Kinney v. Schlussel , 116 Or. 376 ( 1925 )

[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] IN BANC.

AFFIRMED. This was a suit in equity to compel the specific performance of an alleged contract for the sale of land. The complaint alleges that defendants entered into a contract with plaintiff whereby defendants agreed to sell and convey in fee simple and he agreed to purchase certain real property in Clatsop County, Oregon. This allegation was denied by the answer. Two writings are attached as exhibits to the complaint, which the complaint alleges and the answer admits were signed by plaintiff and defendants on April 23, 1923. Omitting the attestation clause, these papers, the signatures to the first of which are sealed, read as follows:

"Know All Men By These Presents, that Birdie F. Schlussel and Sadie R. Schlussel, hereinafter referred to as Schlussels, agree upon the terms hereinafter set out to sell to Robert C. Kinney, hereinafter referred to as Kinney, the following described land, to-wit:

"The Southwest quarter of the Southeast quarter and the Southeast quarter of the Southwest quarter and the Southwest quarter of the Southwest quarter of Section 17, Township 6 North, Range 9 West of the Willamette Meridian, and the Southeast quarter of the Southeast quarter of Section 18, Township 6 North, Range 9 West, Clatsop County, Ore.

"The said Kinney agrees to purchase and pay for said land the sum of fifty-five hundred and no/100 ($5500.00) dollars on the following terms, to-wit:

"Fifteen hundred ($1500.00) dollars upon his approval of title and the execution and delivery of this contract and the balance of four thousand ($4000.00) dollars on or before two years after date with payments of not less than two thousand ($2,000.00) dollars per year with interest on all unpaid balances at the rate of 7% per annum, payable semi-annually.

"The said Schlussels agree that upon the delivery of this contract, the said Kinney may go upon the premises described for the purpose of constructing and laying out his logging road for the purpose of removing the timber on said premises prior to the delivery of the deed according to the terms hereinafter set out, then the entire balance due on said purchase price will become immediately due and payable.

"The said Schlussels agree to pay taxes for the year 1922, and the said Kinney agrees to pay all taxes thereafter.

"The said Schlussels agree to furnish, at their own expense, an abstract of title to date, showing title free and clear of all incumbrances in the said Schlussels, the said Kinney to have five days after receipt of abstract for the purpose of examining the same.

"It is hereby mutually agreed that this contract shall be deposited in Ladd Tilton Bank together with fifteen hundred ($1500.00) dollars by the said Kinney, and when he shall approve title as hereinbefore set out, the fifteen hundred ($1500.00) dollars shall be by said Bank paid to the said Schlussels and the contract delivered to the said Kinney.

"The said Schlussels agree to deposit in Ladd Tilton Bank a general warranty deed to said premises with instructions to deliver the same to the said Kinney upon full payment of the balance due under this contract. * *"

"Portland, Oregon, April 23, 1923.

"Ladd Tilton Bank, "Portland, Oregon.

"Gentlemen:

"There is deposited herewith three copies of a contract between Birdie F. Schlussel and Sadie R. Schlussel on the one part and Robert C. Kinney upon the other, together with the sum of fifteen hundred ($1500.00) dollars.

"When Mr. Kinney shall signify to you that he has approved title to these premises, kindly deliver one copy of the contract to him and hold the other copy subject to our order and credit the $1500.00 to our account.

"There is also delivered herewith a warranty deed covering said premises signed by Birdie F. Schlussel and Sadie R. Schlussel, which you are instructed to deliver to Mr. Kinney upon his paying the balance of four thousand ($4,000.00) dollars according to the terms of the contract, and you are further authorized to affix and cancel the necessary United States Revenue Stamps upon said deed prior to delivery, reimbursing yourself for the cost of said stamps out of moneys in your care and to our credit.

"In the event that Mr. Kinney shall fail to signify to you within thirty (30) days from the date of this letter, that he has approved title to these premises, upon the demand of Sadie R. Schlussel and Birdie F. Schlussel, you are to deliver back to them, or either of them, said contracts and the deed deposited with you with this letter."

The first of these writings is in the form of a contract, — the second contains instructions which were given to the bank directing the disposal to be made of the first paper. Whether the first writing was, in fact, a concluded contract and went into immediate effect, depends upon the intention of the parties, as the fact itself is put in issue by the pleadings. On their face these two writings show that they relate to the same transaction and therefore they must be taken and read together and be so construed that each may have the effect intended by the parties.

While it is ordinarily true that the manual traduction of a written contract is not required, yet the parties may themselves agree that a writing, which if completely executed would be a valid and enforceable contract, shall not be delivered as a contract until the happening of a certain event, or that if such event does not happen there shall be no delivery of it. If there was such an agreement in this case, then there could be no contract until delivery, for no other intention could reasonably be imputed to the parties. There is no evidence of the intention of the parties to be found in this record except that contained in the writings themselves, and so we must look to them alone to determine the intention of the parties.

In construing these two instruments for the purpose of determining the intention of the parties and treating them as one instrument, there are certain well-defined rules of construction which must be followed. Section 715, Or. L., declares that the office of the judge in construing an instrument is simply to ascertain and declare what is in terms or in substance contained therein, not to insert what has been omitted or to omit what has been inserted; and where there are several provisions or particulars, such construction is, if possible, to be adopted as will give effect to all. And, as said by Mr. Justice WOLVERTON inArment v. Yamhill County, 28 Or. 474 (43 P. 653), an instrument must "be construed by taking it at the four corners and looking through the whole instrument from the identical standpoint of the contracting parties when it was entered into, and that construction must be given it, if possible, which will give effect to all its parts and carry out the obvious intention of the parties, and which will make the contract legal rather than one that will render it void."

An examination of these two instruments discloses that by the provisions of the first, second and fifth paragraphs of the first writing the defendants agreed to sell and the plaintiff to purchase the premises in controversy for $5,500, of which $1,500 was to be paid upon the delivery of the contract and balance later at stated intervals, and that the defendants agreed to furnish an abstract of title and that the abstract so furnished should show a good title. If there had been nothing else contained in the contract except the provisions just referred to, and if it was executed by the parties with intent that it should go into immediate effect as a contract, it would, of course, be a concluded contract and either party, upon his performance, would be entitled to require the other party to perform.

Now, before referring to any other provisions of the contract let us assume that the contract contained only the terms just referred to and that the contract was executed by both parties and that they intended it to go into immediate effect, and that upon the performance by one or offer to perform, he would be entitled to compel the other to perform, and apply this legal result to the facts appearing in this case.

The first payment of $1,500 together with the three copies of the first writing were deposited and placed in the bank in accordance with the terms of the understanding between the parties. Defendants furnished an abstract and this abstract failed to show that defendants had a good and merchantable title in the premises, and for that reason the plaintiff did not approve the title and did not notify the bank of his approval, and it further appears that defendants cannot cure the alleged defect in the title. Let us further assume that defendants' failure to furnish the abstract was a breach of the contract upon their part. Now, under these circumstances, what was plaintiff's remedy so far as his right to sue to compel specific performance is concerned? That question is answered in the only way it can possibly be answered by the former decisions of this and other courts. If the title was unsatisfactory to plaintiff he had an election to do either of two things. He could either perform the contract and take a conveyance relying on the covenants in the deed as security against any defects in the title, or he could refuse to perform the contract and receive from the bank the money he had placed there: Friendly v. Elwert, 57 Or. 599, 610 (105 P. 44, 111 P. 690, 112 P. 1085, Ann. Cas. 1913A, 357), and authorities there cited. See, also, Johnson v. Fuller, 55 Minn. 269 (56 N.W. 813); Weir Inv. Co. v. Scattergood, 42 Colo. 54 (94 P. 19).

This is a suit to specifically enforce this particular contract. The principle that a party is entitled to recover damages for a breach of contract is therefore not involved. When confronted with the condition stated, plaintiff refused to approve the title and refused to accept a conveyance of the property with full covenants of warranty entitling him to rely on these covenants as security against any loss he might sustain by reason of the defects in the title. After refusing such conveyance he cannot come into court and compel the defendants to make the same conveyance which they previously offered and which he had previously refused to accept, for in a similar case and upon this identical question this court said: "Plaintiff cannot come into court after refusing the only conveyance defendant could make and compel her to do the very thing which she had previously offered to do and which plaintiff had refused to allow her to do." Friendly v. Elwert, supra.

The contention that the right upon his part to make this election is a legal right only and not an equitable right is not true, for the case of Friendly v. Elwert in which this doctrine was announced by this court was a suit in equity and was brought for the specific performance of a contract for the sale of land. If plaintiff had decided to accept the title which he now consents to take and to rely upon the covenants in defendants' deed as his protection against the defects in the title, he should have accepted them at the time when the deed was there for his acceptance. Instead of doing so, he withdrew from the bank the $1,500 which he had placed there and subsequently tendered that amount of money into court. By withdrawing the money from the bank and by refusing to accept the title, and by failing to notify the bank of his acceptance, which, under the understanding of the parties, he was required to do before there was to be a delivery of the contract to him, he terminated the contract, if there was a contract, — hence there is no contract even if it be assumed that this was a concluded contract which this court or any other can enforce.

Thus far we have treated this contract as it should be treated if it were regarded as a valid, existing and enforceable contract, but we think that it was the intention of the parties plainly expressed in the writings themselves that it was not to be a contract until a copy thereof had been delivered by the bank to plaintiff after plaintiff's approval of the title and notification to the bank of his approval, and the payment by the bank to the account of the defendants of the $1,500 which had been placed there by plaintiff.

The only promise which plaintiff made to pay the consideration for a conveyance was conditioned upon his approval of the title and notification to the bank of such approval. Until he did approve the title and did so notify the bank, he promised to pay nothing whether the abstract should show the title to be either good or bad. There is no provision in the contract whereby defendants agreed to cure the title if there were defects in it, nor is there any provision in the contract showing an intention upon the part of either party that the contract was to go into immediate effect, or was to go into effect at all until it had been delivered by the bank to plaintiff.

The third paragraph of the first paper wherein it is provided that "The said Schlussels agree that upon the delivery of this contract the said Kinney may go upon the premises," etc., shows that plaintiff was to have no right to do anything in connection with the premises until after the delivery of the contract. The instructions to the bank recite that "There is deposited herewith three copies of a contract," and direct the bank to deliver one copy of the contract to the plaintiff when he shall signify to the bank that he has approved title to the premises, and the last clause in the letter of instructions to the bank directs the bank that in the event plaintiff shall fail to signify within thirty days from the date of the letter that he has approved title to the premises, then the bank is to deliver to defendants "said contracts and the deed deposited with you with this letter." These provisions show an intention upon the part of defendants to control the delivery of the contract until after the approval of title and notice to the bank of such approval, and the payment to defendants of the first payment of $1,500.

It is not usual to find contracts which are to go into immediate effect containing a provision that a copy of such contract shall not be delivered to one of the contracting parties until after that party has done certain specified things. Unless these provisions were inserted in these writings for the purpose of preventing a delivery of the contract as a contract to plaintiff they are meaningless, but if they are given the effect which it is obvious the parties intended them to have, then there was to be no delivery of the contract as such until after plaintiff had accepted title and notified the bank of his acceptance and had the $1,500 applied as a partial payment of the purchase price. That being so, it is clear that the parties did not intend to enter into a contract which was to go into immediate effect, for, if they had so intended, there would have been no provision postponing the delivery of the contract to plaintiff until after his performance of the conditions imposed. Hence, while ordinarily the existence of a written contract does not depend upon a delivery of the writing, and the assent of the parties to the terms of the contract is ordinarily all that is required to conclude the contract, nevertheless the parties are free to attach to a writing, which on its face purports to be a contract, any terms they please as a condition without the happening of which no contract is to be entered into between them. The fact that delivery was not to be made until after the condition had been performed shows that the parties did not intend to create a present obligation, but to postpone the existence of the contract until after the performance by plaintiff of what he was required to do before obtaining a delivery of the contract.

The fact that in the second paper the parties referred to the first as a contract is not controlling upon the question of whether the contract was to go into immediate effect or not. It is obvious that there was an agreement or understanding between them at the time they signed and placed these papers in the bank, but the agreement was that the first writing was not to be a binding contract until after the performance by plaintiff of the conditions agreed upon and the delivery of the writings of plaintiff. Hence, until performance and delivery, the writing was a mere proposed or tentative contract and reference to it as a contract by the parties is not sufficient to show an intent that it should go into immediate effect.

The law upon this subject is well settled.

"An escrow is a written instrument, which by its terms imports a legal obligation, deposited by the grantor, promisor, or obligor, or his agent with a stranger or third person, who is not a party to the instrument, to be kept by the depositary until the performance of a condition or the happening of a certain event and then to be delivered over to take effect. * *

"Where an instrument is deposited as an escrow, it cannot become operative until the conditions upon which it is deposited have been performed or the contingency agreed upon has happened."

"It has frequently been held or broadly stated that the escrow does not take effect as a fully executed instrument until it is rightfully delivered by the depositary to the grantee, obligee, or payee. The better rule seems to be that an actual or manual delivery of an escrow is not necessary to invest the grantee or obligee with title, that a constructive delivery may be sufficient, and that the delivery is constructively made the moment the condition has been performed, or the event has happened, upon which the grantee or obligee is entitled to possession. * * The instrument in escrow takes effect in its entirety at the time when it goes into effect." 21 C.J., § 1, p. 865, § 25, p. 880, § 34, p. 888.

While it is true that the time when an instrument takes effect may be controlled by the manifest intention of the parties to the escrow agreement, this intention must be ascertained from the language used in the contract, and, applying to these writings the provisions inserted in them by the parties themselves and giving effect to all of such provisions, it is obvious that neither party intended for the first writing to become an enforceable contract until plaintiff had fully performed the conditions upon which delivery to him of the contract was made to depend, and, since he never performed those conditions, the writing never became a concluded or consummated contract.

Plaintiff, in case specific performance cannot be had, prays for the alternative relief of a judgment for $5,000 because of his alleged expenditures amounting to between four and five thousand dollars which he claims to have made in the construction, or work preparatory to the construction, of a logging road, and which was expended off of the premises partly before and partly after the withdrawal of the papers. Under the terms of this proposed contract there was no provision for the construction of a logging road, except upon the full payment of the purchase price, when plaintiff was to become authorized to go upon the premises and construct a logging road. Expenditures made not upon the premises were not within the contemplation of the parties, nor were expenditures to be made upon the premises themselves until after plaintiff had approved the title and the $1,500 had been transferred to defendants' account, and then only upon the full purchase price becoming immediately due and collectible. Defendants, therefore, are not in any way obligated to pay or reimburse plaintiff on account of expenditures made by him with full knowledge of the terms of the proposed contract.

But one other point needs to be noticed. The complaint contains certain allegations, which are denied by the answer, to the effect that after examining the abstract plaintiff notified the defendants that there were certain objections to the title and that defendants agreed that the objections were well founded and promised to have the same cured; that the papers should remain in escrow until these defects were cured, and that when such defects were cured plaintiff would be notified and then be permitted to carry out the contract. There are two reasons why these allegations are of no avail. In the first place, being denied, the burden of proof to establish them was on the plaintiff and there was no proof offered which in any way tended to show that the defendants, or any other person authorized to contract for them, ever made any such promises. The other reason is that there is no provision in the contract which in any way obligated the defendants to cure the title in case there was a defect in the title. There was, therefore, no consideration for this alleged subsequent agreement, and if such a contract had been entered into it would have been a mere nudum pactum and for that reason unenforceable.

Plaintiff also seeks to invoke the doctrine of estoppel, but there was no allegation or proof of fraud, or of any other circumstances upon which an estoppel could arise.

The decree should be, and is, affirmed.

AFFIRMED.

McBRIDE, C.J., and BROWN, J., concur.