Quinlan v. John

Tidball, District Judge. This action is here upon proceedings in error instituted by plaintiff in error, who was plaintiff below, against defendant in error, who was defendant below. The plaintiff’s amended petition in the court below consisted of two alleged causes of action separately stated and numbered. The defendant demurred to the first cause of action set forth in said petition upon the ground that the first cause of action did not state facts sufficient to constitute a cause of action. This demurrer was sustained by the trial court. Thereupon, plaintiff refused to further amend her petition and elected to stand upon it, and the court accordingly rendered judgment, dismissing the first cause of action. . The only question before this court is whether the trial court erred in sustaining the demurrer and dismissing said first cause of action. The allegations of the first cause of action contained in plaintiff’s amended petition are substantially as follows: That on December 20th, 1911, plaintiff and defendant entered into an escrow agreement for the purchase of certain lots in Lander, Wyoming, said agreement reading as follows: “Lander, Wyo., Dec. 20, 1911. “To Ben Sheldon:— This envelope contains a deed from Edward T. St. John to Beatrice Bright, which you are requested to hold in escrow upon and under the following conditions, viz: The said Beatrice Bright is to pay to you the sum of $75 on the 9th day of each and every month until the full sum of $3,-900.00 shall be paid, said payment of $75 to commence on the 9th day of January, 1912. When the full sum of $3,900 is paid, you are authorized to deliver said deed to the said Beatrice Bright. In the default of the payment to you of $75.00 each month at the time and in the manner hereinbefore provided, then and in that event you are authorized to deliver said deed to the said Edward T. St. John. — 98 — In witness whereof we have hereunto subscribed our names. Edward T. St. John. Beatrice Bright. That the envelope mentioned in the above agreement contained a warranty deed executed by defendant, conveying certain land to plaintiff, which is the deed referred to in the above writing. That plaintiff met the payments regularly and on time until the sum of $2,250 was paid, and that during said time she placed valuable improvements on.the land to the value of approximately $900. That on July 9th, 1914, an installment of $75 became due under said escrow agreement, “but through the wrongful acts of defendant in interfering with the tenants of plaintiff and thereby causing them to withhold from plaintiff money due her from said tenants, which with other unavoidable hindrances, plaintiff was unable to meet the installment due July 9, 1914, in the amount of $75 on the exact day it became due and further says that she pleaded with defendant for an extension of a few days’ time in which tb meet said installment, ’ ’ but that defendant refused to extend the time and recalled said deed from escrow and on July 25th, 1914, sold the property in question to another person “and also taking possession of and appropriating to his own use the said improvements so placed on said property by the plaintiff. ’ ’ The petition then alleges that by taking up the deed, defendant “rescinded said escrow agreement,” but refused to and still refuses to return to plaintiff the $2,250 paid on the contract or to reimburse her for the improvements she placed on the land, as he is legally bound to do. The prayer is for the recovery of the $2,250 paid on the contract, with interest from the dates of the several payments, and for $900, the value of the improvements, with interest from July 25, 1914. There is no allegation in the petition that the Beatrice Bright, a party to the escrow contract, and Bessie M. Quin99 lan, the plaintiff, are the same person. However, the defendant makes no point of this in his brief and virtually concedes the fact. There is also no direct allegation in the petition that plaintiff was in possession of the property during the life of the escrow agreement, the only allegations bearing upon the question being the allegations that plaintiff placed improvements on the property and that defendant, when he recalled the deed from escrow, took possession of said improvements. However, both sides in presenting the case to this court have assumed that plaintiff was in possession during the life of the escrow agreement and so we shall assume that to be the fact. The allegation that the failure of plaintiff to pay the $75 installment falling due July 9th, 1914, was caused by the act of defendant “in interfering with the tenants of plaintiff and thereby causing them to withhold from plaintiff money due her from said tenants, which with other unavoidable hindrances, plaintiff was unable to meet the installment” is likewise very indefinite. The court is not informed whether or not the tenants so interfered with were tenants occupying the premises in question, in what manner they were interfered with, or what the other unavoidable hindrances were. Nor is there an allegation that except for said interference plaintiff would have been able to meet the payment on time, nor are the facts pleaded showing this to be true. There is likewise nothing in the petition to show the court that the plaintiff has been damaged, that is, it is not shown that the money paid and improvements made and taken by defendant were of greater value than the use of the property during the time it was occupied by plaintiff, nor that the improvements were of such a permanent nature as to add anything to the value of the property. Neither does the petition show whether and to what extent the value of the property was enhanced by the improvements placed thereon by plaintiff, nor whether they were made with the vendor’s consent. ' The petition alleges that defendant, when he took up the deed, after failure of plaintiff to meet the payment falling due on July 9th, 1914, rescinded the escrow agreement. — 100 — While this allegation is probably a legal conclusion on the part of the pleader (31 Cyc. 60), nevertheless the plaintiff’s brief presents the case upon the theory that the facts alleged in the petition constituted a rescission and that therefore the defendant is bound to place the plaintiff in statu quo. There is no allegation in the petition that plaintiff ever tendered the installment due on July 9th, 1914, or ever offered to pay said installment.. The plaintiff in error contends (1) that time was not of the essence of the contract in question; (2) that defendant rescinded the contract and therefore must place the parties in statu quo; (3) that defendant by his own wrongful acts, as alleged in plaintiff’s petition, prevented plaintiff from meeting the installment falling due on July 9th, 1914. We shall briefly discuss these several contentions, bearing in mind that this is purely a legal action in the nature of an action for money had and received and that the petition is not sufficient, as we shall hereafter show, to invoke the equitable relief of the court. “When it is said that time is of the essence, the proper meaning of the phrase is that the performance by one party at the time specified in the contract or within the period specified in the contract is essential in order to enable him to require performance from the other party” — (2 Williston on Contracts, 1621.) “Although it seems now to be customary to insert that ‘time shall be of the essence of the contract’ if it is so intended, yet an examination of the cases will show that these words are not essential. Any words that show the intention of the parties to be that time shall be of the essence of the contract, or any clause which provides in unequivocal terms that if the fulfillment is not within a specified time, the contract is to be void will have that effect” — (6 R. C. L. 899. See also note in 104 Am. St. Rep. 268 ef seq.; 39 Cyc. 1369.) The escrow agreement in this case provides that .“In default of the payment to you of $75.00 each month at the time and in the manner hereinbefore provided, then and in that event you are authorized to deliver said deed to Edward T. St. John.” We — 101 — think that in a purely law action, invoking no equitable grounds for relief, time must he considered as of the essence of the contract in question. Did defendant by recalling the deed from escrow after the default of plaintiff rescind the contract ? We think not. He stood upon the terms of the contract. As was said in the case of Hansbrough v. Peck, 5 Wall. 497, 18 L. Ed. 520, “The position (of the plaintiff) is, that there is no longer a subsisting contract, as an end hasi been put to it by the vendor, and he has in consequence resumed the possession, and claims to hold the estate the same as if -no contract had ever existed, and that in such ease the purchaser upon settled principles of law and equity, is at liberty to recover hack the consideration paid and the value of the improvements. But the difficulty is, that the vendor has only availed himself of a provision of the contract — which entitled him to put an end to it and he restored to the possession. It is a proceeding in affirmance, not in rescission of it, by enforcing a remedy expressly reserved in it. Indeed, without such clause or reservation, the remedy would have been equally available to him. ’ ’ Also, in the case of Glock v. Howard & Wilson Colony Co., 123 Cal. 55 Pac. 713, 43 L. R. A. 199, the court said: “But the vendor, in refusing to accept the tender and to repay the money, is neither violating his contract nor rescinding it, nor treating it as at an end. He is standing squarely upon its terms. ’ ’ In the case at bar, the defendant did exactly what the contract provided he might do and nothing more nor different. He did not rescind the contract. It is true, the plaintiff pleads a rescission and the defendant’s demurrer admits all of the facts properly pleaded. But even if the pleading of a rescission by the plaintiff is the pleading of a fact, the other facts pleaded by plaintiff show there was no rescission. In an installment contract, such as the one at bar, for the purchase of realty, where time is of the essence, or when the prompt payment of the installments is made a condition precedent, as here, and the vendee defaults and without pleading sufficient facts to bring his case within recognized — 102 — rules of equitable jurisprudence sues at law to recover payments made, the overwhelming weight of American decisions are to the effect that he cannot recover the purchase money paid, nor for improvements placed upon the property. (Hansbrough v. Peck, supra; Glock v. Howard & Wilson Colony Co., supra; Sanders v. Brock, (Pa.) 79 Atl. 772, 35 L. R. A. (N. S.) 532 and note; L. R. A. 1918 B, Note, page 540; 27 R. C. L. 625; 39 Cyc. 1639, 1401, 2025, 2075; 107 Am. St. Rep. (note), 730.) (See also “Forfeiture for Breach of Contract,” by Professor Ballantine, Minnesota Law Review for April, 1921.) In the case of Lytle v. Scottish American Mrtg. Co., 122 Ga. 458, 50 S. E. 402, which is often cited by text writers as being opposed to the majority rule, the court says: “Of course, where the ven-dee makes default, he cannot take advantage of his own wrong, so as to give himself a standing as plaintiff in an action to recover for improvements or purchase money paid in part performance of the contract of sale. Such claim can only be asserted defensively.” And this is generally held to be the rule even where the contract makes no provision for forfeiture of the money paid. (Glock v. Howard & Wilson Colony Co., supra; 39 Cyc. 2027; 2 Williston on Contracts, § 791, p. 1514; Downey v. Riggs, 102 Iowa 88, 70 N. W. 1091.) “It is difficult to see why such a provision should affect .the question since the buyer’s right of return, if he ever has such a right, is given him by law .necessarily in opposition to the.terms of the contract” — 2 Williston on Contracts, 1514.) There are, however, some cases apparently to the contrary. (2 Williston on Contracts, 1514.) The case at bar is distinguishable from the case of Johnson v. McMullen, 3 Wyo. 237, 21 Pac. 701, 4 L. R. A. 670. In that case there was a contract of sale, the deed to be delivered when the notes given for the purchase price were fully paid, and there was no provision for redelivery of the deed to the vendor upon the failure of the vendee to make the payments on time, but even if time was originally of the ess.ence of that, contract, such provision was clearly waived, as shqwn by; the opinion in the case, by the act of — 103 — the vendor in failing to forfeit the contract upon breach by-plaintiff. In that case also, the contract was never terminated by the vendor when the notes were not paid at maturity, but he allowed the contract to continue in full force, retained the notes, and sold the property to a third person. The court said: “If plaintiff failed to pay her notes at maturity, defendant had it in his power to tender the deed and recover the amount of the notes by suit; or, upon the other hand, it was his right to deliver to plaintiff her notes, and declare a forfeiture of the contract, provided the contract provided for a forfeiture. He did neither, but retained the notes and sold the property to a third party, leaving the contract in full force. ” It is a case quite different from the one at bar. This disposes of all the contentions of the plaintiff in error, except that allegation of the petition “that through the wrongful acts of defendant in interfering with the tenants of plaintiff and thereby causing them to withhold from plaintiff money due her from said tenants, which with other unavoidable hindrances, plaintiff was unable to meet the installment on July 9, 1914, in the amount of $75, on the exact day it became due. ’ ’ Assuming that where, in an action like the one at bar, the petition sufficiently alleges that the defendant by his own wrongful act prevented the plaintiff from meeting an installment when due, the plaintiff may recover back what he has paid in part performance of the contract, we do not think the allegation sufficient. It does not-allege that defendant by his wrongful act prevented the payment. At most, it merely alleges that the act of defendant, coupled with other unavoidable hindrances, prevented the plaintiff from meeting the installment when due. To base a recovery upon such an allegation, it should at least state facts showing that except for the wrongful acts of defendant the plaintiff could have met the payment when due. Our conclusion, then, is that under the facts in the case at bar, as set forth in the plaintiff’s petition, she is not entitled to recover either the installments paid under the con — 104 — tract before its forfeiture by defendant, nor tbe money sbe expended by way of improvements. Neither do we believe that the petition states facts sufficient to entitle- plaintiff to equitable relief, even assuming, without deciding the point, that under a proper petition, she would be entitled to relief. In the case of Wheeler v. Mather, 56 Ill. 241, 8 Am. Rep. 638, which was an action in assumpsit for money had and received, involving the same questions as the case at bar, and which was decided upon a rehearing after the case had “received an extended and careful reconsideration,” the court after holding that plaintiff could not recover in such an action for purchase money and improvements placed on the property uses this language: “We do not, however, hold or mean to be understood as holding, that these rules cover the entire subject-matter. There may be eases where a ven-dee, chargeable with a technical default under such a contract, might under particular circumstances be entitled to other relief, as in a ease where he had paid a large portion of the purchase money, made valuable improvements upon the property, and his default was the result of fraud, accident or mistake; or the vendor should attempt to exercise the power of forfeiture in a ease not fairly within its scope; or unfairly and oppressively, with a view of taking an un--due advantage of the vendee by a forfeiture of payments and improvements; and in all other cases falling within the principles by which courts of equity are governed, the vendee may resort to such court to restrain the act of the vendor, if about to be done, or if accomplished, to set it aside, and to have the equities of the parties arising from their relations adjusted according to the circumstances of each case. ’ ’ But assuming that plaintiff might under a proper petition be entitled to relief at the hands of a court of equity, what facts must she set forth in her petition and to what relief would she be entitled? If entitled to recover at all, it must be upon the ground — 105 — that equity will, under certain circumstances, relieve against a forfeiture and the circumstances sufficient to invoke the aid of a court of equity must be shown by the petition. The rule is not that, upon the forfeiture of a contract by the vendor, the vendee may recover the purchase money paid and the value of all improvements placed on the property by the vendee regardless of their nature or lasting qualities. In the case at bar, the act of defendant was caused by, and the result of, the failure of plaintiff to strictly fulfill the contract on her part by meeting the payments when due under the terms of the contract. In such a case, all that the vendor is hound to do when he forfeits the contract, and all that a court of equity will require him to do, is to place the vendee in statu quo. In some cases this might involve the return of all payments made and the payment for all improvements made by vendee. This would probably he true if the vendor had retained possession of the property during the life of the contract and if the improvements placed on the property were placed there with the vendor’s consent and actually enhanced the value of the property to the full extent of their cost. But in the ease at bar, the vendee was in possession. She does not offer to account for the value of the use of the property during the time she held it. She does not show that the payments made by her were of a greater .amount than the rental value of the property. She does not show the nature of the improvements, whether permanent or otherwise, nor how much they enhanced the value of the property nor whether placed there with the consent of the vendor. In other words, the plaintiff utterly fails to plead facts sufficient so that the court can say what the equity of the case is. "We think .this essential to the statement of a good cause of action. It may he said that the defendant could set these matters up in his answer,, and, of course, he could, hut the plaintiff is here invoking the aid of a court of equity to relieve her against a forfeiture caused by. her failure to meet, payments according to the — 106 — term's of her contract, and in order to invoke that aid, she must show affirmatively that she is entitled to relief. The court cannot presume for her that, when equity is done between her and the defendant, she will be entitled to anything. The burden is on her to show this by her petition, or she fails to state- a cause of action. For aught the court knows, with her petition in its present form, the rental value of the property may have equalled or exceeded the monthly payments made; and the improvements may have been merely repairs or temporary improvements and may not have enhanced the value of the property. What the plaintiff is entitled to recover, if anything, is not the purchase money paid and cost of improvements, but the difference between the purchase money paid, plus the enhanced value of the premises caused by the improvements made by her and properly chargeable against the defendant, and the value of plaintiff’s use of the property. This being true, it would seem to follow inevitably that in order to recover at all, she must show by her petition that there is a difference in her favor and of what it consists. This she has failed to do, so how can it be said that she has stated a cause of action ? We believe the above observations are fully sustained by the decisions and the rules of pleading as set forth in text books, encyclopedias and adjudicated cases. In the case .of Lytle v. Scottish American Mrtg. Co., supra, the plaintiff pleaded the facts showing that he was entitled to relief and offering to do equity. In! the course of its opinion the court says: "When the vendee sets up any right (in his pleading), he is also bound to recognize that of the opposite party, and is equally bound to do equity before he can secure relief. He is not entitled to a return of his purchase money until he has allowed, as a deduction therefrom, all damages caused by his breach-one element of which will be the fair rental of the property during the time he occupied it, even up to verdict * * * — 107 — If the vendor elects to take hack the land, he must return the purchase money, less damages and rent. If the land has keen improved, he must allow the vendee for the enhancement in value occasioned thereby, before he can take the land thus improved. But the vendee cannot force the vendor to pay for the building or other meliorations. When the vendee asks compensation therefor, another factor is-injected into the case, whereby he loses that absolute right to the purchase money and forces an account under which he can secure only what legally comes to him on a sale of the property. ’ ’ “In'the absence of some provision in the contract fixing a different measure of compensation, the amount recoverable for improvements is not what it cost to put them on the property, but the enhanced value of the property, not exceeding the amount expended for the improvements, and from this is to be deducted an amount equivalent to the fair rental value of the premises.” (39 Cyc. 1402.) “Upon rescission by. the vendor, the purchaser is to be charged with a fair rental value of the land from the time of his acquired possession. ” (39 Cyc. 1403.) “Asa condition precedent to the action for the recovery back of purchase money paid to the vendor, the purchaser must put the vendor in' statu quo. • Thus where plaintiff seeks to recov.er the purchase money paid by him for land, treating the contract of sale as reseinde'd, he must account for the value of the use thereof while he was in possession.” (39 Cyc. 2051.) “It (the stating part or premises of the bill in equity) must aver every fact necessary to show his (plaintiff’s) title and right to relief, and such facts cannot be supplied by reference to other parts of the bill. The facts should be stated so distinctly and completely that the' chancellor may, from the face of the bill, see that he has jurisdiction and tell precisely what decree should he rendered, supposing the bill to be true.” (21 C. J. 386.) — 108 — In the case of Gates v. McLean, 70 Cal. 42, 11 Pac. 489, speaking of a,vendee’s right under rescission against a defaulting vendor, it is said that it is the vendee’s duty “to restore the possession, in which case he may recover the purchase money advanced and the interest, together with the value of his improvements, deducting therefrom such sum as the use of the premises may reasonably have been worth.” To the same effect is Barrows v. Harter, (Cal.) 130 Pac. 1050. Though this last case is decided under a statute, the court says the rule would be the same in equity without the statute. In the case of Cornely v. Campbell, (Ore.) 186 Pac. 563, 187 Pac. 1103, which was an action by vendee to recover the value of certain land transferred by him to the vendor in part payment of the purchase price of lands purchased by vendee from the vendor, the contract of purchase having been rescinded, while the question of a sufficient pleading on the part of the vendee was not involved in the case, it appears from the opinion of the court that the vendee, while not offering to account for rents while he occupied the land, showed that the value of such rents was more than compensated by the work expended and improvements made by him upon the land while- he occupiéd it and that therefore (quoting from the complaint) “no accounting for the rents and profits from said lands would be necessary to place the defendant in statu quo.” This ease and many others that we do not cite' show that the counsel conducting the eases for plaintiff deemed it necessary to either account for the rents and profits or show a sufficient excuse for not doing so. In the case of Woodard v. Williamette Valley Irrigated Land Co., 89 Ore. 10, 173 Pac. 262, the plaintiff vendee in suing for the return of the purchase money tendered possession and a quit-claim deed and offered to account to the defendant vendor for the rents and profits during his occupancy and asked for the difference found due. In its opinion the court says: .“Bach party having consented to’ a — 109 — rescission, of tbe contract, neither can base a claim on- such contract except insofar as is- necessary to the restoration of the statu quo.” "We are therefore of the opinion that plaintiff’s petition fails to state a cause of action either as an action at law for money had and received or as an action in equity for an accounting and relief from a forfeiture, and it follows that the demurrer to the petition was properly sustained and that the judgment should be affirmed. It is so ordered. Affirmed. Potter, C. J., and Blume, J., concur.