Miles v. Hemenway

111 P. 696, 59 Or. 318, 1910 Ore. LEXIS 88

• Court: Oregon Supreme Court
• Decided: November 29, 1910
• Status: Published

Opinions

Opinion by

Mr. Chief Justice Moore.

1. It is contended that the supplemental agreement and the quitclaim deed were executed and accepted as additional security for the payment of the sums of money maturing October 1, 1909, and such being the case, plaintiff’s equity in the land could not be defeated by a declaration of forfeiture, nor terminated in any other manner than by a decree of foreclosure rendered by a court of equity in a suit instituted for that purpose. Assuming without deciding that the parties could impart to the transaction, which culminated in the making of the second agreement and the giving of the quitclaim deed, the legal effect which they then contemplated, the testimony will be examined, relating to the execution of these writings, to ascertain the intention prompting their consummation.

Miles testified that about September 28,1909, he applied for a postponement in the payment of the money, maturing in two days, and was told by Hemenway that he wanted a quitclaim deed as security for the extension if granted. On cross-examination plaintiff stated that when the quitclaim deed was executed, his mind was not perfectly clear as to the title conveyed. He further said:

“I certainly looked upon it as additional security. * * I would not have given that quitclaim deed if I had had any idea that it would have ended everything so far as my title to the place, or equity, or anything of the kind was concerned. I would have let him begin proceedings in some way before I would have given it. That was my state of mind at the time.”

In referring to the extension granted, Miles was asked by defendant’s counsel:

“Well, didn’t Hemenway, during all that time, have all of that land to secure what you owed him? Your equity, as your attorney says, as well as the legal title?”

The witness replied:

“Yes, I suppose so.”

Q. “Then how could the quitclaim deed increase his security?”

A. “Well, as I stated a while ago, my mind is not perfectly clear on that, and was not at that time.”

Hemenway, referring to the conversation which he had with Miles, regarding the extension, testified that he told him:

“ T don’t want this postponed from time to time.’ He says, T don’t either.’ ‘Well, now,’ I says, ‘you give me a quitclaim deed to this property and give yourself plenty of time to get the money — you say you can get it in a very few days — take ten days for it,’ and he says, ‘All right.’ ”

On cross-examination defendant testified that the purpose of taking the quitclaim deed was a desire on his part to get the place back without any legal proceedings, saying:

“I wanted it fixed so that there would not be any law about it. * * I told him I had to have the land or the money when I signed the last contract and got the deed, and he understood it thoroughly and perfectly.”

We think an examination of the testimony referred to will show that while Miles states that Hemenway demanded the execution of the quitclaim deed as further security, plaintiff’s subsequent cross-examination and defendant’s sworn declarations, relating to this branch of the case, establish the fact that there was no meeting of the minds of the parties respecting the giving of additional indemnity, and hence there was no contract for security.

2. Considering the estates of the parties, respectively transferred and retained by the original contract, the interests of each will be examined. A court of chancery, invoking the maxim that what ought to be done, should be regarded as completed, treats an executory agreement to sell and convey real property as a conversion, whereby an equitable interest in the land is secured by the purchaser for whom the vendor holds the legal title in trust: Burkhart v. Howard, 14 Or. 39 (12 Pac. 79); Sayre v. Mohney, 30 Or. 238 (47 Pac. 197); Coles v. Meskimen, 48 Or. 54 (85 Pac. 67); Collins v. Creason, 55 Or. 524 (106 Pac. 445).

3. The vendor’s right to the consideration stipulated to be paid is in the nature of a charge on the land as security for the purchase money (Savings Co. v. Mackenzie, 33 Or. 209: 52 Pac. 1046), which equitable lien, upon default in the payment of the sums awarded, by a court of equity, may become merged into the legal estate by a decree of strict foreclosure, which is in the nature of a conditional cancellation. of the contract to convey (Sievers v. Brown, 34 Or. 454, 458: 56 Pac. 171: 45 L. R. A. 642), consisting of an alternate order, providing a definite time for the payment of the debt found to be due, and directing that upon.a failure to discharge the obligation, within the time limited, the purchaser’s equitable estate in the premises shall be forever barred: Wollenberg v. Rose, 41 Or. 314 (68 Pac. 804); Flanagan Estate v. Great Cent. Land Co., 45 Or. 335 (77 Pac. 485); Higinbotham v. Frock, 48 Or. 129 (83 Pac. 536: 120 Am. St. Rep. 796). Such a suit is not governed by the statute (Section 423, B. & C. Comp.) which directs that a lien upon real property shall be foreclosed, and the land adjudged to be sold to satisfy the debt, and if it appear that a personal obligation has been given to evidence the payment of the sum due, a decree for the recovery thereof must be given: Savings Co. v. Mackenzie, 33 Or. 209 (52 Pac. 1046).

The same conclusion has been reached by the court of last resort of a sister state, where it was held that as the title to the land, agreed to be sold and conveyed, did not pass to the purchaser, that part of a decree foreclosing the vendor’s equitable lien which directed a sale of the premises and a recovery of any deficiency, was erroneous. Button v. Schroyer, 5 Wis. 598; Baker v. Beach, 15 Wis. 108; Nelson v. Jacobs, 99 Wis. 547 (75 N. W. 406). In Sievers v. Brown, 84 Or. 454, 458 (56 Pac. 171: 45 L. R. A. 642), it was intimated that a decree foreclosing a contract for the purchase of real property ought to direct a sale of the premises. While the suggestion might be the expression of an equitable principle, it must be regarded as inconsistent with the current of judicial enunciation.

In Vernon v. Stephens, 2 P. Wms. 66, which was a suit for specific performance, it appeared that an agreement had been made for the sale of land, pursuant to which the purchaser paid part of the consideration and after-wards stipulated to discharge the remainder by a designated day, in default of which to surrender the contract and to lose what he had paid thereon, and it was held that a court of equity would relieve him from the terms of the supplemental agreements with which he had not complied. In deciding that case, the Lord Chancellor, referring to the modified contracts, said:

“And as to these agreements, they were all intended only as a security for payment of the money, which end is answered by the payment of principal, interests, and costs.”

The legal- principle thus announced was reaffirmed in Harris v. Greenleaf, 117 Ky. 817 (79 S. W. 267: 4 Am. & Eng. Ann. Cas. 849) where it was determined that if, after the execution of a contract for the sale of land, the purchaser is induced to execute another agreement providing that upon failure to pay the full amount of the purchase price he should forfeit his contract and all his rights thereunder, the latter instrument, if valid, was merely a form of additional security. To the same effect are the cases of Decamp v. Feay, 5 Serg. & R. (Pa.) 323 (9 Am. Dec. 372), and Kercheval v. Swope, 6 T. B. Mon. (Ky.) 362.

4. The purport of these decisions, as we view it, is that while an original contract for the sale and conveyance of. land may be modified by a later ¿greement, which stipulates that unless the remainder of the purchase price is paid on or before a specified day, the purchaser’s right to specific performance shall be terminated and the payments which he has made on account of the contract forfeited, does not render the subsequent engagement self-executing, but it may be enforced according to its terms, either by a decree of a court of equity or by mutual assent of the parties. To this extent of the statement, an unqualified assent is given, but we do not acquiesce in the' doctrine that the modifying- agreement constitutes additional security.

The legal title held by Hemenway, in trust for Miles, being in the nature of an equitable lien, which could have been barred by a strict foreclosure, was not, in our opin- ‘ ion, such an interest in the premises as to be governed by the maxim, “once a mortgage, always a mortgage,” for the legal title and the co-ordinate equitable lien never in a strict sense created a mortgage (Glendenning v. Johnston, 33 Wis. 347), and the quitclaim deed, though it may have been designed to evidence a surrender of the premises for a condition subsequent, the conveyance added no security to that already held by defendant. All the permanent improvements placed on, or made to, the land by Miles augumented the interest which Hemenway held by retaining the legal title, without'the execution of the quitclaim deed. The possession of the premises not having been surrendered by plaintiff, pursuant to the terms of his deed, such pretended conveyance was useless, except as affording evidence, and a strict foreclosure or some other equitable intervention was essential to bar his rights or to cancel the contracts. The quitclaim deed did not, in our opinion, increase the indemnity and could serve no purpose whatever, unless the land was voluntarily abandoned by the purchaser.

5. It is insisted that defendant prevented plaintiff from securing a loan of money with which to discharge the note and the installment of interest, and such being the case, an error was committed in denying the relief prayed for in the complaint. Miles testified that before such debts matured he applied to the Chambers Hardware Company, a private corporation, to which he was indebted, to borrow money to pay the sums which he owed on the land, offering as security a transfer of the legal title to the premises, the witness reserving authority to sell the real property as soon as possible, and from the consideration expected to be received, to pay the corporation the money to be advanced and interest thereon, and his prior debt and interest to the hardware company, and to retain the remainder; that the president of the corporation advised a conference with him before surrendering the land, and pursuant to such suggestion, he, on the morning of October 11, 1909, called upon Frank Chambers, the officer referred to, who soon thereafter, in response to a telephone call, said he was obliged to leave, but would soon return, asking Miles to wait; that the witness did so, and when Chambers came back the latter stated the corporation would not advance the money, whereupon the witness immediately started for the First National Bank of Eugene, where the contracts and deeds were deposited, but before he could reach the place, the noon hour arrived; and that he afterwards learned that the hardware company, prior to 12 o’clock M. of that day assigned its demands against him to Hemenway who also secured from the bank the transfer of a note which it held against the witness.

If defendant had by any means prevented plaintiff from obtaining a loan of money, so that the latter’s estate in the land might have been forfeited, it is probable that the supposed advantage taken by Hemenway would have defeated his application for affirmative relief, because he would not have come into a court of equity with clean hands. Miles was not hindered, evidently, by the bank’s assignment of his note to Hemenway, for the plaintiff testified that after the expiration of the time limited, he applied to the president of such bank to borrow money, offering as security the same indemnity and terms which he had proposed to the hardware company, and was informed by that officer that a national bank could not make such loans. It will thus be seen that plaintiff could never have reasonably expected to secure a loan from a bank of that class by giving as security a conveyance of the land he had engaged to purchase.

Frank Chambers testified that in August, 1909, plaintiff applied to borrow money to take up the Hemenway contract and the witness refused the request. Referring to a conversation had with Miles at that time, Chambers said:

“I told him if he did not find anybody that would take it up, to come back and 'see me again. I think he saw me twice between that and the time of the last talk. That was October 11th, I think, was the date. That morning he came in about — if I remember — the hour was about nine o’clock. I turned him down, and told him, ‘No, I didn’t want it.’ But I told him again, ‘You go out and see if you can’t find somebody that will take it up, and if you can’t, why, come back.’ At that time, I had not approached Mr. Hemenway to sell the notes * * I sent him out three times that forenoon to see if he could not find somebody else that would take it up. * * I figured with him. But I took the matter up of figuring on the indebtedness of the place, and found what it would be. After I found what it would be, I then sent him out, I think, and told him it did not suit me. And then I went to look up Mr. Hemenway. It took me possibly half an hour to find - him. And I asked him — I told him I had some notes — and asked him if he wanted them. He did not give me a very satisfactory answer. I told him I would like to know very soon if he wanted them, and he said, ‘Well, I will see you again.’ I told him I wanted him to see me very shortly; and I then went back to the store and attended to some other business, and took the matter up again with Mr. Miles. And in the meantime, I think while I was sitting there that time, I had a telephone call from the bank. That call was on other matters entirely. Didn’t pertain to the Miles matter. But very soon I had another call, that Mr. Hemenway was at the bank waiting for me. I then went up and closed the deal with Mr. Hemenway. After that I went back and talked with Mr. Miles some. It was then after 11 o’clock, I think, and at a quarter to 12 — I think it was a quarter to 12 — or in a short time, I told him he had better go and look for somebody else to take the matter up. I think it was somewhere between half-past 11 and a quarter to 12, and he went out again and came back, I think after that. * *

“Q. Had you at any time assured him that you wouid furnish him the money?”

“A. I had at no time done anything but figure on what was against the place. He told me all that I asked, that I know of. He told me what it was. But at no time did I do anything but refuse to take it up, except to figure on what would be the conditions, in case it looked good enough for me to take it.”

“Q. There has been some indication here that you and the bank were working together and trying to prevent Mr. Miles from raising the money, to help Hemenway out. What is the fact about that?”

“A. The fact was, that I was trying to collect money that was due from him. I was putting myself in a position to see how best I could do it.”

The testimony of Chambers has been set forth at length, a careful perusal of which convinces us that he had not promised, and never intended, to advance the money to plaintiff. If, by the invitation to call upon the hardware company before he surrendered his interest in the property, or by furnishing to Chambers a statement of the sums due on the land, or in not sooner informing him that he could not obtain a loan from the corporation, Miles reasonably expected to secure the money, the testimony fails to show that Hemenway was in any manner responsible therefor. The defendant, it will be remembered, took from the hardware company and from the bank an assignment of obligations due from plaintiff, but Hemenway being also indebted to the bank, he may have been obliged to take a transfer of such indebtedness in order to obtain the means whereby he could protect his interests in the land. However this may be, we are satisfied that defendant did not prevent or attempt to hinder plaintiff from borrowing from his creditors money with which to discharge the sums he owed on the land.

6. It is argued that conditions should be construed in equity so as to prevent forfeitures, which rule was violated by the trial court, whereby an error was committed. It must be conceded that compensation, and not forfeiture, is a well-recognized principle of equity jurisprudence, but this precept does not prevent parties, who are sui juris, from settling, without litigation, their respective rights. The written agreement whereby the time for the payment of the first note and of the installment of interest on the others was postponed to 12 o’clock noon of October 11, 1909, contained clauses as follows:

“And in consideration of said extension of time, the party of the second part [Miles] has executed to the party of the first part [Hemenway] a quitclaim deed to all his right, title, and interest in said property, which said deed, together with this contract is to be deposited in the First National Bank where the other deed and contract is deposited, and said bank is instructed and the parties hereto as follows: That if the said party of the second part fails to make said payments, then said original deed and contract, together with this contract and deed, is to be delivered to the party of the first part, and that all contracts and agreements between the parties hereto shall be at an end without any claim upon the part of either against the other.”

The testimony of the officers of the bank is to the effect that after 12 o’clock noon of the day specified, in a conversation with them, Miles directed that the papers in their possession, relating to the land transactions, should be delivered to Hemenway, which order they obeyed. Miles, however, testified that when asked by such officers if the papers should be given to defendant, he told them: “If there is no other help.” The cashier of the bank and his assistant, with whom plaintiff conversed on that occasion, severally denied upon oath that he ever made such a limited declaration, and the president of the bank, with whom Miles also talked, at that time, deposed that he did not remember that plaintiff ever made such a qualified assertion. So far as we are able to ascertain from an inspection of the testimony, the officers of the bank, who were witnesses at the trial of this cause, were unbiased, while Miles is necessarily very much interested in a determination of this suit in his favor. The preponderance of the testimony induces the conclusion that before plaintiff had found any person from whom he could obtain a loan of money, he unqualifiedly directed the officers of the bank to deliver to defendant the papers referred to in the supplemental agreement.

7. “The trust in real property, growing out of the contract for its purchase and sale,” says a text-writer, “continues until either the contract is executed by the delivery and acceptance of the deed, or is mutually abandoned by the parties.” Reeves, Real Property, § 404. From this excerpt it will be observed that the author omits to state that the vendor’s equitable lien in the land agreed to be sold and conveyed could be strictly foreclosed, which decree, though resulting in an abandonment of the contract, might be given without the purchaser’s consent. The language employed is quoted, however, to show that a land contract, like all other agreements, may be abrogated by mutual assent of the parties.

8. We do not attach any importance to the supplemental agreement, as a means sanctioned by equity to extinguish a purchaser’s rights even upon failure to comply with the condition, and have treated the last contract as a favor granted plaintiff whereby the time for the payment of the debt was delayed ten days. However obligatory a stipulation may appear to be which provides for a forfeiture upon a breach of a condition, the confiscation is not usually complete, so as to vest the property in the party who is to take by the loss, without affirmative action on his part. 13 Am. & Eng. Enc. Law (2 ed.) 1077; Minneapolis, R. Co. v. Duluth, R. Co., 45 Minn. 104, 106 (47 N. W. 464). If, therefore, under the supplemental agreement, a declaration of forfeiture was essential to terminate plaintiff’s equitable estate in the land, such agreement could not alter the respective rights of the parties and was useless, except to change the day of payment specified in the original agreement.

9. It will be perceived that the same conclusion, practically, is arrived at herein as was reached in the case of Vernon v. Stephens, 2 P. Wms. 66, and in the cases which have adopted the doctrine there announced, as herein-before adverted to, but we put our determination, not on the ground that the supplemental agreement was designed as, or constituted, additional security, but that the modified agreement changed the original contract in the particulars specified.

The decision herein is grounded on the fact, which we think was established by a preponderance of the testimony, that after the expiration of the time limited by the second agreement, the officers of the bank, pursuant to plaintiff’s direction, delivered the papers held in escrow to defendant, who accepted them. This transaction was tantamount to a declaration of forfeiture by Miles to which Hemenway assented, which acquiescence constituted the required affirmative act on his part to complete the surrender of the respective rights of the parties. A refusal to recognize this legal principle would be a denial of the power of responsible parties voluntarily to settle their respective interests and estates in land; thereby making in all cases a resort to a court of equity indispensable, a doctrine to which we cannot assent.

10. It is maintained that the negotiable promissory notes, evidencing the remainder of the purchase price of the land, were unconditionally delivered, and while Hemenway may have left them at the bank for safe-keeping, they were at all times subject to his control and not in escrow; that they were not offered to plaintiff until after dark on October 14, 1909, and three days prior thereto he went to the bank, ready and willing to pay the sums due, but the notes had been delivered to defendant, who, without offering to return them to plaintiff, could not declare a forfeiture. These obligations were made payable at the First National Bank of Eugene and defendant testified that they were placed there as an escrow; that he borrowed from the bank some money and transferred to it, as collateral security, two of the notes and instructed the cashier that when Miles made a payment to indorse on the instruments the money received and also to give the witness credit for the sums so paid on his debt.

These notes were at the bank all the time after they were executed and Hemenway understood, at least, that they were there as an escrow. In referring to the notes and to the directions which he gave to the cashier at the time the contracts and deeds were returned to him, defendant testified:

“I told Snodgrass, I think it was, to hand them to Mr. Miles. They did not belong to me.”

If the cancellation of the land contract depended upon Hemenway’s option to - declare a forfeiture, he would probably have been required to tender to Miles the negotiable instruments, as a condition precedent to the exercise of that prerogative: Comstock v. Brosseau, 65 Ill. 39. The cashier would have delivered the notes to plaintiff if a request therefor had been made by him, but because that officer of the bank, who was by the terms of the last agreement made the agent of both parties, did not tender the notes to Miles until the time stated does not, in our opinion, alter the rights of the respective parties. Hemenway supposed these negotiable instruments were in escrow, whether technically so or not, and when he directed the cashier of the bank to deliver them to Miles, he did all that could reasonably have been required of him under the circumstances.

It is insisted that in refusing to allow an additional reply and a supplemental complaint to be filed, errors were committed. The application to file these pleadings was addressed to the sound discretion of the court, and in denying the requests no abuse of careful judgment is manifest.

It follows from these considerations that the decree should be affirmed, and it is so ordered. Affirmed.