Adams v. Canutt

Chadwick, J. In 1905, defendants Canutt entered into a contract with the state of Washington for the purchase of certain school lands. On January 30, 1908, Canutt and wife entered into a written contract with Frank H. Endsley, whereby they agreed to sell Endsley a fractional part of the lands. Endsley paid them the sum of $1,004.94 in money, and agreed to meet all balances due and to become due to the state upon the principal contract. There were other covenants with reference to the occupation and use of the land, not now necessary to be considered. In order to carry out the agreements of the parties and to effect a final division of the land, a written contract was executed, the material parts of which follow: “The purchase price of said property is the sum of $7,-404.94, which the party of the second part agrees to pay the parties of the first part as follows: the sum of $1,004.94 cash upon the signing and delivery of this agreement, the receipt of which is hereby acknowledged and the balance of said purchase price to be paid as follows: . . . It is further agreed that the parties of the first part will pay all taxes or assessment levied or assessed against said premises for the year 1906 and previous years and the party of the second part will pay all taxes levied or assessed against said premises for the year 1907 and subsequent years. . . . It is further understood and agreed by and between the parties hereto as part of the consideration of this agreement that the party of the second part will farm said lands in good and farmer-like manner during each and every year of this agreement until the full purchase price and interest has been fully paid, and that the title to an undivided one-third of all crops raised upon said premises during each and every year of this agreement is and shall remain in the parties of the first part until the payment of the interest and principal due on said — 424 — contract with the state of Washington then due shall have been paid. It being the intention of the parties hereto that at least one-third of said crops clear of all expense shall be applied during each year of this agreement towards the payment of the sum due the state of Washington upon said contract. If the party of the second' part fully, faithfully and promptly pays said sums of principal and interest due on said contract with the state of Washington, according to the terms of said contract or any extension that the state may grant, subject to the conditions hereinbefore expressed, and shall pay said taxes as herein agreed, and shall fully and faithfully comply with all of the terms of this agreement to be by him performed, then the trustee, hereinafter named is authorized and directed to procure a deed to said lands and premises in the name of said trustee and execute a deed to the lands herein agreed to be conveyed to the party of the second part and to execute a deed to the remainder of said lands to' the parties of the first part. If the party of the second part should fail or neglect to fully and faithfully comply with all the conditions herein expressed to be by him performed promptly at the times herein stated, time being the essence of this agreement, then the parties of the first part are released and discharged from all obligations in law or in equity to convey said premises, or any part thereof, and all payments made shall be kept and retained by the parties of the first part as liquidated damages and as rent for the use of said premises. It is understood and agreed that the parties of the first part will make, execute and deliver to the Farmers State Bank of Colfax, Washington, as trustee, an assignment of said contract with the state of Washington, to be by said bank held as trustee to carry out the terms of this agreement, and if the party of the second part should fail or neglect to fully comply with the conditions of this agreement to be by him performed as herein set forth, said bank is authorized and directed to reassign and redeliver said contract to the parties of the first part.” The following assignment was attached to the principal contract: “John L. Canutt and Nettie E. Canutt, his wife, the within named purchaser, for and in consideration of the sum of one ($1.00) dollar, to them in hand paid by Farmers State Bank, — 425 — a corporation, trustee, of Colfax, county of Whitman and state of Washington, hereby sells, assigns and transfers all their rights, title and interest in and to the within contract and the lands therein described unto the said Farmers State Bank its assigns forever, and we do hereby authorize the state of Washington to receive from said bank the performance of all covenants and agreements in said contract specified to be performed by the party of the second part, and upon such performance to execute to it a patent as it would have been executed to me had this assignment not been made. And Farmers State Bank said assignee, hereby covenants and agrees to keep and perform all the covenants and conditions specified in said contract to be performed by the party of the second part. Given under our hands and seals this 30th day of January, A. D. 1908. “John L. Canutt, “Nettie E. Canutt, “Farmers State Bank of Colfax, Wash. “P. B. Stravens, Pres. “P. O. Address, Colfax, Wash.” Thereafter Endsley, for a valuable consideration, sold all his right and' interest in the land to plaintiffs Adams, who, on the 27th day of October, 1909, tendered to the Farmers State Bank the full sum due on the contract, and demanded that it procure a deed to the lands in controversy and convey to them the part they were entitled to. This the bank refused to do, because the Canutts had on the 20th day of October, served notice upon it that they had declared the contract forfeited and no longer binding upon them. This action was brought to compel specific performance. It was the view of the trial court that the complaint did not state a cause of action, because it was not made to appear that Endsley or these plaintiffs had paid the sums due on the contract to the state of Washington; that a payment to the bank would not be a payment to the state, and that, if payments had been made to the bank, the bank would become an agent merely of appellants to transmit the money. The court further held that the contract was subject to forfeiture; or, to use the words of the trial judge, the complaint could not — 426 — be made to state a cause of action. Accordingly a demurrer was sustained, whereupon plaintiffs filed an amended complaint, wherein it is alleged: “6th. That on the said 30th day of January, 1908, said plaintiffs, John L. Canutt and Nettie E. Canutt, his wife, and defendant Frank H. Endsley, delivered to the Farmers State Bank of Colfax, Washington, a corporation, the original said agreement and said bank accepted the same and covenants and agreed to keep and perform all of the covenants and conditions specified in said contract to be performed by the said John L. Canutt, and said bank agreed upon the receipt of the payments due the said state of Washington, as set forth in said contract to forward the same to the state of Washington, and procure a deed for said lands in accordance with the terms and conditions of the aforesaid agreement.” It was also alleged, as it had been in the original complaint : “13th. That plaintiffs having complied with all of the agreements to be by them performed are entitled to have said defendant Farmers State Bank perform said agreements to be by it performed.” Upon demurrer, the trial judge was still of the opinion that, considering the contracts and assignment, which were made a part of the pleadings, there was no obligation on the part of the bank to receive and transmit the fund, and that he could not decree that it should do so, it nowhere being alleged that appellants or their assignor had paid or tendered payment to the state. He further held that there was nothing for the trustee to do until payment had been made to the state by the plaintiffs or their assignors, and that paragraph 6 of the amended complaint above quoted could not be considered in the light of the writings, which, in his judgment, negatived the bare allegation that the bank agreed to receive and transmit the money. The court was of the further opinion that the complaint lacked in other particulars, that it did not allege that certain taxes and sums agreed to — 427 — be paid the Canutts had been paid, and that the land had been farmed in a proper manner. We think that paragraph IS of the complaint sufficiently covers this point, as against a demurrer, and will proceed to a discussion of the main issues. It occurs to us that the vice of the trial court’s reasoning lies in this, that he is inclined to treat the trustee as a principal; whereas this controversy must be decided upon the equities existing between Canutt and Endsley and his assignees. When so considered, we think the amended complaint, as well as the original complaint, states a cause of action. The bank has answered that it has no interest except as defined by the assignment, and that it is willing to abide any order the court may make, and perform any duty that may be put upon it. The assignment to the bank was made with reference to the agreement between the Canutts and Endsley, and that agreement was made with reference to the law as it existed at the time. It is a fundamental rule that writings in which trusts are declared are to be construed liberally in order to effect the object of the parties concerned; that the intention of the parties affords the only sure test for construing the deed a contract creating an express trust, and that technical constructions are not favored. Porter v. Bank of Rutland, 19 Vt. 410; 28 Am. & Eng. Ency. Law (2d ed.), 991; 1 Perry, Trusts (4th ed), § 95. The only parties who have an interest in this trust are the parties to the contract of sale, and the first inquiry should be, what was their purpose, rather than what was the means adopted to accomplish that purpose. It was the intention of the Canutts to sell all of a certain section of land except a certain part lying south of a county road. An assignment of any part thereof less than the whole, unless described by government subdivisions, could not be entered at .the state land office. (We take judicial notice of the rules and practice of that department.) To secure both parties, — 428 — the title, in so far as it was controlled by the contractee, was put in the Farmers State Bank, under the terms following: “We do hereby authorize the state of Washington to receive from said bank the performance of all covenants and agreements in said contract specified to be performed by the party of the second part.” As we read this contract, we are unable to agree with the trial judge in his ruling that “there is nothing for the trustee to do until all the payments have been made and all other conditions have been complied with.” This would be equivalent to holding that the bank was to do nothing but execute the deeds. To so hold ignores its agreement to keep and perform all the covenants of Canutt’s contract with the state, to receive a deed upon full payment, and Canutt’s command to the state to receive from the bank the performance of all his covenants, the most material of which is the promise to pay the purchase price. But if an agreement to receive and pay the money over to the state is not expressed, it is certainly to be implied as a part of the bank’s obligation. To hold otherwise would be to make the manner and form of payment to the’ state, not merely material, but controlling; whereas, considering the design of the parties, it was and must be now so held of no consequence to the Canutts whether the payment to the state was made by the bank, Endsley, or these plaintiffs, so long as his obligation was discharged. Furthermore, there being no question as to the creation of a trust, the assignment, which in this case is the trust instrument, is to be construed in the light of the object sought to be obtained; and to that end if it be held that the assignment is uncertain, incomplete, or ambiguous, parol evidence may be received to show the situation and circumstances surrounding its execution. Or, to restate the proposition, while an express trust in lands (assuming that the bank is a trustee of lands) cannot be proved by parol, the trust being established, parol evidence will be received to make the instru — 429 — ment certain if it be uncertain, or to show its terms, to the end that the true purpose of the parties in interest be not defeated. Beach, Trusts, 753; Reid v. Reid, 12 Rich. Eq. (S. C.) 213; Hinckley v. Hinckley, 79 Me. 320, 9 Atl. 897; Nesbitt v. Stevens, 161 Ind. 519, 69 N. E. 256. Under this rule, paragraph 6 of the amended complaint makes the complaint state a cause of action, although it be held that the original did not. It was urged upon the argument of this cause, and is suggested in the brief, that appellants and their assignor have failed to meet other covenants and conditions of their contract. If so, it may be shown in defense of this action. We are not holding that there may not be a defense, but merely that the complaint before us states a cause of action and entitles the appellants to be heard in a court of equity. Reversed, and remanded with instructions to overrule the demurrer. Dunbar., C. J., Ellis, Crow, and Morris, JJ., concur.