Smith v. McMillan

352 S.W.2d 871, 1961 Tex. App. LEXIS 2107

• Court: Court of Appeals of Texas
• Decided: November 30, 1961
• Docket: 13815
• Status: Published

Opinions

WERLEIN, Justice.

This suit was brought by R. E. Smith and Ray Hofheinz, appellants, against ap-pellees for specific performance of a contract of sale of land in Brazoria County, Texas. Appellees filed a cross-action against appellants, praying that the contract be declared null and void. Trial was without a jury. After appellants rested, appel-lees moved for judgment on the ground that the undisputed evidence showed as a matter of law that appellants had failed to make an adequate tender of performance as a condition precedent to the relief sought by them.

The trial court rendered judgment that appellants take nothing against appellees, and declared the contract of sale null and void.

In order to obtain a clear understanding of the issues involved, the agreement of the parties dated August 24, 1959 must be carefully examined. In such agreement appel-lees contracted to sell and appellants to buy all of the property owned or claimed by ap-pellees in Section 76, H. T. & B. R. R. Co. Survey, Abstract No. 562; Section 77, H. T. & B. R. R. Co. Survey, Abstract No. 302; Section 1, A. C. H. & B. Survey, Abstract No. 403; Section 2, A. C. H. & B. Survey, Abstract 566.

The contract provides that notwithstanding the enumeration by section and abstract numbers set out above, it is the intention of the sellers to sell to the purchasers all of the tracts of land owned or claimed by them in the over-all parcel of lands centering upon said Section 77, whether contained within the foregoing sections or not; that sellers will convey the surface and mineral estate in and to all of such lands by general warranty deed subject to a trust lien held by the Bank of the Southwest National Association, excepting, however, from the mineral estate such outstanding royalty and mineral interests as are shown of record, and excepting from the conveyance and warranty the rights, if any, existing under a conveyance for canal purposes.

The contract provides for a consideration of $525,000.00, and that upon final closing of the transaction, the purchasers will assume said trust lien and after deducting the pro rata portion of taxes for the year 1959 and other closing costs “hereinafter set forth chargeable to sellers,” purchasers will pay to sellers in cash the difference between the total amount of assumed principal and accrued interest, and the over-all price of $525,000.00. The agreement also provides for an adjustment in price at the rate of $443.42 per acre should there be more or less than 1184 surface acres in the over-all parcel of lands.

Paragraphs 6 and 7 of the agreement are as follows:

“6. Sellers agree to furnish the Purchasers an abstract of title covering the above described lands from the sovereignty of the soil to a current date, which abstract shall be furnished without delay and within a reasonable time from and after the date of this agreement, and which abstract of title, upon examination, will show a good and merchantable title in the Sellers as represented in Paragraph 2 hereof, to the satisfaction of Purchasers’ attorneys. Within a reasonable time after delivery of such abstracts, Purchasers will either accept the title as good and merchantable as herein set out or will furnish to the Sellers the written title opinion of Purchasers’ attorneys, stating objections to the title, whereupon Sellers shall have a reasonable time to clear the objections, at Sellers’ sole cost and expense, and show a good and merchantable title as aforesaid. In the event of the failure of the Sellers to furnish a good and merchantable title satisfactory to Purchasers’ attorneys, the Escrow Agent shall, upon Purchasers’ demand, return to Purchasers the $25,000.00 earnest money whereupon this contract shall be cancelled; or Purchasers may enforce specific performance of this contract; or, in the event of Sellers’ failure to meet and cure objections to the title, Purchasers may demand and take title subject to such objections and shall be thereupon entitled to charge the Sellers and recover from them the reasonable cost and expense of curing and perfecting the title so acquired.

“7. Not later than thirty (30) days from and after the delivery of all curative instruments necessary to show' a good and merchantable title to the satisfaction of Purchasers’ attorneys, or thirty (30) days after acceptance by Purchasers’ attorneys of the title as shown in the abstract as good and merchantable, the Sellers agree to deliver a good and sufficient General Warranty Deed (subject to the exceptions set out above) in form satisfactory to the Purchasers properly conveying the lands herein contracted to the Purchasers; and upon the delivery of such deed, Purchasers agree to pay the consideration by assumption and cash payment as set out above. At the time of such closing, the Sellers will be charged with their prorated portion of taxes for the year 1959, with the cost of Federal revenue stamps, and with abstract and title costs (including cost of curing title.) * * * ”

The survey of the property established that there was a total gross acreage covered by the agreement of 1202.825 acres which included 18.408 acres in County Roads, 18.76 acres in Houston Lighting & Power Company easement, 4.28 acres in Dow Chemical Company easement, .20 acre in Trunkline Gas Company easement and 17.08 acres in a rice canal easement. In addition the survey showed a probable vacancy of 36.203 acres, and that approximately five acres of the Houston Lighting- & Power Company easement was included in and was a part of such vacancy.

The title opinion of appellants’ attorney, delivered to appellees on November 23, 1959, listed 25 objections to the title. Thereafter, both appellants and appellees undertook to clear up and satisfy some of such objections. On January 6, 1960, appellants’ attorney wrote a supplemental title opinion, which the court erred in excluding, showing the objections that had been satisfied and the defects in the title which had not been cured.

On February 29, 1960, the sale had not been consummated because there were several defects in the title which appellees had failed to cure. On that date appellants elected to take the title subject to unsatisfied objections, in accordance with Paragraph 6 of the agreement. In their letter of that date they advised appellees that they had sent to the escrow agent, Houston Bank and Trust Company, for execution by appel-lees, a general warranty deed covering 1184.417 acres, being the entire acreage surveyed less 18.408 acres' excluded because in county road easements, and they tendered appellees the purchase price for such acreage in the sum of $525,184.90, less the Bank of the Southwest lien, the cost of the survey, the County Clerk’s filing fees, costs of certified copies, Federal documentary stamps, and $27,898.12 which they stated was the reasonable cost and expense of curing and clearing title.

The $27,898.12 deducted.from the amount tendered included $16,093.04 for the 36.293 acres in the vacancy at the rate of $443.42 per acre. There was also deducted $1500.00 as reasonable and necessary charges, including attorney’s fees, court costs and miscellaneous legal costs to cure certain objections to the title. $10,305.08 was deducted to cover the 23.24 acres within the Dow Chemical Company, Trunkline Gas Company and Houston Lighting & Power Company easements.

Thereafter, on March 18, 1960 appellees advised appellants that the tender made by them was insufficient, stating that no value was allowed or placed upon the alleged vacancy included in the deed; the $1500.00 charge for the cost of curing title was utterly ridiculous; no value was allowed or placed upon the acreage covered by the easements included in the deed, and the tender was not in accordance with the terms of the contract. Appellees further advised appellants that since the tender in said letter of demand dated February 29, 1960 was insufficient they had decided, without waiving any of their rights, to treat such insufficient tender as a manifestation on the part of appellants to rescind the contract, and that if they were mistaken in so construing said letter, they themselves rescinded the contract by reason of appellants’ insufficient tender.

The parties hereto do not contend that there is any ambiguity in the contract in question. It is appellants’ contention that under the contract they had the right in making their tender to deduct from the amount tendered the value of the acreage in the vacancy and in said easements at the full rate of $443.42 per acre, although they included such acreage in the general warranty deed which they demanded that appellees execute. They also contend that they had the right to deduct the $1500.00 as reasonable and necessary charges to take care of anticipated curative work.

Appellees, on the other hand, take the position that they were not required to execute a general warranty deed to any acreage for which they were not paid the contract price of $443.42 per acre. They also contend that appellants were deducting twice for five acres included in both the Houston Lighting & Power Company easement and in the vacancy. They further contend that appellants had no right to deduct from the amount tendered the $1500.-00 representing the reasonable and necessary costs of curing defects in the title since no costs had been incurred. It is their contention that they should be paid for the number of acres included in the general warranty deed, and if their title fails to any of such acreage appellants may recover from them upon their warranty.

Paragraph 6 of the agreement gives appellants, upon appellees’ failure to furnish a good and merchantable title satisfactory to the purchasers’ attorneys, the right to demand the $25,000.00 earnest money and treat the contract as cancelled, or enforce specific performance of the contract, or in the event of sellers’ failure to meet and cure objections to the title, to demand and take the title subject to such objections and charge the sellers and recover from them the reasonable cost and expense of curing and perfecting the title so acquired. Appellants chose to demand and take title subject to title objections, and to charge the sellers and recover from them the reasonable cost and expense of curing and perfecting the title so acquired. However, they sought to deduct $1500.00 which they estimated would be the reasonable cost and expense of curing the title before they had expended such amount. The contract does not give them the right to do so. The evidence shows that a suit may or may not become necessary to cure the title. Until the expense has been incurred, no one can determine the amount or reasonableness thereof. The contract does not provide that appellants may deduct the reasonable cost and expense of curing and perfecting the title, but that they may recover such costs.

Appellants contend, however, that Paragraph 7 of the agreement gives them the right to deduct such reasonable cost and expense at the time of closing. The sentence they rely upon is as follows: “At the time of such closing, the Sellers will be charged with their prorated portion of taxes for the year 1959, with the cost of Federal revenue stamps, and with abstract and title costs (including cost of curing title).”

It will be noted that Paragraph 7 has to do with the situation where not later than thirty days from and after the delivery of all curative instruments necessary to show a good and merchantable title to the satisfaction of purchasers’ attorneys, or thirty days after acceptance by purchasers’ attorneys of the title as shown in the abstract as good and merchantable, the sellers agree to deliver a good and sufficient warranty deed conveying the land. Curative instruments were not delivered showing good and merchantable title to the satisfaction of purchasers’ attorneys, and title was never accepted as good and merchantable. The provision “(including the cost of curing title)” has reference to costs that have been incurred at the time the purchasers accept the title as good and merchantable. The provision in Paragraph 3 of the agreement with .respect to closing costs may be construed as referring to costs mentioned in Paragraph 7, but such provision clearly includes only costs incurred at the time purchasers take title to the property. It does not authorize the purchasers to deduct from the purchase money anticipated costs that may or may not be incurred in curing title defects.

Appellants’ counsel in his title opinion, which was admitted subject to being later stricken, and which was later stricken from the record, showed a probable vacancy of some 36 acres in the over-all parcel of lands centering upon Section 77. The court refused to permit counsel to testify as to his positive opinion from what the surveyor found on the ground that a vacancy actually existed. In striking the title opinion and in excluding such testimony the court erred. Under the terms of the agreement it was necessary for appel-lees to show a good and merchantable title to the property to the satisfaction of appellants’ attorney. The law is well settled that such provision must be given effect and that a purchaser will not be required to take title which his 'attorney finds defective, so long as the attorney’s failure to approve the title is not arbitrary or in bad faith. Dixie Oil Co. v. McBurnett, Tex. Com.App.1928, 6 S.W.2d 83; City of Amarillo v. W. L. Slayton & Co., Tex.Civ.App., 208 S.W. 967; Campbell v. Hart, Tex.Civ.App., 256 S.W.2d 255, writ ref., n. r. e., 1953.

The agreement clearly states that the over-all consideration of $525,000.00 is subject to the agreement and understanding of the parties that 1184 surface acres are contained within the over-all parcel of lands to be conveyed, and provides:

"Should it be determined upon examination of abstracts of title that the Sellers do not own 1,184 surface acres, or should it be determined that the overall parcel of lands actually contains less than 1,184 or more than 1,184 acres by survey upon the ground, conducted by a Licensed State Land Surveyor selected by the Purchasers, at Sellers’ cost, the final cash consideration to be paid shall be adjusted at the rate of $443.42 per acre, such sum to be deducted for acreage short of 1,184 acres, or added for acres in excess of 1,184 acres.”

The over-all parcel of lands in round figures contains 1184 acres (excluding the roads), but including the alleged vacancy. Appellants contend that appel-lees do not own the 36 acres in the vacancy, but merely have a claim thereto and a prior right to obtain a patent from the State to such acreage. We are not un-mindfhl of the rule that ownership of the land by vendor at the time suit is brought for specific performance of a contract of sale is ordinarily essential to the mainte.nance of such. suit. Clifton v. Charles, 1909, 53 Tex.Civ.App. 448, 116 S.W. 120, error ref.; Blair v. Lowrey, Tex.Civ.App. 1914, 164 S.W. 14; Redwine v. Hudman, 1911, 104. Tex. 21, 133 S.W. 426. The present case does not fall within such rule since the sellers in this case agree to sell and the purchasers to buy not only what the sellers own but what they claim in the over-all parcel of lands. This provision gives appellants the right to insist that the acreage in the vacancy be conveyed to them. Since, however, their attorney in his opinion states that appellees’ title to the vacancy is not good and merchantable, appellants cannot be required to accept a conveyance to such acreage.

The opinion of appellants’ attorney as to the title must be taken as controlling in determining whether appellants may be required to accept title to the vacancy. Dixie Oil Co. v. McBurnett; City of Amarillo v. W. L. Slayton & Co.; Campbell v. Hart; supra. Such opinion, however, is np substitute for an adjudication of legal title or ownership for all purposes, even though the opinion is given in the utmost good faith. It is not unusual for attorneys to disagree as to what does or does not constitute a good and merchantable title to land.

Appellants assert that since their attorney in good faith has pronounced the title to the vacancy bad they may deduct $443.42 for each acre in the vacancy and at the same time have such acreage included in the general warranty deed since appellees claim such vacancy. We do not agree. Appellants have a perfect right to refuse to accept a deed to such acreage and deduct from the over-all consideration $443.42 per acre therefor, but they cannot take the title to the land by general warranty deed and at the same time deduct for the acreage in the vacancy. If they could do this, it might well be that they would get the acreage in the vacancy for nothing. They may never be evicted from such acreage by the State and they may be able to settle with the State for much less than the per-acre valuation.

Appellees’ claim to the vacancy and their prior right to secure a patent thereto, as well as the privity of estate with respect to claims of limitation and adverse possession which would result from the conveyance, are not without value. We do not think the parties to the contract ever contemplated that a claim of such nature should be included in the deed without payment therefor. The contract of sale which was drawn up by appellants does not provide that any part of the consideration can be deducted for acreage which is included in the deed. If such was appellants’ intention, they should have so provided in no uncertain language. As stated by Chief Justice Gaines in Amory Mfg. Co. v. Gulf, C. & S. F. Ry. Co., 89 Tex. 419, 37 S.W. 856 (1896):

“The rule is elementary that if a written contract, when viewed as a whole, and in the light of the attendant circumstances, reasonably admits of two constructions, that one is to be adopted which is least favorable to the party whose language it is.”

Furthermore, the contract provides that “ * * * it is the intention of the Sellers to sell to the Purchasers all of the tracts of land owned or claimed by them. * * * ” We think the word “sell” connotes a sale and not a gift. True, Paragraph 4 of the contract provides that should it be determined that the sellers do not own 1184 acres the cash consideration shall be adjusted at the rate of $443.42 per acre, such sum to be deducted for acreage short of 1184 acres. Such provision cannot reasonably be construed ■ to mean that there can be a deduction for land claimed by sellers when such land is included in the deed at the instance of the purchasers. Appellants elected to take the title subject to the objections of appellants’ attorney. This they must do. If the title fails or if it is later adjudicated that appellees do not own the acreage in the vacancy, or in the event it is necessary to cure certain title defects, appellants “shall be thereupon entitled to charge the Sellers and recover from them the reasonable cost and expense of curing and perfecting the title so acquired.”

The acreage in the easements was also included in the general warranty deed but without allowing anything therefor, except the per-acre price for the acreage in the canal easement. The easements constitute encumbrances upon the land, but do not result in a deficiency in the acreage owned by appellees. Bonzer v. Garrett, Tex.Civ.App., 162 S.W. 934, error refused, 1914. It was proper to include in the deed the acreage in the easements, but no deduction from the purchase price should have been made by appellants for such acreage. It is our view that appellants are required to pay for such acreage and then later recover from appellees because of the encumbrances such damages or curative costs as may be reasonable and equitable.

Appellants contend that they were at no time in default and that, therefore, appel-lees had no right to rescind the contract, and that the court erred in declaring the contract to be of no effect. There is no provision in the contract expressly giving appellees the right to rescind it other than that contained in paragraph 8 of the agreement, which provides:

“Should the Purchasers fail to con-' summate this contract as specified herein for any reason except the failure of the Sellers to deliver a good ■ and merchantable title satisfactory to the Purchasers’ attorneys as herein provided, the Sellers ' shall have the election to cancel and .rescind this contract, retaining the $25,000.00 earnest money as liquidated damages for Purchasers’ breach thereof, or Sellers may enforce specific performance of this contract as against the Purchasers.”

It will be noted that appellees did not undertake to retain the $25,000.00 earnest money. It is manifest that they do not contend that the purchasers failed to consummate the contract for any reason except the failure of sellers to deliver a good and merchantable title satisfactory to the purchasers’ attorneys. Appellees assert, however, that they had the right to rescind the contract because of the delay in closing the transaction and also because of the inadequate tender made by appellants.

Appellees were at least as much responsible as appellants for the delay in closing the transaction. They were in no position to rescind because of delay. Nor were they in a position to rescind because of the inadequacy of appellants’ tender, since they were clearly in default by refusing to perform their part of the contract with respect to curing certain title defects. In submitting the deed and taking the deductions in question, as set out in their letter of February 29, 1960, appellants were merely setting out their interpretation and understanding of the contract and their rights thereunder. Such letter cannot be construed as a rescission of the contract by appellants, nor do we think it can be construed as a final, unequivocal and absolute refusal on their part to perform the contract in its entirety. It provides for certain adjustments or prorations to be made and changes in the amounts which appellants would pay. It is in the nature of a demand that appel-lees, who were in default and who continued to be in default, perform their part of the agreement in connection with curing title defects and execute a deed of conveyance as they were required to do when appellants elected to take the title subject to objections. Such letter did not give appellees the right to rescind the agreement.

In .reply to the letter of February 29, 1960, appellees wrote their letter of March 2, 1960, which the court erred in excluding, clearly indicating that they thought the matter of settling the transaction could be satisfactorily disposed of by agreement of the parties and the transaction closed within a dr.y or two. This letter should have been admitted in evidence as it has an important bearing upon waiver on the part of appellees of any default on the part of appellants, in the event their letter of February 29, 1960 can be construed as placing them in default. Appellees’ letter of March 18, 1960, addressed to appellants, in effect states that if the appellants’ letter of February 29 was not intended as a rescission of the contract, then appellees elected to rescind the same “by reason of your breach thereof and insufficient tender of consideration thereunder.” In such-letter appellees did not state what payment they would demand for execution of the deed, although they did complain that n& amount had been allowed for the vacancy or the acreage in the easements, and asserted that the $1500.00 charged by purchasers was ridiculous. It was their responsibility as sellers to furnish a proper-deed conveying the property, if dissatisfied with the deed presented by appellants, or-at least to give appellants notice of an intention to rescind prior to rescission in, view of the letter of March 2, 1960. Instead of doing so, they undertook to rescind the contract of sale. By such action they clearly indicated their intention not to be bound by the contract, thereby relieving appellants from making any further tender prior to suit.

Since appellees were in default, they-neither had the right to rescind the contract nor to take advantage of appellants’' alleged insufficient tender. In Burford v. Pounders, 1947, 145 Tex. 460, 199 S.W.2d 141, 143, our Supreme Court quoted with approval the following statement in 49 Amer.Jur., under the title “Specific Performance”, § 144, p. 167:

“ ‘Whatever difference of opinion there may be as to the necessity of tender of performance before suit, when the defendant is not in default, it is clear that a tender is unnecessary-if the defendant repu>diates the contract before suit, or it appears that he would have refused the tender if it had been made. * * * If the defendant puts himself in an attitude of default, resists the performance, and' insists that he is not bound by the contract, tender to him is unnecessary. * * * Consequently, all that is required in such case is that the plaintiff place himself in favor with the court, and this may be done by a proper offer in the pleadings.’ (Italics ours).”

See also Young v. Fitts, 1942, 138 Tex. 138, 157 S.W.2d 873; Haney v. Clark, 65 Tex. 93, 1885; 91 C.J.S. Vendor and Purchaser § 134, p. 1071.

Under the circumstances of this case appellants had the right to file and prosecute their suit for specific performance. In their petition they alleged that they had •offered to do and perform and had at all times since February 29, 1960, been ready, .able and willing to do and perform each and every obligation required of them by the contract of sale, and had tendered performance under said agreement to appel-lees, and that they were ready, able and willing to pay to appellees the full and complete amount of the purchase money in full accordance with, the sale agreement .and to do complete equity as between the •parties. In connection with such tender they deposited in court the sum of $336,-038.10 which they considered the amount owing, but they pleaded that “ * * * in the event the Court for any other reason determines that any further sum is due to Defendants under the sale agreement, 'Plaintiffs stand ready, willing and able and 'here and now offer to deposit such further sum in court or pay the same to the Defendants, as the Court may order.” Clearly the tender was not limited to the .amount deposited.

Generally specific performance, when permissible under a contract, will be granted when it is apparent that it will subserve the ends of justice and not result in injustice or hardship to either of the parties. Fisher v. Wilson, Tex.Civ.App., 185 S.W.2d 186, 190, aff’d 1945, 144 Tex. 53, 188 S.W.2d 150. Since the action for specific performance is one in equity, the court may refuse relief if the evidence shows that the granting of relief would work hardship. The plaintiff in seeking equity must offer to do equity. The trial court may condition relief in such manner as to require it.

We are of the opinion that the court erred in excluding the letters between the parties relating to the tender and the negotiations between the parties with respect to curing title defects, and also in striking out the title opinion of appellants’ attorney. We shall not discuss such errors at length because they will not likely arise upon another trial of the case.

It is apparent that the trial court tried the case on the theory that it was necessary as a condition precedent to relief in the nature of specific performance, for appellants to have tendered the exact amount that might be due under the contract as a condition to maintaining the suit, regardless of the title objections made by appellants’ attorney and despite appellees’ failure and refusal to cure a number of such objections. In so doing the court excluded much of appellants’ evidence that should have been admitted, with the result that the case was not fully developed and must be retried.

Reversed and remanded.

COLEMAN, J., concurring, BELL, C. J., dissenting.