The opinion of the court was delivered by: FRANKEL
Plaintiff, a real estate broker licensed in New York, sues for a $50,000 commission it claims to have earned by producing a "ready, willing, and able" buyer for some sixty parcels of realty (the "Safeway Properties") located in nine states. The facts, substantially undisputed, are these:
The Safeway Properties are plants, stores, and warehouses occupied under individual leases by Safeway Stores, Incorporated. Originally owned by Safeway, they were in 1951 sold to, and leased back from, the Argosy Fund, which was later merged into West Coast Properties, Inc. In 1957, the defendant became owner-lessor by purchase from West Coast Properties.
Defendant held the leased properties subject to a first mortgage and trust indenture securing an original bond issue of $25,000,000, which had been reduced to $12,984,000 by the time (late 1961) which concerns us. The lien of the mortgage was allocated among the parcels in accordance with appraised values assigned to each of them. The bulk of the rentals under the leases was required for payment of interest and amortization of the bonds, with a balance of "cash flow" remaining for the defendant as successor mortgagor.
Under the terms of each lease, Safeway was empowered to terminate by tendering 90 days' notice together with an offer to purchase the property for the unamortized balance of the mortgage allocable to that property plus one-half of one percent of this balance. The owner was then to have 45 days within which to accept the offer. If he accepted, the purchase price was to be applied to liquidate the mortgage balance allocable to the particular property, and the property was to be conveyed to Safeway free and clear of any other liens or mortgages. If the purchase offer was rejected, the owner was likewise required to liquidate the applicable portion of the mortgage balance, and the lease would terminate 90 days after Safeway's notice. As will appear below, these interrelated lease and mortgage obligations were to become critical in frustrating the transaction out of which plaintiff's claim arises.
In late August or early September of 1961, David Bolger, then an assistant vice president of plaintiff and formerly (until April 1961) defendant's employee, met with the defendant and asked whether he might be interested in selling the Safeway Properties. The defendant, influenced by existing tax considerations and by the possible impact of tax legislation then under consideration, encouraged Bolger to seek a suitable purchaser for a sale in that calendar year. Bolger prepared a draft proposal, returned to discuss it with defendant, and was then authorized by defendant to prepare a definitive offering memorandum. Bolger circulated such a memorandum and made personal soundings in search of potential buyers. Around the beginning of November he was introduced to the attorney for Charles B. Benenson, who quickly became interested in the proposition.
On November 6, 1961, Bolger presented to defendant an offer from Benenson proposing to purchase the Safeway Properties for $900,000 above the existing mortgage, the payment to be comprised of $500,000 cash and a $400,000 second mortgage. In this initial proposal, noting that his purchase price was higher than the Safeway recapture price (namely, existing mortgage balance plus 1/2%), Benenson sought a provision that would have reimbursed him for any loss on such recapture. Defendant rejected the offer on a number of grounds, including the proposed price.
On November 8, 1961, Bolger transmitted to defendant a second Benenson offer, increasing the price to $1,000,000, with $500,000 cash and a $500,000 second mortgage. Among its other revised terms, this offer provided that if Safeway repurchased any of the properties, the balance of the second mortgage would be spread over those remaining in Benenson's hands. In reporting this offer to defendant, Bolger stated that Benenson wished to check with Safeway to determine whether termination of any of the leases was in contemplation. Defendant indicated that he was willing to have Benenson make such inquiries and inspect the properties before proceeding further.
After inspecting the stores and leases, Benenson submitted another offer, again delivered to defendant by Bolger, on December 4, 1961. This offer, in the form of a letter prepared by Benenson's attorney, contained, inter alia, the same proposed price of $1,000,000 above the existing mortgage. It was rejected by defendant because of two of its provisions: (1) that the parties would "work in good faith to complete the closing by December 31, 1961", and (2) that the offer was "subject to the drawing of a formal contract of sale, and documents of closing * * *." Both of these features were inconsistent in defendant's view with his objective of insuring completion of a sale, if one were to be made, before the end of the calendar year 1961. This was essential from his standpoint in part because of anticipated tax law changes, mentioned above, that threatened disadvantageous results for him after that year. A cognate concern was his desire to complete the transaction in time to make transfers of the proposed second mortgage in the year 1961. Thus motivated, defendant was not satisfied to have merely "work in good faith" toward a 1961 closing. Similarly, he took the position that any hope of completion before the end of the waning year was doomed in advance if the parties were to wait out the lawyering "of a formal contract of sale, and documents of closing."
On December 6, 1961, Bolger delivered to defendant another revised offer from Benenson, likewise prepared by the latter's attorney, eliminating the provisions to which defendant had objected. This offer, in the form of a letter from Benenson to defendant, was accepted by defendant's writing the word "Accepted" and his signature upon it.
The December 6 letter agreement stipulated a purchase price of $1,000,000 over the existing mortgage, with a cash payment of $400,000 (including $50,000 tendered by Benenson with the letter), a second mortgage of $550,000, and Benenson's personal notes for $50,000, payable in 1962. The second mortgage was to cover all the properties except specified stores Safeway was then planning to repurchase. Three aspects of the letter agreement have come to be central in the present dispute:
(1) A subparagraph governing the handling of the second mortgage with respect to any properties on which Safeway might exercise its right to give notice of termination and an offer to repurchase. The pertinent terms of the agreement on this subject said: "In event of offer to recapture by Safeway of any property * * *, that portion of the [second] mortgage affecting the particular property including accrued current and deferred interest attributable to the particular property, will become due and payable if Safeway's offer is rejected. If Safeway's offer is accepted, the unpaid balance will 'swing' to the remaining properties. All interest on that portion of the mortgage will thereafter be deferred until maturity. The $550,000. purchase money mortgage will be allocated in accordance [with named appraisal values]. * * * Adequate provision will be made for release of individual properties, and the mortgage ...