NORTH v. NEWLIN

MILLER, Judge.

The instant litigation involves an action for specific performance of a land purchase contract by appellee Russell K. Newlin against the sellers, appellant Richard Warren North and co-appellants Northwestern Farms, Inc. and Northwestern Feed & Grain, Inc., of which North is president and sole stockholder. Pursuant to Newlin's amended complaint for specific performance and compensatory and punitive damages, the trial court ordered North and the other appellants to convey to Newlin some 1,492 acres of farm land plus a grain elevator located in White County for a price of $4.5 million. North argues on appeal that no contract for sale of the land was ever formed and that in any event specific performance was an inappropriate remedy since Newlin's earnest money deposit was refunded and the land in question has been sold on conditional contract to a third party, the David R. Webb Co., Inc., which had no notice of Newlin's claim when its offer to buy was accepted, and which was not joined as a party to the present law suit.1

We affirm.

FACTS

Attached to Newlin's amended complaint was a copy of a written offer to purchase the property in question, signed by Newlin, and prepared by the sellers which offer the parties do not dispute was presented by Newlin on October 7, 1976 to one Morris Skiles, a Lafayette real estate broker acting for North, and to whom Newlin had submitted two previous offers (also prepared by Skiles himself) which were rejected. At that time Newlin gave Skiles a $100,000 "earnest money deposit" described in the written offer, as quoted infra. By way of background to the essential issues of this appeal, the relevant terms of the original Newlin offer were as follows:

It is further undisputed by the parties that such offer was never accepted by North, but that on October 8, North did sign the same piece of paper after directing Skiles to change the price and interest terms to $4.5 million and 8%, which changes were initialed by North before returning the document (now a counteroffer) to Skiles. As found by the trial court, this counteroffer was also apparently signed by Louis Pearlman, Jr., secretary of Northwestern Farms, Inc.

There is conflicting evidence regarding the subsequent conversations between Newlin and Skiles, and an alleged oral acceptance of North's counteroffer by Newlin. However, the evidence tending to support the trial court's judgment, consisting mainly of Newlin's own testimony regarding conversations with Skiles, may be summarized as follows: On October 8, sometime after North initialed his counteroffer and returned it to Skiles, Skiles telephoned Newlin and there was a conversation which Newlin summarized as follows:

Newlin did not initial the document that afternoon but instead went to Chalmers, Indiana, where he discussed with Larry Keesling, a farmer and realtor, the possibility that Keesling would buy a grain elevator and some of the land on the North farm if Newlin acquired the property.3 While at Keesling's, however, Newlin did call Skiles (with Keesling on an extension telephone) and had a conversation which Newlin recounted at trial as follows:

Similarly, Keesling's notes of that conversation, which were introduced as Defendant's Exhibit 5, revealed that Newlin had called Skiles that evening and that Newlin "told Morris Skiles he would talk to Warren North and would pay $4,500,000 at 8% interest and would be in touch with Morris after conversation with Warren" and that "Morris Skiles said nothing else could be done until Saturday morning, October 8, 1976 [sic]."4 His notes also reflect that Skiles told Newlin he "had until noon Saturday to get details worked out." (Emphasis added.) The same evening that Newlin called Skiles, and according to Keesling's notes about half an hour later, Keesling telephoned North himself, with Newlin on the line, to discuss the transaction, and was told by North the latter was too tired to talk that night but that the matter could be discussed the next morning, namely, Saturday, October 9. In this regard, Skiles confirmed that North had requested Skiles, and his attorney, Pearlman, to be present at a meeting Saturday morning with both Keesling and Newlin.

Newlin's wife testified that on Saturday morning, Skiles called her to say her signature would be required when the deal was "finalized" that morning, although Skiles, who stated he remembered calling her, asserted he couldn't recall whether or not her signature had been discussed. When Newlin, Keesling, and attorney Ralph Bower went to North's residence that morning, however, North was not at home and Newlin was informed by North's housekeeper they were at Pearlman's office in Lafayette. When Keesling called that office, Pearlman told Newlin and Keesling the farm had already been sold. Skiles stated by affidavit he had attempted to contact Newlin the previous night to inform him the meeting with North had been moved to Pearlman's office, but that he could not reach Newlin, apparently because the latter was then at Keesling's, where he spent the night. According to North, he agreed to meet with Newlin on Saturday morning only "to be courteous," since he had decided to accept the Webb Company offer.

Newlin testified that after he, Keesling and Bower ultimately proceeded to Pearlman's office on Saturday morning, Skiles reiterated that the farm had already been sold, and when Newlin asked to have his "contract" back, Skiles told him, "Mr. North and Mr. Pearlman never signed the Contract ... you never seen it, did you?" Pearlman then handed Newlin the document, which had Newlin's signature on it, but from which the half page reserved for the seller's signature had been removed. Newlin stated Pearlman told him he had torn off this part of the document because he had "doodled on it." In addition, two notations — presumably North's initials and the changes he made in the purchase price and interest rate — had been marked out with ink, and at the top of the document appeared the handwritten word "Rejected," North's and Pearlman's initials, and the date 10-8-76, although it is conceded these latter notations were actually made on the morning of October 9. Thereafter, Newlin asked for and received back his $100,000 deposit, and, according to Keesling's notes, then said "you guys accepted the offer to purchase and we've bought [the] farm and if you don't think we have, there will be a lawsuit."

As noted above, the revised judgment of the trial court5 on July 27, 1979, following a trial to the court, awarded Newlin specific performance of the land contract, subject to North's changes in purchase price and interest rate, and on the same date that court denied the petition of the Webb Company to intervene for the reason that it was not timely filed.6

Pursuant to the instant appeal, the trial court further granted a stay of its judgment, upon defendant's motion under Ind. Rules of Procedure, T.R. 62(B) and (C), "for the reason that irreparable injury would result therefrom for the reasons set forth in the Motion to Correct Errors." The Memorandum accompanying the Motion to Correct Errors asserted the Webb Company was the equitable owner of the property pursuant to performance under its accepted offer and resulting contract. It was stipulated at trial there was a signed agreement to purchase between Webb Company and the original defendants in existence on November 1, 1976, but that no contract was recorded as of that date, and also that no lis pendens notice had been recorded in the county where the land is located.

ISSUES

There are only two issues involved in this appeal, namely 1) whether a contract was ever formed, since North allegedly revoked his counteroffer; and 2) whether specific performance was properly or equitably awarded since Newlin allegedly was aware the defendants had entered into a binding commitment with the Webb Company prior to commencement of this action but failed to file a lis pendens notice or join that Company as a party, and since the Webb Company was the equitable owner of the property when the judgment was entered.

I.

Whether A Contract Was Created

There appears to have been sufficient evidence for the trial court to properly conclude Newlin accepted North's counteroffer and that a contract was thus formed.

North and the other appellants argue, in essence, that Skiles told Newlin he (and perhaps Newlin's wife) must sign or initial7 North's counteroffer in order to accept it and that Newlin failed to take such action before North properly revoked it. They further maintain that such specified means of acceptance was not waived when Skiles told Newlin he could sign on Saturday morning, but rather that such statement was merely a promise to keep the offer open which was unsupported by consideration, and therefore unenforceable. In presenting their argument, the appellants quote the following language from 1 A. Corbin, Contracts § 39 (1963) at 163:

Even assuming the accuracy of such rule of law regarding acceptance and revocation, however, it is evident the trial court could reasonably have viewed the conflicting evidence in a manner different from that urged by North and the appellants. Initially, it is not clear that any precise means of acceptance was in fact ever communicated to Newlin, whether before his acceptance or after. North merely argues (without citing authority) that the "simultaneous" communication of an offer and a "specified mode of acceptance" requires acceptance in such manner, and thus that Newlin was required to sign or initial the counteroffer because Skiles told him on the telephone he was "ready to bring it down for his signature and for his wife's signature, if he were ready to go ahead and accept the changes." (Emphasis added.) It is not clear such statement "prescribes" a mode of acceptance, as contended. Moreover, such statement by Skiles was not made until after he had asked Newlin whether he would accept the changes and the latter had responded, "we will accept it." Thus, it does not appear any restriction was placed on the manner of acceptance before acceptance in fact occurred.

Similarly, North's argument in this regard is not significantly buttressed by Newlin's own testimony, also cited by the appellants, that the document "had to have ... [Newlin's] initials on it," since such requirement may reasonably have been intended as a memorial that Newlin had agreed to the obvious handwritten changes, rather than a prerequisite to his valid acceptance of the offer. The record shows Bower, the attorney for Keesling who testified as to what Newlin told him about the deal, stated only that "there was something about initialing on the original offer and that it was still go, that instead of coming in that evening, he didn't need to go, and that he could come in the following morning" and that "[t]here was some discussion about his wife's signature, that she was going to be needed when the formal Contract was prepared, that she would have to sign it." (Emphasis added.)

In this regard, it is instructive to note the general rule that "the mere fact that parties who orally assent to all the terms of a contract refer to a future contract in writing does not negative the existence of a present and completed oral contract," 6 I.L.E. Contracts § 51 at 109, (1958) citing International Shoe Co. v. Lacy, (1944) 114 Ind.App. 641, 53 N.E.2d 636, opinion supplemented, 116 Ind.App. 78, 61 N.E.2d 85; Horner v. Daily, (1922) 77 Ind.App. 378, 133 N.E. 585; and Featherstone Foundry & Machine Co. v. Criswell, (1905) 36 Ind.App. 681, 75 N.E. 30. Moreover, it is clear that "the intention to make a legal obligation is not necessary for the existence of a contract," State ex rel. Appleman v. Lake Circuit Court, (1952) 231 Ind. 378, 382-83, 108 N.E.2d 898, 900, quoting 1 Williston, Contracts (rev. ed.) § 28 at 61, and that:

Young v. Bryan, (1977) Ind. App., 368 N.E.2d 1, 3, on remand, 368 N.E.2d 3 (acceptance of offer so as to create a contract in an action for specific performance of an agreement to sell a farm may be oral, and need not be filed or delivered to offeror.)8 As noted above, in the instant action Newlin stated he told Skiles "[i]f that's what it takes to buy it, we will accept it" and Keesling's notes of the later conversation corroborated that Newlin "told Morris Skiles he would talk to Warren North and would pay $4,500,000 at 8% interest and would be in touch with Morris after conversation with Warren" and that Skiles "said nothing else could be done until Saturday morning."

Finally, although North and the other appellants raise the further argument there was no "meeting of the minds" necessary to create a contract because "[t]he involvement of Keesling was not contemplated by the counter-offer," we conclude such contention (the precise nature of which is unclear) is without merit. The appellants empowered Newlin to accept the counteroffer, and he did. By the terms of such counteroffer, Newlin was authorized to transfer parts of the farm with North's approval, and the evidence shows not only that North was aware of Keesling's interest in the farm but also that, after the acceptance, Newlin and Keesling arranged to meet with North when the deal was finalized. That Newlin undertook before his acceptance, to discuss such a transfer with Keesling should not in any way affect his acceptance of North's counteroffer. The evidence does not suggest, much less require the trial court to conclude, that any of the parties anticipated Keesling would actually be a party to the contract, although it is true his negotiations with Newlin suggested Keesling would give Newlin a percentage of the total purchase price in return for his share. In this regard, the argument in the instant case may be distinguished from the reasoning in Gates v. Petri, (1957) 127 Ind.App. 670, 143 N.E.2d 293, in which case there was a signed acceptance of an offer by only the seller-husband, although the offer was directed to the "owner" of certain property which in fact was held by the husband and his wife as tenants by the entireties. In that case, the Court concluded there was evidence to support the verdict that no acceptance was effectuated. By contrast, as noted above, the court in the instant case could reasonably have determined Newlin did accept the counteroffer and that Keesling's "involvement" was not legally significant, as regards formation of a contract.9 Accordingly, all of the elements of a valid contract were present.

II.

Specific Performance

The additional argument made by North and the other appellants is that the award of specific performance was inappropriate under the circumstances. In this regard they argue 1) that it was inequitable to give Newlin specific performance in the absence of the Webb Company as a party to the litigation, since return of his $100,000 earnest money returned him to a position of "status quo," while the new purchaser of the land has made substantial payments thereon before notice of Newlin's claim; and 2) that in any event, Newlin waived any claim to specific performance by demanding return of his $100,000.

Was Specific Performance "Inequitable"?

North and the other appellant's contention that the award of specific performance was inequitable draws considerable support from their representation, though it is not supported by specific evidence in the record, that the ultimate purchaser of the property, namely, the Webb Company, has made substantial payments thereon pursuant to a conditional sales contract, and that such company is in fact the equitable owner of the farm and has been in possession of it since December of 1976. In this regard, they apparently argue that the trial court abused its discretion by awarding specific performance, since it is settled law that the grant or denial of such relief rests within the sound discretion of that body. Gyr v. Hagemann, (1960) 130 Ind.App. 212, 163 N.E.2d 620.

It is apparent appellants have the burden of demonstrating the trial court's judgment was inequitable based on the facts in the record, and in this regard we note the appellants conceded at oral argument any defense of "impossibility" of performance in the absence of the Webb Company is an affirmative defense which they were required to establish.10 See Indianapolis Northern Traction Co. v. Essington, (1913) 54 Ind.App. 286, 300-01, 100 N.E. 765, 765-66, (On Petition for Rehearing) where the Court stated:

See generally, Louisville, New Albany & Chicago Railway Co. v. Bodenschatz Stone Co., (1895) 141 Ind. 251, 262-63, 39 N.E. 703, 707. With such burden in mind, it is significant that in the instant case, the appellants failed to prove the performance was inequitable or impossible in the absence of the Webb Company as a party, in that the only evidence presented on this question to which they allude did not establish the full terms of any existing agreement between appellants and the Webb Company at the time of trial. Instead, the only evidence presented consisted of the Webb Company's accepted offer to purchase, dated October 8, 1976, which North stated was signed October 9, the unelaborated testimony of Skiles that with respect to such offer a transaction had been "carried out" and the offer "consummated," and Keesling's notes of a conversation with North after October 9 in which North acknowledged the farm had been sold to Webb and that a closing was set for "sometime the first of December." In other words, the appellants failed to submit to the trial court any specific evidence not only of performance under such contract and the exact nature of the terms established at the closing, including any provisions not mentioned in the offer then in evidence, apart from the vague assertion that the transaction had been "carried out," but in fact failed to introduce into evidence the parties' present agreement itself, or any specific evidence as to when the closing in fact took place and whether an abstract of title was provided by the sellers showing the interest claimed by Newlin, although the offer submitted into evidence recited that a contract of sale would be entered into between the parties on or before December 1, and that at such time the seller would provide an appropriate abstract of title11 to the Webb Company. Based on such lack of evidentiary showing, we believe the trial court could only speculate whether, as alleged by the appellants, it would be inequitable to award specific performance of the contract to Newlin in the absence of Webb, since the parties' agreement may have made some provision regarding the suit already filed by Newlin.12 Under such circumstances that court did not act improperly in awarding the relief requested.13 We note, in this regard, the general rule of law to the effect that "failure to produce evidence, which under the circumstances would be expected, gives rise to a presumption against the party failing to produce it." P.R. Mallory & Co., Inc. v. NLRB, (7th Cir.1968) 400 F.2d 956, 959, cert. denied, (1969) 394 U.S. 918, 89 S.Ct. 1191, 22 L.Ed.2d 452. See also 12 I.L.E. Evidence § 25 (1959). This Court cannot determine, any better than could the trial court, in what manner the transaction was "carried out" and whether the final contract with Webb would make conveyance to Newlin inequitable, as contended.

Finally,14 North and the other appellants also contend that since Newlin was allegedly returned to his original position when his $100,000 earnest money deposit was refunded, and he thus suffered no monetary injury, any further relief under the circumstances was inappropriate. With respect to such argument, they quote the following language found in Ames v. Ames, (1910) 46 Ind.App. 597, 610, 91 N.E. 509, 514:

The Ames Court noted "[a]ppellee had paid nothing on the contract... ." Id. at 608, 91 N.E. at 513. Even assuming such principle could be applied where, as here, a party had made an earnest money deposit which was returned only after the breaching party had indicated his intention not to perform, it is significant that in Ames it was also stated:

Id. at 608, 91 N.E. at 513. The facts in that case, in contrast to those in the case at bar, involved an advantageous agreement with a 62-year old party, in ill health, who the Court concluded "did not comprehend what the nature of the contract was." Id. at 608, 91 N.E. at 513.

Significant in this context, this Court, in the case of Bauermeister v. Sullivan, (1928) 87 Ind.App. 628, 634, 160 N.E. 105, 107, has suggested that the injury suffered where a contract for the sale of land is involved may not generally be equated with simple monetary damages, and may in fact be peculiar to the buyer, for the reason that "the exact counterpart of any particular piece of real estate does not exist anywhere else in the world." Accordingly, the rule is that:

See also Walcis v. Kozacik, (1927) 86 Ind.App. 484, 156 N.E. 589. The Bauermeister Court further observed the Court in Ames v. Ames, supra, like that in Harter v. Morris, (1919) 72 Ind.App. 189, 123 N.E. 23, an additional authority cited by the appellants, "made inaccurate statements of the law" by failing to distinguish the general rule involving specific performance of contracts from "the different rule as to land contracts." Id., 87 Ind. App. at 636, 160 N.E. at 107. We believe that on the facts presented to the trial court, noted above, no error was committed in finding the equities were with Newlin in favor of specific performance.

Did Newlin Waive His Right to Specific Performance?

The further argument that Newlin "waived" any right to specific performance by demanding and accepting return of his $100,000 earnest money deposit appears to be without substantial merit, despite the assertion in 81 C.J.S. Specific Performance § 25 at p. 753 (1977) that "specific performance may be denied a vendee who has brought a prior action to recover a deposit or earnest money under the contract, or a suit to quiet title, since the institution of such a suit amounts to a repudiation of the contract." In the instant case, of course, Newlin brought no prior action to recover his deposit, and indeed even after receiving such deposit informed the appellants at the meeting on Saturday morning (according to Keesling's notes introduced into evidence) that "we've bought [the] farm and if you don't think we have, there will be a lawsuit." Such assertion does not necessarily show, as is required by the waiver doctrine, that the "remedy" pursued by Newlin at that time was "inconsistent with that of specific performance." 81 C.J.S. Specific Performance § 25 at p. 753 (1977). (Emphasis added.)15 Moreover, Keesling's notes further suggested that based on his recollection, Newlin merely received the earnest money check at the initial urging of Pearlman, who stated, "Here is your check, we don't need it anymore," although Newlin's own recollection expressed in his testimony was that Newlin had asked to have the money returned. Based on such facts, the trial court was not required to conclude Newlin waived any right to specific performance.

The decision of the trial court is affirmed.

YOUNG, P.J., and CHIPMAN, J., concur.