Earley v. France

Bronson, J. This is an appeal from judgment rendered in the district court of Barnes county upon a verdict for the defendant, and from the order of the trial court denying a motion for judgment non obstante, or for a new trial. In the district court two actions were submitted upon the same evidence and separate verdicts returned by the jury. The Bank of Sanborn is the plaintiff in one of the actions, and the appellants herein, the plaintiffs in the other. In the action brought by the Bank of Sanborn a verdict was rendered in its favor. In substance the record discloses the following facts: One Beeson, a resident of Wilkin county, Minnesota, has been engaged in the real estate business for some twenty-five years. He had a contract for a deed from one Porter covering 320 acres of land in Wilkin county, Minnesota. On October 29, 1912, he made a contract for a deed concerning this land with one Deree, of Kandiyohi county, Minnesota, for an expressed consideration of $9,920. Deree paid him on this contract $2,000. On July 9, 1914, Deree made a written contract with Beeson which recited therein that Deree desired to sell and transfer to Beeson his interest in such lands so that Beeson could sell the same under a contract for a deed to the defendant, France, who agrees to deliver to Beeson a stock of merchandise valued at $3,500, which amount is to be credited as payment on Deree’s interest in the lands; that Deree’s interest in the'lands, after deducting the price of such merchandise, is $2,480, less the amount that was owing to Beeson on the contract and other indebtedness. That under a contract for a deed made between Beeson and France on the same date for the sale of such lands, there were three notes signed by the defendant payable to Beeson, — one for $800, due on or before November 1, 1915; one for $800, due on or before November 1, 1916; and one for $880, due on November 1, 1916, evidencing payments to be made on such contract. That it was agreed that Deree should sell to Beeson his interest in such lands and surrender to Beeson his contract therein, in consideration of which Deree was to receive from France the stock of goods, and also the three notes above mentioned for the balance of his equity in the lands; such notes to be indorsed by Beeson without recourse; and such notes further to be held by Beeson as security for the payment of his indebtedness. That it was further — 55 — agreed that in case the notes in question were not paid when due Beeson should use his best endeavors to collect the same under his contract for the deed. On the same day, July 6, 1914, Beeson entered into a contract for a deed with the defendant, France, whereby he agreed to convey to the defendant the land involved for an expressed consideration of $14,400 to be paid as follows: $500 in cash; $3,500 through a stock of merchandise; $1,800 on or before November 1, 1915; $1,800 on or before November 1, 1916; $1,880 on or before November 1, 1917, and $4,920 on November 1, 1918, with interest at 6 per cent payable annually. The three payments of $1,000 and $1,880, respectively, were to be evidenced by six notes for $1,000 and $800, and $1,000 and $880, respectively, made by said defendant, France, payable to Beeson. It was further agreed in this contract that Beeson had a contract for a deed from one Porter and was to get proper conveyance from Porter. In connection with these contracts some preliminary negotiations were had between the defendant, France, and Deree. Deree had this land under such contract; France had his stock of goods at Sanborn. Some sort of an agreement was signed with reference to an exchange. The written agreement was not introduced in evidence; witnesses testify that it provided that Mr. Deree was to take over the stock of merchandise and the defendant, France, to take the land in Minnesota with the provision that the agreement should not be binding unless the real estate in Minnesota proved to be as represented, and also that the defendant, France, should go down and look at the land, and if the deal did not go through he was to receive his expenses if the land was not as represented; the defendant then went down the same evening to see the land in Minnesota. He found out that Deree had a contract for the land with Beeson. While in Minnesota he went to Beeson’s office and there signed a contract for a deed, which he testifies was on July 11, 1914. While there he paid Beeson $450 by check and delivered a bill of sale of his stock to Deree. At the time the defendant made and delivered to Beeson the promissory notes; namely, two for $800, and one for $880, and the promissory notes for $1,000 each, mentioned in the contract. On the next day France, Mr. Deree, and a son of Mr. Beeson returned to Sanborn. Beeson testified that it was not a fact that Deree was to receive the three notes in question so that he could raise money — 56 — by using such notes and pay Beeson what he owed before Beeson was willing to enter into the contract with France. Further, that his son took the notes to Sanborn for the reason that Deree thought he could get money on the notes sufficient to pay Beeson what he owed him at that time on an outside matter. He further testified that France said to Deree that his note was good at the Bank of Sanborn, and that such bank would take his notes. Deree and a son of Beeson came to San-born .and Deree there sold one $800 note to the bank and borrowed $1,100 upon his own note by putting up the other two notes with such bank as collateral security. The bank had knowledge of this entire transaction concerning these contracts for a deed. Later, the two notes •put up as collateral security were transferred by the bank to the plaintiffs herein, who were directors of such bank. The defendant, France, paid $164.70 interest on such contract up to November 1, 1914. He did not, and was unable to, make further payments. Thereafter proceedings to cancel the contract for a deed were initiated by Beeson by notice thereof dated November 30, 1915. Such notice was served upon the Bank of Sanborn and on the defendant, France, and upon Deree during t?ie first week of December, 1915. Prior to that time, on November 8, 1915, the bank commenced action on the notes so purchased, and at the same time caused a warrant of attachment to be issued. Later, on September 26, 1916, the appellants herein instituted action against the defendant upon the other two notes not then due, and caused a warrant of attachment to be issued, alleging in their complaint that the action was so commenced before the debt became due for the purpose of obtaining an attachment against the property of the defendant. The defendant in his answer to the complaint of the plaintiffs set up a failure of consideration and that the defendant was not indebted to said Beeson or any of his assigns on said notes. The evidence shows that these two notes involved herein were taken over by the appellants apparently still as collateral notes to the indebtedness of Mr. Deree of the $1,100 note which was a demand note. The appellants challenge, by specifications of error, the judgment and order of the trial court, principally upon the ground that the evidence is insufficient to support the verdict, and that under the instructions given by the court to the jury it was possible for the jury to render a verdict for the defendant even though the defendant knew at the time he made — 57 — the notes that they were to be used for the purpose of paying Deree for his equity in the land, and though they were in fact used for such purposes. Upon this record, it is clear that Beeson could not recover upon these notes if action had been brought by him; such notes are simply evidences of the purchase price to be paid in accordance with the payments stipulated in the contract. The purchase price to be paid is the principal obligation; the contract for the deed is incident thereto. Although the vendor holds the legal title to the land through the contract it is nevertheless in the nature of a lien to secure the purchase price stipulated. Woodward v. McCollum, 16 N. D. 49, 111 N. W. 623, and cases cited. The vendor may either enforce the same upon the covenant's therein to pay through specific performance, or he may declare a ■forfeiture and rescind the contract under the express terms thereof. He cannot both enforce the contract and rescind the same. As stated in Warren v. Ward, 91 Minn. 254, 94 N. W. 886, “There is no difference in the authorities upon the proposition that one cannot have the specific performance of the contract and its rescission. This is but the application of the very hackneyed truism that 'one cannot have his cake and eat it.’ ” The main proposition involved in this case is the question whether Deree and the appellants are placed in the same position legally as the vendor, Beeson, or whether the defendant, France, gave these notes in question as a direct consideration for the equity of Deree in the land covered by the contract. If, in fact, France had executed these notes direct to Deree, and Deree had assigned his contract with Beeson to France, the foreclosure of the contract by Beeson would not in any way affect the liability of France to Deree upon his notes made to Deree. This, however, in óur opinion, is not the legal situation which was so expressly created between the parties. Deree had an equity in this land, its value was $2,-480. Instead of turning this equity over to France, he turned it over by his own contract shown in the evidence to Beeson; he surrendered his contract to Beeson. Beeson assumed, therefore, both the legal and equitable title that Deree formerly had. Beeson then made his contract with France, and although there was credited on this contract the amount of such equity to Deree to the extent of $3,500, the stock of — 58 — goods turned over, nevertheless this equity, as to the title therein, and as to Deree’s equity represented by the notes, was retained by Beeson, and the contract made with Deree specifically provided that Beeson might declare a default and rescind the contract for failure to pay the very notes which France gave and Deree received. Furthermore, in the contract with France, Deree authorized Beeson to collect on such notes through such contract so made by Beeson to France. Beeson indorsed these notes to Deree; Deree put them up as collateral security with the bank; the bank turned them over to the appellants. All of the parties have notice of this entire transaction. In legal effect, therefore, the situation is just the same as if Beeson in fact had purchased Deree’s equity, and had assumed the same and had made a direct bargain himself with France concerning it. The fact that France gave a bill of sale of the stock to Deree does not alter the situation. The contract provided that such stock should pass to Beeson. The situation is just the same as if France had turned over $3,500 to Beeson and Beeson had turned over the same $3,500 to Deree for his equity. Furthermore, upon this legal situation, when Beeson indorsed the transfer of these notes to Deree, the transfer of the same operated to assign pro tanto the security which was incident thereto, or at least the right to enforce as an assignee an assignee’s right in such security. 39 Cyc. 1810; 2 R. C. L. p. 633; 5 C. J. 951; Smith v. Mills, 145 Ind. 334, 43 N. E. 564, 44 N. E. 362. See Funk v. Voneida, 11 Serg. & R. 110, 14 Am. Dec. 621; Terry v. Woods, 6 Smedes & M. 139, 45 Am. Dec. 277. Deree was not satisfied to turn his equity in the land over to France and take the notes; he wanted further the security of the contract that • Beeson had. lie directly authorized Beeson, impliedly at least, to make collections and to enforce default for failure to pay these very notes. Neither in law nor in equity is he entitled to have both his equity, now, in the face of the record, in Beeson’s hands, who was authorized to collect his obligations, and also his money. If it be argued that this holding serves to permit the defendant to take advantage of his own default, the answer is that Deree should not be entitled to take advantage twice of defendant’s default. The fact that France knew that Deree was surrendering his equity is no reason why Deree should be permitted either in law or in equity to — 59 — recover back through Beeson both the land and his money. The. appellants stand in no better position than Deree; they received the notes with full notice, and are maintaining this action apparently as holders of these notes put up as collateral security. The notes as such were subject to the same defense as if they were non-negotiable. Comp. Laws 1913, § G943. Deree was not a holder in due course; the appellants were not holders in due course. Comp. Laws 1913, § 6937. The notes, therefore, were subject to the defense that there existed, at the time this action -was instituted, no obligation therefor, aud that the contract covering the same had been rescinded. This was set up in. the answer, and the record shows that the instructions of the trial court were favorable, rather than otherwise, to the appellants, and that the verdict as rendered by the jury is proper. The judgment is affirmed with costs to the respondent. Grace, «L, concurs.