Watts v. Kellar

CALDWELL, Circuit Judge, (after stating the facts.) Upon the allegations of the bill the contract between the parties from its inception was, in equity, a mortgage. It is expressly averred in the bill that "it was well understood that the transaction was in the nature of a loan by your orator to defendants, with a reservation that your orator should be authorized to retain the property if he should so elect.” The necessary implication from the aver-ments of the bill is that the plaintiff loaned the defendants $7,000, and that to secure the payment of the same the defendants caused the lot in question to be conveyed to the complainant by a deed absolute in form, upon the understanding and agreement that at the expiration of one year (he complainant should have the option to retain the title to the lot in satisfaction of the loan, or to demand payment of the sum loaned, with 10 per cent, interest thereon, and, upon the payment thereof, convey to the defendants the same title to the lot which he had received. This agreement, in equity, constituted a mortgage. Pom. Eq. Jur. §§ 1102-1196; Russell v. Southard, 12 How. 139. The demurrer admits the truth of the averments in the bill. In this aspect of the case the bill may be regarded as one to foreclose a mortgage, and is sufficient for that purpose. A foreclosure was the only remedy open to the complainant to bar the defendants’ equity of redemption in the property. Upon the facts stated the complainant’s election at the expiration of the year to retain the property in satisfaction of the loan would not have operated to bar the defendants’ equity of redemption. Russell v. Southard, supra. This equity of redemption "would have remained, and could have been enforced, until barred by laches or the statute of limitations. If we lay out of sight the allegations of the bill which show the transaction was a loan of money, secured by a conveyance absolute in form, but in equity a mortgage, and determine the rights of the parties by the letter of the written contract, the defendants are not benefited. By the terms of this contract the defend [4] ants, in consideration that the plaintiff would pay $7,000 for the lot, agreed to pay the plaintiff $7,700 therefor at the expiration of one year from the date of plaintiff’s purchase, if the plaintiff should then elect to sell the lot at that price. The consideration for this agreement is expressed in the contract, and is sufficient. An option to sell land is as valid as an option to buy.- When one holding a buyer’s option makes his election to purchase, and tenders the money according to the terms of the contract, it is the duty of the seller to accept the price, and execute a deed to the purchaser for the property; and when one holding an option to sell elects to make the sale, and tenders a deed, it is the duty of the buyer to accept the deed, and pay the price. Such contracts are perfectly valid, and it is now well settled that a court of equity may decree a specific performance of them. A suit for that purpose is, of course, subject to the general rule that the specific enforcement of contracts for the purchase or sale of land is not a matter of course, but rests in the discretion of the court, in view of all the circumstances. But the rules by which the court will be guided, in a suit like this, in decreeing or refusing a specific enforcement are the same that they are in other suits for the specific enforcement of contracts relating to land. Cases may be found which hold that such contracts will not be specifically enforced, because the right to a specific enforcement is not mutual. The want of mutuality of right to a specific performance of a contract, which sometimes precludes its enforcement in equity, has no application to an option contract of the character we are considering. The purchaser of an option to buy or sell land pays for the privilege of his election. It is that very privilege which the other party to the contract sells. In the absence of an agreement to the contrary, each party to a contract to buy or sell land may have it specifically enforced against the other, (Raymond v. Land & Water Co., 4 C. C. A. 89, 10 U. S. App. 601, 53 Fed. Rep. 883,) but the very purpose of an optional contract of this nature is to extinguish this mutuality of right, and vest in one of the parties the privilege of determining whether the contract shall be vitalized and enforced. An option to buy or sell land, more than any other form of contract, contemplates a specific performance of its terms; and it is the right to have them specifically enforced that imparts to them their usefulness and value. An option to buy or sell a town lot may be valuable when the party can have the contract specifically enforced, but, if he cannot do this, and must resort to an action at law for damages, his option in most cases will be of little or no value. No man of any experience in the law would esteem an option on a lawsuit for an uncertain measure of damages as of any value. The modem, and we think the sound, doctrine is that when such contracts are free from fraud, and are made upon a sufficient consideration, they impose upon the makers an obligation to perform them specifically, which equity will enforce. Pom. Cent. §§ 167-169, and notes; Willard v. Tayloe, 8 Wall. 557; Brown v. Slee, 103 U. S. 828. In the case last cited the [5] supreme court of tbe United States enforced, quite as a matter of course, tbe specific performance of a setter’s option which was in these terms: “It is further understood and agreed that, if said executors desire it, said Brown shall, at the expiration of five years stated in said contract of April 25, 1871, repurchase the 130 acres of land in the city of lies Moines at $25,-000. * * *” The opinion of the court was delivered by Chief Justice Waite, and discusses at length the sufficiency of the executors’ notice of their election to sell, and the question whether the tender of the deed was timely, but contains no intimation (hat the want of mutuality in the contract was any impediment to its specific enforcement. The want of mutuality was too obvious to lie overlooked, and the fact that' it was not adverted to shows that, in the judgment of that court, the right to enforce the specific performance of such a contract was too well settled to require or justify any observation. Viewed in any light, the hill presented a case of equitable cognizance, and it was error to dismiss it. The decree of the circuit court is reversed, and the cause remanded for further proceedings therein not inconsistent with this opinion.