Atchison, Topeka & Santa Fe Railroad v. Chicago & Western Indiana Railroad

Mr. Justice Phillips delivered the opinion of the court: It is apparent from a consideration of the facts appearing in this record, that the contract for the sale of the lots and land, and the lease, were, at the time of their execution, although separate instruments and covenants, a single contract. It was necessary for the appellant to have freight depot grounds and switch yards to make the use of appellee’s road, under the lease, of any value, and by the covenants of the lease “connections with lead tracks from said main tracks to and onto such property as the said lessee has or may acquire, in order to reach its freight buildings, freight yards and switch yards,” were to be furnished by the appellee company as a part consideration of the sum of §100,000 per annum to be paid under the lease tiy appellant. The situation of the two railroad companies was such that one, the appellee, had certain real estate which it would sell, which was suitable for railroad purposes, and had also a main and side-tracks entering the city of Chicago, with a depot centrally situated and located with reference to business, and for a sufficient consideration it was ready and willing to sell that real estate and lease the right of running trains over its tracks into its depot, and to have connecting switches from its main track to freight buildings, yards and switch yards of a lessee company for a long term of years. The appellant company, desiring to have access to and the benefits from the vast business of carriage to and from the city of Chicago, was desirous of leasing the right to run its trains over the main and side-tracks of the appellee company from Forty-ninth street to the depot of the appellee so located, and have the benefits to be derived from connecting switches with its freight buildings, grounds and switch yards. Even if the appellant company had such right to run over the track and into the depot of the appellee company, to be benefited thereby it became necessary to acquire land on which to place its freight buildings and yards and its switching yards. The contracts of leasing and for the purchase and sale of the land above mentioned were entered into under these circumstances. Immediate possession of the lands was given, by the terms of the agreement, by the vendor to the vendee, and the latter took possession thereof and entered into the lease, by which it acquired the right to run over the main track from Forty-ninth street into appellee’s depot, for a consideration of §100,000 per annum to be paid by it. By the terms of the agreement, upon the performance of the stipulations of the agreement as to the time when the purchase price of the property first described becomes due and a release of the two mortgages placed on the property by the appellee and a tender of a deed by the latter, the appellant was to at once pay the purchase money. Until this was done the money did not become due as to tract first. As to tract second, the purchase price was to be paid upon the tender by the Western Indiana company of a warranty deed, with releases of the mortgages. By the terms of the agreement the purchase price of tract second should be determined before the contract became effective by the confirmation of the lease. Immediately thereafter the deed and releases might be tendered and the consideration collected. No delay thereafter in the tender of deed and releases and in the payment of the consideration was contemplated by the contract. Such deed and releases were tendered, and the purchase price, without interest, was paid and accepted on or after June 21, 1887. The bill alleges that the consideration, “as described in said agreement,” was paid about June 17, 1887. The date of the deed is June 17, 1887, and of the acknowledgment June 21, 1887. The answer admits that the deed was delivered upon the payment of the consid.erg.tion “as provided in said agreement.” The consideration was $214,560. The Atchison company went into possession on or before May 21,1887. The agreement became eSective and the purchase price of tract second became due if a release of the mortgages and a proper deed were tendered on May 21, 1887. The deed, however, was not tendered and the consideration was not paid until June 17, 1887, or later. Interest at six per cent on the purchase price for this time amounts to more than $1000, yet no interest was asked or paid. Such was the interpretation which the parties, appellee as well as appellant, put upon the contract at that time. As to tract first, the appellee parted with the possession before it was entitled to the purchase money. The •vendor was to make certain improvements, procure a release of certain mortgages and tender a warranty deed before it was entitled to the purchase money. This being the agreement, when the appellee refused to execute a deed except with a clause of defeasance, which was not in accordance with the agreement but violative of its terms and of the duty of appellee to appellant, it was an unreasonable default and refusal of the appellee to carry out its contract. The appellee refusing to comply with its contract, and by reason thereof the purchase money not being due, the appellant filed this bill for specific performance. By its answer the appellee placed a construction on the contract not authorized,- and which was not in accordance therewith. At the hearing that construction was first abandoned and a deed tendered which was' in accordance therewith, but appellee for the first time insisted that interest should be allowed on the purchase price from about the time appellant took possession. This was by the trial court held to be equitable, and the decree in that regard was affirmed by the Appellate Court, on the principle that where there is a sale of land at a specified price, to be paid for at a subsequent date, and delivery of possession to the vendee, the vendor is entitled to interest on the purchase money, on the principle that the value of the possession is, in its rents and profits, equal to the interest, even though the contract of sale is silent as to interest. This presents the first legal question raised by the assignments of error. The appellee, being desirous of the advantages and benefits of the lease, by which appellant was to pay $100,000 per annum for 999 years, contracted to sell the land, pay off the mortgages, make certain improvements and tender a warranty deed, upon which the purchase money was to be paid by appellant. But these acts to be performed by appellee were, under the terms of the contract, to be distinctly performed with appellant in possession, and by its contract no provision was made for interest. The necessary construction of the language used in the contract, taken in connection with the circumstances attending the transaction, convinces this court that the benefits to be derived by appellee from its rights under its lease to .appellant, and the consideration to be paid thereunder, were to be regarded as equivalent to a release of a claim of interest, inasmuch as the extension of time for making repairs, completing improvements, releasing mortgages and executing deed was in the interest and for the benefit of appellee, whilst during all that time it may be reasonably considered that appellant would not have undertaken to pay so high an amount under the lease unless it had its own switch yards, freight buildings and grounds, so that the lease would be of value to it. These were mutual advantages. The appellee was to receive' the consideration per month under its lease, and, to induce appellant to pay that, was willing to deliver immediate possession of the lands sold, and receive the purchase money when it was able to comply with its contract in building its viaduct, the alignment of its tracks, the release of mortgages and the execution and tendér of a warranty deed. Such being the circumstances attendant on this transaction, and the contract being silent with reference to the question of interest, it is clear to this court that at the time of entering into this agreement the intention of the parties was expressed in the agreement itself, clearly and explicitly, and that intention was, as derived from the lease and agreement, that no interest was to be paid on the purchase money. Where a contract is in Writing, courts of equity, like courts of law, must construe the contract according to the intention of the parties as expressed by its terms, and where there is doubt or ambiguity as to the intention of the parties, courts may take into consideration the surrounding facts and circumstances. But neither courts of equity nor of law are authorized to make contracts for the parties. Such being the contract and its interpretation, we must determine whether, where a bill for specific performance is filed, equity will require interest on the purchase money to be paid by the vendee in possession, regardless of the fact that the vendor may be in fault in failing to comply with the terms of the contract in tendering a deed, and by otherwise failing to comply with its provisions and covenants. A person cannot, as a matter of right, call upon a court of equity to enforce the specific performance of a contract for the sale of land. It is always within the sound discretion of the chancellor whether he will exercise the power, taking into consideration the contract and surrounding circumstances. In his exercise of that sound discretion he is governed by the rules and principles of equity jurisprudence. Where a contract of sale and purchase of land is entered into and a written agreement partly made, in equity the title is treated as being where the parties have placed it by the terms of their agreement, and for that purpose the vendor is held to be a trustee of the legal title for the benefit of the vendee, and the vendee is trustee of the purchase money for the benefit of the vendor. This equitable construction of such contracts arises from the principle that equity considers that which is agreéd to be done as actually performed. As a result of this principle, where there is an agreement in writing for the purchase and sale of lands, and the vendee enters into possession, there are many authorities holding that the purchaser entering into possession must pay interest on the purchase money from the time such possession commenced. It is held inequitable that the vendee shall have the rents and profits and retain the purchase money without the vendor being entitled to interest. Fry on Specific Performance (sec. 1418) states the rule thus: “It follows from the principles already stated and discussed in this chapter, that generally, in the absence of stipulation, a purchaser of the estate which is the subject matter of the contract must pay interest on the unpaid purchase money from the time when his possession under the contract commenced until completion.” And again (sec. 1419): “The rule that the purchaser in possession shall pay interest on the unpaid part of the purchase money will be applied even in cases where the delay arises from the neglect of the vendor, and the purchaser makes no actual profit out of the land. ‘The act of taking possession,’ said Grant, M. R., ‘is an implied agreement to pay interest, for so absurd an agreement as that a purchaser is to receive the rents and profits to which he has no legal title, and the vendor is not to have interest, as he had no legal title to the money, can never be applied.’” And this is again stated as follows (sec. 1425): “So strongly does the court hold to this principle, that a purchaser in possession shall pay interest on the unpaid purchase money, that it will look at any contract which appears to prevent the application of this'rule by the light of this general principle of justice, and, it seems, refuse execution of it where it grossly violates this principle, for a court of equity interposes only according to conscience.” It must be conceded the authorities go to the full extent of sustaining the statements made in the text of this able writer on this subject. But there are exceptions to the general rule, and one exception is well stated by Sir William Grant, Master of the Bolls, who, in applying the rule and allowing interest, said in Powell v. Martyr, 8 Ves. 146: “The rule is perfectly clear and reasonable, that if a purchaser is let into possession and the reception of the rents and profits, he shall pay interest for his purchase money. On the other hand, it must be admitted that a case may be in which he shall not pay interest notwithstanding he has the rents and profits, but it must be a strong case and clearly made out.” It is important, therefore, to determine whether this case comes within the exceptions to the general rule. In determining this question it is necessary to make a further reference to the authorities. In Minard v. Beans, 64 Pa. St. 411, the contract was made March 9, 1868, to convey property October 1, 1868, for £25,000, payable §1000 cash, £5000 April 1, 1868, §4000 October 1, 1868, the balance to be secured by mortgage and payable in five installments, “with interest on all money remaining unpaid.” Possession was taken April 1, 1868. The first three payments were made as agreed, and the deed was delivered October 1,1868. The vendor sued for interest on the §19,000 from April 1 to October, 1868, when the deed and mortgage were delivered. The trial court allowed interest. On appeal the Supreme Court, by Thompson, O. J., said: “A plain reading of its (the agreement’s) terms in regard to the payment of the purchase money seems to be all that is needed to show that the claim of the plaintiff for interest is unsupported. * * * There was no contract to pay interest on any money falling due on the first of October, 1868. * * * Interest, as a general, I may say universal, rule, is never demandable until money is due. ‘It is, ’ say the books, compensation allowed to the creditor for delay of payment by the debtor.’ It is completely due whenever a liquidated sum "of money is unjustly withheld. It is a legal and uniform rate of damages allowed, in the absence of any express contract, when payment is withheld after it has become the duty of the debtor to discharge the debt. There was no express contract for the payment of interest up to the first of October, 1863. That is certain. Where is the principle that implies it? There was no debt due at that time bearing interest, and no overdue' debt existed. It was a mistake to imply it from possession of the property by the vendee when no money was due or withheld. There is a class of cases where interest is always charged on money due, although not payable by the vendee. For instance, where the purchase money is payable at a certain time and the deed is to be made at the same time, if the vendor cannot make title at the time appointed for the payment of the purchase money, and the vendee retains possession, he must pay interest as a compensation for the profits he is receiving during the vendor’s inability to make title. It would be grossly inequitable that the vendee should hold both the land and money and compensate for neither. These and kindred circumstances raise an obligation to pay interest, although the purchase money is not .recoverable. But even here the money must be overdue. Where it is not due, and no contract exists for its payment while running to maturity, it must be an exceptional case where it is legally demandable. It is certainly not so, we think, in this case.” So in the recent case before this court, (Fowler v. Harts, 149 Ill. 592,) there was a sale of land for §8000, of which §500 was paid in cash, and a mortgage, on which §7500 debt and interest was claimed, was assumed. Foreclosure proceedings were then pending, and the vendor desired to resist them for the purpose of reducing the amount, and the vendee agreed to pay whatever reduction was made in the suit, to the vendor. At the end of the suit, nearly four years later, the mortgage was cut down, and the vendee, who had been In possession all the time, paid the vendor the exact difference. The vendor sued for interest on that difference during that time. The court, by Bailey, J., held that the contract did not provide for the payment of interest, saying: “It is impossible to deduce from this agreement any obligation to pay interest. The promise is merely to pay the amount of the reduction, and nothing is said about interest. To require the payment of interest would necessitate the importation into the agreement of terms which the parties did not see fit to adopt.” In Lofland v. Maull, 1 Del. Ch. 359, it was said: “Again, the ground taken rests upon what is not true as a principle of law, viz., that the obtaining possession is-a consideration which creates an equitable obligation to pay interest. * * * It is too absurd a principle to be admitted, and is contrary to equity, that if a defendant takes possession of his own property, which it was lawful for him to do, that such an act should make him liable to pay a larger sum for the land than he had agreed to pay,—■ that the legal effect of doing a lawful act of exercising a right by possessing himself of Ms own property should make the defendant liable to pay interest beyond and in contradiction to the expressed terms of the written contract. I am of opinion that the claim for interest cannot be sustained.” Other cases might be cited where, under their particular facts, it was held the vendee in possession was not liable for interest, The decided cases so often necessarily depend upon the facts of the particular case that to deduce g'eneral rules therefrom applicable to every case is almost impossible. From apparently diverse and conflicting authorities, where a bill is filed for specific performance, we may deduce these principles: First—Where the contract contains no provision as to possession or interest, if the vendee takes possession he must pay interest from that date. Calcraft v. Roebuck, 1 Ves. Jr. 221; Fludyer v. Cocker, 12 id. 25; Powell v. Martyr, 8 id. 146; Ballard, v. Shutt, L. R. 15 Ch. Div. 122; Attorney General v. Christ Church, 13 Sim. Ch. 214; Rutledge v. Smith, 1 McCord, 231; Wilson v. Herbert, 25 Atl. Rep. 685; Boyle v. Howard, 3 Desauss. 555; Bostwick v. Beach, 103 N. Y. 414; Phillips v. South Park Comrs. 119 Ill. 626; Steenrod v. Railroad Co. 27 W. Va. 1; Stevenson v. Maxwell, 2 Comst. 408; Binks v. Lord Rokeby, 2 Swam 223; Gibson v. Clark, 1 Ves. & B. 500; Rhys v. Railway Co. L. R. 19 Eq. 93; Paton v. Rogers, 6 Madd. 256; Blount v. Blount, 3 Atk. 636; Lang v. Moole, 31 N. J. Eq. 413; Cleveland v. Burrill, 25 Barb. 532; Huntley v. Lyons, 5 Munf. 342; Monro v. Taylor, 8 Hare, 51; Phillips v. Sylvester, L. R. 8 Ch. App. 173; Railroad Co. v. Gesner, 20 Pa. St. 240; Pomeroy on Contracts, sec. 430. Second—Where the contract contains no provision as to possession, but provides a date for performance and for the payment of interest thereafter, if either party is in willful default equity will refuse to enforce the terms of the agreement for the benefit of the defaulting party. DeVisme v. DeVisme, 1 Mac. &, G. 336; Lombard v. Chicago Sinai Congregation, 64 Ill. 477; 75 id. 271; Jones v. Mudd, 4 Russ. Ch. 122; Monk v. Huskinson, 4 id. 122, note a; Leggott v. Railway Co. L. R. 5 Ch. App. 716; Lofland v. Maull, 1 Del. Ch. 359; Riley v. Streetfield, L. R. 34 Ch. Div. 388; Tewart v. Lawson, 3 Sm. & G. 307; King v. Ruckman, 24 N. J. Eq. 556. Third—Where the contract provides a time for performance, with a provision for prior possession, and an express agreement for interest from a day named, and the vendor merely neglects or is unable to perform, in such case the vendee shall have the rents and profits and pay interest from the time fixed by the contract. Birch v. Joy, 3 H. L. Cas. 565; Brockenbrough v. Blythe, 3 Leigh, 676; McKay v. Melvin, 1 Ired. Eq. 73; Baxter v. Brand, 6 Dana, (Ky.) 296; Cowper v. Bakewell, 13 Beav. 421. The case now under discussion is somewhat anomalous. By the terms of the leasing and contract, as we-have construed them, there were reciprocal rights and interests and duties growing out of both the lease and the agreement. The lessor derived a benefit by having the lessee enter into the lease at the earliest moment. It is apparent that to induce the lessee to do so the lessor was ready and willing to sell the two tracts of land and deliver possession at once, as it could not immediately release the mortgages, align its tracks, build its viaduct, etc. Switch yards, freight grounds and buildings being necessary to the vendee, when it could thus acquire them it could derive a benefit from the lease. Bach was thus mutually benefited, and with the execution of the lease the liability for compensation at $100,000 per annum was incurred by the vendee. The vendor was thus benefited. It is a reasonable construction to say that this entered into consideration and was regarded when the agreement was made which provided for the delivery of possession to the vendee and was silent as to interest. The delay in the execution of the deed was the fault of the vendor. When it had complied with all the conditions except the execution of the deed, it then sought to incorporate in the deed a condition of defeasance unauthorized by the agreement. The delay was a willful, wrongful default, and was brought about by the vendor’s act alone. It is insisted that even if such is the case, the vendee in possession is liable for interest unless the money was tendered, retained, and held dead in the hands of the vendee, and the vendor was notified thereof. To avoid the payment of interest after tender the debtor must tender the amount due and keep that money ready at all times, to pay it to the creditor if he should conclude to receive it. The debtor cannot use it and then escape the payment of interest. And the purchaser must, in general, give notice that the money is lying dead, and must actually appropriate it for the payment of the particular debt. These principles are declared by the great weight of authority. In the case here the money was tendered and the deed demanded. The bill for specific performance was filed and an offer and willingness to pay averred. To that bill the answer refusing to make a deed without its containing a condition of defeasance stands as a constant refusal to receive. From this record these general facts stand prominently forward: The contract gave the vendee possession and placed on the vendor certain duties which were conditions precedent to its right to receive the purchase money. It did not contain any provision for the payment of interest. Mutual advantage resulted from an immediate possession. The delay in completing the sale was due solely to the willful and excuseless conduct of the vendor. The vendor acted not merely negligently, but needlessly and willfully and wrongfully refused to perform its contract. It may well be that where the vendor is unable to perform his contract at the time he agreed to convey, and is prevented bj^ circumstances not under his control, or that by mere negligence he fails to convey at the time, equity may require interest to be paid. A very different question is presented where the vendee is desirous of having a compliance by the vendor, and the vendor is able but wrongfully and willfully refuses to comply with his contract. In the latter case he is in no position to appeal to equitable rules by which he may be benefited. Under these circumstances we are of opinion the court erred in entering its decree requiring the vendee to pay interest prior to the entering of the decree. The decree of the circuit court of Cook county and the judgment of the Appellate Court for the First District are each reversed, and the cause is remanded to the circuit court of Cook county, with directions to enter a decree requiring the vendor to execute and deliver a deed in fee simple absolute, in accordance with the terms of the contract, by a short day to be named, and on its refusal so to do the master in chancery to execute such deed, the deed to be delivered on the payment of the purchase price of $197,449.60, the amount found in the original decree as the sum of the purchase price, with interest from July 29, 1893,—the date of entering the decree appealed from. „ 7 , 7 , Reversed and remanded.