Shelly v. Mikkelson

63 N.W. 210, 5 N.D. 22, 1895 N.D. LEXIS 7

• Court: North Dakota Supreme Court
• Decided: April 11, 1895
• Status: Published

Opinions

Wallin, C. J.

The principal facts in this case, appearing of record, maybe condensed as follows: On January 20, 1890, the plaintiff sold to the defendant certain real estate, which was then incumbered by a mortgage, and received as consideration for such land the defendant’s two promissory notes, falling due, respectively, on December 15, 1890, and December 15, 1891. The contract of sale was reduced to writing, in the form of a bond for a deed, which was duly recorded on September 7, 1890, and was in the following language: Know all men by these presents that Mads Mikkelson, of De Groat, in the County of Ramsey and Territory of Dakota, is held and firmly bound unto I. E. Shelly in the sum of three hundred and four and 38-100 dollars, lawful money of the United States, to be paid unto I. E. Shelly, his heirs, executors, administrators, or assigns, for which payment well and truly to be made he binds his heirs, executors, and administrators firmly by these presents. Whereas, the said I. E. Shelly has this day bargained and sold unto the said Mads Mikkelson, his heirs, executors, and assigns, a certain lot or parcel of land, situate, lying, and being in the County of Ramsey and Territory of Dakota, designated and described as follows, to-wit, the north half of the southeast quarter of southeast quarter of section eleven, and the northeast quarter of the northeast quarter of section fourteen, in township one hundred and fifty-six north, of range sixty-five west: Now, therefore, the condition of this obligation is such that if the said I. E. Shelly, his heirs, executors, administrators, or assigns, make, execute, and deliver a good and sufficient warranty deed, with full covenants, except as to such incumbrances as may arise by virtue of any tax assessed subsequent to the execution of this instrument, and a first mortgage of $275 and interest now on the land, and tax of 1889, of the above-described premises, upon being paid the full sum of three hundred and four and 38-100 dollars, according to the conditions of the two notes, one for $154.38, due December 15th, 1890, and one note for $150, due December 15th, 1891, both notes bearing dates the 20th day of January, 1890, and 10 per cent, int., or when he has broken 80 acres on the land, and secured said notes with mortgage on crop for 1891 on said land, bearing even date herewith, then this obligation' to be null and void, otherwise to remain in full force and virtue. In testimony whereof, I have hereunto set my hand and seal this 20th day of January A. D. 1890. I. E. Shelly. [Seal.]” This action is upon said promissory notes, and was not instituted until after both notes had matured, by their terms. The plaintiff prays only for a money judgment, and does not set out in his complaint any ground authorizing the intervention of a court of equity. Defendant, by his answer, admits the execution and delivery of the notes, and alleges a failure of consideration as a defense. A copy of said bond for a deed is annexed to and made a part of the answer, and the answer further alleges “that defendant went into possession of said land under said arrangement, and broke and cultivated thereon 80 acres, and improved said land to the amount of four hundred dollars; that all of said acts were done prior to the commencement of this action, and prior to March, 1892; that defendant has demanded of plaintiff a full and faithful performance of the conditions of said bond, and offered to do what he (defendant) was required to do by the terms thereof, but that plaintiff has neglected and refused to execute to defendant said warranty deed for said land; that prior to the commencement of this action, and prior to March 1, 1892, the said plaintiff conveyed and transferred said land, by quitclaim deed, to John A. Percival, and that thereafter, and prior to the commencement of this action, defendant, in order to protect himself, and save to himself the benefits of his improvements on said land, was obliged to purchase said land from John A. Percival; the consideration for said notes has wholly failed; that by reason of said transfer of land to said Percival, and by reason of the fact that since prior to March I, 1892, plaintiff has not be able or willing to comply with the term of said bond, and has made it impossible for him to comply therewith.” The case was tried before a jury, and at the close of the testimony the court directed a verdict for plaintiff, and a verdict was accordingly returned for plaintiff for the amount of both notes, with interest.

At the trial the following facts were made to appear: Plaintiff rested his case after putting the notes in evidence, and testifying that he owned the' notes, and they had never been paid. The bond for a deed was also put in evidence. Defendant testified that in the year 1890 he entered upon the land under the contract and broke and backset 80 acres thereof, and raised a crop thereon in 1891. The plaintiff tendered a deed of warranty to the defendant some time after the breaking was done, in 1890, and offered to deliver the deed on condition that defendant should execute a crop mortgage on the crop to be grown in 1891 as security for the purchase-money notes. Defendant refused to do so, and plaintiff never delivered a deed to defendant, and never at any time tendered defendant a deed after both notes fell due. Defendant testified that he was at the time of the trial the owner of the land, and had purchased it, about one year prior to the trial, of one Percival. He was asked, “How much did you pay for the land?” Plaintiff, by his counsel, objected to this question on the ground that it was immaterial. The objection was sustained, and defendant excepted to the ruling. Defendant was asked: “Was there any other consideration for these notes, besides the land described in this bond for a deed? A. He says,‘No.’ The consideration for the purchase of the land was six hundred and forty-four dollars, and a part of that was the two hundred and seventy-five dollars, and he was to get a larger loan on the land, and through that indemnify himself.” On plaintiff’s motion, this answer was stricken out as unresponsible, and as immaterial and irrelevant, and defendant excepted to the ruling. Plaintiff was sworn as a witness for the defendant, and testified, in effect, that he never tendered a deed of the land to the defendant at any time after both notes matured. Plaintiff was asked: “Then, afterwards, without tendering to him any deed, you sold the land to another person, did you? A. I simply quitclained my interest. Q. You quitclaimed your interest? A. Yes sir. Q. You made a quitclaim deed? A. Yes, sir. Q. To whom. A. To John A. Percival.” Plaintiff’s counsel, on cross-examination, asking the following question: “Did you receive any consideration for this quitclaim deed you say you gave to John A. Percival?” Defendant objected upon the ground that the question was immaterial, and not proper cross-examination. The objection was sustained, and plaintiff excepted to the ruling. Plaintiff further testified that he gave the quitclaim to Percival either in November or December, ,1891, or in January 1892; that he had, prior to the quitclaim, a good title to the land, subject to the first mortgage referred to in the bond; that the mortgage was foreclosed, and bought at the sale by one Wilmott, and the title was afterwards transferred to said Percival. There was no redemption from the mortgage sale. Plaintiff made the quitclaim to Percival after the latter acquired the interest obtained by Wilmott at the foreclosure sale, and some months prior to the expiration of the period allowed by law for redemption from such sale. In other words, the year had not run when the quitclaim was made by the plaintiff to Percival. It does not clearly appear whether the no.te last falling due had matured at the time the quitclaim to Percival was made. Percival executed and delivered to the defendant a quitclaim deed of the land, bearing date March 12, 1892, which deed recites on its face that it was given for a consideration of $600.

As we construe the bond, it gave the defendant an option. He could not be compelled to close the transaction before the last note fell due, i. e. December 15, 1891; but defendant might require the plaintiff to deliver a deed prior thereto on -performing the other conditions of the bond, i. e. on breaking 80 acres of the land in 1890, and by giving a chattel lien on the crop of 1891 to secure the notes. Defendant in fact broke the 80 acres in 1890, and thereafter plaintiff tendered him a deed of the land on the condition that defendant should execute a chattel mortgage on the crop of 1891, and upon the further consideration that defendant should execute a real-estate mortgage on the land to secure the notes. This the defendant refused to do, except that he did, for reasons not appearing in the record, make and deliver the required real-estate mortgage. At this point the defendant refused to give the chattel security, and the deed was not delivered to him by the plaintiff. The defendant, in our opinion, was fully justified by the agreement in refusing. Besides, the plaintiff appears to have exacted from the defendant, as a condition of delivering the deed, a real-estate mortgage. This was not a condition in the contract for delivering the deed. The defendant not having elected to comply with the option stated in the bond by giving security on the crop of 1891, and taking a deed at that time, the instrument must be construed independently of the option feature contained in it. Under the terms of the agreement, the plaintiff could have instituted an. action upon the note first falling due as soon as it matured, and without tendering a deed. The covenant to deliver a deed, and the cevenant to pay the first note, were independent covenants. McCroskey v. Ladd, 96 Cal. 455, 31 Pac. 558; Beecher v. Conradt, 13 N. Y. 108; Eddy v. Davis, 116 N. Y. 247, 22 N. E. 362. But this was not true .with respect to the last note, which matured December 15, 1891. By the terms of the agreement the deed was to be delivered on payment of this last installment of the purchase money, and when this became due the agreement to pay the entire purchase money, and to deliver the deed, at once became mutual and dependent covenants. Bank v. Hagner, 1 ; Loud v. Water Co., 153 U. S. 564, 14 Sup. Ct. 928. In such a case, according to one class of cases, a tender before suit becomes necessary. Another class of decisions, however, hold— and we think this is the better rule — that the vendor ■ need not tender a deed before suit, and if plaintiff is able and willing to convey, and tenders performance after suit is brought, that this will answer, and the judgment will provide for the delivery of a deed concurrently with the payment of the purchase money. Hogan v. Kyle, 7 Wash. 595, 35 Pac. 399, and authorities above cited. Where the covenant to pay is independent, an action at law for the purchase price may be maintained; but, where the time for the delivery of the deed has arrived before suit is brought for the price, we think the only action which, on principle, can be maintained by the vendor, is one for specific performance. That such an action will lie is elementary. Baumann v. Pinckney, 118 N. Y. 604, 23 N. E. 916; Rock Island Lumber & Manuf’g Co. v. Fairmont Town Co., (Kan. Sup.) 32 Pac. 1100; 22 Am. & Eng. Enc. Law, 947, and cases cited in note 7; Comp. Laws, § § 4627-4629, 4635. Under the weight of authority, after the time fixed for delivering a deed has arrived a suit for the purchase money is necessary, by an action in equity. Johnston v. Wadsworth, (Or.) 34 Pac. 13; Hogan v. Kyle, 7 Wash. 595, 35 Pac. 399; Warv. Vend. p. 961. In Rindge v. Baker, 57 N. Y. 209, the court says: “It is claimed that the present action is not an equitable one. The fact that it is brought for money is not decisive on that point. The real test in such an action is this: If it be brought for damages for breach^ of contract, it is a case at law. If it be brought for money, by! way of a specific performance of a contract, it is a case in equity. | Thus, where a vendor in a contract for the sale of land sues for \ the pxdce, his action is equitable.”

Both notes having matux-ed before suit, the notes and bond must be construed together", and treated as one instrument, embracing mutual and dependant covenants, viz. a covenant to convey, dependent upon payment, and a covenant to pay, dependent on conveyance. Hill v. Grigsby, 35 Cal. 656; Underwood v. Tew, (Wash.) 34 Pac. 1100; Glassell v. Coleman, 94 Cal. 260, 29 Pac. 508; Divine v. Divine, 58 Barb, 264; McCroskey v. Ladd, 96 Cal. 435, 31 Pac. 558. It is true that promissory notes, upon their face, import a consideration; hence the plaintiff, under a familiar rule, was enabled to make out a prima facie case by the introduction of the notes in evidence. Nevertheless, as we have seen, the vendor’s action was in equity, for the specific performance of the contract on defendant’s part. The action was not one for damages, but was brought by the vendor for the stipulated price after the time of delivering the deed had expired. True, the real character of the action was not revealed by the complaint, nor by the introduction of the notes in evidence; but when and as soon as it appeared that the notes were one feature only of the entire contract for the purchase and sale of land, the essential nature of the action became at once revealed. From the first the action was in equity, for the specific performance of a contract for the purchase and sale of real estate. If this were an action at law, the plaintiff would necessarily be cast in his suit, because it appears distinctly that the plaintiff did; not tender a warranty deed after the purchase money became due. At law, the plaintiff must tender performance on his part' before an action will lie upon the dependent covenant of the other party. This rule is strictly enforced in jurisdictions where the action by a vendor for the purchase money is regarded as an action at law. Goodwine v. Morey, 111 Ind. 68, 12 N. E. 82; Undewood v. Tew, (Wash.) 34 Pac. 1100. But, as already stated, we hold that the better doctrine is that this action is in equity, and in such actions the question of tender is important only in its bearing upon the question of costs. It is true that in contracts of sale, where time is of the essence of the contract, a failure to tender performance may defeat the action altogether, but otherwise not. Freeson v. Bissell, 63 N. Y. 168; Bruce v. Tilson, 25 N. Y. 194; Railway Co. v. Crisolm, (Minn.) 57 N. W. 63; Lewis v. Prendergast, 39 Minn. 302, 39 N. W. 802; 3 Pom. Eq. Jur. § 1407, note on page 453; Comp. Laws, § 4628. Under these authorities, in a court of equity tender before suit is not vital to a recovery.

The action will lie if the plaintiff is compellable by the decree to carry out his part of the agreement; but in this case the plaintiff was wholly unable to give the defendant title to the land in question at the time suit was instituted or at the time judgment was rendered. Before instituting the action, plaintiff had parted with the land, and the defendant, after buying it from plaintiff’s grantee, had received a deed from such grantee, several months prior to the bringing of this action.

But it does not necessarily follow from the fact that the plaintiff was unable to convey that he must go out of court. If the defendant, by any voluntary act, has caused the plaintiff’s inability to convey, the defendant can derive no benefit or advantage from plaintiff’s failure or inability to perform on his part. This rule is tersely expressed by § 3480, Comp. Laws, as follows: “If the performance of an obligation be prevented by the creditor the debtor is entitled to all the benefits which he would have obtained if it had been performed by both parties.” The question is presented, therefore, whether the act of the defendant in obtaining a deed of conveyance of the land in question from the plaintiff’s grantee (Percival) was of such a nature as to exonerate the plaintiff from giving the defendant title. In our opinion, this question must receive an affirmative answer. Turning to the condition in the bond, we ascertain that it was expressly stipulated therein that upon the payment of the purchase money, “if the said I. E. Shelly, his heirs, executors, administrators, or assigns, make, execute, and deliver a good and sufficient warranty deed,” etc., “then this obligation to be null and void.” The obligation bound the vendee, therefore, to accept a deed either from the plaintiff or his “assigns,” as it might happen; in such a contract, the word “assigns,” must be construed to mean “grantee.” In effect, the writing made it obligatory upon the defendant, after paying the price, to receive a deed ffom either the plaintiff or his grantee as the case might be. The contingency of a transfer of the title by the vendor before the time of performance arrived had been anti.cipated by the parties, and expressly provided for by a stipulation whereby the vendee agreed to accept a conveyance from the grantee of the vendor as a full performance of the contracts on the part of the vendor. This consideration, therefore, is fatal to any claim which might be put forward on the vendee’s part..that the transfer to Percival, followed as it was by a conveyance by the latter to the defendant, was in any sense a breach of the contract to convey title. On the contrary, such conveyance constituted a full and literal performance of the terms of the contract to convey the title of the land to the defendant. The defendant now has the title, and he received it from one of the sources agreed upon in the writing. Nor does the defendant complain that his title is imperfect, or different from that which the plaintiff bound himself to furnish. In brief, the defendant is entirely satisfied with his title, and does not ask for any further assurance of title, either from the plaintiff or from the court.

The bond was recorded, and was clearly entitled to record. It is an instrument which directly affects the title to real estate, and which, by a plain inference from its terms, relates to its possession also. Comp. Laws, § 3268. Furthermore, while there is no statute providing in terms that the recording of such instruments shall operate as constructive notice to the public of its contents, we are of the opinion that it should so be construed. By authorizing such instruments to be recorded, the legislature must have intended, we think, to protect the parties thereto, and those subsequently dealing with the land to which the instruments relate. Case v. Bumstead, 24 Ind. 429-432.

It follows that, in receiving a quitclaim deed of the land from\ Shelly, Percival took with contractive notice of all the rights and' obligations springing from the contract of sale. He was chargeable with notice that prior to his purchase from S. the latter had sold the land to Mikkelson, and had bound himself and his f ¡! assigns to convey the land to Mikkelson, with covenants of Í warranty, whenever and as soon as the stipulated purchase price f of the land should be paid by Mikkelson. Hence Percival f received his title from Shelly burdened with the obligation of the trust to convey on payment of the purchase money. But to whom, under these circumstances, did the right to receive the purchase money belong? Or, in other words, to whom, after the land was conveyed by Shelly to Percival, was Mikkelson bound to pay the purchase money, as a condition of receiving title from Percival? He was bound, as has been said, under the contract, to take title either from his vendor, or any of his assigns. The title had been transferred, and was, when the money became due, vested in the grantee or “assigns” of the vendor. Shelly had not tendered the defendant a conveyance after the purchase money became due, and had, without such tender, quitclaimed to Pecival. Under such circumstances, we are of the opinion that the conveyance by Shelly to Percival (a stranger to the contract) was sufficient of itself, prima facie, to justify the defendant in assuming, in the absence of any other notice or kowledge, that Shelly had transferred to Percival, not only the legal title of the land, but all the rights and'obligations incident to his trustee relation thereto, including the right to receive the purchase price which was to be paid as a condition of a conveyance to the vendee. True, the quitclaim did not, in terms, refer to either the bond or the notes; but this, we think, is unimportant, because the bond was on record, and the notes, having both matured, ceased to be independent obligations thereafter, and became a part of, and inseparable from, the bond. The question, as between Shelly and Percival, whether the latter acquired the right by his purchase to collect the purchase money, would depend upon the intention of the parties, and would not be determined by the delivery or nondelivery of the notes with the quitclaim deed. The bond advertised the fact that the purchase money was to be paid before the land was to be conveyed to the defendant. But the controversy does not arise between Shelly and Percival, and we are not, therefore, called upon to determine in this case whether the former did transfer to the latter, by the quitclaim deed or otherwise, the chose in action i. e. the right to collect the purchase money, or whether that right was reserved to Shelly by some collateral agreement.

From our point of view, the crucial question is whether the defendant, on learning the fact that his vendor had conveyed the land to a stranger,-- — and having no notice of any collateral agreement or reservation, if any there was, — was justified in assuming from-the fact of such conveyance, and from that alone, that Shelly had conferred upon his grantee all the rights, as well as all the obligations, arising from the trustee relation which Shelly sustained to the land, as springing from the contract of sale. In other words, in our opinion, the vendee was warranted in assuming from the fact of the conveyance that Percival was clothed by* Shelly with authority to close up the deal. The question is one of considerable nicety, and we freely confess that our minds are not free from doubt as to its proper solution; but a majority of the members of this court hold that the facts justified the defendant in negotiating with Percival for the title, and in assuming that his obligations under the bond could be discharged by acquiring title to the land upon terms mutually satisfactory to Percival and himself. By one of the terms of the bond, the vendee might be required to accept the deed and personal covenants of a grantee of the vendor It seems a legitimate inference to draw from this stipulation that in a certain event the purchase money was to be paid to another than the vendor, i. e. that grantee of the vendor, who was vested with title when the purchase money became payable by the terms of the contract. We are unable to see how the words “or assigns,” found in the condition of the bond, can weaken the natural inference to be drawn from the fact that the vendor of the land, without tendering a deed to the vendee, dispossessed himself of the title, and thereby disabled himself from performing the contract in his own person. The vendor did not repossess himself of title after his conveyance, and we are therefore of the opinion that his conveyance operated prima facie as an abandonment of the contract, so far as he was personally concerned; and, in the absence of notice or knowledge to the contrary, we think the vendee was justified in assuming that the vendor had, so far as he was personally concerned, abandoned the contract, and turned over to Percival, his grantee, all of his rights and duties growing out of the trust. If the defendant,^ relying upon the appearance of abandonment created by the J vendor's conveyance, has negotiated for the title with Percival, | and in good faith paid Percival for the land, it would manifestly j be inequitable to allow the plaintiff to recover. We think the authorities cited below will sustain our conclusions upon this point: Sons of Temperance v. Brown, 9 Minn. 157 (Gil. 144;) Ten Eick v. Simpson, 1 Sandf. Ch. 246; Mackreth v. Symmons, 15 Ves. 350; Champion v. Brown, 6 Johns. Ch. 403; 2 Story, Eq. Jur. § 784, and cases in note 3; Burwell v. Jackson, 9 N. Y. 535; Wyvell v. Jones, 37 Minn. 68, 33 N. W. 43; Bennet v. Phelps, 12 Minn. 326, (Gil. 216;) Taylor v. Read, 19 Minn. 372, (Gil. 317.)

It follows from the views we have expressed that the learned trial court erred in directing a verdict in favor of the plaintiff for the amount of the notes, with interest; and for this error the judgment will be reversed, and a new trial granted. We are also of the opinion that it was error to exclude evidence of what Mikkelson paid Percival for the land. The actiop was tried by a jury, and as a purely legal action, whereas, as has been shown, it is essentially an action in equity, for the specific performance of a contract for the purchase and sale of land. But no objection was made to the form of trial, and hence no reversible error can be predicated upon it in this court. In the event of a new trial the action should be tried by the court, and specific findings, upon all material facts should be made a part of the record. The fact should be found whether or not there was an agreement between Shelly and Percival that the right to recover the purchase money should be reserved to Shelly, and not transferred to Percival, and that Percival should convey the title so received to Mikkelson, on payment of the puixhase price by Mikkelson to Shelly, and whether, if there was such an agreement made, that Mikkelson had any notice or knowledge of the same at any time prior to obtaining title from Percival. If there was such a reservation of the right to recover the purchase money, and Mikkelson had notice thereof before closing the deal with Percival, the plaintiff should recover in this action. The mere fact that Mikkelson bought the title acquired by Percival through the foreclosure will not exonerate Mikkelson from the obligations assumed by him in the contract of sale. All matters, therefore, connected with the sale, as between the plaintiff and Percival, and as between the latter and the defendant, should be carefully investigated, and specific findings of fact made thereon.

Reversed, and a new trial ordered.