Flanagan Estate v. Great Cent. Land Co.

Mr. Justice Wolverton, after stating the facts in the foregoing terms, delivered the opinion of the court. 1. The first contention in logical order to be noticed is that the forfeiture was prematurely declared, it being insisted by counsel for the defendant land company that the third payment of 50 per cent of the $49,000 remaining of the purchase price after the payment of the $1,000 was not then due and payable. The position depends upon the proper interpretation of the contract, the plaintiff contending that the payment in question fell due July 25, 1903. The agreement or contract, as will be noticed, provides that Sengstacken shall pay on the day which it-bears — 340 — date the sum of $1,000, “and shall within ten (10) days thereafter deposit 25 per cent of ($49,000.00) Forty-nine Thousand Dollars, in the Flanagan & Bennett Bank to our credit and subject to our order, and shall within one year thereafter deposit in said bank fifty per cent of said Forty-nine Thousand ($49,000.00) Dollars with interest thereon at the rate of 6 per cent per annum.” The inquiry centers, about the employment of the word “ thereafter,” where found the second time in the excerpt. Does it bear relation to-the date of the contract and that of the payment of the $1,000, or to the date of the deposit of the 25 per cent of the balance of the purchase price designated ? By pursuing the contract further, it will be found that the stipulation touching, the last payment is that it shall be made two years after its date, so that all payments save this one are unmistakably fixed with reference to the date of the execution of the contract, and it is highly improbable that the payment in question should have been fixed with reference to some other da,te. Indeed, a critical reading of the conditions does not seem to us to lead to such a result, and we are firmly of the opinion that the contention is without merit. 2. It is next insisted that the deed by the Flanagan heirs, the vendors in the contract, to plaintiff carried the title of the premises to it, so as to defeat the purposes of the escrow, which is tantamount to, or is in itself, a breach of the contract on their part, and for that reason plaintiff cannot insist upon the remedy sought, the plaintiff not having placed in escrow a deed executed by it to the land company to' be delivered upon like conditions as the former. The rule seems to be well established that a deed deposited in escrow does not become operative to convey the title until the performance of the conditions or happening of the event upon which it was intended to be delivered to the grantee.designated, except in certain cases — 341 — arising through incapacity of the grantors, where by fiction of law it is allowed to take effect from the first delivery : 1 Devlin, Deeds (2 ed.), § 328 ; Prutsman v. Baker, 30 Wis. 644 (11 Am. Rep. 592); Taft v. Taft, 59 Mich. 185 (26 N. W. 426, 60 Am. Rep. 291); Andrews v. Farnham, 29 Minn. 246 (13 N. W. 161); Cannon v. Handley, 72 Cal. 133 (13 Pac. 315). 3. An inspection of the provisions of the deed to the Flanagan Estate will disclose, however, that it was not the purposeof the Flanagan heirs thereby to supersede the escrow, or to defeat the title that was intended to be conveyed by the latter instrument at the happening of the events upon which it was to become operative as a conveyance. By express condition the deed was made subject to the contract, and to the conveyance to the land company evidenced by the escrow, which we are impressed was effective to subordinate any title that may have passed thereby to the title that would have been acquired through the escrow-if the conditions had cometo pass upon which it was so placed. The fact that the plaintiff knew of the escrow, and of the terms and conditions upon which it was to become operative, would not alone have been effective to subordinate its title to that which would have ripened by the escrow taking effect as a deed, but it would be held, upon principles of equity, to have acquired the legal title in trust for the defendant land company. This, however, would not obviate the objection of the defendant, because it was‘the purpose of having the deed deposited in escrow to avoid the possibility of trust relations thus arising, and the necessity of requiring their enforcement so as to obtain the legal title. We think, however, as indicated above, that the conditions of the deed to the Flanagan Estate of themselves subordinated its title to that which would have accrued to the land company through the escrow, had the conditions upon whichitwas so placed cometo pass; hence — 342 — we conclude that the second objection is not well asserted. 4. The next objection pertains to the relief sought, it being insisted that the court ought not to decree a strict foreclosure under the conditions prevailing. A forfeiture is not insisted upon here, and, if it were, equity would not enforce it. While it might refuse in many instances to. interfere for the relief of an obligor against forfeiture for breach of an obligation, it will never interpose to declare a forfeiture, that being a matter, if insisted upon, entirely for the law side of the court. The plaintiff, by the act of instituting a suit for a strict foreclosure, recognizes the agreement as still in force and presently subsisting, for its purpose is to get rid of the equity of the land company-by obtaining a decree barring it forever. The plaintiff thereby admits that the land company has an equity in the premises which plaintiff’s predecessors by the terms of the contract agreed to convey, but submits that the company should be foreclosed thereof by reason of not having fulfilled the stipulations therein contained upon its part. 5. It was once a mooted question whether strict foreclosure could be at all maintained in this State, in view of the provisions of our statute with relation to the foreclosure of liens (B. & C. Comp. § 423), but it has been settled in favor of the remedy, as applied to contracts for the sale of land, in Security Sav. Co. v Mackenzie, 33 Or. 209 (52 Pac. 1046), where the lien thereby acquired is differentiated from the lien acquired for the security of some debt, which latter is alone declared to be within the intendment of the statute. 6. By the contract of sale an equitable conversion takes place, the vendee being deemed the owner of the land in equity, and the vendor to have a lien thereon for the purchase money, but at law these relations are not recognized. The lien suggested is known in the books as a “ vendor’s — 343 — lien,” but does not exist in this State after title has passed : Frame v. Sliter, 29 Or. 121 (45 Pac. 290, 34 L. R. A. 690, 54 Am. St. Rep. 781). Its only existence, therefore, is upon the idea, which is nearly if not quite a fiction, that the title has passed when it has not, and that the vendor retains a lien upon the land which has passed to the vendee in equitable contemplation, but has not in law or in reality, the prime fact being that the legal title is reserved pending compliance on the part of the vendee with the conditions upon which it is to be conveyed. “And the so-called ‘lien,’” as'said by Mr. Justice Bean in Security Sav. Co. v. Mackenzie, 33 Or. 209 (52 Pac. 1046), “is simply the vendor’s right to enforce his claim for the purchase money against or out of the vendor’s equitable estate ” — not his legal estate, for he has none. The conversion spoken of entails equitable remedies, hence the vendor may invoke equitable cognizance by foreclosure to cut off or bar the vendee’s interest, it being an equity of redemption, on the supposition that that is done which ought to be done. 7. This much being settled, it does not follow, however, that the court will always declare a strict foreclosure of the contract. It may also decree a foreclosure by a sale of the land in the ordinary way, although the title has not passed from the vendor, dependent upon the exigencies and equities of the case: Security Sav. Co. v. Mackenzie, 33 Or. 209 (52 Pac. 1046); Vail v. Drexel, 9 Ill. App. 439. Mr. Story says: “The usual course of enforcing a lien in equity, if not discharged, is by a sale of the property to which it is attached ” (2 Story, Eq. Jur., 10 ed., § 1217), and this in connection with his discussion of the nature of the vendor’s rights and remedies in a case like the present. “ In this country, as a general rule,” says Mr. Justice Berry in Wilder v. Haughey, 21 Minn. 101, 103, “ a sale is almost universally regarded as the just and appropriate — 344 — remedy.” See also, Jefferson v. Coleman, 110 lad. 515 (11 N. E. 465). And, speaking relative to the conditions under which a strict foreclosure would be proper, Mr. Justice Norval, in Harrington v. Birdsall, 38 Neb. 176, 186 (56 N. W. 964), says: “The remedy by strict foreclosure of land contracts cannot be resorted to in all cases. The remedy being a harsh one,, courts of equity will decree a strict foreclosure only under peculiar and special circumstances. Applications of that character are addressed to the sound legal discretion of the court, and they will be granted in cases where it would be inequitable to refuse them. If the vendee or purchaser has not been guilty of gross laches, nor unreasonably negligent in performing the contract, a strict foreclosure should be refused on the ground that it would be unjust, even though the vendee may have been slightly in default in making a payment. So, for the same reason, a strict foreclosure will be denied where the premises have greatly increased in value since the sale, or where the amount of unpaid purchase money is much less than the value of the property. On the other hand, if the vendee, without sufficient excuse, fails to make his payments according to the stipulations of his contract, and for an unreasonable time remains in default, the vendor may have a strict foreclosure of the contract for the sale and purchase of the land, unless some principle of equity would be thereby violated.” And this court has given utterance to a similar view in Sievers v. Brown, 34 Or. 454 (56 Pac. 171, 45 L. R. A. 642), which is especially applicable to.the case at bar, wherein Mr. Justice Moore says : “The justice of the rule announced in England and followed in Wisconsin may well be doubted, and particularly so when the vendor has received a large portion of the purchase money, in which case equity would seem to demand that the premises be sold to satisfy the balance due on the contract, upon the payment of which — 345 — the vendee should be entitled to the remainder of the money derived from such sale." Thus we find that strict foreclosure is the exception, not the rule, but, if required by the equities of the case, the court will not hesitate to enforce it. 8. Of the stipulated consideration of $50,000, $13,250 has' been paid. The balance, if interest for two years be added to' it at 6 per cent per annum, would amount to $41,160. Deductingthis from.the original, we have $8,840, a considerable sum, as the measure of the defendant laud company’s equity of redemption, if the value of the land remains the same to this time as the estimate the parties put upon it when the agreement was entered into. Assuming that such is the case, there are still other considerations to be taken into account in determining whether there should be a strict foreclosure. It was the intendment of the parties that the agreement should cease to be obligatory upon the vendors when the vendee made default in payment, and at law the stipulation could have been insisted upon. But plaintiff, having gone into equity, must at least do equity, else the court would not grant any relief. Having admitted that defendant was not yet precluded from making payment and acquiring title to the land, the subject of the contract, plaintiff must allow a reasonable time .in which to make the payment, otherwise the foreclosure would be tantamount to a declaration of forfeiture, which, as we have seen, equity will not entertain affirmatively. 9. As to what time is reasonable, there appears to be no positive rule, it resting mainly within the sound discretion of the court. Under the English chancery it was six months, and if the debt was large another six months was usually granted : 2 Jones,Mortgages (2ed.), §§ 1563, 1565; Vail v. Drexel, 9 Ill. App. 439. 10. While, however, the defendant is conceded still to — 346 — have an equity in the premises, it has not sought to reinstate itself by tendering or offering to make the overdue payment, but stands upon technical defenses, though insisting upon the broadest equities. By the agreement, defendant is not obligated to pay anything more if it does not desire to do so, and no deficiency decree can be obtained against it. There is, therefore, not that reciprocity of remedies that ordinarily exists in foreclosure cases, and it is not in as good a position to insist upon the largest latitude possible for its redemption as a debtor resting his equity of redemption upon the legal title. We conclude, therefore, that it would not be inequitable to grant a strict foreclosure in the present case. 11. The decree complained of, however, required the payment.by the defendant land company of the full stipulated consideration at a date when part of it had not yet become due, or be foreclosed. This, we are impressed, did not give time enough for that purpose, and, considering the. large amount involved, another six months will be allowed from the date of the entry of the decree here in which to make such payment. In all other respects the decree will be the same as rendered by the trial court. Mopifiep. •