Fischer v. Kennedy

138 A. 503, 106 Conn. 484, 1927 Conn. LEXIS 146

• Court: Supreme Court of Connecticut
• Decided: July 25, 1927
• Status: Published

Opinions

Wheeler, C. J.

The trial court was right in holding that specific performance cannot be decreed. Malkan v. Hemming, 82 Conn. 293, 73 Atl. 752, The court was also right in holding, upon the facts found, that the original contract was continued by the mutual consent of the parties. Both parties, it appears, treated the contract as continuing in force, waived the sixty-day contract limit for the completion of the contract, from time to time discussed terms and conditions with a view to carrying out the contract, and the plaintiff, with the knowledge and consent of the defendants, with a view to completing the executory contract by adding the missing term, made a number of efforts to procure a first mortgage loan, but none of his efforts satisfied the defendants. Both parties engaged Jones to procure a first mortgage, but when he secured someone willing to loan $5,000 or $6,000, the defendants refused to consider it and as a result of their conduct the failure to obtain the loan ensued. The defendants’ conduct in failing to give prospective mortgagees consideration during the months of May and June was also a result of their decision not to carry out the contract. Both parties to the contract undoubtedly anticipated that a first mortgage would be secured from the Federal Land Bank. The executory contract had been made upon this assumption. When it failed to materialize, either party had the right to treat the contract as at an end; neither could have enforced it against the other. 3 Williston on Contracts, §§ 1544, 1559, 1570.

There was no express agreement as to a termination. When an executory contract cannot in its then form become an executed contract through the happening of an event over which neither party had any control, the law will imply that it is abrogated, unless the facts repel this implication. 13 Corpus Juris, 640, note 74; Marks Realty Co. v. “Churchills,” 153 N. Y. Supp. 264. After the Federal Land Bank refused to make the loan, the parties treated the contract as continuing —the plaintiff to continue in possession of the farm under the same arrangement as that defined in the contract—and both parties understanding that he was to secure a first mortgage in place of the Federal Land Bank mortgage which should be satisfactory to the defendants. During the entire period, both the two months prior to the Federal Land Bank decision, and from this period to the beginning of this action, the plaintiff continued to make expenditures upon these premises with the knowledge of the defendants that the plaintiff was doing this in the expectation that the loan would be obtained and the contract be carried out, and during the last two months the defendants permitted the plaintiff to continue these expenditures when all of the time they had determined not to carry out the contract and to refuse to accept the first mortgage which plaintiff was endeavoring to obtain. Defendants’ conduct was deceitful in the extreme, and worked a hardship and pecuniary loss upon the plaintiff. Moreover, while they determined to not carry out the contract the defendants have been enriched by the plaintiff’s labor, material and expenditures on the farm, and these far exceed all the rental value of the farm during the period of plaintiff’s occupancy. The contract while complete in its terms was executory because it could not go into effect until the mortgage from the Federal Land Bank was obtained. After that time it continued to remain executory pending the securing by the plaintiff of a first mortgage acceptable to defendants. The executory contract was not terminated when plaintiff brought this action for specific performance and he was justified in his course by the conduct of the defendants who had not for two months intended to carry out the contract. The defendants’ breach made the course plaintiff took a just and legal one.

The trial court held that the plaintiff could not recover for the moneys expended upon these premises, since the terms of the contract govern their use and occupancy and do not permit such recovery. It is true the contract does provide that all moneys expended in repair, alteration and improvement shall be paid by the plaintiff; this provision merely refers to the conditions which will exist when the contract is carried out, so that the plaintiff may not require the defendants to pay them when the first mortgage is obtained and the contract is in force. The cause of action under the second count is not one for the breach of this contract; it is one to recover for the loss which the plaintiff has incurred as a result of making these expenditures, which have enriched the defendants through plaintiff’s reliance upon their course of conduct leading him to believe that defendants would accept another first mortgage and would carry out the contract. Equity will not permit one to enrich himself at the expense of another in any such way. When specific performance fails, the action at law is a personal one upon a quantum meruit to recover for the expenditures so made. It is sometimes referred in courts of law to the fiction of “implied contract” resorted to to account for the existence of certain equitable rights and liabilities; really, says Pomeroy’s Equity Jurisprudence, Yol. 3 (4th Ed.) § 1238, “they arise wholly from considerations of. right and justice, and from the application to particular conditions of fact of those maxims which lie at the foundation of equity jurisprudence.” The remedy is often availed of where one, in reliance upon a parol agreement to convey land, takes possession of the land and makes improvements upon it. If the agreement be unenforceable, the vendor will be required to pay the vendee the reasonable value of the improvements in an action upon a quantum meruit, otherwise the vendor would be enriched at the expense of the trusting vendee.

Upon the same principle a like action is given the one who enters into possession of land and makes valuable improvements thereon upon the promise of the owner to compensate him in his will which he fails to do. In Wainwright v. Talcott, 60 Conn. 43, 52, 22 Atl. 484, we state the applicable principle in these words: “The principle applied in such cases is, that where one party by his contract, or his conduct outside of contract, which was well calculated to mislead another relying thereon, does mislead him to his harm, and thereby obtains an unjust and unconscientious advantage over the latter, he will not be allowed to reap the benefit of his wrong doing. The cause of action in such cases is not the refusal to .perform a contract, or keep a promise or engagement upon which another relied, but it is the consequent unjust infliction of loss or injury upon one party, and the consequent benefit and advantage resulting to the other, from the violation or breach of a faith and confidence which, under the circumstances, a court of equity deems to have been rightly reposed in him.” See also Grant v. Grant, 63 Conn. 530, 543, 29 Atl. 15.

In discussing this principle Mr. Justice Baldwin says in Ensign v. Batterson, 68 Conn. 298, 307, 36 Atl. 51: “In ordinary cases at the present time, a mortgagee in possession is not thus permitted to profit by improvements made without the acquiescence of the party seeking to redeem; but it is often equitable that he should be, when he acted in the honest, though mistaken, belief that he was the absolute owner, with an unincumbered title. In the Roman law, this equity was deemed so clear, that if the real owner brought suit for the land, while refusing to allow for the added value which the betterments had given it, this was treated as a fraud on his part, which justified the court in rejecting his demand. Dig. 41, 1, de acquirendo rerum dominio, 7, § 12. American law, without either imputing fraud, or requiring proof of it, is content with holding it inequitable to allow a man to be enriched under such circumstances by expenditures which another has made, as he supposed, for his own benefit, while acting in good faith and in ignorance of any adverse claim or title.”

There is no difference in principle between the case of a parol contract to convey land in reliance upon which possession has been taken and improvements made, and a case where possession is taken under an executory contract for the sale of land and, when one term of the contract becomes unenforceable through no fault of the parties to the contract, the parties agree to waive the time limit for completion of the contract, and to treat the contract as a continuing one, and then to endeavor to provide a substitute for the unenforceable term, and meantime the vendee, with the knowledge and consent of the vendor, continues- to make expenditures in improvements upon the premises during the period of occupancy until the vendor refuses to carry out the contract and is intent upon enriching himself by securing possession of the premises with the improvements placed thereon by- the vendee. In the one case the contract was ah initio legally unenforceable; in the other one of the terms became in fact unenforceable, but it was entirely probable that a substitute term might be supplied, that is, another first mortgage obtained, and in that situation the parties treated the contract as a continuing one and endeavored to supply the missing term and while the contract continued defendants deceitfully and intentionally determined to prevent the completion of the contract for the purpose of enriching themselves by appropriating the earnest money plaintiff had paid in and the improvements to the premises he had made. If equitable principles intervene, by the action of quantum meruit in the first case to prevent the wrong, they will in the second, especially when the wrong committed is intentional and savors of fraud. It can make no difference whether there be a definite agreement defining the new term which the vendor agrees to accept, or whether there is merely an agreement that the contract shall continue and that the vendee shall endeavor to secure the substitute for the missing term of the contract which shall be acceptable to the vendor. If the vendee in either case, in reliance upon the completed or the incompleted executory contract, makes expenditures for improvements upon the premises the vendor must, upon his prevention of the carrying out of the contract, reasonably reimburse the vendee for his expenditures, not because of the contract relation, but because he may not enrich himself by such unjust and unconscionable conduct at the expense of the vendee. The plaintiff made his expenditures in reliance upon the defendants’ fairness and reasonableness in accepting the new term and thus completing and carrying out the contract. Conduct of the vendee which “was calculated to mislead the grantee and does mislead him to his harm” and from which the vendor will reap a benefit will not be permitted to succeed in giving to the vendor this “unjust and unconscientious advantage.” The remedy for the prevention of the wrong which the law gives is that of a quantum meruit to recover the fair value of the benefits conferred upon the vendor less any benefits which have accrued to the vendee. Wainwright v. Talcott, 60 Conn. 43, 52, 22 Atl. 484; Grant v. Grant, 63 Conn. 530, 542, 543, 29 Atl. 15; Dix v. Marcy, 116 Mass. 416, 418.

The facts found leave no room for question that the defendants reached the determination early in May not to carry out the contract and that their course of conduct from that time on was without legal excuse and justified the plaintiff in not continuing in the fruitless effort to secure a first mortgage acceptable to the defendants.

The suggestion is made that the contract terminated upon the Federal Land Bank’s refusal to make a loan and that the continued occupancy of the plaintiff was under an agreement extending the terms of the contract pending negotiations for a new contract. Then it is said that until the right to occupy is terminated no implied contract .to pay for use and occupancy can arise. If the contract has terminated it is difficult to see how its terms can be extended. The legal fact is the contract never terminated; the finding makes this doubly clear. We are not concerned in this action with finding an implied contract to pay. We are concerned only in finding whether the defendants have inflicted an unjust and unconscionable wrong upon the plaintiff; if so, the law upon equitable principles will, so far as it can, make good the loss he has unjustly suffered.

The defendants could not have recovered under their counterclaim as originally filed; it was saved by the amendment suggested by the court, which was that the agreement has been terminated and plaintiff has since wrongfully continued in the possession of the premises, and prayed for the possession of the premises. Under the facts found, the executory agreement could have been terminated on account of the conduct of the defendants in May, 1925. The bringing of this action did not constitute a termination of the executory contract. The action of the plaintiff was for specific performance in reliance upon the continued existence of the contract. Until the plaintiff filed his second count, seeking to recover on a quantum meruit, he had done nothing to put an end to his right of possession. The foundation of that action under that count was a termination of the contract and thereafter the defendants were justified in seeking the remedy of ejectment without previous demand based upon such termination. Catlin v. Washburn, 3 Vt. 25, 40. It was not until they filed their amendment to the counterclaim that they were entitled to maintain their claim of ejectment. The court was correct in rendering judgment on the counterclaim giving defendants possession of the premises, but we think the judgment of possession should have been conditioned upon the payment of the judgment in favor of the plaintiff. While plaintiff can only collect on his judgment once, the judgment should make the prompt payment of that judgment a certainty. Staley v. Murphy, 47 Ill. 241.

There is error on both appeals, and the cause is remanded to the Superior Court for the assessment of damages and for the rendition of judgment in accordance with this opinion.

In this opinion Haines, Hinman and Banks, Js., concurred.