Southern Pacific Railroad v. Allen

112 Cal. 455 | Cal. | 1896

Lead Opinion

Van Fleet, J.

This is an appeal from the judgment upon the judgment-roll.

The action is to compel the payment of moneys alleged to be due under contracts for the purchase of lands, and, in default of payment, to foreclose defendant’s rights under the contracts, and for general relief. The action is on more than one contract, but they are alike in terms, and one will serve as a • type of all. Plaintiff agreed to sell, and defendant to buy, a certain piece of land. At the date of the contract defendant paid one-fifth of the purchase price and one year’s interest upon the unpaid portion, and agreed to pay the same interest annually in advance until the completion of the purchase, or the termination of the contract, together with all taxes and assessments levied upon the land, and to pay the remainder of the purchase price “on or before the first day of February, 1893.” Defendant is given the right of immediate possession of the land, and upon the performance of all the conditions of his contract is to receive a deed for the land, which deed plaintiff agrees to make upon denland, “after the receipt of a patent therefor from the United States.” The contract proceeds: “It is further agreed between the parties hereto, that the party of the first part claims all the tracts hereinbefore described, as part of a grant of lands to it by the Congress-of the United States; that patent has not yet issued to it for said tracts; that it will use ordinary diligence to procure patents for them; that, in consequence of circumstances beyond its control, it sometimes fails to obtain patents for lands that seem to be legally a portion of its said grant; therefore nothing in this instrument shall be considered as a guaranty or assurance that patent or title will be procured; that, in case it be finally determined that patent shall not issue to said party of the first part for all or any of the tracts herein described, it will, upon demand, repay, without interest, to the party of the second part, all moneys that may have been paid to it by him on account of any such tracts as it shall fail to procure patent for, the amount of repayment to be calculated at the rate and price per acre fixed at this date for such tracts by said party of the first part, as per schedule on page three" hereof; that said lands being unpatented, the party of the first part does not guaranty the possession of them to the party of the second part, and will not be responsible to him for damages or cost in case of his failure to obtain and keep such possession.”

This action was brought upon default of defendant in paying the second, third and fourth years’ installments of interest. It was commenced before the expiration of the five-years’ limitation for the payment of the balance of the purchase money, but was brought to trial and decided after the lapse of that period. Defendant, by answer, denied title in plaintiff, and by cross-complaint alleged false representations by plaintiff of its title, injury to himself therefrom, and concluded with an offer of rescission and demand for a return of the moneys paid by him. The findings are in favor of plaintiff, except as to the fact of possession by defendant of the lands described in the complaint, and against the answer and cross-complaint, and the decree requires defendant to pay within six months the amount found due as unpaid interest, or be debarred and foreclosed of all right and interest in and to said lands, and in and under the contracts.

The only question really involved in the case is as to the construction of the contracts sued upon. It is contended by the defendant that he was under- no obligation to purchase the land or to pay the remainder of the purchase price, unless the plaintiff should, within the five years, obtain a patent for the land; and that, as the plaintiff had failed to obtain a patent within that time, and as the action was not tried until after the expiration of that time, the defendant was entitled to a rescission of the contract. But clearly the contracts will not bear any such construction. The defendant contracted unconditionally to pay the remainder of the purchase 11rice “on or before” a certain day named, and to pay interest annually in advance on such remainder; but the plaintiff contracted to convey to defendant only “upon the receipt of a patent,” and was to repay the money only “in case it be finally determined that patent shall not issue.” The defendant, therefore, was not entitled to terminate the contract, or to require a repayment of the moneys paid, until the question of the issue of a patent to the plaintiff should be “finally determined.” The findings state that proceedings are now pending in the United States land department for the issue of patent to the plaintiff, and that it has not been finally determined that such patent shall not issue. At the time, therefore, at which defendant contracted to pay the balance of the purchase price, plaintiff was not in default, nor was it in default at the time of the trial.

It will thus be seen that, under these contracts, the times fixed for the payment by defendant of the balance of the purchase price, and the installments of interest on that balance, might all arrive before the happening of the event upon which plaintiff agreed to convey, or before the happening of the event upon w'hich plaintiff agreed to return the money paid. A certain day was appointed for the payment of the balance of the purchase price, and the interest thereon, in advance. But the issuance of the patent to plaintiff, or the final determination that such patent should not issue, were events the time of the occurrence of which was uncertain, and which might take place long after the expiration of the five years. 'The case is, therefore, strictly within the well-established rule that, “if a. day be appointed for payment of money, or a part of it, or for doing any other act, and the day is to happen or nay happen before the thing which is the consideration of the money, or the act is to be performed, an action may be brought for the money, or for not doing such other act, before performance; for it appears that the party relied upon his remedy, and did not intend to make the performance a condition precedent.” (Donovan v. Judson, 81 Cal. 334; Front St. etc. R. R. Co. v. Butler, 50 Cal. 574; Platt v. Gilchrist, 3 Sand. 125; Loud v. Pomona etc. Co., 153 U. S. 564, 576; Coleman v. Rowe, 5 How. (Miss.) 460; 37 Am. Dec. 164; , Couch v. Ingersoll, 2 Pick. 301; Bean v. Atwater, 4 Conn. 10; 10 Am. Dec. 91; Edgar v. Boies, 11 Serg. & R. 450.) The whole framework of the contracts shows that both parties understood that the question whether or not patents would issue was one of uncertainty, and that it was impossible to know, in advance, when that question would be “finally determined.” Defendant, with full knowledge of that fact, contracted to make his payments at all events and within certain specified times; merely reserving the right to a repayment of the money in case the particular title contracted for should fail. Under these circumstances the obtaining of patents could not be a condition precedent to his obligation to make the deferred payments.

The defendant further contends that the contracts were void, ab initia, for want of mutuality or consideration, or amounted at most to mere offers to purchase on his part. This contention cannot be sustained. Plaintiff claimed title to these lands, but its title had not been perfected by patent. Defendant had the same opportunity as plaintiff of knowing the nature and probable validity of that claim. Under these circumstances plaintiff agreed to convey to defendant when it should obtain a patent, and to permit defendant to enter into possession of the land at once. In consideration of these promises defendant agreed to purchase when a patent should be issued, paid at once one-fifth of the purchase price and one year’s interest on the balance, and agreed to pay the remainder (with interest thereon annually in advance) on or before a given date, with the right to a repayment without interest in the event of an ultimate failure to obtain a patent. These promises were strictly mutual,.and each constituted a sufficient consideration for the other. Plaintiff by its contract surrendered its right to contract with or sell to any one else, and yielded to defendant the present right to possession which it claimed. These concessions were clearly a detriment to plaintiff, and, in a legal sense, an advantage to defendant; and they, therefore, furnished a consideration for defendant’s promise to pay.

Defendant also claims that the bringing of this action was a rescission of the contracts, which entitled him to a return of the money already paid. But since, 'under the contract, plaintiff was entitled absolutely to receive the money at the times agreed upon, and to have the benefit of its use until the final determination of the question of the issuance of patent, it was entitled to enforce the collection of the money by this action, and in the event of a failure to pay to have defendant foreclosed of bis rights under the contracts. (Keller v. Lewis, 53 Cal. 118; Fairchild v. Mullan, 90 Cal. 194; Hansbrough v. Peck, 5 Wall. 506.) The decree gave the defendant the alternative of paying within six months, or suffering foreclosure; and this was in accordance with equity. It may be, in view of the fact that the action was tried after the expiration of the time for the payment of the last installment of the purchase price, that the decree should have required the defendant to pay the balance of the principal as well as the unpaid installments of interest; but the error, if any, in that particular is in favor of defendant, and cannot be considered on his appeal.

It follows from these considerations that plaintiff is entitled to the relief granted by the court below, and that the judgment must be affirmed.

It is so ordered.

McFarland, J., Garoutte, J., and Harrison, J., concurred.

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Dissenting Opinion

Henshaw, J.,

dissenting.—I dissent, under the conviction that the interpretation given to this contract in the opinion rendered by Department Two is proper and sound. It was there said (Southern Pacific R. R. Co. v. Allen, 40 Pac. Rep. 752): “Plaintiff agreed to sell, and defendant to buy, a certain piece of land. At the date of the contract defendant paid one-fifth of the purchase price and one year’s interest upon the unpaid portion, and agreed to pay the same interest annually in advance until the completion of the purchase or the termination of the contract. The time of payment for the unpaid part of the purchase price was ‘on or before the first day of February, 1893’; that is to say, ■within five years from the execution of the contract. Upon performance by defendant of the conditions of his contract he was entitled: 1. To take and hold possession of the land; and 2. To receive a deed for the same upon demand, and after payment of the remaining four-fifths of the purchase price, which deed plaintiff agreed to make ‘after the receipt of a patent therefor from the United States.’ The contract proceeds: ‘It is further agreed between the parties hereto that the party of the first part claims all the tracts hereinbefore described as part of a grant of lands to it by the Congress of the United States; that patent has not yet issued to it for said tracts; that it will use ordinary diligence to procure patents for them; that, in consequence of circumstances beyond its control, it sometimes fails to obtain patent for lands that seem to he legally a portion of its said grant, therefore nothing in this instrument shall be considered a guaranty or assurance that that patent or title will be procured; that, in case it be finally determined that patent shall not issue to said party of the first part for all or any of the tracts herein described, it will, upon demand, repay, without interest, to the party of the second part, all moneys that may have been paid to it by him on account of any such tracts as it shall fail to procure patent for, the amount of repayment to be calculated at the rate and price per acre fixed at this date for such tracts by said party of the first part, as per schedule on page 3 hereof; that, said lands being unpatented, the party of the first part does not guaranty the possession of them to the party of the second part, and will not be responsible to him for damages or cost in case of his failure to obtain and keep such possession/ .... Under such circumstances defendant agreed to buy and pay for these lands at anytime within five years, should plaintiff’s claim ripen into a perfect title by the issuance of a patent. Plaintiff agreed, as the consideration flowing from it, 1. To convey to defendant, and thus to forego its right to contract with or sell to any one else; 2. To yield to the defendant, in the meantime, such possession, use, and enjoyment of the lands as would otherwise belong to it. Defendant, to secure these advantages to himself, paid one-fifth of the purchase price, and agreed to pay interest upon the remainder of it. If, at any time within five years, plaintiff’s title was perfected, defendant had the right, upon payment, to compel a conveyance of it to himself. If, at the expiration of five years, the result had not been reached, defendant was entitled to repayment of his moneys, without interest, while plaintiff, for foregoing its right to make other contracts, and for yielding to defendant its right to the occupancy and enjoyment of the lands, was to be compensated by the use, without payment of interest, of the defendant’s moneys held by it. It is true these terms are not explicitly declared in the contract, as here set forth, but they fairly state the expressed agreement of the parties.”

There is no doubt but that in a contract for the sale of land the covenant to convey and the covenant to pay may be made independent, but there is likewise no doubt but that the general rules of interpretation require these covenants to be construed as interdependent, unless the contrary is made clearly to appear upon the face of the contract, and where doubt arises as to the intent of the parties that doubt should be resolved by a construction holding them to be interdependent—1. As expressing the meaning most probably intended by the parties; and 2. As being the interpretation consonant with the spirit of equity and fair dealing. The seller ought not to be compelled to part with his property without receiving the consideration, nor the purchaser to part with his money without an equivalent in return.

In Hill v. Grigsby, 35 Cal. 656, this court said: “ It is very correctly said in Bank of Columbia v. Sagner, 1 Pet. 455, that ‘in contracts of this description the undertakings of the respective parties are always considered dependent, unless a contrary intention clearly appears’; and the reason assigned, as well as the rule, would be applicable here were the words of the covenant of doubtful import. ‘A different construction would, in many cases, lead to the greatest injustice, and a purchaser might have payment of the purchase money enforced upon him, and yet be disabled from procuring the property for which he paid it.’ The authorities in support of these principles are very numerous, and there is a greater degree of uniformity among -them than is usual on a question presented, as this has been, in so many different aspects.”

A man purchases real property for purposes of improvement and permanent ownership, or for barter and sale. He may, and frequently does, pay the purchase money in speculation, whether or not the title he receives shall prove a good title, but he at least buys something. No case has been called to our attention, and none is cited in the prevailing opinion, in which he pays the purchase price upon a speculation as to whether the vendor shall give him something or nothing. For it will be noted that the plaintiff does not agree at any fixed time, or at all, to convey to defendant such title as it has or may then have, but merely to convey to it its title when perfected by the issuance of a patent. If it obtains no patent, it conveys nothing. In all the cases which are cited, and in which the question of land sales is considered, it was some interest in land, or claim of title, which the vendee was purchasing, and which he agreed to pay for in advance. Here it is quite otherwise, and it may be instructive to see just what effects must logically follow the interpretation given by the prevailing opinion: Allen, at the end of five years, has paid the full purchase price -for the land with interest. He has been permitted to take possession of it, but has not been secured or warranted even in that. He has no title to the land whatsoever. He cannot compel a conveyance to him of the compny’s claim or interest in the land. There is no definite future time fixed upon the arrival of which he may recover either his money or the land. He has parted with his money and the use of it for ten, twenty, thirty, or fifty years—until it “ shall be finally determined that a patent is not to issue.” Meanwhile, he has no interest to sell, so that it is impossible for him to retrieve himself. He dare not improve the land, because he is not secured in possession or improvements, and he cannot even sell or assign his rights under the contract itself, for that is forbidden by its terms. At the end of an undetermined time, if plaintiff, who is called upon to use only ordinary diligence, fails to obtain a patent, defendant receives nothing but the principal of the purchase price. If that time covered a number of years, as it well might, the use of the money of which defendant was deprived, and which plaintiff has gained, would equal or exceed the principal itself, and yet for this loss defendant receives nothing. It is not easy to believe that a sane man would so contract, and if this be the true interpretation, the contract is one without parallel. Upon the other hand, it may be readily gathered from the contract itself that the parties assumed that the question of the issuance of the patent would be determined within five years, and that if determined by or within that time the corresponding rights and liabilities of the parties to it would attach. If not then determined the transaction should be at an end, and plaintiff would have had the use of the full purchase price (or its equivalent in interest) for its agreement to sell to defendant and to yield him possession, while for these considerations defendant would have paid this money with the right to the return of the principal sum at the end of five years —a time long enough in which to bring the contract to an end in one or another way.

The lapse of five years without issuance of a patent is intended to be, so far as the rights of the parties to this contract are concerned, in and of itself a final determination that the patent is not to issue. So construed the covenants are clearly dependent.

The one interpretation manifestly exposes the defendant to such untoward danger and loss that it is inconceivable that a man of ordinary intelligence would have bound himself by it; the other expresses a fair business contract, such as any two individuals might enter into.

In the prevailing opinion it is said that the contract clearly will not bear the latter construction. That it is the equitable construction is not and cannot be questioned. Upon the other hand, there should be the clearest and most satisfying language in the contract to warrant the interpretation given it. That language I am unable to find, and if there be an existing doubt, under all the authorities and under the law of this court above quoted, the doubt should be resolved against the contention that the covenants are independent.

Temple, J., concurred.

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Dissenting Opinion

Beatty, C. J.,

dissenting.—I dissent, but upon a different ground from that stated by Justice Henshaw. As to the construction of the contract, I concur in the views of the majority, but I do not think that the breach of this particular kind of a contract of sale gives the vendor the right to go into equity to claim specific performance, or to foreclose the right of the purchaser. In ordinary contracts for the sale of land the vendor has the right either to rescind or to foreclose for failure of the vendee to make deferred payments, because in ordinary contracts of sale the vendor is able to perform the contract on his part by making a conveyance. But when, as in this case, the vendor is not ready to convey, and may never be able to do so, I think he should be limited to rescission or to his action to recover the installments due, and that he has no right to claim the relief awarded by this judgment.

Rehearing denied.