Strong v. Moore

207 P. 179 | Or. | 1922

HARRIS, J.

Reduced to brief terms the situation presented by the record is one where Emma Gr. Robinson by the payment of $1,000 acquired from the Browns an option whereby she could purchase the real property owned by the Browns by paying within a prescribed time the additional sum of $10,000 and giving a note for $25,000 secured by a mortgage on the premises; and, being unable to borrow the funds with which to make the necessary additional payment, she transferred her option to the Moores in consideration of the payment to her of $1,000, the exercise by the Moores of the right to purchase the property from the Browns, and the giving of an option by the Moores to the plaintiffs entitling the latter within six months to purchase the property by paying $13,500 and assuming the payment of the mortgage of $25,000. Neither the option of June 8th nor the one of July 15th speaks of insurance. Both options are silent upon that subject. It is true that there was testimony in behalf of plaintiffs, contradicted, however, by the defendants, indirectly if not directly charging that the Moores agreed to carry insurance for the benefit of the plaintiffs and that the alleged agreement concerning insurance should have been expressed in the option of July 15th; but it is also true that the uncontradicted evidence is that the option of July 15th was submitted to Wilson T. Hume, the attorney for the plaintiffs, for examination and was approved by him; and, furthermore, this option was acknowledged by Ben H. Moore before "Wilson T. Hume as notary public. Furthermore, the complaint does not ask for a reformation of the option. The writing of July 15th must therefore be accepted as a complete statement of the agreement of the Moores. The building was insured for $34,000. The cost of the insurance was paid by the Moores. The land, after the destruction of the building, was valued at $20,000. The policies required the payment of the insurance to the mortgagees as their interest might appear, and the remainder, if any, to the Moores. The building was totally destroyed by fire on August 7, 1920. The insurers paid $34,000, the full amount of the insurance, the Browns receiving the amount of their mortgage and the Moores receiving the balance of the insurance money. The plaintiffs did not accept or attempt to accept the option of July 15th until after the fire. The tender of $13,500 made by the plaintiffs was on each occasion upon the condition that the defendants account for the moneys paid by the insurance companies.

The defendants contend that the tenders made in December, although made within the time allowed by the option, were conditional and not in conformity with the offer contained in the option, and that therefore the plaintiffs are not entitled to any relief whatever. The plaintiffs insist that the insurance money in equity represents the building and must be paid to the plaintiffs in lieu of the building which has been destroyed.

The fights and obligations arising out of an option to purchase are to be contrasted rather than merely to be compared with the rights and obligations arising ont of a contract of sale. An option is simply a contract by which, an owner agrees that another shall have the privilege of buying his property at a fixed price and within the time expressly or impliedly prescribed by the writing. The optionee is not obliged to buy, although he may, if he chooses, elect to buy. A contract of sale imposes upon the vendee an obligation to buy. An option confers a privilege or right to elect to buy, but it does not impose any obligation to buy: Fargo v. Wade, 72 Or. 477, 479 (142 Pac. 830, L. R. A. 1915A, 271); Hanscom v. Blanchard, 117 Me. 501 (105 Atl. 291, 3 A. L. R. 545); Stelson v. Haigler, 63 Colo. 200 (165 Pac. 265, 3 A. L. R. 550); 27 R. C. L. 334, 336.

An option does not pass to the optionee any interest in the land; but a contract of sale does transfer to the vendee an interest in the land; and therefore a person appearing in the character of an optionee possesses nothing except the right to elect to buy, and he has no interest in the lajid until by his acceptance of the option he transforms the option into a contract of sale and changes his character from that of an optionee to that of a vendee: Kingsley v. Kressly, 60 Or. 167, 172 (111 Pac. 385, 118 Pac. 678, Ann. Cas. 1913E, 746); Gamble v. Garlock, 116 Minn. 59 (133 N. W. 175, Ann. Cas. 1913A, 1294).

An option is a continuing offer. If the option is without consideration it may be withdrawn before acceptance; but if it was given for a consideration it cannot be withdrawn before the expiration of the prescribed time without the consent of the optionee: Sprague v. Schotte, 48 Or. 609 (87 Pac. 1046); Mossie v. Cyrus, 61 Or. 17, 19 (119 Pac. 485, 119 Pac. 624); note in 3 A. L. R. 580.

If the optionee accepts the option, the acceptance produces a contract of sale with mutual obligations and remedies: Sprague v. Schotte, 48 Or. 609 (87 Pac. 1046); House v. Jackson, 24 Or. 89, 95 (32 Pac. 1027). So long as a person stands in the position of an optionee his rights are those of an optionee, and hisv rights as a vendee do not come into existence until he occupies the position of a vendee. When by accepting an option a person changes his position from that of an optionee to that of a purchaser, the interest in the land created by the contract of sale dates, in this jurisdiction, from the date of the contract of sale and is not by force of a fiction deemed to date from the date of the option: Sprague v. Schotte, 48 Or. 609 (87 Pac. 1046). See, also, Caldwell v. Frazier, 65 Kan, 24 (68 Pac. 1076); Gilbert & Ives v. Port, 28 Ohio St. 276.

In order to effect a contract of sale capable of specific performance, the acceptance of an option must conform with the terms of the offer, and ordinarily must be unequivocal, absolute and unconditional: Friendly v. Elwert, 57 Or. 599, 610 (105 Pac. 404, 111 Pac. 690, 112 Pac. 1085, Ann. Cas. 1913A, 357); Wetherby v. Griswold, 75 Or. 468, 474 (147 Pac. 388); Leadbetter v. Price, 103 Or. 222 (202 Pac. 104, 108); Clarke v. Burr, 85 Wis. 649 (55 N. W. 401).

Whether or not the tenders relied upon by the plaintiffs constitute such an acceptance as is required by the law depends upon whether the plaintiffs are entitled to an accounting of the insurance money. When the fire occurred the plaintiffs were mere optionees and possessed nothing except a bald right to elect to buy and did not have any legal or equitable interest in the land. However, if for the purposes of discussion it be supposed that a binding contract of sale was in existence when the fire occurred, it will be found that some courts follow one rule and other courts adhere to a different rule, the difference in the rules resulting’ from the difference in views as to whether, in the absence of an agreement concerning the matter, the loss in case of fire falls upon the vendor or upon the vendee.

A majority of the courts take the view that by a contract of sale the vendee becomes in equity the owner of the land with the vendor holding the legal title as security for the purchase price with the result that, in the absence of a stipulation upon the subject matter, loss of a building by fire or otherwise without fault on the part of either party falls upon the vendee: Sewell v. Underhill, 197 N. Y. 168 (90 N. E. 430, 134 Am. St. Rep. 863, 18 Ann. Cas. 795, 17 L. R. A. (N. S.) 233); 27 R. C. L. 556; note in 9 Ann. Cas. 1053. In jurisdictions where the loss of a building caused by accident falls upon the vendee the courts necessarily, in order to be consistent, hold that if the vendor receives insurance money the vendee is entitled in equity as between himself and the vendor to demand that the insurance money be applied on the purchase price or to the restoration of the property: 27 R. C. L. 559.

Thirty-seven years ago Oregon adopted and has lately reaffirmed the view that where from the nature of the contract it appears, as it does here, that the parties must from the beginning have contemplated the continued existence of the subject matter of the contract, then, in the absence of an agreement that the subject matter shall exist, the contract is to be construed as subject to an implied condition that, if the subject matter or a large or important part of it has ceased to exist when the time for performance arrives, each party is discharged from the contract, the vendor from his obligation to convey and the vendee from his obligation to pay; and the vendor can neither recover nor retain any part of the purchase price. In the instant case the premises were to be conveyed for an entire price, and since the building was insured for $34,000 -and the land is valued at $20,000, it is manifest that the building was a very large part of the subject matter: Powell v. Dayton & Sheridan, G. R. R. Co., 12 Or. 488 (8 Pac. 544); Elmore v. Stephens-Russell Co., 88 Or. 509 (171 Pac. 763); 27 R. C. L. 557. In jurisdictions where this rule discharging both parties prevails we should naturally expect to find the law to be that the vendor, who has paid the insurance premium, is entitled to collect and hold the insurance money without liability to account to the vendee: 27 R. C. L. 560. It is appropriate to state that we are aware of the conclusion reached in Waller v. City of New York Ins. Co., 84 Or. 284 (164 Pac. 959, Ann. Cas. 1918C, 139); nor have we overlooked any statement made in the opinion rendered in that ease; but the governing facts there were radically different from the controlling facts here.

The general rule observed in most jurisdictions is that if a building is accidentally destroyed while the relation of optionor and optionee exists the loss falls upon the optionor, for the reason that the optionee has no interest, neither legal nor equitable, in the land, and consequently moneys received on an insur-anee policy held and paid for by the optionor are the absolute property of the optionor and he is not required to account for them to the optionee: Gamble v. Garlock, 116 Minn. 59 (133 N. W. 175, Ann. Cas. 1913A, 1294); Caldwell v. Frazier, 65 Kan. 24 (68 Pac. 1076); Gilbert & Ives v. Port, 28 Ohio St. 276; Clark v. Burr, 85 Wis. 649 (55 N. W. 401). James on Option Contracts, § 512. Where there is a contract of sale and the relation of vendor and vendee exists, the courts adhering to the rule that the loss falls upon the vendee and that he may demand that the insurance moneys be applied on the purchase price or to a restoration of the property do so on the theory that in equity the vendee is the owner of the real property; but when the contract is only an option, the reason upon which such rule is based does not exist, and consequently the rule, being without any foundation upon which to stand cannot be applied even in those jurisdictions which apply such rule to contracts of sale. There are a few adjudications like People St. Ry. Co. v. Spencer, 156 Pa. St. 85 (27 Atl. 113, 36 Am. St. Rep. 22), and Williams v. Lilley, 67 Conn. 50 (34 Atl. 765, 37 L. R. A. 150), where, because of peculiar and unusual circumstances and notwithstanding the fact that an acceptance of the option did not occur until after the loss, the doctrine of relation was applied so as to make the date of the contract of sale relate back to the date of the option, and thus with the aid of a legal fiction enable it to be said that the vendee was in equity the owner at the time of the loss and on that account entitled to require the vendor to account for the proceeds.

In the instant case, however, the loss occurred at a time when the parties stood in the position of optionor and optionee unaffected by any unusual or peculiar circumstances. The writing of July 15, 1920, was a pure option; and even though it be assumed that the tenders relied upon by the plaintiffs constituted such an acceptance as was required to effect a contract of sale, nevertheless such assumed contract of sale would date from the time of such supposed acceptance and could not relate back to tbe date of the option: Sprague v. Schotte, 48 Or. 609, 611 (87 Pac. 1046). Since, therefore, only the relation of optionor and optionee existed at the time of the fire the plaintiffs are not entitled to require the defendants to account for the insurance money even though it be supposed that the defendants would be obliged to account for such money if the relation of vendor and vendee existed. But as already pointed out, under the established rule in this jurisdiction, the destruction of the building discharged the parties from their respective obligations even though it be assumed that they occupied the relation of vendor and vendee. A different question would of course be presented if notwithstanding the loss the plaintiffs had not demanded an accounting of the insurance money and had offered fully to perform. The plaintiffs, however, tendered a conditional performance, and for that reason the option was not transformed into a contract of sale. Whether the plaintiffs occupied the position of a mere optionee or that of a vendee, in either event they must fail. The plaintiff permitted the time fixed in the option to expire without tendering an unqualified performance, and for that reason they are not entitled to specific performance. The decree of the Circuit Court gave to the plaintiffs more than they are entitled to receive. The' Circuit Court refused to allow costs to either side and we think that a like order should be made in this court; and s.o the suit is dismissed without costs to any party in either court.

Modified and Suit Dismissed.

Rehearing Denied.

Mr. Justice MoCourt took no part in the consideration of this case.