Security Savings & Trust Co. v. Latta

BELT, J. As we construe this contract, the plaintiff was bound to convey a good and marketable title. This it was unable to do until decree of court was obtained foreclosing interests of third persons to the real property in question. The objections made by defendant were not captious or unreasonable. Plaintiff’s predecessors in interest had entered into contracts with numerous purchasers of small tracts included within the boundaries of the property sold to defendant. Many of these purchasers made partial payments and then abandoned their contracts, but *564 the abstract of title failed to disclose that their interests, if any they had, were .foreclosed. In view of the fact that plaintiff’s deed was “without covenants of warranty express or implied,” it behooved defendant to exercise due caution. At the time the deed was tendered, November 20, 1919, the abstract of title disclosed actual or apparent defects which would cause a person of ordinary prudence and caution to hesitate in making the purchase. Defendant was not obliged to accept a. title which might reasonably be expected to involve him in litigation. If plaintiff had not been doubtful of its title, the proceedings to foreclose any outstanding interests would not likely have been instituted. If defendant’s objections were unreasonable and not in good faith, a suit for specific performance would have given plaintiff complete and adequate relief. We believe that defendant was justified in refusing to accept the deed tendered in the-first instance. In the absence of contract determining the payment of interest or where superior equities do not dictate to the contrary, it is uniformly held that a vendee, who takes possession of real property under an executory contract and enjoys the rents and profits of the land, is liable to pay interest on the purchase price, even though the vendor is unable to convey a good and marketable title at the time contemplated. Ordinarily it is deemed inequitable that a purchaser should enjoy the benefit of possession without liability for interest: Livesley v. Muckle, 46 Or. 420 (80 Pac. 901); Koehler v. McGlinchy, 20 Or. 360 (25 Pac. 1067); Hoard v. Huntinton Ry. Co., 59 W. Va. 91 (53 S. E. 278, 8 Ann. Cas. 929, and note); Sanders v. Bryer, 152 Mass. 141 (25 N. E. 86, 9 L. R. A. 255); In re Estate of Blair, 178 Pa. St. 582 (36 Atl. 179); *565 Obrey v. Collins et ux., 121 Misc. Rep. 93 (200 N. Y. Supp. 175); 39 Cyc. 1572; 27 R. C. L. 537. While the above general rule of equity is well established, it does not prevail over the contractual rights of the parties in reference to the payment of interest. The law will not imply an obligation to pay interest where there is a stipulation determining such matter. The contract is controlling either in law or equity. Parties unquestionably have the right to stipulate when and in what manner interest will be paid. If the contract is silent on the subject then, under certain circumstances, the law will imply an obligation on the part of the purchaser in possession to account to the equitable owner for the use of the purchase money. Let us look to the contract. Defendant, in the original and supplementary agreements, was expressly given the right of possession. After payment of the $1,000, nothing was due until plaintiff had executed and delivered a deed conveying a good and marketable title. When this was done defendant was obliged to make additional payment of $29,000 and “at the same time” to execute and deliver the three notes payable one, two and three years from date, “with interest thereon from date at the rate of 6 per cent per annum.” In view of these stipulations can it be said that the parties did not agree when interest should accrue? If they did agree in reference thereto, shall we invoke a general rule in equity to defeat such agreement? We think not. It was proper for plaintiff to agree, if it saw fit, to give defendant the right to enjoy whatever rents and profits might accrue from possession of the property and to relieve him of the payment of interest until the execution and delivery *566 of a deed. There is nothing unconscionable about such an agreement. Referring to the rule for which appellant contends, the court in Sale et al. v. Swann, 138 Va. 198 (120 S. E. 870), said: “We do not understand, however, that this rule can be extended and applied to determine such a question when the parties have by their contract expressly determined their own rights as to interest.” In 27 R. C. L. 537 it is said: “Unless it is otherwise stipulated in the contract the unpaid purchase money does not draw interest before the stipulated time for its payment, though the purchaser is given possession.” In Minard v. Beans, 64 Pa. St. 411, the court stated: “There is a class of cases where interest is always charged on money due, although not payable, by a vendee. For instance, where the purchase money is payable at a certain time, and the deed is to be made at the same time. If the vendor cannot make title at the time appointed for the payment of the purchase money and the vendee retains possession, he must pay interest as a compensation for the profits he is receiving during the vendor’s inability to make title * * . But even here the money must be due.” The cases cited by appellant belong to that class, as clearly recognized in Re Howell’s Estate, 224 Pa. 415 (73 Atl. 445), wherein there is a certain®time appointed for the delivery of the deed, and payment of the purchase price, but the vendee in possession fails to receive his deed at the stipulated time on account of default of vendor. As stated in the case last cited: “In these instances the purchase money is legally ‘due’ by the terms of the vendee’s covenant at the day set for payment. Although he gets no deed imme *567 diately lie has an equitable title in the land, and continued undisturbed possession of it makes him responsible for the interest from that date, provided the vendor is vigilant in removing the disability, and the vendee has not kept his money uninvested and unproductive, but appropriated to this anticipated and future payment.” Hoehler v. McGlinchy, supra, and Livesley v. Muckle, supra, merely state the general rule and are not controlling in a case where the parties have expressly declared when the interest shall be payable. In the instant case had it been stipulated the $29,000 was due on November 20, 1920, at which time the vendor was to deliver the deed, then plaintiff might invoke the equitable rule for which it contends, assuming there were no superior equities to preclude its application. In view of the conclusion reached that the contract of the parties expressly controls the payment of interest, it is not necessary to consider respondent’s contention that the general rule in equity above mentioned does not apply when the expenditures exceed the rents and profits. The decree of the lower court is affirmed. Neither party will recover costs and disbursements. Aeítrmed.