Guild v. Atchison, Topeka & Santa Fe Railroad

33 L.R.A. 77, 45 P. 82, 57 Kan. 70, 1896 Kan. LEXIS 109

• Court: Supreme Court of Kansas
• Decided: June 6, 1896
• Docket: No. 8558
• Status: Published

Opinions

The opinion of the court was delivered by

Allen, J. :

The answer of the defendant presented two principal issues : (1) That the land described in the contract was incumbered, and the plaintiff therefore unable to convey a perfect title; (2) that the authority of the arbitrators was revoked before an award was made. The principal question for our consideration is whether or not either of these defenses was good under the facts disclosed.

1. Effect of incumbrances. 1. It appears that the land was incumbered by mortgages amounting to $10,000 and some interest. Does the existence of an incumbrance on land contracted to be sold defeat specific performance of the contract, where the amount of the incumbrance is much less than the amount of the purchase-money, so that the incumbrance can be completely discharged from the proceeds of the sale? It is well settled that the purchaser will not be compelled to receive and pay for a defective title. (Fry, Spec. Perf. §859; Watts et al. v. Waddle et al., 6 Pet. 391; Jeffries v. Jeffries, 117 Mass. 184; Bowen v. Vickers, 1 Green Ch. 520.) Nor can a purchaser be compelled to accept a title subject to incumbrances, for the payment of which out of the purchase-money provision cannot.be or is not in fact made. (Hinckley v. Smith, 51 N. Y. 21; Walsh v. Barton et al., 240 Ohio St. 28; Mayer & Morgan v. Adrian & Vollers, 77 N. C. 83.) Nor can the purchaser be compelled to receive a deed conveying an incumbered title, and be forced to rely on the vendor’s covenants for his security against existing incumbrances, unless he has expressly agreed to do so. But where an incumbrance can be removed merely by the application of the purchase-money, and the court is able to provide for the conveyance of a clear title to the vendee, the mere fact that incumbrances exist which the plaintiff has not removed, or even is unable to remove without the application of the purchase-money for that purpose, will not prevent a decree for a specific performance. (Guynet v. Mantel, 4 Duer, 86; Halsey v. Grant, 13 Vesey, 73; Oakey v. Cook, 7 Atl. Rep. [N. J.] 495; Thompson v. Carpenter, 4 Pa. St. 132.) It appears from the evidence of Dunn that the fact that the property was incumbered by a mortagage was known to Robinson, who said that would make no difference ; that it could be arranged out of the proceeds. This evidence is uncontradicted. As the amount of the incumbrances was but little more than one-third the proceeds of the sale, especially in view of the defendant’s knowledge and statement with reference thereto, they did not constitute a valid ground for refusing specific performance of the contract. Nor does the fact that one-half the taxes for the year 1890 remained unpaid, even though unknown to the defendant, furnish any obstacle to the performance of the contract. The fund was ample for their payment.

2. Revolution of appointment of appraisers. II. The contract executed by the parties provided for the sale of the plaintiff’s land to the defendant at a price to be fixed by what are denominated, in the contract, as arbitrators. It is not disputed that Mr. Bonebrake was named as one of the arbitrators by the defendant, and that Mr. Whitaker was named as another by the plaintiff, though the appointment of Mr. Jewell, as the third, is questioned. We think the evidence clearly shows his selection by the other two as the third arbitrator, and that he was recognized as such by both parties. The evidence shows that Bone-brake and Whitaker first attempted to fix a pi'ice ;• that they were unable to agree; that, thereupon, Jewell was selected, and that the three had two or more consultations, at which they endeavored to agree on a price. Bonebrake’s figures were lower than those of the others. The railroad company attempted to revoke the authority of the arbitrators. A question is presented whether they were arbitrators, or merely appraisers selected to value the property, and if the latter, whether the defendant could still revoke their authority before the appraisement was actually made. An arbitration is properly a submission to the decision of one or more persons of a matter in controversy or dispute between the parties. The only matter these persons were called upon to. decide was the value of the land, which, according to the evidence, had not been discussed by the parties. Before the execution of the contract the defendant had taken possession of a portion of this land, and constructed its tracks along the edge of it. The plaintiff was claiming damages for the use and occupation of his property, and insisting on their payment. With reference to this claim there was a controversy, but by the written contract it was agreed that the claim should be waived, and that the land should be sold by the plaintiff to the defendant at a price to be fixed by arbitrators. The arbitrators were not named in the contract, and, of course, there could be no specific performance of it until they were selected. They were, however, afterward named. The question is, then, whether or not the. defendant, by revoking the appointment, could in effect annul the contract.

3. Appraisers distinguished from arbitrators. It must be borne in mind that the railroad company was still in possession of a part of the property, wholly without right, and Avas during all of the time liable to the plaintiff for whatever actual damage he had sustained by reason of the defendant’s occupation of his property. The contract contemplated, and provided, not merely that the plaintiff should sell and the defendant should buy the whole tract of land, but that such purchase and sale should cancel all demands of the plaintiff for what had already been'done. The authorities recognize a distinction between appraisers of value or persons selected to make a measurement or computation under such a contract, and arbitrators properly so called. Conditions are frequently attached to policies of insurance providing that, in case differences arise between the parties touching a loss, the matter shall be submitted to arbitrators. Where these provisions are in such form that they require the submission of every controversy that may arise under the policy to arbitrators, and thus in terms oust the courts of all jurisdiction in the matter, they are held invalid ; but where they merely provide for the submission to arbitrators of the question as to the amount of loss sustained, so that the arbitrators have nothing to do but make an appraisemeht of the property destroyed, if definite and reasonable in their provisions, they are generally sustained, and held to be, when so expressly stated in the policy, conditions precedent to a recovery. (Insurance Co. v. Clancy, 71 Tex. 5; Chippewa Lumber Co. v. Ins. Co., 80 Mich. 116 ; Manufactoring Co. v. Assurance Co., 106 N. C. 28; Wolff v. Insurance Co., 50 N. J. L. 453; Chandos and another v. American F. Ins. Co., of Philadelphia, 84 Wis. 184.) If appraisement maybe made a valid condition precedent to the maintenance of an action, of course, when the appraisement is made in accordance with the contract, it is binding on the parties. For other instances in which the distinction between an arbitration, which shall have the effect completely to dispose of a matter in controversy between the parties, and an appraisal of property, or determination of any matter of quantity or the like, see the following authorities: Russ., Arb. 40 ; Garred v. Doniphan, 10 Mo. 161; Curry v. Lackey, 35 id. 389; Atkinson v. Whitney, 67 Miss. 655; Collins v. Collins, 26 Beav. 306; Garr v. Gomez, 9 Wend. 649. In Morse v. Merest, 6 Madd. 27, it was held that, where a defendant refused to permit appraisers to go upon the land, the court would remove the impediment and direct the defendant to permit valuation to be made. Smith v. Peters, (L. R.) 20 Eq. Cases, 511, is to the same effect. In Rochester v. Whitehouse, 15 N. H. 468, it was held that the appointment of appraisers might be revoked the same as that of arbitrators. On the other hand, see Orne, Appellant, v. Sullivan, 4 Miss. 161. Where the parties to an action have entered into an arbitration and made the same a rule of the court, the submission is not revocable. (1 Am. & Eng. Encyc. Law, 664; Morse, Arb. 232.) But mere naked arbitration is generally held revocable at the pleasure of either party at any time before an award is made. (Boston & L. Rld. v. Nashua & L. Rld., 139 Mass. 463; Morse, Arb. 229; Russell, Arb. 156.)

It would seem to be settled, under the authorities, that where there is an agreement for the purchase and sale of lands or chattels to be appraised by third parties, and such agreement is upon a valid consideration, and where the appraisement is rather an incident of the contract than a single subject of agreement between the parties, one party may not retain an advantage gained by the contract and revoke the authority of the appraisers. (McGheehen v. Duffield, 5 Pa. St. 497; The Bank of Monroe v. Widner, 11 Paige Ch. 529; Atkinson v. Whitney, supra.) The English cases go so far as to hold that a court will remove obstacles placed by the vendor in the way of the appraisers in performing their duties, as held in Morse v. Merest, and Smith v. Peters, supra.

The plaintiff had agreed that he would sell his land to the defendant at a price to be fixed by the appraisers. He had also agreed that, in consideration that the defendant would }:> urdíase on those terms, he would relinquish all claims for damages already due him from the defendant for the use of it. After the appraisers were appointed in accordance with the terms of the contract, he could not have sued the defendant for the occupation of his land without revoking not merely the appointment of the appraisers, but his solemn written agreement. This he had no right to do. Nor had the defendant any better right to retreat from and annul its solemn agreement than had the plaintiff. The settlement of past differences on the basis of the purchase and sale of the land at a value to be fixed by the appraisers was a valid consideration for the agreement, and sufficient to render the contract irrevocable. An appraisement having been made by a majority of the appraisers, the contract became complete in all its parts and enforceable specifically, unless other equitable considerations are found constituting a valid defense.

4. Fraud, mistake, or misconduct must be pleaded. III. On cross-examination, the appraiser Whitaker made statements indicating partiality. If the appraisement had been challenged by the answer for fraud, mistake, or misconduct of the appraisers, we might hesitate about holding . .... .. , ,. the appraisement binding. But there was no such claim put forth in the answer, and it is clearly necessary that misconduct should be pleaded if relied upon. It seems to us evident that the trial court decided either that the incumbrances constituted a bar to the plaintiff’s action, or that the defendant could lawfully, and did in fact, revoke the authority of the arbitrators, and that the case was decided on the issue presented by the pleadings under an erroneous conception of the law.

The judgment is therefore reversed and a new trial awarded.

Martin, C. J., concurring.