Higgins v. Kenney

Atkinson, J. The evidence demanded a finding that the contract was entered into, that the earnest money that was sued for was paid by the vendees (plaintiffs), and that the vendor (defendant) did not ever acquire a merchantable title that he could convey to the vendees. A controlling question made by the assignments of error in the petition for certiorari is, can the vendor in the circumstances above enumerated retain the earnest money ? Properly construed, the contract was not for an interest in the prior executory contract held by the vendor for purchase of the land, but was an unconditional contract to sell and convey by a warranty deed a merchantable title to the land, subject to “existing leases” and specified “reservations,” the passing of such title “to take place within” a named day, time being “of the essence of the” contract, the earnest money to be retained by the vendor “in case of breach” by the purchaser, and to be returned to the purchaser “if title to the premises are not merchantable.” In Wells, Fargo & Co. v. Page, 48 Oregon, 74 (82 Pac. 856, 3 L. R. A. (N. S.) 103), Benson and Hyde contracted to sell Gilbert certain land which they did not own at the time the contract was made, but which they promised to acquire and convey. It was provided that Gilbert should pay for the land as it should be conveyed to him in parcels, [745] and that he should deposit in bank a specified sum to secure his performance of the contract by him, which should be forfeited to Benson and Hyde in case he should fail to comply with the terms of his agreement. Gilbert made the deposit and paid for parcels of the land as title was acquired, and conveyed by Benson and Hyde until a certain time, when, on account of damage to the timber by fire, Gilbert notified Benson and Hyde that he would mot receive or pay for any more of the land and demanded the forfeit money from the bank. Thereupon Benson and Hyde, without attempting to acquire title to any more of the land, demanded the forfeit money from the bank. The bank, being in doubt, brought an equitable suit to compel the claimants to the fund to interplead. Gilbert and Benson and Hyde filed appropriate pleadings setting up their respective claims, and on the trial the money was decreed to be paid over to Gilbert. On appeal it was held: “A vendor who, at the time of contracting to sell real estate, has not perfected his title to it, can not claim a forfeit deposit by the vendee to secure performance on his part upon his repudiation of the contract before the time of performance arrives, unless he shows that he has perfected his title so as to be in a position to perform his own agreement.” In the opinion it was said: “The money in dispute was the property of Gilbert, and was deposited with the bank by him. He is therefore ■ entitled to its return, unless Benson and Hyde have a cause of action against him for a default in the performance of •the contract. He deposited the money as security for the performance of his contract, to be forfeited only in case of his default, and, whether it be regarded as liquidated damages, as security for actual damages sustained,, or as a sum to be forfeited to the vendors in case of the vendee’s default, is immaterial, unless he is liable for failure to comply with the contract. [Then follows a discussion of the evidence showing that Benson and Hyde did not acquire title to the land.] It thus appears that Benson and Hyde were at no time in a position, during the life of the contract, to require Gilbert to receive and accept the deeds, the delivery of which was made a condition precedent to the payment by him of the purchase-price and necessary to put him in default. They did not own, and could not have conveyed, or caused to be conveyed, the land which they had agreed to sell, and which Gilbert had agreed to purchase [746] and pay for.. It is contended, however, that the renunciation of the contract, and the refusal of Gilbert to be bound by it, before the time for performance had expired, excused them from tendering the deeds or showing that they were in a position to complete the performance of the contract. Where either party to a contract gives notice to the other, before the time for performance has arrived, that he will not comply with its terms, the other is relieved from averring or proving tender of performance in an action thereon. 3 Page, Contr. § 1436. Thus, where a vendor of real estate has title or ability to perform, and the vendee repudiates the contract before the time for performance has arrived, it is not necessary for the vendor to aver a tender or offer to perform in an action for breach of the contract, because such a step would be but an idle -and useless ceremony'. 2 Warvelle, Vend. & P. 2d ed. § 757; North v. Pepper, 21 Wend. 636; Johnston v. Johnson, 43 Minn. 5, 44 N. W. 668. But the waiver by.refusal to perform goes only to the formal matter of the presentation or tender of a deed or demand of payment; and a vendor of real estate can not enforce the contract against a vendee who is in default or has repudiated it, unless he himself is in a condition to perform. Sievers v. Brown, 34 Or. 454, 45 L. R. A. 642, 56 Pac. 171; Hampton v. Speckenagle, 9 Serg. & R. 212, 11 Am. Dec. 704; Bigler v. Morgan, 77 N. Y. 312; Gray v. Smith, 28 C. C. A. 168, 48 U. S. App. 581, 83 Fed. 824; Mix v. Beach, 46 Ill. 311; Wallace v. McLaughlin, 57 Ill. 53; Peck v. Brighton Co., 69 Ill. 200; Birge v. Bock, 24 Mo. App. 330. In Sievers v. Brown, supra, the vendee refused to pay the first instalment due on the- contract, and the court said that his default did not authorize the vendor to declare a forfeiture until he himself was ready and able to convey the premises according to the terms of his bond. . . We are of the opinion, therefore, that Benson and Hyde are not entitled to the money in dispute, because they have not shown that they were able to perform the contract on their part. Gilbert’s repudiation of the agreement before the time for performance had arrived ’ would probably have excused them from making a formal tender of a deed; but it did not relieve them from showing an ability to comply with the contract, if they intended to put him in default, so as to entitle them to the forfeit money.” In Smith v. Lamb, 26 Ill. 396 (79 Am. D. 381), it was held that [747] a vendee may rescind a contract for the sale of land for the vendor’s inability to convey, and recover the money paid on the contract, in an action for money had and received; and that in such a case the vendee need not tender the balance of the purchase-money in order to recover back the money paid on his contract, when the vendor admits that he has not the title and could not convey. See also cases to the same effect, cited in a note in 79 Am. D. 383. In Runkle v. Johnson, 30 Ill. 191 (83 Am. D. 191), it was held that a vendee desiring to rescind a contract for the sale of land need only show inability of the vendor to perform, and need not show tender of purchase-money on his part. In the opinion it was said: “Had the plaintiff brought his action for the first two installments before the time'had arrived when the plaintiffs agreed to convey, it may be that the want of title would not have been a sufficient answer, for he might claim the whole time until the contract matured to acquire such title: Harrington v. Higgins, 17 Wend. 376. But the case is different where the party delays his action until the last payment is due, when the obligations under the contract become mutual and dependent, and the acts to be done in its execution are simultaneous. Then, the party who insists upon the performance by the other party must show performance on his own part, while he who desires to rescind the contract need only show non-performance, or an inability to perform by the other party: Doyle v. Teas, 4 Scam. 265. Indeed, this inability to perform is a good excuse on the part of the purchaser for not tendering the last payment,—for the law will not require the performance of a useless act,—and would be sufficient to entitle him to recover the money back if he had paid the first installments: Sir Anthony Main’s Case, 5 Coke, 21. There can be no difference in principle, whether the party had never had the title, or, having had it, has parted with it. In either case, it might be competent for him to show that he still owned it in equity, and could control it for the benefit of the purchaser, so that he could, in fact, perform his covenant. But here it is admitted that the plaintiff never had the title which he professed to sell, and agreed to convey; and this was, at least prima facie, a breach of his covenant the moment the time arrived when he might be called upon to perform it, and this authorized the purchaser to renounce it altogether, and treat it as if it had never existed.” See also Wright v. Dickinson, 67 Mich. [748] 580 (35 N. W. 164, 11 Am. St. R. 602); Cleary v. Folger, 84 Cal. 316 (24 Pac. 280, 18 Am. St. R. 187); Seibel v. Purchase, 134 Fed. 484; 27 R. C. L. 653, § 413; 27 R. C. L. 626, § 380. In Pearson v. Horne, 139 Ga. 453 (3 a) (77 S. E. 387), it was held: “Where'it was alleged that the owner of the property sold it to a third person without affording to the plaintiff an opportunity to purchase it in accordance with the terms of the contract, and thus put it out of her power to comply with the contract, no tender on the part of the plaintiff was necessary.” Applying the foregoing-principles to the case under consideration, the earnest money was the property of the plaintiffs, because the undisputed evidence showed that the defendant did not ever have or acquire title to the' property which he contracted to convey. It was essential that he should have such title at the time fixed by the contract for its conveyance, in order to give him any claim to the earnest money which he received as a part of the purchase-price. As he did not have such title, it was not necessary for the plaintiffs to have paid or tendered payment of the balance of the agreed purchase-price as a condition to a rescission or repudiation of the contract and a demand for the return of their money. As the evidence demanded a finding that the defendant did not have title which he could convey in pursuance of his contract, the trial judge properly directed a verdict for the plaintiffs, and the Court of Appeals erred in reversing that judgment. Judgment reversed. All the Justices concur.