Lennon v. Habit, 216 N.C. 141 (1939)

Sept. 20, 1939 · Supreme Court of North Carolina

216 N.C. 141

GUY H. LENNON, R. B. LENNON, and R. B. ETHERIDGE, Trading as VIRGINIA DARE TRANSPORTATION COMPANY, v. JOHN HABIT and JOE HABIT, Individually and Trading as HABIT BROTHERS FREIGHT LINE, and VIRGINIA-CAROLINA TRANSPORTATION COMPANY, INC.

(Filed 20 September, 1939.)

1. Contracts § 10: Carriers § 5 — Option to sell franchise within stipulated time requires notice hut not payment of purchase price nor approval of commissions within that time.

Defendants gave plaintiffs an option to buy at any time within 90 days their franchise as a common carrier at a stipulated price subject to the approval of the Interstate Commerce Commission and the State commissions having jurisdiction. Sold: It was of the essence that plaintiffs give notice of their intention to exercise their option within the 90-day period but notice within that period made the agreement a binding contract of purchase and sale at the price and upon the condition stipulated, and it was not required that the purchase price be paid within the 90-day period nor that the commissions approve the transfer within that time.

2. Contracts § 20: Carriers § 5: Specific Performance § 3 — Tender is not required of plaintiffs when on defendants’ statements it would he futile.

Defendants gave plaintiffs an option to buy their franchise as a common carrier at a stipulated price within a period of 90 days, subject to the approval of the commissions having jurisdiction. Plaintiffs instituted this action for specific performance, alleging that plaintiffs gave defendants notice of their intention to exercise the option within the time specified and that the parties to the contract filed an application for the transfer with the Interstate Commerce Commission, that the application was refused because'it was not in proper form, and that defendants notified plaintiffs that they would take no further steps to secure the approval of the several commissions and that defendants had declared their intention not to carry out the contract. Held: Upon notification by plaintiffs of their intention to exercise the option it was the duty of the defendants to take all necessary steps required of them to secure the approval of the several commissions and to deliver the property in accordance with the contract, and since the allegations of the complaint are sufficient to disclose that tender on the part of plaintiffs, under the circumstances, would be futile, tender of the purchase price by plaintiffs was not required.

3. Carriers § 5: Specific Performance § 3—

In a suit to compel specific performance of a contract of sale of a franchise as a common carrier, made subject to the approval of the Interstate Commerce Commission and the State commissions having jurisdiction, defendant sellers’ demurrer on the ground that it failed to appear from the complaint that the commissions would approve the transfer, is untenable, it being incumbent upon defendants under the terms of their contract to join in a proper application to the commission for such transfer.

4. Same—

The jurisdiction of the Interstate Commerce Commission does not preclude our courts from entertaining a suit to compel defendant sellers to join in making a proper application to the proper commissions for a transfer of their franchise to plaintiffs in accordance with their contract for the sale of such franchise.

Appeal by plaintiffs from Thompson, J., at Chambers in Elizabeth City, N. C., 1 July, 1939.

Reversed.

The plaintiffs brought suit to compel specific performance of a contract entered into between it and the defendants for the sale and delivery of - certain franchises and property of defendants’ transportation business, known as “Habit Brothers Freight Line,” and to recover damages for breach of the contract.

The contract set up in the complaint is as follows :

“AGREEMENT.

“THIS AGREEMENT, Made and entered into this 1st day of August, 1938, by and between John Habit and Joe Habit, Trading as HABIT BROS. FREIGHT LINE, parties of the first part, and GUY H. LENNON, R. B. LENNON, AND R. B. ETHERIDGE, Trading as VIRGINIA DARE TRANSPORTATION COMPANY, parties of the second part, WITNESSETH:

“That the parties of the first part, for and in consideration of the sum of THREE HUNDRED ($300.00) DOLLARS to them in hand by the parties of the second part paid, the receipt of which is acknowledged, do hereby agree to sell to the parties of the second part at the option of the parties of the second part at any time within ninety (90) days from the date hereof, for the purchase price of TWENTY-ONE THOUSAND, SEVEN HUNDRED ($21,700.00) DOLLARS, in addition to the Three Hundred ($300.00) Dollars already paid, the following property, to wit: Interstate Certificate No. 37015 issued by the Interstate Commerce Commission; North Carolina State Certificate No. 233; Virginia Certificate No., and all other State and Federal franchises now or hereafter acquired; two (2) Chevrolet trucks, 1936 model; two (2) Ford trucks, 1937 model; one (1) Chevrolet truck, 1937 model; three (3) semi-trailers, and all other equipment of every description, including office equipment used in connection with the freight transportation business of the parties of the first part carried on under the above name (except garage equipment located in Edenton).

“In the event said option is exercised, the parties of the first part agree to deliver said property in as good condition as it now is, reasonable wear and tear excepted, and free of all liens and encumbrances.

“The exercise of this option is subject to the approval of the Interstate Commerce Commission, the North Carolina Utilities Commissioner and the Virginia State Corporation Commission, and in the event the sale is disapproved by any of said agencies, the Three Hundred ($300.00) Dollars paid as consideration for this option is to be returned to the parties of the second part.

“IN WITNESS of which the parties of the first part have hereunto set their hands and seals.

JohN Habit [Seal]

Joe Habit [Seal]

By: JohN Habit [Seal]

“AUorney-in-Fact.”

Plaintiffs allege that at the time of the exercise of this contract they paid the $300.00 mentioned therein upon the contract price and subject to the terms of the contract.

The complaint further alleges that within the ninety-day period named in the agreement plaintiffs notified the defendants of their intention to exercise the option, and that they were ready, able, and willing to carry out its terms, and offered to give assurances to that effect. It is alleged that after this notice to defendants, a joint application was made to the Interstate Commerce Commission pursuant to the rules and regulations of that body, which said application was executed by Virginia Dare Transportation Company by Guy II. Lennon, and by Habit Brothers Freight Line by John Habit, and duly acknowledged; but that under the rules of the Interstate Commerce Commission it is required that when application so made is on behalf of partnerships each partner of the partnership shall execute and acknowledge the execution of the application, of which rule neither the plaintiff Guy H. Lennon nor the defendant John Habit were advised until the said application was made in good faith. That the petition was dismissed because it was not signed in accordance with the aforesaid rule.

It is alleged that when the plaintiffs were advised of this they immediately transmitted the information to John Habit and Joe Habit, individually, and that the request and demand was made on said defendants individually, and doing business as Habit Brothers Freight Line, that a further and additional application be executed and filed with the Interstate Commerce Commission, to obtain approval of said Commission for the transfer of the certificates and to prevent any dismissal of the petition theretofore filed, and that the said defendants John Habit and Joe Habit refused and continued to refuse to join in any further application, and that, thereby, the plaintiffs were prevented from obtaining approval by the said Commission.

It is alleged that John Habit, on behalf of Habit Brothers Freight Line, on 25 October, 1938, filed with the North Carolina Utilities Commission an application for the transfer or sale of the franchise certificate in question, and on 23 November, 1938, the said Utilities Commission issued its order directing the sale and transfer of Certificate No. 233 to the Virginia Dare Transportation Company, upon approval of the Interstate Commerce Commission.

That the Virginia State Corporation Commission has been advised by the plaintiffs of the proposed purchase by the Virginia Dare Transportation Company of the certificate issued by the Virginia State Corporation Commission, but no approval has as yet been issued, nor has the Commission refused to approve the sale.

It is further alleged that the defendants have failed and refused to-comply with their agreement, and that they have stated to the plaintiffs that they do not intend to comply therewith, or to convey to the plaintiffs, the certificates and property referred to in the agreement, and have failed and refused to comply with the rules of the Commission issuing the respective certificates with reference to the transfer thereof, and have advised the plaintiffs that they do not intend to do any act of assistance in approving the transfer and sale of certificates and property referred to in the agreement.

It is alleged in the complaint that the defendants demanded of the plaintiffs the payment of the full purchase price within the ninety-day period of tbe option as a condition precedent to tbe transfer of tbe franchises and property.

Tbe defendants filed a written demurrer to tbe complaint as not stating a cause of action, for tbat, as contended by tbem, tbe contract was for tbe transfer of motor carrier’s certificates issued to defendants by tbe Federal Interstate Commerce Commission, tbe North Carolina Utilities Commission, and tbe Virginia State Corporation Commission, “which option was expressly subject to tbe approval of tbe said Commissions,” and tbe transfer could not be made without tbe approval of said Commissions, which has not been given, and tbat this Court has no jurisdiction of any matter legally vested in tbe discretion of such Commissions.

Defendants further demur on tbe ground tbat tbe complaint does not state a cause of action for tbat (a) tbe option was limited to ninety days, and tbat this exercise by tbe plaintiffs was subject to tbe approval by tbe Commissions aforesaid, and tbe burden was, therefore, “entirely, or at least equally, upon tbe plaintiffs” to secure tbe approval by all three Commissions, and such approval has not been obtained; and tbat it “affirmatively appears tbat tbe opportunity to obtain tbe approval of tbe Interstate Commerce Commission within tbe time prescribed by tbe option, without which tbe option could not be exercised, was lost by failure of tbe plaintiffs to properly execute and acknowledge tbe application therefor”; (b) tbat it is not alleged or known tbat approval could have been bad if application bad been made in apt time, and it cannot be known, therefore, whether tbe plaintiffs suffered any loss; (c) tbat tbe option required tbe plaintiffs to pay tbe balance of tbe purchase price in ninety days from its date, which was not done; and (d) no tender was made, nor is it alleged tbat plaintiffs are now ready, able and willing to pay tbe purchase price.

Tbe court sustained tbe demurrer, dismissing plaintiffs’ action, and plaintiffs appealed.

Bailey & Lassiter and M. B. Simpson for plaintiffs, appellants.

W. S. Privott and W. D. Pruden for defendants, appellees.

Seawell, J.

Passing tbe fact tbat tbe interpretations placed by defendants on a number of tbe substantial allegations in tbe complaint lead to statements and assumptions in tbe demurrer contradictory to these allegations, fairly interpreted, we do not agree with tbe interpretation which tbe court below evidently placed upon tbe contract, nor with tbe legal inferences which it drew in sustaining tbe demurrer.

It is not necessary to set out in great detail tbe considerations which have led us to this conclusion, but we do not regard tbe contract as requiring the full payment of tbe purchase price within the ninety-day period during which the option had to run, but only as requiring this to be done when the defendants were in position to transfer, and did within reasonable time transfer, the unencumbered property to the plaintiffs.

Certainly, in so far as notice that the plaintiffs intended to exercise the option of purchase, time was of the essence of the contract, and this had to be done within the ninety-day period; but payment within that period was not of the essence of the contract. The notice within the ninety days was sufficient to make it a binding contract of purchase and sale at the price and upon the conditions named, none of which conditions necessarily, and as a matter of law, operated to defeat the contract by reason of nonperformance within the option period. Davis v. Martin, 146 N. C., 281, 59 S. E., 700; Timber Co. v. Wilson, 151 N. C., 154, 65 S. E., 932; Wachovia Bank & Trust Co. v. United States, 98 Fed. (2d), 609.

This view of the contract disposes of much of the objections of the defendants which prevailed in the lower court.

The contract calls for a delivery free from encumbrance. It was the duty of the defendants, upon notice of the plaintiffs that they intended to exercise the option, to take all necessary steps to deliver to the plaintiffs the unencumbered title to the property. The complaint alleges that defendants have notified the plaintiffs that they will take no steps to secure from the several Commissions the approval necessary to the delivery of the property, apparently basing their refusal on the mistaken notion that the expiration of the ninety-day period of the option foreclosed any rights the plaintiffs had to the enforcement of the contract or for damages for its breach. The complaint also alleges that they have declared their intention not to carry out the contract for the delivery of the property at all.

Even if the plaintiffs had been required by the contract to pay all the purchase price within the ninety days- — which is not conceded- — -sufficient matter appears in the allegations of the complaint to justify a submission to the jury of the readiness and.ability of the defendants to comply with their duty to see that plaintiffs receive an unencumbered title.

Tender is not required where on defendant’s statements it would be futile. Bateman v. Hopkins, 157 N. C., 470, 73 S. E., 133; Samonds v. Cloninger, 189 N. C., 610, 127 S. E., 706; Wachovia Bank & Trust Co. v. United States, supra.

Apparently at one time the defendants themselves took the view that the contract might be complied with, although the purchase price had not all been paid within the ninety-day period, since they joined with the plaintiffs in a petition to the Interstate Commerce Commission to approve tbe sale and tbe transfer about six days before tbe expiration of tbe period.

It seems clear to us tbat sucb approval need not bave been made necessary under tbe terms of tbe contract during the ninety-day period. At any rate, tbe defendants may not speculate upon tbe probability of an adverse ruling by tbe various ■ Commissions concerned, based upon tbeir present attitude of unwillingness, or for any other reason, since under tbe circumstances of this case it was tbeir duty at least to join in any application made to tbe Commissions in furtherance of tbe purpose of tbeir contract, which tbe complaint alleges they bave failed to do.

Tbe fact tbat tbe trade between plaintiffs and defendants could not be consummated without tbe approval of tbe Interstate Commerce Commission does not affect tbe jurisdiction of this Court of tbe subject matter of this action, as set out in tbe complaint.

¥e bave refrained from discussing any matter not necessary to a consideration of tbe demurrer.

Tbe complaint alleges a cause of action, and tbe judgment sustaining tbe demurrer is ■

Beversed.