity in the manner in which they were covered or in the obligations assumed in reference thereto. The proof showed that there was no general uniformity as to such leases in Milwaukee. We are not unmindful of the fact that respondents insist that the matter is fully covered in Tolman's evidence. We do not think so, but this point in itself is not of sufficient importance to discuss it at length.

The parties had in contemplation that in an important and complicated transaction of this kind attorneys would be employed to draft the necessary papers, and they were employed by both parties. Tolman did not desire to be out any money on this account if the negotiations resulted in nothing, and so> required the plaintiffs to pay him $250 to make him whole if the negotiations fell through. If they did not, the amount was to be credited on rent. This provision very clearly indicated that the parties did not understand that the terms of the lease had been agreed upon. It is argued that the money was paid as compensation for drawing a lease, the terms of which had been settled, but the language of the agreement itself and the subsequent conduct of the parties clearly show that such was not the case. If it was, why was the provision made for crediting the amount on rent if an agreement to lease was consummated? Aside from the reference to the usual terms on which ninety-nine year leases are drawn, the preliminary contracts are indefinite in some respects and approach being unenforceable in others. The first one provides that plaintiffs shall give sufficient security that they will put up a building to cost not less than $200,000'. Nothing is said as to who shall pass upon the sufficiency of the security ■or as to how it shall be determined. The plans and specifications of the new building were required to be submitted to Tolman, and no building could be put up without his approval. If this provision were enforced according to its terms, Tolman could prevent the erection of any building. This was one of the clauses on which the parties split during their earlier negotiations. Tolman construed the provision last referred to as giving him the absolute right to say what kind of a building should be put up, and in the first lease which he had prepared he specified that it should be a hotel building. Plaintiffs declined to accept this construction as being correct. This agreement required plans and specifications for the building to be submitted to Tolman for his approval, in addition to providing that no building should be built without Tolmans approval. The first lease prepared by Tolman contained such a provision. That submitted by plaintiffs on November 5th provided that the plans and specifications should be submitted, not to Tolman, but to such a firm of engineers of the city of Chicago and of established reputation as Tolman might select. This was a very proper modification of the agreement of October 16th to contend for if the parties were simply negotiating. The plaintiffs had .no right to insist on it if there was nothing left to negotiate.

There was a ten-foot alley running east and west which formed the north boundary line of the leased property. Tol-man owned property to the north of the alley which was not included in the lease. ' By the second supplemental agreement Tolman agreed to lease such rights as he had in the alley “belonging to and attaching to the said premises south of the alley.” Tolman construed this provision as requiring him to lease all his rights in the south half of the alley and so provided in the lease of October 28th. The plaintiffs, in tbeir lease of November 5th, included “all the rights of the lessor in and to the ten-foot alley.” This would shut out the occupant of Tolmaris property to the north of the alley from the use of it. Some of these matters were adjusted later, but others were left which the parties were unable to adjust.

It would serve no useful purpose to engage in a tedious recital of the various matters of difference between the parties. At one time or another, in addition to the disputes mentioned, they disagreed as to who should assume responsibility for obtaining consent to the assignment of Gimbel Brothers’ lease; as to whether Tolman should turn over to plaintiffs $5,000 advanced as security for the Sherman Brown lease; as to the payment of certain taxes; as to the ownership of the building when it was completed; as to the amount of the bond to be given; as to whether the interest on Tolman1 s loan should be paid in advance or not; as to conditions under which plaintiffs might assign their lease; as to the liability of the original lessees in case of an assignment; and as to the right of the lessor to increase a mortgage on the property covered by the proposed leases. If the minds of the parties met on a contract, none of them knew it or knew what the contract was. It is argued with much force and reiteration that plaintiffs were willing and ready at all times to accept such a lease as the court finally found' was agreed upon. Either the argument is without foundation or else the plaintiffs were acting in bad faith. They asserted the contrary in the two leases which they prepared and submitted, in their communications with Tolman while the negotiations were pending, and finally in their pleadings in this action. It is true, they say in the complaint that they have at all times been ready to accept such a lease as the parties agreed upon, but they also say that each of the leases submitted by them conformed to the agreement. This could not be correct in any event, because there were some material differences between the two leases submitted!. These differences ■did not consist of particularization in tbe second lease as to matters which were generally covered by the first one.

The facts are: The lease submitted by Tolman on October 28th was unsatisfactory to the plaintiffs. On November 5th they presented a lease drawn by their attorney, which they claimed and probably thought embodied the agreement of the parties. Tolman refused to execute this lease because it was not in accordance with his understanding of the agreement. Interviews took place and communications passed between the parties and an endeavor was made to reach an agreement. Some concessions were made, and as a final offer Tolman on February 28th submitted a second draft of a lease which was not satisfactory to plaintiffs. Negotiations continued, and on April 16th plaintiffs submitted their ultimatum in the shape of a draft of a new lease, which Tolman declined to accept. This practically brought negotiations to an end. By active or tacit consent the parties agreed that they could not agree. It is difficult to see how it can be said that the minds of the parties met on a contract, when neither of them, after six months of effort, was able to say what it was. We have the statement of the court that Tolman came nearer hitting the mark than did the plaintiffs, and we are inclined to think the statement is correct, although not very material. The essential point is that neither of the parties knew that they had made such a contract as the court found until the court said so. The plaintiffs then discovered not only that they were prepared to accept the lease drawn by the court, but that they had been willing to do so all the time. A letter written by plaintiffs’ attorney to Tolman on the day on which the lease of April 16th was transmitted contained this statement:

“I desire to state that my clients stand upon the original agreement and ask no change and have not changed their purpose or intention since the same was executed, of fully complying with the same and signing the lease therein provided, and it is you and not them that bave beld this matter in abeyance.

“Eind inclosed leases in duplicate, including a bond which my clients are ready and willing to execute and- have been since they signed the original agreement with you. . .

Here we have a pretty positive assertion that the leases submitted by plaintiffs contained their understanding of what the contract was. If this is so, then the court’s lease did not. If the minds of the parties met on a contract, surely one or the other of them should, after six months of endeavor, be able to tell what it was.

We think the conclusion reached is well supported by the authorities, as will be seen from a reference to the following cases: Sourwine v. Truscott, 17 Hun, 432; McIntosh v. Miner, 37 App. Div. 483, 55 N. Y. Supp. 1074; Federal L. & S. Co. v. Hatch, 147 Iowa, 18, 125 N. W. 837; Methudy v. Ross, 81 Mo. 481; Water Comm’rs v. Brown, 32 N. J. Law, 504; St. Louis & S. F. R. Co. v. Gorman, 79 Kan. 643, 100 Pac. 647; Bryant v. Ondrak, 87 Hun, 477, 34 N. Y. Supp. 384; Laroussini v. Werlein, 52 La. Ann. 424, 27 South. 89; Mayer v. McCreery, 119 N. Y. 434, 23 N. E. 1045; Buck v. Pond, 126 Wis. 382, 105 N. W. 909; Auer v. Mathews, 129 Wis. 143, 108 N. W. 45; Poole v. Tannis, 137 Wis. 363, 118 N. W. 188, 864; Thoemke v. Fiedler, 91 Wis. 386, 391, 64 N. W. 1030; Mississippi River L. Co. v. Wheelihan, 94 Wis. 96, 68 N. W. 878; 1 Tiffany, Landl & T. § 64; Charlton v. Columbia R. E. Co. 64 N. J. Eq. 631, 54 Atl. 444; Arnold v. R. Rothschild's Sons Co. 37 App. Div. 564, 56 N. Y. Supp. 161; Foster v. Clifford, 42 Misc. 496, 86 N. Y. Supp. 28; Donnison v. People's C. Co. 45 Law T. n. s. 187.

While it is true that, where a contract informal but complete in its terms appears to have been made, it will take effect although the parties contemplate that a more formal contract will thereafter be made, it is also true that writings passing between the parties will not be construed as a contract where it is plain that they were intended only as preliminary negotiations, to be followed by a formal contract containing material provisions not contained in or to be inferred from the preliminary writings. Francis H. Leggett & Co. v. West Salem C. Co. 155 Wis. 462, 144 N. W. 969, and cases cited.

If we should accept the conclusion that the minds of the parties met on the terms of the lease prepared by the court, we think no recovery should be allowed, because both of the parties breached their contract if they made one, and it was as much the fault of the plaintiffs that the proper lease was not executed as it was that of Tolman. The plaintiffs were no more willing than was Tolman to enter into the lease drawn by the court, until they found that they had to accept such lease or nothing. There never was any partial performance, unless it can be said that the amount exacted by-Tolman to indemnify him against expenses for attorney’s fees in case no lease was agreed upon constituted such performance. We do not see how this could be, when the money was paid, not on the theory that a contract had been made, but to provide for the contingency that no contract would be made. After many futile attempts on the part of both parties to secure a lease differing from that prepared by the court, negotiations were abandoned. The plaintiffs in effect said they would not accept such a lease as the court found was made, and the defendant Tolman said he would not give such a lease. More than a year and a half thereafter, and after Tolman had spent $27,000' in repairs and made a ninety-nine year lease to another party, the plaintiffs, conceiving that they were right in their contention as to what the lease should -contain, brought this action to compel Tolman to execute such a lease as they submitted to him on November 5, 1909, or else such a one as they submitted April 16, 1910. The court held, and was justified in holding, that plaintiffs were not entitled to either of the leases which they sought, but pro■ceeded to supply a new one, which up to this time was not •satisfactory to any one. .We think under the circumstances •of this case it was just as incumbent on the plaintiffs to correctly state the terms of the lease as it was upon Tolman, and, having breached a duty to the same extent that he did, there can be no recovery.

As a conclusion of law the court found that the duty devolved on Tolman to prepare such a lease as the court found was made. The whole burden was placed on him and no significance was given to the conduct of the plaintiffs. We think this conclusion is not warranted by the facts. No •doubt it was understood and contemplated by the parties that Tolman should present to the plaintiffs a draft of a lease -drawn according to his views. Eor reasons already stated, we do not think it was within the contemplation of either party that this draft would meet the views of both parties. It was the duty of the plaintiffs upon receipt of it to object to the things which they considered objectionable therein. If •this were not so, they assumed to perform such a duty. They presented not one lease but two which they insisted contained -the true conditions of the agreements, and the ones and the •only ones which they were willing to accept. Having assumed the duty of stating what the contract was, why were they absolved from the duty of stating it with substantial ac-•euracy any more than was Tolman, and why was not their failure to do so as much a breach of their obligation as was Tolman1s like failure a breach of his obligation ? The conclusion reached on the other branch of the case renders it unnecessary to further elaborate on this one or to treat the question of laches or other questions that were argued at length •on the appeal.

By the Court. — The judgment appealed from is reversed, and the cause is remanded with directions to dismiss the •complaint.