Fulenwider v. Rowan

136 Ala. 287

• Court: Supreme Court of Alabama
• Decided: November 15, 1902
• Status: Published

Opinion

HARALSON, J.

1. The real question in this case is the proper construction of the two contracts between the parties, one of the 15th June, 1900, and the other of July 17th, 1900, in which latter the former contract is referred to.

The defendant’s contention is, that the one of June 15th was a mere option, and that the later one, of July 17th, was in effect a mere extension of the time for the exercise of the option in the first, to twelve months'from the latter date. Their counsel say in brief: “We contend, however, that by the express terms of that contract, the condition of payment is a condition precedent, and time is made an essential part of the contract, so that the rights of defendants under that contract • were not different from what they would have been under a strict option contract.” It must be admitted, and is not denied by plaintiff, that the first contract, according to the definitions of option contracts, contains all the essentials of such a contract.

A transaction between two, may be, (1) a sale of lands; (2) an agreement to sell lands, or, (3) what is generally called an option. Touching these, it has been said: “The first is an actual transfer of the title from the grantor to the grantee by appropriate instrument of conveyance; the second is a contract to be performed in the future, and if fulfilled, results in a sale; it is prelimi- • nary to the sale, a.nd is not a, sale. Breaches, rescissions or leases may occur by which the contemplated sale never takes place. The third, an option, originally is neither a sale nor an agreement to sell. It is simply a contract by which the owner of property agrees with another, that he shall have the right to buy the property at a fixed price within a time certain. He does not sell his land; he does not then agree to sell it; but he does then sell something, viz.: the’right or privilege to buy at the option or election of the other party. The second party gets in praesevti not lands, or an agreement that he shall have lands-, but he does get something of value, that is the right to call for and receive lands if he elects. The owner parts with his right to sell his lands (except to the second party) for a limited, period. The second party receives this right, or rather from his point of view, he receives the right to elect to buy. * * * A present conveyance of land is an executed contract. An agreement to sell is an executory contract. Tlie sale of an option is an executed contract. That is to say, the lands are not sold. The contract is not executed as to them, hut the option is as completely sold and transferred in praesenti as a piece of personal property instantly delivered on the payment of the price.” — Ide v. Leiser, 10 Montana 5, s. c. 34 Am. St. Rep. 17.

In 28 Am. & Eng. Ency. Law (1st ed.), 77, it is said: “The right to purchase land is frequently the subject of contract, and such right may be styled an option. It is not an estate in land and an option is not a contract of salé. An option must be for a limited time, and if none is mentioned, will remain in force for a reasonable time to be determined under all the circumstances of the case. Time is thus always of the essence of the contract.”

By the first contract, the plaintiff had to pay to defendants in addition to the $500 he paid them for the option, “the sum of nineteen thousand five hundred dollars, cash, at any time within sixty (60) days from the date hereof,” — the 15th June, 1900, — in which case, they bound themselves to sell and convey to him or to his assigns, by deeds and covenants of warranty, the lands therein described. On the 17th July following, within the sixty days prescribed for the expression of the option, the contract of the latter date was entered into, in which the defendants acknowledged receiving the sum of $7,500, “on account of purchase price named in the within option ['the latter contract having been written evidently on the first], making in all the sum of $8,000 paid by him on account of the purchase money, and in consideration of this payment, we do hereby agree to ex-' tend the time for the payment of the balance of the purchase money, for the period of twelve months from this date, with interest thereon at six per cent, per annum, and do hereby agree that the said Fulenwider may at any time pay the balance of the purchase money with interest then due, and that we will, upon payment being made, execute to him titles according to the terms of this option,” — the one referred to within. Fairly interpreted, this last agreement was a clear declaration on the part of plaintiff to exercise his option. On doing this, he was bound to pay the $19,500 in cash, to entitle him to a deed to the lands, unless the defendants waived the payment in cash, to payment on credit. This they were privileged to do or not, as they chose. When the plaintiff said to them that he would take the lands at the stipulated price, they agreed with him, as the contract showed, — whether proposed by him or them does not appear, — that if he would pay in addition to the $500 already paid, $7,500 in cash, they would credit him for the remaining $12,000, to be paid in a year from that date, if he would pay 6 per cent, interest on the deferred payment, which he agreed to do, and upon its payment they would execute to him titles to the land according to the terms of the option contract, which had theretofore existed between them.

If this contract had been entered into, making no reference to the other, and had contained within itself a description of the property and the character of the deed to be executed, it would have been purely a transaction or agreement for the sale of land, without any element of an option contract in it. The reference in the last to the first instrument, saved the trouble of setting out much contained in the first, without making the latter an agreement dependent on the former, except for the purposes of identification of certain things. This reference was evidently for the purpose of .identifying the property contracted to be sold and the character of the • deed to be executed upon the payment of the purchase money. Without this, there would have been no necessity to make any reference in the last to the first agreement. The expressions in the latter contract, such as, “paid by him on account of the purchase money,” “the balance of the purchase money,” etc., tend to indicate an independent transaction or agreement for the sale and purchase of the land. Such expressions do not very appropriately belong to an option to purchase within a given period of time. Again, the payment of $8,000 out of the $20,000, when $500 was the price of the option at first, would not indicate that the parties designed that the element of option within a limited period, should enter into this last transaction. Furthermore, the stipulation in the original agreement, providing for its termination and the forfeiture of the a] noun t paid, is entirely omitted, and the purchaser was authorized to- pay the balance “ at any time,” which means at any time before, or certainly after the expiration of the twelve months. Still more, the original made no provision for the payment of interest, and the substituted contract, provides for the payment of six per cent, per annum on the deferred payment of $12,000, neither of which provisions as to the time of payment and interest, reasonably suggest that the condition of option to purchase in a limited time was preserved. In the original, the amount paid, as compared to that to be paid, if plaintiff exercised his option and carried it out as provided was, as above shown, very small, being only one-fortieth of the entire purchase price, whereas, in the last agreement, that amount was increased by $7,500, making $8,000 paid in all; the same being within $2,000 of one-half of the entire amount to be paid. The price of the $500 option being almost nominal, it was natural that defendants should make strict, provision as to the time within which it was to be expressed and performed. But* while it was competent for the. parties to make the price of the option to be presently made, as- large as they chose, yet, when so large and substantial a part of the purchase price was paid, the reason for such strictness in the payment of the balance ceased to be of any great import-’ anee. Retaining the title as security for the balance,-— if $20,000 was the reasonable value of the property, as presumably it was, — the land was ample security for its payment, and interest that might accrue thereon.

2. The contract was not unilateral, as contended by defendants. It was mutual and binding on both parties, having been made by the one and accepted by the other. It cannot be contended, that if plaintiff, having accepted, failed to perform it, the defendants might not have enforced its performance. The consideration on each side was a promise, expressed by defendants and implied by plaintiff. Although signed by defendants and not by plaintiff, that fact made no difference, if accepted and acted on by him. Each party to it, therefore, assumed fixed and definite -obligations. — 3 Am. & Eng. Ency. Law, 846, n. 4; Howard v. Railroad, 91 Ala. 269; L. & N. R. R. Co. v. Fulgham, Ib. 556; A. O. Ex. Co. v. Ryan, 104 Ala. 267; Mouton v. L. & N. R. R. Co., 128 Ala. 538, 544.

3. The contract being one for the sale of land, and a substantial part of the consideration being paid, the covenants and undertakings in the agreement were independent and not conditions precedent. “Where a stipulation in the nature -of a condition precedent has been partially performed, it ceases to be available as a condition, and becomes a stipulation by way of agreement, for the breach of which compensation must be sought in damages.’'' — 1 Addison on Contracts, § 233. Mr. Parsons states, that “the validity of many of these defenses [resting upon the acts or omissions of the plaintiff] must depend upon the question, sometimes difficult, whether the contracts are dependent or independent. There are cases, and especially some early ones, which seem to be severe and more technical than rational; but of late the courts incline to decide these questions as good sense and common justice require;” and as a rule for distinguishing them, he states: “Where the agreements go to the whole of the consideration on both sides, the-promises are dependent, and one of them is a condition precedent to the other. If the agreements go to a part only of the consideration on both sides, and a breach may be paid for in damages, the promises: are so far independent.”- — -2 Parsons on Contracts, 792 bottom page, *677; 645, *528.

The rule is thus declared in 1 Chittv Pleading (16th Am. ed.), *p. 333: “Where the plaintiff’s covenant or stipulation constitutes only-a part of the consideration of the defendant’s contract, and the defendant has actually received a partial benefit, and a breach on the part of the plaintiff might be compensated in damages, an action may be supported against the defendant wdthout averring performance by the plaintiff; that where a party bas received a part of the consideration for bis agreement it would be unjust that because be bad not bad the whole, be should enjoy that part without paying or doing anything for it; and, therefore, the law obliges him to perform the agreement on bis part, and leaves him to bis remedy to recover any damages be may have sustained in not having received the whole consideration.”

In Stavers v. Curling, 3 Bing. (N. C.) 367, Tindal, C. J., said: “The rule bas been established by a long series of decisions in modern times, that the question whether covenants are to be held dependent or independent of each other, is to be determined by the intention and meaning of the parties as it appears on the instrument, and by the application of common sense to each particular case; to which intention, when once discovered, all technical forms of expression must give way. And one of the means of discovering such intention, has been laid down with great accuracy by Lord EllenboriOUGI-l, in the case of Richie v. Atkinson, 10 East, 295, to be this: ‘That where mutual covenants go to the whole of the consideration on both sides, they are mutual conditions, the one precedent to the other; but where the covenants go only to a part, there a remedy lies on the covenant to recover damages for the breach of it, but it is not a condition precedent.’ ”

In Mill D. Foundry v. Hovey, 21 Pick. 438, it was said by Shaw, C. J., that in order to construe a stipulation on one side to be a condition precedent to an obligation to. perform on the other, it must in general appear, “1. That the undertaking on one side is in terms a condition to the stipulation on the other; 2. It must result from the nature of the acts to be done and the order in which they must proceed and follow each other in the progress of performance; 3. The non-performance on one side must go to the entire substance of the contract, to the whole consideration, so that it may be safely inferred as the intent and just construction of the contract that if the act to be performed, on the one side is not done there is no consideration for the stipulation. on the other side. And, therefore, though there he a breach of an express or implied covenant on one side, attended with some loss and damage to the other, yet if it does not go to the whole consideration, and the loss can be compensated in damages, the stipulation must- be construed to be independent, for the breach of which the party sustaining such loss has a remedy by action, but it is not a condition precedent, upon the non-performance of which the other party is absolved from the performance of the stipulations on his part.”

These principles' have been recognized by this court in a' number of decisions. — Weaver v. Childress, 3 Stew. 361; Jones v. Sommerville, 1 Port. 457; Hays v. Hall, 4 Port. 374.

4. It is said that time was of the essence of this contract, but this could not be the case, since it was not so expressly stipulated by the parties, nor does it fob laAV from the circumstances of the case. — McFaddin v. Henderson, 128 Ala. 221.

5. The facts stated in a number of the counts, were intended, and pertinent to that, end, to sIaoav, even conceding,- -which was not done, — that the last was an option contract, that defendants had waived the forfeiture therein and were estopped from setting it up.- — Lowery v. Peterson, 75 Ala. 109, 113; Wingo v. Hardy, 94 Ala. 191; G. H. Ins. Co. v. Allen, 128 Ala. 451. In the first case cited, — 75 Ala. 113, — it was said: “The condition in the contract or agreement of the parties, that in the event the vendee failed to pay the purchase money, as it became due and payable, the contract should be forfeited, and the purchaser bound to pay rent, Avas reserved for the benefit of the vendor, and, at discretion, he could dispense Avith or waive it. And it was dispensed with or waived by an act on his part, clearly evincing an intention to treat the contract as a valid subsisting contract of purchase.”

The demurrers to the complaint should have been overruled.

Reversed and remanded.